<PAGE>
As filed with the Securities and Exchange Commission on June 18, 1996
Securities Act registration no. 2-34223
Investment Company Act file no. 811-1829
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
------------------------------
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 54
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 29
------------------------------
ACORN INVESTMENT TRUST
(Registrant)
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606
Telephone number: 312/634-9200
------------------------------
Ralph Wanger Janet D. Olsen
Acorn Investment Trust Bell, Boyd & Lloyd
227 West Monroe Street, Suite 3000 70 West Madison Street, Suite 3300
Chicago, Illinois 60606 Chicago, Illinois 60602
(Agents for service)
------------------------------
Amending Parts A, B, and C, and filing exhibits
------------------------------
It is proposed that this filing will become effective:
[_] immediately upon filing pursuant to rule 485(b)
[_] on _________________ pursuant to rule 485(b)
[_] 60 days after filing pursuant to rule 485(a)(1)
[_] on _________________ pursuant to rule 485(a)(1)
[_] 75 days after filing pursuant to rule 485(a)(2)
[X] on September 3, 1996 pursuant to rule 485(a)(2).
- -------------------------------------------------------------------------------
Registrant has previously elected to register pursuant to Rule 24f-2 an
indefinite number of shares of beneficial interest of its series designated
Acorn Fund and Acorn International. By this amendment, Registrant elects to
register an indefinite number of shares of beneficial interest, without par
value, for the series Acorn USA. On February 28, 1996, Registrant filed its
Rule 24f-2 Notice for the fiscal year ended December 31, 1995.
- -------------------------------------------------------------------------------
<PAGE>
ACORN INVESTMENT TRUST
Cross-reference sheet pursuant to rule 495(a) of Regulation C
<TABLE>
<CAPTION>
ITEM LOCATION OR CAPTION*
- ---- --------------------------------
<C> <S>
Part A (prospectus) - Acorn Fund and Acorn International
--------------------------------------------------------
1 (a) & (b) Front cover
2 (a) Expenses and Performance - Expenses
(b) & (c) Contents; The Funds at a Glance
3 (a) Financial History
(b) Not applicable
(c) Performance
(d) Performance
4 (a)(i) Organization
(ii) The Funds at a Glance; The Acorn Philosophy; Securities,
Investment Practices, and Risks
(b) Securities, Investment Practices, and Risks
(c) The Funds at a Glance - Who May Want to Invest; The Acorn
Philosophy; Securities, Investment Practices, and Risks
5 (a) Organization
(b) Organization; Management; The Funds in Detail - Expenses;
Expenses and Performance - Expenses; How to Contact Us
(c) Organization; Management
(d) Not applicable
(e) How to Buy Shares; How to Sell Shares; How to Contact Us
(f) Expenses and Performance - Expenses; The Funds in Detail -
Expenses
(g) Not applicable
5A The information called for is contained in the annual reports of
Acorn Fund and Acorn International
6(a) Organization; How to Buy Shares; How to Sell Shares; Exchange
Plan Restrictions
(b) Not applicable
(c) Shareholder and Account Policies - Purchases; Shareholder and
Account Policies - Redemptions; Exchange Plan Restrictions
(d) Not applicable
(e) Doing Business With Acorn; How to Buy Shares; How to Sell
Shares; Shareholder and Account Policies - Statements and
Reports; How to Contact Us
(f) & (g) Dividends, Capital Gains, and Taxes
7 Doing Business with Acorn; How to Buy Shares; Shareholder and
Account Policies - Purchases; Shareholder and Account Policies -
Telephone Exchange Plan
(a) Not applicable
</TABLE>
- ----------------
* References are to captions within the part of the registration statement to
which the particular item relates except as otherwise indicated.
i
<PAGE>
<TABLE>
<CAPTION>
ITEM LOCATION OR CAPTION*
- ---- --------------------------------
<C> <S>
(b) How to Buy Shares; Shareholder and Account Policies - Share
Price; Shareholder and Account Policies - Telephone Exchange
Plan
(c) Not applicable
(d) How to Buy Shares; Exchange Plan Restrictions
(e) & (f) Not applicable
8(a) Doing Business with Acorn; How to Sell Shares; Shareholder and
Account Policies - Redemptions; Shareholder and Account Policies -
Telephone Exchange Plan; Exchange Plan Restrictions
(b) Shareholder and Account Policies - Purchases
(c) & (d) Shareholder and Account Policies - Redemptions
9 Not applicable
Part A (prospectus) - Acorn USA
-------------------------------
1(a) & (b) Front cover
2(a) Expenses and Performance - Expenses
(b) & (c) Contents; The Fund at a Glance
3(a) Not applicable
(b) Not applicable
(c) Performance
(d) Performance
4(a)(i) Organization
(ii) The Fund at a Glance; The Acorn Philosophy; Securities,
Investment Practices, and Risks
(b) Securities, Investment Practices, and Risks
(c) The Fund at a Glance - Who May Want to Invest; The Acorn
Philosophy; Securities, Investment Practices, and Risks
5(a) Organization
(b) Organization; Management; The Fund in Detail - Expenses;
Expenses and Performance - Expenses
(c) Organization; Management
(d) Not applicable
(e) How to Buy Shares; How to Sell Shares
(f) Expenses and Performance - Expenses; The Funds in Detail -
Expenses
(g) Not applicable
5A Not applicable - The information called for is contained in the
annual reports of Acorn Fund and Acorn International
6(a) Organization; How to Buy Shares; How to Sell Shares; Exchange
Plan Restrictions
(b) Not applicable
(c) Shareholder and Account Policies - Purchases; Shareholder and
Account Policies - Redemptions; Exchange Plan Restrictions
(d) Not applicable
</TABLE>
- ----------------
* References are to captions within the part of the registration statement to
which the particular item relates except as otherwise indicated.
ii
<PAGE>
<TABLE>
<CAPTION>
ITEM LOCATION OR CAPTION*
- ---- --------------------------------
<C> <S>
(e) Doing Business With Acorn; How to Buy Shares; How to Sell
Shares; Shareholder and Account Policies - Statements and
Reports
(f) & (g) Dividends, Capital Gains, and Taxes
7 Doing Business with Acorn; How to Buy Shares; Shareholder and
Account Policies - Purchases; Shareholder and Account Policies -
Telephone Transactions
(a) Not applicable
(b) How to Buy Shares; Shareholder and Account Policies - Share
Price; Shareholder and Account Policies - Telephone Exchange
Plan
(c) Not applicable
(d) How to Buy Shares; Exchange Plan Restrictions
(e) & (f) Not applicable
8(a) Doing Business with Acorn; How to Sell Shares; Shareholder and
Account Policies - Redemptions; Shareholder and Account Policies -
Telephone Transactions; Exchange Plan Restrictions
(b) Shareholder and Account Policies - Purchases
(c) & (d) Shareholder and Account Policies - Redemptions
9 Not applicable
Part B (Statement of additional information) - Acorn Fund and
-------------------------------------------------------------
Acorn International
-------------------
10 Front cover
11 Front cover
12 Part A - Organization
13(a)-(c) Investment Objectives and Policies; Investment Techniques and
Risks; Investment Restrictions
(d) Investment Techniques and Risks
14(a)-(b) Trustees and Officers
(c) Not applicable
15(a) & (b) Not applicable
(c) Trustees and Officers
16(a)(i) Investment Adviser
(ii) Trustees and Officers
(iii) Investment Adviser
(b) Investment Adviser
(c)-(g) Not applicable
(h) Custodian; Independent Auditors
(i) Not applicable
17(a) Portfolio Transactions
(b) Not applicable
(c) & (d) Portfolio Transactions
(e) Not applicable
</TABLE>
- ----------------
* References are to captions within the part of the registration statement to
which the particular item relates except as otherwise indicated.
iii
<PAGE>
<TABLE>
<CAPTION>
ITEM LOCATION OR CAPTION*
- ---- --------------------------------
<C> <S>
18(a) The Trust
(b) Not applicable
19(a)-(c) Purchasing and Redeeming Shares
20 Additional Tax Information
21(a)-(b) Distributor
21(c) Not Applicable
22 Performance Information
23 Information About the Funds
Part B (Statement of additional information) - Acorn USA
--------------------------------------------------------
10 Front cover
11 Front cover
12 Part A - Organization
13(a)-(c) Investment Objectives and Policies; Investment Techniques and
Risks; Investment Restrictions
(d) Investment Techniques and Risks
14(a)-(b) Trustees and Officers
(c) Not applicable
15(a) & (b) Not applicable
(c) Trustees and Officers
16(a)(i) Investment Adviser
(ii) Trustees and Officers
(iii) Investment Adviser
(b) Investment Adviser
(c)-(g) Not applicable
(h) Custodian; Independent Auditors
(i) Not applicable
17(a) Portfolio Transactions
(b) Not applicable
(c) & (d) Portfolio Transactions
(e) Not applicable
18(a) The Trust
(b) Not applicable
19(a)-(c) Purchasing and Redeeming Shares
20 Additional Tax Information
21(a)-(b) Distributor
21(c) Not Applicable
</TABLE>
- ----------------
*References are to captions within the part of the registration statement to
which the particular item relates except as otherwise indicated.
iv
<PAGE>
<TABLE>
<CAPTION>
ITEM LOCATION OR CAPTION*
- ---- --------------------------------
<C> <S>
22 Performance Information
23 Information About the Fund
</TABLE>
- ----------------
*References are to captions within the part of the registration statement to
which the particular item relates except as otherwise indicated.
v
<PAGE>
THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION RELATING TO ACORN FUND
AND ACORN INTERNATIONAL, EACH A SERIES OF ACORN INVESTMENT TRUST, ARE NOT
AFFECTED BY THE FILING OF THIS POST-EFFECTIVE AMENDMENT NO. 54.
vi
<PAGE>
<TABLE>
<CAPTION>
ITEM LOCATION OR CAPTION*
- ---- --------------------------------
<C> <S>
Part C (Other Information)
--------------------------
24 Financial statements and exhibits
25 Persons controlled by or under common control with registrant
26 Number of holders of securities
27 Indemnification
28 Business and other connections of investment adviser
29 Principal underwriters
30 Location of accounts and records
31 Management services
32 Undertakings
</TABLE>
- ----------------
*References are to captions within the part of the registration statement to
which the particular item relates except as otherwise indicated.
vii
<PAGE>
ACORN USA
A NO-LOAD FUND
ACORN USA invests for long-term capital growth. The Fund invests mostly in
stocks of small and medium-size U.S. companies.
Please read this prospectus before investing, and keep it on file for future
reference. It contains important information, including how the funds invest
and the services available to shareholders.
A Statement of Additional Information ("SAI") dated September 3, 1996 has been
filed with the Securities and Exchange Commission, and is incorporated herein by
reference (is legally considered a part of this prospectus). The SAI is
available free upon request by calling Acorn at 1-800-9-ACORN-9 (1-800-922-
6769).
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS
SEPTEMBER 3, 1996
ACORN INVESTMENT TRUST
227 West Monroe Street
Suite 3000
Chicago, Illinois 60606
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE FUND AT A GLANCE.................................................. 1
Goal................................................................. 1
Strategy............................................................. 1
Management........................................................... 1
Who May Want to Invest............................................... 1
EXPENSES AND PERFORMANCE.............................................. 2
Expenses............................................................. 2
Performance.......................................................... 3
YOUR ACCOUNT.......................................................... 4
Doing Business with Acorn............................................ 4
CHOICES FOR YOUR ACCOUNT REGISTRATION................................. 5
Highlights - How to Buy Shares....................................... 7
Highlights - How to Sell Shares...................................... 10
SHAREHOLDER AND ACCOUNT POLICIES...................................... 12
Statements and reports............................................... 12
Share Price.......................................................... 12
Purchases............................................................ 12
Redemptions.......................................................... 13
Address Changes...................................................... 14
Telephone Transactions............................................... 14
Exchange Plan Restrictions........................................... 16
DIVIDENDS, CAPITAL GAINS, AND TAXES................................... 18
Distribution Options................................................. 18
Taxes................................................................ 18
THE FUND IN DETAIL.................................................... 20
Organization......................................................... 20
Management........................................................... 20
Distributor.......................................................... 21
Expenses............................................................. 21
The Acorn Philosophy................................................. 21
Securities, Investment Practices, and Risks.......................... 23
Illiquid and Restricted Securities................................... 24
Diversification...................................................... 24
Lending and Repurchase Agreements.................................... 25
Other Investment Companies........................................... 25
Foreign Securities................................................... 25
Managing Investment Exposure......................................... 26
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
THE FUND AT A GLANCE
- -------------------------------------------------------------------------------
GOAL
Acorn USA invests for long-term growth of capital.
STRATEGY
Acorn USA invests primarily in stocks of small and medium-size U.S. companies.
The Fund looks for attractively-priced companies that Wanger Asset Management,
L.P., investment adviser to the Fund, thinks will benefit from favorable long-
term social, economic, or political trends. The areas of emphasis change from
time to time.
MANAGEMENT
Wanger Asset Management, L.P. (WAM) chooses investments for the Fund. WAM
employs a team approach to management of the Fund. The management team is
comprised of the lead portfolio manager, other WAM portfolio managers and
research analysts. Team members share responsibility for providing ideas,
information, knowledge and expertise in managing the Fund. Each team member has
one or more areas of expertise that is applied to the management of the Fund.
Daily decisions on portfolio selection rest with the lead portfolio manager who
utilizes the input and advice of the management team in making purchase and sale
determinations.
ROBERT MOHN is the Fund's lead portfolio manager.
There is no limit on the assets of the Fund. However, WAM will monitor Fund
size and its impact on portfolio management and the Fund may be closed to new
investors if the board of trustees of Acorn, based on WAM's recommendation,
believes closing the Fund would be in the best interests of the Fund's
shareholders. If and when the Fund is closed to new investors, it is expected
that persons who are shareholders of the Fund on the date of closing would be
permitted to continue to make investments, but that new investors would not be
permitted to open accounts.
WHO MAY WANT TO INVEST
Acorn USA is designed for investors who want long-term growth of capital rather
than income and who have the long-term investment outlook needed for investing
in the stocks of small and medium-size U.S. companies.
The value of the Fund's investments and the return it generates vary from day-
to-day. Performance depends on WAM's skill in identifying the trends that are
the basis for the Fund's stock selections, and in picking individual stocks, as
well as general market and economic conditions. When you sell your shares, they
may be worth more or less than the amount you paid for them.
The stocks of smaller companies often involve more risk than the stocks of
larger companies. Over time, stocks have shown greater growth potential than
other types of securities. In the short term, however, stock prices may
fluctuate widely in response to company, market or economic news. The Fund does
not pursue income, and is not by itself a balanced investment plan.
See "Your Account" for information on how to buy and redeem shares.
<PAGE>
- -------------------------------------------------------------------------------
EXPENSES AND PERFORMANCE
- -------------------------------------------------------------------------------
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell shares
of the Fund.
TRANSACTION EXPENSES
Maximum sales charge on purchases and
reinvested dividends.................... NONE
Deferred sales charge on redemptions.... NONE
Exchange fee............................ NONE
Wire transaction fee.................... NONE
ANNUAL FUND OPERATING EXPENSES. The Fund pays its own operating expenses
including the management fee to WAM. Expenses are factored into the Fund's
price or dividends, and are subtracted from the share price daily. Expenses are
not charged directly to shareholder accounts.
The Fund expects to incur the following expenses (calculated as a percentage of
average net assets):
Management fee........................ 1.00%
12b-1 fee............................. NONE
Other expenses (after reimbursement).. 1.00%
-----
Total fund operating expenses (after
reimbursement)........................ 2.00%
=====
WAM has undertaken to reimburse the Fund for any ordinary operating expenses,
with certain exceptions, in excess of 2.00% of the Fund's average daily net
assets annually. The estimates of "Other Expenses" and "Total Operating
Expenses" are estimates based on the expenses the Fund expects to incur during
its initial partial fiscal year.
EXAMPLE: Let's say, hypothetically, that the Fund's annual return is 5% and that
its operating expenses are exactly as shown above. For every $1,000 you
invested, here's how much you would have paid in total expenses if you closed
your account after the number of years indicated:
After 1 year $20
After 3 years $63
These examples illustrate the effect of expenses, but are not meant to suggest
actual or expected costs or returns, all of which may vary. They are intended
to help you understand the costs and expenses associated with investing in the
Fund.
2
<PAGE>
PERFORMANCE
Mutual fund performance is commonly measured as total return. Total return is
the change in value of an investment in a fund over a given period, assuming
reinvestment of any dividends and capital gains. TOTAL RETURN reflects actual
performance over a stated period of time. AVERAGE ANNUAL TOTAL RETURN is a
hypothetical rate of return that, if achieved annually, would have produced the
same total return if performance had been constant over the entire period.
Average annual total returns smooth out variations in performance; they are not
the same as actual year-by-year results.
Total returns are based on past results and are not a prediction of future
performance. They do not include the effect of income taxes.
The Fund sometimes shows its performance compared to stock indexes (described in
the statement of additional information), or gives its ratings or rankings
determined by an unrelated organization.
Information about the performance of the Fund is contained in the Fund's annual
report which may be obtained free of charge by calling Acorn at 1-800-9-ACORN-9
(1-800-922-6769).
- -------------------------------------------------------------------------------
THE NO-LOAD ADVANTAGE
Acorn USA is 100% no-load, which means that all of your money goes to work for
you immediately. There are no sales charges, and no 12b-1 fees or back-end load
fees, so all of your dollars are invested at the net asset value. Acorn USA
invests in companies for the long-term (usually 3-5 years), so our turnover rate
is low. This reduces both trading costs and shareholders' taxes.
- -------------------------------------------------------------------------------
3
<PAGE>
YOUR ACCOUNT
- -------------------------------------------------------------------------------
DOING BUSINESS WITH ACORN
Acorn provides customers with service Monday through Friday, except holidays,
from 8:00 a.m. to 4:30 p.m. Chicago (central) time.
To reach Acorn, call:
. For help in setting up your account, prices, literature, or fund
information--1-800-9-ACORN-9 (1-800-922-6769) (from outside the U.S. 1-312-
634-9240)
. For existing IRAs -- call our transfer agent at 1-800-962-1585 (outside the
U.S. 1-617-774-5000 ext. 6457)
. To add to your existing account, to redeem shares, or to exchange shares by
phone--call our transfer agent by 3:00 p.m. Chicago (central) time at
1-800-962-1585 (outside the U.S. 1-617-774-5000 ext. 6457)
HOW TO BUY SHARES
YOU CAN OPEN A NEW ACCOUNT BY:
. mailing in an application with your check or a money order for $1,000 or
more, or
. using the exchange plan to move $1,000 or more from your account with Acorn
Fund, Acorn International, or one of the Reich & Tang Money Funds into new
identically registered account for Acorn USA.
AFTER YOUR ACCOUNT IS OPEN, YOU MAY ADD TO IT BY:
. wiring money from your bank;
. moving money from your bank account by telephone if you participate in the
telephone purchase plan;
. using the telephone exchange plan to move your investment from one of your
Acorn accounts to another account within the Acorn family, or from one of
the Reich & Tang Money Funds; or
. mailing a check or money order with the stub from one of your account
statements, a slip from your Acorn Investment Booklet or a letter.
You must make your telephone purchases or exchanges from Acorn USA by 3:00 p.m.
Chicago (central) time. To exchange out of the Reich & Tang Money Funds, you
must call by 11:00 a.m. (Central time). See "Telephone Exchange Plan."
See "Shareholder and Account Policies" for more information about the exchange
plan.
4
<PAGE>
CHOICES FOR YOUR ACCOUNT REGISTRATION
- -------------------------------------------------------------------------------
INDIVIDUAL OR JOINT OWNERSHIP
For your general investment needs
Individual accounts are owned by one person. Joint accounts can have two or
more owners.
- -------------------------------------------------------------------------------
GIFT OR TRANSFER TO A MINOR (UGMA, UTMA)
To invest for a minor's education or other future needs
These custodial accounts provide a way to give money to a minor. The account
application must include the minor's social security number.
- -------------------------------------------------------------------------------
TRUST OR ESTABLISHED EMPLOYEE BENEFIT OR PROFIT-SHARING PLAN
For money being invested by a trust, employee benefit plan, or profit-sharing
plan
The trust or plan must be established before an account may be opened.
- -------------------------------------------------------------------------------
CORPORATION OR OTHER ENTITY
For investment needs of corporations, associations, partnerships, institutions,
or other groups
You will need to send a certified corporate resolution with your application.
- -------------------------------------------------------------------------------
RETIREMENT
To shelter your retirement savings from taxes
Retirement plans allow individuals to shelter investment income and capital
gains from current taxes. Contributions to these accounts may be tax deductible.
IRAs require a special application (call 1 800 9-ACORN-9); lower minimum
investments apply.
. ACORN INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal age and
under 70. with earned income to save up to $2,000 per tax year. If your
spouse has (or elects to be treated as having) earned income of less than
$250 your spouse may invest in a "Spousal IRA." Each account is subject
to the $2,000 maximum; the maximum for your combined accounts is $2,250.
. ROLLOVER IRAS retain special tax advantages for certain distributions from
employer-sponsored retirement plans.
. SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) allow small business owners or
those with self-employment income to make tax-deductible contributions of
up to $30,000 per year for themselves and any eligible employees.
. OTHER RETIREMENT PLANS--The Fund may be used as an investment in other
kinds of retirement plans, including Keogh or corporate profit sharing and
money purchase plans, 403(b) plans, and 401(k) plans. All of these accounts
need to be established by the trustee of the plan. Acorn does not offer
prototypes of these plans.
- -------------------------------------------------------------------------------
5
<PAGE>
IF YOU ARE INVESTING THROUGH AN ACORN IRA for the first time you will need a
special application. Call 1-800-9-ACORN-9 (1-800-922-6769) or complete and
return the enclosed card to receive information and an application for an Acorn
IRA. For both initial and subsequent IRA investments, please indicate the year
for which the investment is being made.
MINIMUM INVESTMENTS
To open an account $1,000
To open an IRA $ 200
To add to an account $ 100
If you sign up for the Automatic Investment Plan and later wish to change the
amount or frequency of your automatic investments, or stop future investments,
you may do so by calling us at 1-800-962-1585 at least one week prior to your
next scheduled investment date.
HOW TO SELL SHARES
You can arrange to take money out of your Fund account at any time by selling
(redeeming) some or all of your shares. Your shares will be sold at the next
NAV (share price) calculated after your order is received and accepted. See
"Shareholder and Account Policies" for more information about share price.
To sell shares in a regular (non-IRA) account, you may use any of the methods
described here. To sell shares in an Acorn IRA, your request must be made in
writing, except for exchanges between the Fund and another of the Acorn Funds or
to one of the Reich & Tang Money Funds, which can be requested before 3:00 p.m.
Chicago (central) time by phone or in writing. If you need an IRA Withdrawal
Request form, call us at 1-800-9-ACORN-9 (1-800-922-6769).
THE TELEPHONE REDEMPTION PLAN lets you redeem $100 to $50,000 per day by phone.
You must make your telephone redemptions by 3:00 p.m. Chicago (central) time.
You automatically have the telephone redemption plan unless you decline it on
your application. If you have changed the address on your account by telephone
within 60 days of the telephone redemption request, this service is not
available. You must designate an account on your purchase application, or in
writing with a signature guarantee, to have proceeds of a telephone redemption
wired to your bank account.
6
<PAGE>
HIGHLIGHTS - HOW TO BUY SHARES
- -------------------------------------------------------------------------------
PHONE 1-800-962-1585 LOGO
- -------------------------------------------------------------------------------
TO OPEN AN ACCOUNT:
. Exchange between Acorn USA and another of the Acorn Funds, or from a money
fund account with the same registration, including name, address, and
taxpayer ID number.
TO ADD TO AN ACCOUNT:
. Exchange between accounts with the same registration, including name,
address, and taxpayer ID number.
. Use the telephone purchase plan to transfer $100 to $50,000 from your bank
account. Call first to verify that this service is in place on your
account. (This service is not available for IRAs.)
You must make your telephone purchases or exchanges from any of the Acorn Funds
by 3:00 p.m. Chicago (central) time.
- -------------------------------------------------------------------------------
MAIL LOGO
- -------------------------------------------------------------------------------
TO OPEN AN ACCOUNT:
. Complete and sign the application. Make your check payable to "Acorn USA".
Mail: Overnight delivery:
State Street Bank & Trust Co. Boston Financial Data Services
Attn: Acorn Funds Attn: Acorn Funds
P.O. Box 8502 2 Heritage Drive, 6th Floor
Boston, MA 02266-8502 N. Quincy, MA 02171
1-617-774-5000 ext. 6457
TO ADD TO AN ACCOUNT:
. Make your check payable to "Acorn USA". Put your fund account number on
your check.
. Use the return envelope that comes with your statements, or mail to the
address shown above.
- -------------------------------------------------------------------------------
WIRE LOGO
- -------------------------------------------------------------------------------
TO OPEN AN ACCOUNT:
. You may not open a NEW account by wire.
TO ADD TO AN ACCOUNT:
. Wire to:
State Street Bank & Trust Co.
Attn: Mutual Funds
Boston, MA 02110
Routing #0110-0002-8
Deposit DDA 9902-990-2
Specify the name of the fund and the name and the number of your account.
- -------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN LOGO
- -------------------------------------------------------------------------------
TO OPEN AN ACCOUNT:
. You may not open a NEW account automatically.
TO ADD TO AN ACCOUNT:
. Sign up on the purchase application for monthly or quarterly transfers of
$100 to $50,000 from your bank account, or call 1-800-9-ACORN-9 (1-800-922-
6769) for a Doing Business with Acorn form. If you already have this
service, you can easily change the frequency or amount of your automatic
investments over the phone by calling 1-800-962-1585.
- -------------------------------------------------------------------------------
TDD--Service for the deaf and hearing-impaired: 1-800-306-4567
This Highlights page answers the most common questions about How to Buy Shares.
See "Your Account" for more information.
7
<PAGE>
THE SYSTEMATIC WITHDRAWAL PLAN lets you set up automatic monthly or quarterly
redemptions from your account in specified dollar amounts if you have a $25,000
minimum Acorn account balance. Call 1-800-9-ACORN-9 (1-800-922-6769) for a
Doing Business with Acorn form.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
. your name,
. the fund's name,
. your fund account number,
. the dollar amount or number of shares to be redeemed, and
. any other applicable requirements listed in the table on the next page.
Mail your letter to:
State Street Bank and Trust Co.
Attn: Acorn Funds
P.O. Box 8502
Boston, MA 02266-8502
If you are using overnight mail:
Boston Financial Data Service
Attn: Acorn Funds
2 Heritage Drive, 5th Floor
N. Quincy, MA 02171
1-617-774-5000 ext. 6457
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE, designed to protect you and
Acorn from fraud. Your request must be made in writing and include a signature
guarantee if one of the following situations applies:
. you wish to redeem more than $50,000 worth of shares;
. your name has changed by marriage or divorce (send a letter indicating your
account number(s) and old and new names, signing the letter in both the old
and new names and having both signatures guaranteed)
. your address has changed within the last 60 days and you would like to
redeem shares;
. the check is being mailed to an address different from the one on your
account (address of record);
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. the check is being made payable to someone other than the account owner; or
. you are instructing us to wire the proceeds to a bank or brokerage account
and have not signed up for the telephone redemption by wire plan.
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HIGHLIGHTS - HOW TO SELL SHARES
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PHONE 1-800-962-1585 LOGO
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All accounts, except IRAs . To verify that the telephone redemption plan is
in place, call 1-800-9-ACORN-9 (1-800-922-6769).
You automatically have this feature on your new
account unless you tell us that you do not want
it.
. Maximum--$50,000; minimum--$100
All account types . To exchange between identically-registered
accounts
You must make your telephone redemptions by 3:00 p.m. Chicago (central) time.
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MAIL LOGO
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Individuals, Joint Owners, . The letter of instruction must be signed by all
Sole Proprietorships, persons required to sign for transactions
UGMA, UTMA (usually, all owners of the account), exactly as
their names appear on the account.
IRAs . The account owner should complete an IRA
Withdrawal Request form. Call 1-800-9-ACORN-9
(1-800-922-6769) to request one.
Trust . The trustee must sign the letter indicating
capacity as trustee. If the account registration
does not include the trustee's name, provide a
copy of the trust document certified within the
last 60 days.
Business or Organization . The person(s) authorized by the corporate
resolution to act on the account must sign, in
that person's official capacity, and the
redemption request must be on corporate
letterhead.
. Include a corporate resolution certified within
60 days if the amount to be redeemed exceeds
$50,000.
Executor, Administrator, . Call 1-800-962-1585 for instructions.
Conservator, Guardian
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WIRE LOGO
- -------------------------------------------------------------------------------
All account types, except . You must sign up for payment of redemptions by
IRAs wire before using this feature. Call to verify
that this service is in place--1-800-9-ACORN-9
(1-800-922-6769)
. Minimum wire: $1,000; maximum: $50,000.
You must make your telephone redemptions by 3:00 p.m. Chicago (central) time.
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AUTOMATIC EXCHANGE LOGO
- -------------------------------------------------------------------------------
All account types . Call 1-800-962-1585 to set up monthly or
quarterly automatic exchanges of $100 to $50,000
between identically-registered accounts.
TDD service for the deaf and hearing-impaired: 1-800-306-4567
NOTE: Some redemptions require signature guarantees and must be done by mail.
Please see page __.
This Highlights page answers the most common questions about How to Sell Shares.
See "Your Account" for more information.
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You should be able to obtain a signature guarantee from a bank, broker dealer,
credit union (if authorized under state law), securities exchange or
association, clearing agency, or savings association. A notary public cannot
provide a signature guarantee.
The price at which your shares will be redeemed is determined by the time of day
our transfer agent receives your redemption request. The price per share is
always the next net asset value (NAV) per share calculated after your redemption
request, including any required signature guarantee or supporting documents, is
received. The Fund's calculate NAV as of Closing Time on each day the New York
Stock Exchange (NYSE) is open for trading. Closing Time is the close of regular
session trading on the NYSE, which is usually 3:00 p.m. Chicago (central) time
but is sometimes earlier.
To get today's price --
. Use the telephone redemption plan to call your redemption request in before
Closing Time (note that the Closing Time to exchange out of the Reich &
Tang Money Funds is 11:00 a.m. Chicago (central) time).
. Have your written redemption request, with a signature guarantee if
required and any supporting documents, delivered to our transfer agent
before Closing Time.
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<PAGE>
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SHAREHOLDER AND ACCOUNT POLICIES
- -------------------------------------------------------------------------------
STATEMENTS AND REPORTS that Acorn sends to you include:
. Confirmation statements (after every transaction in your account or change
in your account registration)
. Year-end account statements
. Shareholder reports
If you would like us to send duplicate statements to someone, simply call us at
1-800-962-1585, and we can take your request over the phone. We have average
cost basis information for shares purchased in 1990 or later. If you redeem
shares purchased in 1990 or later and would like an average cost statement, call
us at 1-800-962-1585.
If you need copies of your historical account information, please call 1-800-
962-1585. There is a small charge for historical account information for prior
years.
SHARE PRICE
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE) is
open. THE OFFERING PRICE (price to buy one share) and REDEMPTION PRICE (price
to sell one share) are the fund's net asset value ("NAV") calculated at the next
Closing Time after receipt of your order. Closing Time is the time of the close
of regular session trading on the NYSE, which is usually 3:00 p.m. Chicago
(central) time but is sometimes earlier.
THE FUND'S NAV is the value of a single share. The NAV is computed by adding up
the value of the Fund's investments, cash, and other assets, subtracting its
liabilities, and then dividing the result by the number of shares outstanding.
The Fund's portfolio securities and assets are valued primarily on the basis of
market quotations from the primary market in which they are traded or, if
quotations are not readily available, by a method that the board of trustees
believes accurately reflects a fair value.
Your purchase or redemption of Fund shares will be priced at the next NAV
calculated after your investment (including the application, if for a new
account, and the money) or redemption request is received and accepted. An
order received before Closing Time will get that day's price. No telephone
orders will be accepted after Closing Time.
PURCHASES
. All of your purchases must be made in U.S. dollars and checks must be drawn
on U.S. banks. You may not open an account with a third party check.
. Acorn does not accept cash or credit cards.
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<PAGE>
. If payment for your check or telephone order does not clear, your purchase
will be canceled and you will be liable for any losses or fees the Fund or
its transfer agent incurs.
. Your Automatic Investment Plan and Telephone Purchase Plan may be
immediately terminated if any item is unpaid by your financial institution.
. When you make a purchase by telephone, the money is ordinarily drawn from
your bank account the day after you call and the Acorn shares purchased are
at the NAV calculated after the money is transferred.
THE FUND RESERVES THE RIGHT TO reject any specific purchase order, including
certain purchases through the exchange plan. See "Exchange Plan Restrictions."
Purchase orders may be refused if, in WAM's opinion, they are of a size that
would disrupt management of the Fund.
REDEMPTIONS
. Normally, redemption proceeds will be mailed within seven days after State
Street Bank receives a request for redemption.
. The Fund may hold payment on redemptions until it is reasonably satisfied
that it has received payment for a recent purchase made by check, by the
Automatic Investment Plan, or by the Telephone Purchase Plan, which can
take up to fifteen days.
. If you elected to participate in the Telephone Redemption by Wire plan,
Acorn will send payment for your redemption to your bank account by wire
transfer. Your bank may impose a fee for the incoming wire. Payment by wire
is usually credited to your bank account on the next business day after
your call.
. Redemptions may be suspended or payment dates postponed on days when the
NYSE is closed (other than weekends or holidays), when trading on the NYSE
is restricted, or as permitted by the SEC.
. Certain accounts (such as trust accounts, corporate accounts and custodial
accounts) may require documentation in addition to the redemption request.
Call 1-800-962-1585 for more information.
If the value of your account (except an IRA account) falls below $1,000, Acorn
reserves the right to close your account and send the proceeds to you. Your
shares will be redeemed at the NAV calculated on the day your account is closed.
If checks representing (1) redemption proceeds, (2) withdrawals under a
systematic withdrawal plan, or (3) dividend and capital gains distributions are
returned ''undeliverable'' or remain uncashed for six months, the checks will be
canceled and the proceeds will be reinvested in the Fund at the per share net
asset value on the date of cancellation. In addition, after that six-month
period, (1) your systematic withdrawal plan will automatically be canceled and
future withdrawals will occur only when requested, or (2) your cash election
will automatically be
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<PAGE>
changed and future dividends and distributions will be reinvested in the Fund at
the per share net asset value determined on the date of payment of such
distributions.
ADDRESS CHANGES
You may change your address over a recorded line by calling 1-800-962-1585.
Acorn will send a written confirmation of the change to both your old and new
addresses. No telephone redemptions may be made for 60 days after a change of
address by phone. During those 60 days, all redemption requests must be in
writing with a signature guarantee. If you send us your change of address in
writing with a signature guarantee, your telephone redemption privilege will
continue without interruption.
TELEPHONE TRANSACTIONS
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE OVER A RECORDED LINE:
. Change your address;
. Request duplicate statements to be sent to someone you designate;
. Request an average cost statement for redeemed shares that were purchased
in 1990 or later;
. Request a current account statement;
. Purchase shares through the telephone purchase plan (after you have signed
up for the plan);
. Redeem $50,000 or less and have it wired to a bank checking account (after
you have signed up for the wire-redemption plan; not available for IRA
accounts);
. Change the frequency or amount, or discontinue the Automatic Investment
Plan on your account(s);
. Add or discontinue the telephone exchange privilege on your account;
. Add or discontinue the telephone redemption by check privilege on your
account;
. Add automatic exchange (from Acorn USA to Acorn Fund or Acorn
International, or vice versa, each month) to your account;
. Change your distribution option (does not apply to IRA accounts);
14
<PAGE>
. Redeem $50,000 or less, with a check sent to the address of record (does
not apply to IRA accounts, or to accounts for which the address of record
was changed by telephone in the last 60 days);
. Exchange money from an individual account to an existing IRA account with
an identical registration;
. Exchange money between identically-registered accounts in Acorn USA or
another of the Acorn Funds or certain Reich & Tang Money Funds, or exchange
money from one fund to establish an identically-registered account in
another fund; and
. Change the contribution year on an IRA account to the previous year up
until April 15 of the following year.
Acorn will not be responsible for any losses resulting from unauthorized
telephone transactions if it follows reasonable procedures designed to verify
the identity of the caller. Those procedures may include recording the call,
requesting additional information, and sending written confirmation of telephone
transactions.
You should verify the accuracy of telephone transactions immediately upon
receipt of your confirmation statement. If you do not want to be able to
initiate purchase or redemption transactions by telephone, decline these
privileges on your account application or call Acorn for instructions at 1-800-
962-1585.
IF YOU ARE UNABLE TO REACH ACORN BY PHONE (for example, during periods of
unusual market activity), consider placing your order by mail.
TELEPHONE EXCHANGE PLAN. Acorn's telephone exchange plan permits you to
exchange your investment between Acorn USA and another of the Acorn Funds (Acorn
Fund and Acorn International), into one of the money market mutual funds
participating in the plan (Reich & Tang Money Funds) upon telephone
instructions, or from one of the Reich & Tang Money Funds in which you had
invested by exchanging from one of the Acorn Funds. The REICH & TANG MONEY
FUNDS are: Short Term Income Fund , Money Market Portfolio; Short Term Income
Fund, U.S. Government Portfolio; Daily Tax Free Income Fund; California Daily
Tax Free Income Fund; Connecticut Daily Tax Free Income Fund; Florida Daily
Municipal Income Fund; Michigan Daily Tax Free Income Fund; New Jersey Daily
Municipal Income Fund; New York Daily Tax Free Income Fund; North Carolina Daily
Municipal Income Fund; and Pennsylvania Daily Municipal Income Fund.
Each of the Reich & Tang Money Funds is a no-load fund managed by Reich & Tang
Asset Management L.P. and offers check-writing privileges (for accounts other
than IRAs) in addition to the exchange plan. Only the Short Term Income Fund,
Money Market Portfolio is available for IRA accounts.
15
<PAGE>
THE PRICE AT WHICH SHARES ARE EXCHANGED is determined by the time of day we
receive your request. TO GET TODAY'S PRICE:
. For an IRA account, call Acorn at 1-800-962-1585 before Closing Time.
. If you are exchanging FROM ONE OF THE ACORN FUNDS (Acorn USA, Acorn Fund or
Acorn International) into another of the Acorn Funds or one of the Reich &
Tang Money Funds, call Acorn at
1-800-962-1585 before Closing Time.
. If you are exchanging FROM ONE OF THE REICH & TANG MONEY FUNDS to one of
the Acorn Funds, CALL REICH & TANG AT 1-800-221-3079 BEFORE 11:00 A.M.
CHICAGO (CENTRAL) TIME.
Because of the time needed to transfer money between the Funds and the Reich &
Tang Money Funds, you may not exchange into and out of a money fund on the same
or successive days; there must be at least one day between exchanges.
EXCHANGE PLAN RESTRICTIONS
. The fund you are exchanging into must be registered for sale in your state.
. You may only exchange between accounts that are registered in the same
name, address, and taxpayer identification number.
. If you are opening a new account by exchange, your exchange must be at
least $1,000 or $200 for an IRA account.
. If your account is subject to backup withholding, you may not use the
exchange plan.
. Generally, you will be limited to 4 round-trip exchanges per year (a round-
trip being the exchange out of one fund into another fund, and then back).
. Because excessive trading can hurt Fund performance and shareholders, Acorn
reserves the right to temporarily or permanently terminate the exchange
privilege of any investor who makes excessive use of the exchange plan.
. Acorn also reserves the right to refuse exchange purchases by any person or
group, if Acorn believes the purchase will be harmful to existing
shareholders.
. Before exchanging into a fund, you should read its prospectus.
. Exchanges may have tax consequences for you.
Acorn reserves the right to terminate or modify the exchange plan at any time,
but will try to give you prior notice if it can reasonably do so.
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<PAGE>
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DOING BUSINESS WITH ACORN
- -------------------------------------------------------------------------------
From time to time you may find it necessary to make changes to your account
privileges or registration. The following easy-to-use shareholder forms are
available upon request by calling 1-800-9-ACORN-9 (1-800-922-6769):
TO ACCOMPLISH THIS: PLEASE REQUEST THIS FORM:
For changes to account privileges . Doing Business with Acorn
For reregistering your current account . Changing Your Account Registration
For re-registering your Acorn shares . Broker-Dealer Transfer Form
held by a broker to an account with
Acorn
For changes to your IRA beneficiary . Change of Beneficiary
designations
For transferring money from an IRA . IRA Transfer Form
account with another institution to
Acorn
For redeeming shares from your IRA . IRA Withdrawal Form
account
17
<PAGE>
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DIVIDENDS, CAPITAL GAINS, AND TAXES
- -------------------------------------------------------------------------------
The Fund distributes substantially all of its net income and capital gains to
shareholders each year, usually in December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to receive
your distributions. If you later want to change your distribution option, call
us at 1-800-962-1585. The Fund offers three options:
. REINVESTMENT OPTION. Your dividends and capital gain distributions will be
automatically reinvested in additional shares of the Fund. If you do not
indicate a choice on your application, you will be assigned this option.
. INCOME-ONLY OPTION. Your capital gain distributions will be automatically
reinvested, but you will be sent a check for each dividend.
. CASH OPTION. You will be sent a check for each dividend and capital gain
distribution.
FOR IRA ACCOUNTS, all distributions are automatically reinvested because payment
of distributions in cash would be a taxable distribution from your IRA, and
might be subject to income tax penalties if you are under 59 1/2 years old.
After you are 59 1/2, you may request payment of distributions in cash.
When you reinvest, the reinvestment price is the fund's NAV at the close of
business on the reinvestment date. The mailing of distribution checks will
usually begin on the payment date, which is usually one week after the ex-
dividend date.
TAXES
As with any investment, you should consider how your investment in the Fund will
be taxed. If your account is a tax-deferred account (for example, an IRA or an
employee benefit plan account), the following tax discussion does not apply. If
your account is not a tax-deferred account, however, you should be aware of the
following tax rules:
TAXES ON DIVIDENDS AND DISTRIBUTIONS. Dividends and distributions are subject
to federal income tax, and may also be subject to state or local taxes. If you
live outside the United States, your distributions could also be taxed by the
country in which you reside.
Your dividends and distributions are taxable when they are paid, whether you
take them in cash or reinvest them in additional shares. However, dividends and
distributions declared in December and paid in January are taxable as if they
were paid on December 31.
18
<PAGE>
For federal tax purposes, the Fund's income and short-term capital gain
distributions are taxed as dividends; long-term capital gain distributions are
taxed as long-term capital gains. Every January, Acorn will send you and the
IRS a statement, called a Form 1099, showing the amount of each taxable
distribution you received in the previous year. You may not receive a Form 1099
if total distributions for the year are less than $10.
TAXES ON TRANSACTIONS. Your redemptions--including exchanges between funds or
into a money fund--are subject to capital gains tax. A capital gain or loss is
the difference between the cost of your shares and the price you receive when
you sell (redeem) them.
Whenever you sell shares of the Fund, Acorn will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a year-end statement every January. It is up to you or your tax
preparer to determine whether any given sale resulted in a capital gain and, if
so, the amount of tax to be paid. Be sure to keep your regular account
statements; the information they contain will be essential in calculating the
amount of your capital gains. We have average cost basis information for shares
purchased in 1990 or later. If you redeem shares purchased in 1990 or later and
would like an average cost statement, call 1-800-962-1585.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that your
Social Security or taxpayer identification number is correct and that you are
not subject to 31% backup withholding for failing to report income to the IRS.
If you violate IRS regulations, the IRS can require Acorn to withhold 31% of
your taxable distributions and redemptions.
- -------------------------------------------------------------------------------
UNDERSTANDING DISTRIBUTIONS
As a Fund shareholder, you are entitled to your share of the Fund's net income
and any net gains realized on its investments.
The Fund's income from dividends and interest, and any net realized short-term
capital gain, are paid to you as DIVIDENDS. The Fund realizes capital gains
whenever it sells securities for a higher price than it paid for them. Net
realized long-term gains are paid to you as CAPITAL GAIN DISTRIBUTIONS.
- -------------------------------------------------------------------------------
19
<PAGE>
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THE FUND IN DETAIL
- -------------------------------------------------------------------------------
ORGANIZATION
Acorn USA is a series of Acorn Investment Trust ("Acorn" or the "Trust"), an
open-end, management investment company. The Acorn Fund, Inc. began operations
in 1970, and was reorganized as the Acorn Fund series of the Trust on June 30,
1992. The Trust is a Massachusetts business trust organized on April 21, 1992.
Acorn USA began operations in September 1996.
Each share of the Fund is entitled to participate pro rata in any dividends and
other distributions declared by the board of trustees with respect to the Fund,
and all shares of the Fund have equal rights in the event of liquidation of the
Fund.
THE TRUST IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of the shareholders of the Fund and the other Acorn
Funds. The trustees are experienced executives and professionals who meet at
regular intervals to oversee the activities of the Trust and the funds. A
majority of trustees are not otherwise affiliated with Acorn or WAM.
ACORN MAY HOLD SPECIAL MEETINGS OF SHAREHOLDERS to elect or remove trustees,
change fundamental policies, approve a management contract, or for other
purposes. Acorn will mail proxy materials in advance, including a voting card
and information about the proposals to be voted on. You are entitled to one
vote for each share of Acorn USA that you own. Shareholders not attending these
meetings are encouraged to vote by proxy.
MANAGEMENT
The Fund is managed by Wanger Asset Management, L.P. (WAM), 227 West Monroe
Street, Suite 3000, Chicago, Illinois 60606-5016. WAM chooses the Fund's
investments and handles its business affairs, under the direction of the board
of trustees. WAM is a limited partnership managed by its general partner,
Wanger Asset Management, Ltd., which is controlled by Ralph Wanger. WAM manages
more than $4.5 billion in assets.
WAM employs a team approach to management of the Fund. The management team is
comprised of the lead portfolio manager, other WAM portfolio managers and
research analysts. Team members share responsibility for providing ideas,
information, knowledge and expertise in managing the Fund. Each team member has
one or more areas of expertise that is applied to the management of the Fund.
Daily decisions on portfolio selection rest with the lead portfolio manager who
utilizes the input and advice of the management team in making purchase and sale
determinations.
ROBERT MOHN is the Fund's lead portfolio manager.
Mr. Mohn has been a key member of WAM's domestic analytical team since August
1992, and a principal of WAM since July 1995. Prior to his position at WAM, he
worked as an analyst for Ariel Capital Management (June to August 1991). His
formal education includes a B.S. from Stanford University (1983) and an M.B.A.
from the University of Chicago (1992).
20
<PAGE>
State Street Bank and Trust Company is the Fund's transfer agent and custodian.
DISTRIBUTOR
Shares of Acorn USA are offered for sale through WAM Brokerage Services, L.L.C.
("WAM BD") without any sales commission or charges to the Fund or its
shareholders. WAM BD is wholly-owned by WAM and WAM's general partner, Wanger
Asset Management, Ltd. WAM BD's address is 227 West Monroe Street, Suite 3000,
Chicago, Illinois 60606-5016. All distribution and promotional expenses
relating to the Fund are paid by WAM, including the payment or reimbursement of
any expenses incurred by WAM BD.
EXPENSES
Like all mutual funds, Acorn USA pays expenses related to its daily operations.
Expenses paid out of the Fund's assets are reflected in its share price or
dividends.
The Fund pays a MANAGEMENT FEE to WAM for managing its investments and business
affairs. For services provided by WAM, the Fund pays an annual fee of (i) 1.00%
of the Fund's average daily net assets up to $200 million, and (ii) .95% of
average daily net assets in excess of $200 million.
While the management fee is a significant component of the Fund's annual
operating costs, the Fund has other expenses, too. The Fund pays the fees of
its custodian, transfer agent, auditors, and lawyers. It also pays other
expenses such as the cost of compliance with federal and state laws, proxy
solicitations, shareholder reports, taxes, insurance premiums, and the fees of
trustees who are not otherwise affiliated with Acorn or WAM.
THE ACORN PHILOSOPHY
ACORN USA seeks long-term capital growth.
THE FUND PREFERS SMALL COMPANIES. Since large institutions seek highly
marketable stocks, the stocks of large companies are studied in detail by
security analysts, with the result that all investors know much the same thing
about large companies. WAM prefers to work with stocks where values are more
attractive because the facts about the companies are not universally known. The
Fund thus generally concentrates purchases on that segment of the market where
the competition is less intense -- companies with a total common stock market
capitalization of less than $1 billion. WAM wants to be able to understand any
company in which the Fund invests, and smaller companies are easier to
comprehend than large firms or conglomerates. When a company develops into a
multi-industry giant, it is difficult for even the top management of the company
to understand its own business and even harder for an outsider to follow such
widespread activities. Since WAM places a premium on understanding the Fund's
investments, when possible WAM talks to top management directly. That is easier
to do with smaller firms.
21
<PAGE>
LOOKING FOR HIGH QUALITY COMPANIES. The Fund looks for quality businesses, with
each investment ideally resting on a solid tripod of growth potential, financial
strength, and fundamental value. Not all of the companies in which the Fund
invests necessarily have all of these characteristics.
The sources of growth are a growing marketplace for the company's product, good
design, efficient manufacturing, sound marketing, and good profit margins.
Financial strength means low debt, adequate working capital, and conservative
accounting principles. Strong capitalization gives management the stability and
flexibility to reach strategic objectives. In economies with less well-
developed capital markets than those of the U.S., a strong balance sheet is an
essential component of competitive advantage. Fundamental value means low
relative price. The existence of a good company does not necessarily make its
stock a good buy. The price of a stock determines value as measured relative to
dividends, earnings, cash flow, growth rate, book value, and economic
replacement value of assets. The emphasis on fundamentals in relation to price
sets the Fund apart from pure "growth" or "value" funds.
WAM also believes that finding and understanding high quality companies is
important because investing in smaller companies involves relatively higher
investment costs. One way to reduce these costs is to invest with a long-term
time horizon (at least 3-5 years) and to avoid frequent turnover of the stocks
held by the Fund. Occasionally, however, securities purchased on a long-term
basis may be sold within 12 months after purchase in light of a change in the
circumstances of a particular company or industry, or in general market or
economic conditions.
INVESTMENT THEMES. To find long-term investments and reduce its rate of
turnover, the Fund seeks out areas of the economy that it believes will benefit
from favorable long-term economic and political trends. These areas of emphasis
may change from time to time, and are usually related to identified investment
themes or market niches. A small company frequently can carve out a specialized
niche for itself. The niche can be geographic, like that of a regional bank,
utility, or railroad. It can be technological, based on patents and know-how.
Sometimes the niche is a marketing technique.
The Fund invests primarily in equity securities, including common and preferred
stocks, warrants or other similar rights, and convertible securities of U.S.
companies. The Fund may also invest in any other type of security, including
debt securities, and may invest up to 10% of its total assets in foreign
securities.
The Fund may invest without limit in corporate or government obligations or hold
cash or cash equivalents if WAM determines that a temporary defensive position
is advisable. The Fund uses various techniques to increase or decrease its
exposure to the effects of possible changes in security prices, currency
exchange rates, or other factors that affect the value of the Fund's portfolio.
These techniques include buying and selling options, futures contracts, or
options on futures contracts, or entering into currency exchange contracts or
swap agreements.
The investment objective of the Fund may be changed by the board of trustees
without shareholder approval. If there were such a change, you should consider
whether the Fund would remain an appropriate investment in light of your then
current financial position and needs. The Fund alone is not intended to present
a balanced investment program.
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<PAGE>
SECURITIES, INVESTMENT PRACTICES, AND RISKS
The following pages contain more detailed information about types of investments
the Fund may make, and strategies WAM may employ in pursuit of the Fund's
investment objective, including information about the associated risks and
restrictions. All policies stated throughout this prospectus, other than those
identified as fundamental, can be changed without shareholder approval. A
complete statement of the Fund's investment restrictions is included in the SAI.
Compliance with these policies and limitations is determined at the time of
purchase; the sale of an investment is not required because of a subsequent
change in circumstances.
WAM may not buy all of these instruments or use all of these techniques to the
full extent permitted unless it believes that doing so will help the Fund
achieve its goal.
COMMON STOCKS. Common stocks represent an equity (ownership) interest in a
corporation. This ownership interest often gives the Fund the right to vote on
measures affecting the company's organization and operations. Although common
stocks have a history of long-term growth in value, their prices tend to
fluctuate in the short term.
Acorn USA invests mostly in the securities of smaller companies, that is,
companies with a total market capitalization of less than $1 billion. During
some periods, the securities of small companies, as a class, have performed
better than the securities of large companies, and in some periods they have
performed worse. Stocks of small companies tend to be more volatile and less
liquid than stocks of large companies. Small companies, as compared to larger
companies, may have a shorter history of operations, may not have as great an
ability to raise additional capital, may have a less diversified product line
making them susceptible to market pressure, and may have a smaller public market
for their shares.
Restrictions: The Fund may not acquire securities of any one issuer which at
the time of investment (a) represent more than 10% of the voting securities of
the issuer or (b) have a value greater than 10% of the value of the outstanding
securities of the issuer.*
DEBT SECURITIES. Bonds and other debt instruments are methods for an issuer to
borrow money from investors. The issuer pays the investor a fixed or variable
rate of interest, and must repay the amount borrowed at maturity. Debt
securities have varying degrees of quality and varying levels of sensitivity to
changes in interest rates.
- ----------------
* These restrictions are "fundamental," which means that they cannot be
changed without shareholder approval.
23
<PAGE>
"Investment grade" debt securities are those rated within the four highest
ratings categories of Standard & Poor's Corporation ("S&P") or Moody's Investors
Services, Inc. ("Moody's") or, if unrated, determined by WAM to be of comparable
quality. Securities rated BBB or Baa are considered to be medium-grade and to
have speculative characteristics. Investment in non-investment grade debt
securities is speculative and involves a high degree of risk.
Lower-rated debt securities (commonly called "junk bonds") are often considered
speculative and involve greater risk of default or price changes due to changes
in the issuer's credit-worthiness. The market prices of these securities may
fluctuate more than higher-rated securities and may decline significantly in
periods of general economic difficulty.
Money market instruments are high-quality, short-term debt securities that
present minimal credit risk. These instruments may carry fixed or variable
interest rates.
The Fund may invest without limit in corporate or government obligations, or
hold cash or cash equivalents if WAM determines that a temporary defensive
position is advisable. To meet liquidity needs (which, under normal market
conditions, are not expected to exceed 25% of its total assets) or for temporary
defensive purposes, the Fund may hold cash and may invest in domestic and
foreign money market securities.
Restrictions: There are no restrictions on the ratings of debt securities in
which the Fund may invest. However, Acorn USA does not intend to invest more
than 20% of its total assets in debt securities, nor more than 5% of its total
assets in debt securities rated at or lower than the lowest investment grade.
ILLIQUID AND RESTRICTED SECURITIES
Some investments may be determined by WAM to be illiquid, which means that they
may be difficult to sell promptly at an acceptable price. Other securities,
such as securities acquired in private placements, may be subject to certain
legal restrictions on sale. Difficulty in selling securities may result in
delays or a loss, or may be costly to the Fund.
Restrictions: Acorn USA may not purchase a security if, as a result, more than
15% of its total assets would be invested in illiquid or restricted securities.
DIVERSIFICATION
Diversifying the Fund's investment portfolio can reduce the risks of investing.
This may include limiting the amount of money invested in any one company or, on
a broader scale, limiting the amount invested in any one industry.
24
<PAGE>
Restrictions: Acorn USA may not invest more than 5% of its total assets in the
securities of any one issuer. This restriction applies to only 75% of Acorn
USA's total assets, leaving a "basket" of 25% of total assets in which
investments may exceed the 5% limit. The Fund may not invest more than 25% of
its total assets in any one industry. These limitations do not apply to U.S.
government securities.*
LENDING AND REPURCHASE AGREEMENTS
The Fund generally may not make loans, but will invest in repurchase agreements
(generally as a cash management technique). A repurchase agreement involves a
sale of securities to the Fund in which the seller agrees to repurchase the
securities at a higher price, which includes an amount representing interest on
the purchase price, within a specified time. In the event of bankruptcy of the
seller, the Fund could experience both losses and delays in liquidating its
collateral.
Restrictions: The Fund may not generally make loans, but may (a) invest in debt
securities within the limits described in the prospectus and SAI, (b) invest in
repurchase agreements, or (c) lend up to 33% of its portfolio securities.*
OTHER INVESTMENT COMPANIES
The Fund may invest in other investment companies, which may involve the payment
of a premium above the value of the issuer's portfolio securities, and is
subject to market availability. In the case of a purchase of shares of such a
company in a public offering, the purchase price may include an underwriting
spread. As a shareholder in an investment company, the Fund would bear its
ratable share of that investment company's expenses, including its advisory and
administration fees. At the same time, the Fund would continue to pay its own
management fees and other expenses. The Fund does not intend to invest in such
circumstances unless, in the judgment of WAM, the potential benefits of such
investment justify the payment of any applicable premium or sales charge and the
additional layer of expense.
Restrictions: Acorn USA generally may invest up to 10% of its assets in shares
of other investment companies and up to 5% of its assets in any one investment
company (in each case measured at the time of investment). No investment in
another investment company may represent more than 3% of the outstanding voting
stock of the acquired investment company at the time of investment.
FOREIGN SECURITIES
The Fund invests mostly in stocks of U.S. companies, but has the flexibility to
invest up to 10% of its total assets in foreign securities. Investment in a
foreign security may be appropriate if the foreign company has significant U.S.
operations, or occasionally if WAM believes it is an exceptional investment
opportunity.
- ----------------
* These restrictions are fundamental.
25
<PAGE>
Investments in foreign securities provide opportunities different from those
available in the U.S., and risks which in some ways may be greater than in U.S.
investments, including: fluctuations in exchange rates of foreign currencies;
less public information with respect to issuers of securities; less governmental
supervision of stock exchanges, securities brokers, and issuers of securities;
different accounting, auditing, and financial reporting standards; different
settlement periods and trading practices; less liquidity, frequently greater
price volatility, and higher transaction costs in foreign markets than in the
United States; imposition of foreign taxes; and political risk, including
expropriation or nationalization.
The Fund may invest in American Depositary Receipts (ADRs) that are not
sponsored by the issuer of the underlying security. To the extent the Fund does
so, it would probably bear its proportionate share of the expenses of the
depository and might have greater difficulty in receiving copies of the issuer's
shareholder communications than would be the case with a sponsored ADR.
The Fund may invest in securities purchased on a when-issued and delayed
delivery basis. Although the payment terms of such a security are established at
the time a fund enters into the commitment, the security may be delivered and
paid for a month or more after the date of purchase, when its value may have
changed. The Fund will make such commitments only with the intention of
actually acquiring the securities, but may sell the securities before settlement
date if WAM considers it advisable for investment reasons.
Restrictions. Acorn USA's investments in foreign securities, including ADRs,
are limited to not more than 10% of its total assets.
MANAGING INVESTMENT EXPOSURE
The Fund uses various techniques to increase or decrease its exposure to the
effects of possible changes in security prices, currency exchange rates or other
factors that affect the value of the Fund's portfolio. These techniques include
buying and selling options, futures contracts, or options on futures contracts,
or entering into currency exchange contracts or swap agreements.
These techniques are used by WAM to adjust the risk and return characteristics
of the Fund's portfolio. If WAM judges market conditions incorrectly or
employs a strategy that does not correlate well with the Fund's investments, or
if the counterparty to the transaction does not perform as promised, the
transaction could result in a loss. Use of these techniques may increase the
volatility of the Fund and may involve a small investment of cash relative to
the magnitude of the risk assumed. These techniques are used by the Fund for
hedging, risk management or portfolio management purposes and not for
speculation.
OPTIONS AND FUTURES. The Fund may enter into stock index or currency futures
contracts (or options thereon) to hedge a portion of the Fund's portfolio, to
provide an efficient means of regulating the Fund's exposure to the equity
markets, or as a hedge against changes in prevailing levels of currency exchange
rates. The Fund may write covered call options and purchase put and call
options on foreign currencies, securities, and stock indices. Futures contracts
and options can be highly volatile. The Fund's attempt to use such investments
for hedging purposes may not be successful and could result in reduction of the
Fund's total return.
26
<PAGE>
CURRENCY EXCHANGE TRANSACTIONS. The Fund may use forward foreign currency
contracts to "lock-in" an exchange rate between the U.S. dollar and the foreign
currency or currencies involved in a particular transaction or in which
portfolio securities are denominated. A forward contract is an agreement to
purchase or sell a specified currency at a specified future date (or within a
specified time period) and price set at the time of the contract. Forward
contracts are usually entered into with banks and broker-dealers, are not
exchange-traded and are usually for less than one year, but may be renewed.
Although forward contracts may be used to protect the Fund from adverse currency
movements, the use of such hedges may reduce or eliminate the potentially
positive effect of currency revaluations on the Fund's total return. See the
SAI for more information.
Restrictions: The Fund will not use futures contracts for speculation, and will
limit its use of futures contracts so that no more than 5% of its total assets
would be committed to initial margin deposits or premiums on such contracts.
The aggregate market value of the Fund's portfolio securities covering call or
put options will not exceed 10% of the Fund's net assets.
27
<PAGE>
- -------------------------------------------------------------------------------
HOW TO CONTACT US
- -------------------------------------------------------------------------------
MAIL LOGO
- -------------------------------------------------------------------------------
State Street Bank & Trust Co. . for regular mail delivery, including
Attn: Acorn Funds purchases, written exchanges,
P. O. Box 8502 redemptions, and IRA contributions
Boston, MA 02266-8502
Boston Financial Data Service . for overnight deliveries of purchases,
Attn: Acorn Funds written exchanges, redemptions, or IRA
2 Heritage Drive, 6th Floor contributions
N. Quincy, MA 02171
Wanger Asset Management, L.P. . the Fund's adviser
227 W. Monroe St., Suite 3000
Chicago, IL 60606-5016
WAM Brokerage Services, L.L.C. . the Fund's distributor
227 W. Monroe St., Suite 3000
Chicago, IL 60606-5016
- -------------------------------------------------------------------------------
PHONE LOGO
- -------------------------------------------------------------------------------
1-800-9-ACORN-9 . for Fund information, account balances,
(1-800-922-6769) literature, prices, and performance
information (from outside the U.S. 1-312-
634-9240)
1-800-962-1585 . for telephone purchases, exchanges and
redemptions, and for IRA information
(from outside the U.S. 1-617-774-5000
ext. 6457)
1-800-221-3079 . to exchange out of a money fund
1-800-306-4567 . TDD service for the deaf and hearing
impaired
Customer service is available on business days from 8:00 a.m. to 4:30 p.m.
Chicago (central) time.
Telephone requests for purchases, redemptions or exchanges from any of the Acorn
Funds must be made by 3:00 p.m. Chicago (central) time. Telephone requests for
purchases, redemptions or exchanges from the Reich & Tang Money Funds must be
made by 11:00 a.m. Chicago (central) time.
- -------------------------------------------------------------------------------
WIRE LOGO
- -------------------------------------------------------------------------------
State Street Bank & Trust Co. . to wire money from your bank to add to an
Attn: Mutual Funds existing account
Boston, MA 02110
Routing #0110-0002-8
Deposit DDA 9902-990-2
Specify the name of the fund and
the name and the number on your
account
28
<PAGE>
29
<PAGE>
Acorn Investment Trust P.O. Box 8502 [ACORN LOGO]
Boston, MA 02266-8502
Application - Acorn USA
It takes only a few moments to fill out this simple step-by-step
application. If you have questions, call us at 1-800-9-ACORN-9,
(1-800-922-6769), weekdays, 8:00am-4:30pm, Chicago (central) time.
Please be sure to print your information on this application, then
simply sign and return it to us in the postage-paid envelope we've
provided. (Please do not use this form if you are opening an IRA.)
YOUR ACCOUNT REGISTRATION
[][][] [][] [][][][]
Social Security Number (Use minor's social security number for
gifts/transfers to minors) or
[][] [][][][][][][]
Taxpayer ID Number
_____________________________________________________________
[] Individual or Joint* Account
_____________________________________________________________
Owner's name: first, middle initial, last
_____________________________________________________________
Joint owner's name: first, middle initial, last
*Joint tenants with right of survivorship, unless
you indicate otherwise.
_____________________________________________________________
[] Gift/Transfer to a Minor (ugma/utma)
_____________________________________________as custodian for
Custodian's name: first, middle initial, last
____________________________________________________under the
Minor's name: first, middle initial, last
_________________________Uniform Gifts/Transfers to Minors Act.
State
_______________________________________________________________
Minor's date of birth
_______________________________________________________________
[] Trust or Established Employee Benefit
or Profit-Sharing Plan
___________________________________________________as trustee of
Trustee('s) name(s)
_______________________________________________________________
Name of Trust Agreement
_______________________________________________________________
Date of Trust Agreement
Please include copy of first page and last page of trust agreement.
_______________________________________________________________
[] Corporation or Other Entity
_______________________________________________________________
Name of corporation or other entity
_______________________________________________________________
Type of entity (for example, corporation, partnership, non-profit)
Please attach a certified copy of your corporate resolution showing
the person(s) authorized to act on this account.
YOUR ADDRESS
_______________________________________________________________
Street or P.O. Box
_______________________________________________________________
City State Zip Code
_______________________________________________________________
Daytime phone, including area code
[] U.S. Citizen [] Non-citizen residing in U.S.
To invest, you must be a U.S. citizen (or a non-citizen residing
in the U.S.) with a social security or tax identification number.
CHOOSE YOUR INVESTMENTS
There is an initial investment minimum of $1,000 per Fund.
[] Acorn Fund $___________________
[] Acorn International $___________________
[] Acorn USA $___________________
[] Total Investment $___________________
Make check(s) payable to Acorn Fund and/or Acorn International.
DIVIDEND/CAPITAL GAINS PAYMENT OPTIONS
Please choose how you want to receive your income dividends and
capital gains. If no option is checked, all dividends and capital
gains will be reinvested automatically. (Check one box.)
[] Reinvest dividends and capital gains to help keep my
account growing.
[] Pay dividends and capital gains in cash.
[] Pay dividends in cash; reinvest capital gains.
DUPLICATE STATEMENTS
_______________________________________________________________
[] Send duplicate statements for my account to:
_______________________________________________________________
Name
_______________________________________________________________
Street or P.O. Box
_______________________________________________________________
City State Zip Code
MORE ON THE BACK.
<PAGE>
Acorn Investment Trust FIRST CLASS
WAM Brokerage Services, L.L.C. U.S. POSTAGE
P.O. Box 8502 PAID
Boston, MA 02266-8502 CHICAGO, IL
PERMIT NO. 1200
AUTOMATIC INVESTMENT PLAN
To keep building your investments, you can easily add
to your fund accounts by joining the automatic
investment plan:
[_] Automatic Investment Plan: to add to your Acorn USA
account automatically
[_] monthly [_] quarterly (check only one box)
The minimum automatic investment is $100; the maximum
is $50,000. Your automatic investment will be drawn from
your bank account on or about the 15th of the month.
Attach a voided check from the bank account you will
be using.
BANK TRANSFER OPTIONS
To make transactions fast and easy, choose the Telephone
Purchase Plan, Telephone Redemption by Wire Plan, or both.
It takes about 10 days to set up these plans.
[_] Telephone Purchase Plan: to add to your Acorn USA account
or by transferring money from your bank checking account
($100 minimum, $50,000 maximum per transfer.)
[_] Telephone Redemptions by wire: to redeem shares and
transfer the money to your bank checking account ($1,000
minimum, $50,000 maximum per transaction.)
Telephone requests for purchases or redemptions must be made
by 3:00 p.m. Chicago (central) time.
Attach a voided check from the bank account you will be using.
TELEPHONE PLANS
You automatically have the ability to exchange and redeem
shares by telephone unless you check the boxes below.
Proceeds of telephone redemption requests are paid by check
mailed to the address of record may not be more than
$50,000. Exchanges must be between identically-registered
accounts and requested by 3:00 p.m. Chicago (central) time.
See the prospectus for details.
I do NOT want: [_] telephone exchanges
---
[_] telephone redemptions
AGREEMENT
By signing this form, I certify that:
I am of legal age, have received and read the Prospectus, and
agree to its terms. I understand that each of the account
services, including the telephone exchange plan, may be
terminated or modified by Acorn in the future.
If I fail to give the correct number or sign this form, Acorn
may reject, restrict, or redeem my investment.
I authorize Acorn and its affiliates and agents to act on any
instructions reasonably believed to be genuine for any service
authorized on this form (including telephone transactions).
I agree that they will not be liable for any resulting loss or
expense. I certify that I have read the explanation and agree
to the terms and provisions for the services I have elected
as set forth in the current prospectus of Acorn Fund and Acorn
International, as amended from time to time.
(If you have elected the Automatic Investment Plan or any
Bank Transfer Option) I authorize Acorn and its affiliates
and agents to initiate (1) credit entries (deposits) (if
I have elected the telephone redemption bank transfer option),
(2) debit entries (withdrawals) (if I have elected to participate
in the Automatic Investment Plan or telephone purchase Bank Transfer
Option), and (3) debit or credit entries and adjustments for
any entries made in error to my bank account, for which I
have attached a voided check. This authorization will remain
effective until I notify Acorn in writing or by telephone at
1-800-962-1585 of its termination and until Acorn has a
reasonable time to act on that termination.
YOUR SIGNATURE
Under penalty, I certify that (i) the Social Security or Tax
Identification Number given is correct and (ii) I am NOT
currently subject to IRS backup withholding for failure to
report dividend or interest income to the IRS. (Please cross
out "NOT" if you are currently subject to withholding.) The
IRS does not require your consent to any provision of this
document other than the certifications required to avoid
backup withholding.
X
______________________________________________________________________
Signature (Sign exactly as name appears in Account Registration) Date
X
______________________________________________________________________
Signature (Sign exactly as name appears in Account Registration) Date
Joint accounts require both signatures.
<PAGE>
ACORN INVESTMENT TRUST
STATEMENT OF
ADDITIONAL
INFORMATION
September 3, 1996
227 West Monroe Street
Suite 3000
Chicago, Illinois 60606
1-800-9-ACORN-9
1-800-922-6769
ACORN USA
No-Load Fund
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
-----------------
Page
----
Information About the Fund................................................. 2
Investment Objectives and Policies......................................... 2
Investment Techniques and Risks............................................ 2
Investment Restrictions.................................................... 14
Performance Information.................................................... 17
Investment Adviser......................................................... 17
Distributor................................................................ 19
The Trust.................................................................. 19
Trustees and Officers...................................................... 20
Purchasing and Redeeming Shares............................................ 22
Additional Tax Information................................................. 24
Portfolio Transactions..................................................... 25
Custodian.................................................................. 26
Independent Auditors....................................................... 26
Appendix - Description of Bond Ratings..................................... 26
- --------------------------------------------------------------------------------
This Statement of Additional Information ("SAI") is not a prospectus but
provides information that should be read in conjunction with the prospectus of
ACORN USA dated September 3, 1996 and any supplement thereto, which may be
obtained from Acorn at no charge by writing or telephoning Acorn at its address
or telephone number shown above.
<PAGE>
INFORMATION ABOUT THE FUND
ACORN USA is a series of Acorn Investment Trust ("Acorn" or the "Trust").
The discussion below supplements the description in the prospectus of the
Fund's investment objectives, policies, and restrictions.
INVESTMENT OBJECTIVES AND POLICIES
ACORN USA invests with the objective of long-term growth of capital.
Although income is considered by ACORN USA in the selection of securities, the
Fund is not designed for investors seeking primarily income rather than capital
appreciation.
The Fund uses the techniques and invests in the types of securities
described below and in the prospectus.
INVESTMENT TECHNIQUES AND RISKS
DEBT SECURITIES
The Fund may invest in debt securities, including lower-rated securities
(i.e., securities rated BB or lower by Standard & Poor's Corporation ("S&P") or
Ba or lower by Moody's Investor Services, Inc. ("Moody's"), commonly called
"junk bonds"), and securities that are not rated. There are no restrictions as
to the ratings of debt securities acquired by the Fund or the portion of the
Fund's assets that may be invested in debt securities in a particular ratings
category. The Fund does not intend to invest more than 20% of its total assets
in debt securities nor more than 5% of its total assets in securities rated at
or lower than the lowest investment grade.
Securities rated BBB or Baa are considered to be medium grade and to have
speculative characteristics. Lower-rated debt securities are predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal. Investment in medium- or lower-quality debt securities involves
greater investment risk, including the possibility of issuer default or
bankruptcy. An economic downturn could severely disrupt the market for such
securities and adversely affect the value of such securities. In addition,
lower-quality bonds are less sensitive to interest rate changes than higher-
quality instruments and generally are more sensitive to adverse economic changes
or individual corporate developments. During a period of adverse economic
changes, including a period of rising interest rates, the junk bond market may
be severely disrupted, and issuers of such bonds may experience difficulty in
servicing their principal and interest payment obligations.
Medium- and lower-quality debt securities may be less marketable than
higher-quality debt securities because the market for them is less broad. The
market for unrated debt securities is even narrower. During periods of thin
trading in these markets, the spread between bid and asked prices is likely to
increase significantly, and the Fund may have greater difficulty selling
2
<PAGE>
its portfolio securities. See "Net Asset Value." The market value of these
securities and their liquidity may be affected by adverse publicity and investor
perceptions.
A more complete description of the characteristics of bonds in each ratings
category is included in the appendix to this SAI.
OPTIONS AND FUTURES
The Fund may purchase and write both call options and put options on
securities and on indexes, and enter into interest rate and index futures
contracts, and may purchase or sell options on such futures contracts ("futures
options") in order to provide additional revenue, or to hedge against changes in
security prices or interest rates. The Fund may also use other types of
options, futures contracts and futures options currently traded or subsequently
developed and traded, provided the board of trustees determines that their use
is consistent with the Fund's investment objective.
OPTIONS. An option on a security (or index) is a contract that gives the
purchaser (holder) of the option, in return for a premium, the right to buy from
(call) or sell to (put) the seller (writer) of the option the security
underlying the option (or the cash value of the index) at a specified exercise
price at any time during the term of the option (normally not exceeding nine
months). The writer of an option on an individual security or on a foreign
currency has the obligation upon exercise of the option to deliver the
underlying security or foreign currency upon payment of the exercise price or to
pay the exercise price upon delivery of the underlying security or foreign
currency. Upon exercise, the writer of an option on an index is obligated to
pay the difference between the cash value of the index and the exercise price
multiplied by the specified multiplier for the index option. (An index is
designed to reflect specified facets of a particular financial or securities
market, a specific group of financial instruments or securities, or certain
economic indicators.)
The Fund will write call options and put options only if they are
"covered." For example, in the case of a call option on a security, the option
is "covered" if the Fund owns the security underlying the call or has an
absolute and immediate right to acquire that security without additional cash
consideration (or, if additional cash consideration is required, cash or cash
equivalents in such amount are held in a segregated account by its custodian)
upon conversion or exchange of other securities held in its portfolio.
If an option written by the Fund expires, the Fund realizes a capital gain
equal to the premium received at the time the option was written. If an option
purchased by the Fund expires, the Fund realizes a capital loss equal to the
premium paid.
Prior to the earlier of exercise or expiration, an option may be closed out
by an offsetting purchase or sale of an option of the same series (type,
exchange, underlying security or index, exercise price and expiration). There
can be no assurance, however, that a closing purchase or sale transaction can be
effected when the Fund desires.
3
<PAGE>
The Fund will realize a capital gain from a closing purchase transaction if
the cost of the closing option is less than the premium received from writing
the option, or, if it is more, the Fund will realize a capital loss. If the
premium received from a closing sale transaction is more than the premium paid
to purchase the option, the Fund will realize a capital gain or, if it is less,
the Fund will realize a capital loss. The principal factors affecting the
market value of a put or a call option include supply and demand, interest
rates, the current market price of the underlying security or index in relation
to the exercise price of the option, the volatility of the underlying security
or index, and the time remaining until the expiration date.
A put or call option purchased by the Fund is an asset of the Fund, valued
initially at the premium paid for the option. The premium received for an
option written by the Fund is recorded as a deferred credit. The value of an
option purchased or written is marked-to-market daily and is valued at the
closing price on the exchange on which it is traded or, if not traded on an
exchange or no closing price is available, at the mean between the last bid and
asked prices.
OTC DERIVATIVES. The Fund may buy and sell over-the-counter ("OTC")
derivatives. Unlike exchange-traded derivatives, which are standardized with
respect to the underlying instrument, expiration date, contract size, and strike
price, the terms of OTC derivatives (derivatives not traded on exchanges)
generally are established through negotiation with the other party to the
contract. While this type of arrangement allows the Fund greater flexibility to
tailor an instrument to its needs, OTC derivatives generally involve greater
credit risk than exchange-traded derivatives, which are guaranteed by the
clearing organization of the exchanges where they are traded. The Fund will
limit its investments so that no more than 5% of its total assets will be placed
at risk in the use of OTC derivatives.
RISKS ASSOCIATED WITH OPTIONS. There are several risks associated with
transactions in options. For example, there are significant differences between
the securities markets, the currency markets, and the options markets that could
result in an imperfect correlation between these markets, causing a given
transaction not to achieve its objectives. A decision as to whether, when, and
how to use options involves the exercise of skill and judgment, and even a well-
conceived transaction may be unsuccessful to some degree because of market
behavior or unexpected events.
There can be no assurance that a liquid market will exist when the Fund
seeks to close out an option position. If the Fund were unable to close out an
option that it had purchased on a security, it would have to exercise the option
in order to realize any profit or the option would expire and become worthless.
If the Fund were unable to close out a covered call option that it had written
on a security, it would not be able to sell the underlying security until the
option expired. As the writer of a covered call option on a security, the Fund
foregoes, during the option's life, the opportunity to profit from increases in
the market value of the security covering the call option above the sum of the
premium and the exercise price of the call. As the writer of a covered call
option on a foreign currency, the Fund foregoes, during the option's life, the
opportunity to profit from currency appreciation.
4
<PAGE>
If trading were suspended in an option purchased or written by the Fund,
the Fund would not able to close out the option. If restrictions on exercise
were imposed, the Fund might be unable to exercise an option it has purchased.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Fund may use
interest rate futures contracts and index futures contracts. An interest rate
or index futures contract provides for the future sale by one party and purchase
by another party of a specified quantity of a financial instrument or the cash
value of an index /1/ at a specified price and time. A public market exists in
futures contracts covering a number of indexes (including, but not limited to:
the Standard & Poor's 500 Index; the Value Line Composite Index; and the New
York Stock Exchange Composite Index) as well as financial instruments
(including, but not limited to: U.S. Treasury bonds; U.S. Treasury notes;
Eurodollar certificates of deposit; and foreign currencies). Other index and
financial instrument futures contracts are available and it is expected that
additional futures contracts will be developed and traded.
The Fund may purchase and write call and put futures options. Futures
options possess many of the same characteristics as options on securities and
indexes (discussed above). A futures option gives the holder the right, in
return for the premium paid, to assume a long position (call) or short position
(put) in a futures contract at a specified exercise price at any time during the
period of the option. Upon exercise of a call option, the holder acquires a
long position in the futures contract and the writer is assigned the opposite
short position. In the case of a put option, the opposite is true.
To the extent required by regulatory authorities having jurisdiction over
the Fund, the Fund will limit its use of futures contracts and futures options
to hedging transactions. For example, the Fund might use futures contracts to
hedge against fluctuations in the general level of stock prices, anticipated
changes in interest rates, or currency fluctuations that might adversely affect
either the value of the Fund's securities or the price of the securities that
the Fund intends to purchase. The Fund's hedging may include sales of futures
contracts as an offset against the effect of expected declines in stock prices
or currency exchange rates or increases in interest rates and purchases of
futures contracts as an offset against the effect of expected increases in stock
prices or currency exchange rates or declines in interest rates. Although other
techniques could be used to reduce the Fund's exposure to stock price, interest
rate, and currency fluctuations, the Fund may be able to hedge its exposure
more effectively and perhaps at a lower cost by using futures contracts and
futures options.
The success of any hedging technique depends on WAM correctly predicting
changes in the level and direction of stock prices, interest rates, currency
exchange rates, and other factors.
- ----------------
/1/ A futures contract on an index is an agreement pursuant to which two
parties agree to take or make delivery of an amount of cash equal to the
difference between the value of the index at the close of the last trading
day of the contract and the price at which the index contract was
originally written. Although the value of a securities index is a function
of the value of certain specified securities, no physical delivery of those
securities is made.
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Should those predictions be incorrect, the Fund's return might have been better
had hedging not been attempted; however, in the absence of the ability to hedge,
WAM might have taken portfolio actions in anticipation of the same market
movements with similar investment results but, presumably, at greater
transaction costs.
When a purchase or sale of a futures contract is made by the Fund, the Fund
is required to deposit with its custodian (or broker, if legally permitted) a
specified amount of cash or U.S. government securities or other securities
acceptable to the broker ("initial margin"). The margin required for a futures
contract is set by the exchange on which the contract is traded and may be
modified during the term of the contract. The initial margin is in the nature
of a performance bond or good faith deposit on the futures contract, which is
returned to the Fund upon termination of the contract, assuming all contractual
obligations have been satisfied. The Fund expects to earn interest income on
its initial margin deposits. A futures contract held by the Fund is valued
daily at the official settlement price of the exchange on which it is traded.
Each day the Fund pays or receives cash, called "variation margin," equal to the
daily change in value of the futures contract. This process is known as
"marking-to-market." Variation margin paid or received by the Fund does not
represent a borrowing or loan by the Fund but is instead settlement between the
Fund and the broker of the amount one would owe the other if the futures
contract had expired at the close of the previous day. In computing daily net
asset value, the Fund will mark-to-market its open futures positions.
The Fund is also required to deposit and maintain margin with respect to
put and call options on futures contracts it writes. Such margin deposits will
vary depending on the nature of the underlying futures contract (and the related
initial margin requirements), the current market value of the option, and other
futures positions held by the Fund.
Although some futures contracts call for making or taking delivery of the
underlying securities, usually these obligations are closed out prior to
delivery by offsetting purchases or sales of matching futures contracts (same
exchange, underlying security or index, and delivery month). If an offsetting
purchase price is less than the original sale price, the Fund realizes a capital
gain, or if it is more, the Fund realizes a capital loss. Conversely, if an
offsetting sale price is more than the original purchase price, the Fund
realizes a capital gain, or if it is less, the Fund realizes a capital loss.
The transaction costs must also be included in these calculations.
RISKS ASSOCIATED WITH FUTURES. There are several risks associated with the
use of futures contracts and futures options as hedging techniques. A purchase
or sale of a futures contract may result in losses in excess of the amount
invested in the futures contract. There can be no guarantee that there will be
a correlation between price movements in the hedging vehicle and in the
portfolio securities being hedged. In addition, there are significant
differences between the securities and futures markets that could result in an
imperfect correlation between the markets, causing a given hedge not to achieve
its objectives. The degree of imperfection of correlation depends on
circumstances such as: variations in speculative market demand for futures,
futures options, and the related securities, including technical influences in
futures and futures options trading and differences between the Fund's
investments being hedged and the securities underlying the standard contracts
available for trading. For example, in the case of
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index futures contracts, the composition of the index, including the issuers and
the weighting of each issue, may differ from the composition of the Fund's
portfolio, and, in the case of interest rate futures contracts, the interest
rate levels, maturities, and creditworthiness of the issues underlying the
futures contract may differ from the financial instruments held in the Fund's
portfolio. A decision as to whether, when, and how to hedge involves the
exercise of skill and judgment, and even a well-conceived hedge may be
unsuccessful to some degree because of market behavior or unexpected stock price
or interest rate trends.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of the
current trading session. Once the daily limit has been reached in a futures
contract subject to the limit, no more trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because the
limit may work to prevent the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses. Stock index futures contracts are not normally subject to
such daily price change limitations.
There can be no assurance that a liquid market will exist at a time when
the Fund seeks to close out a futures or futures option position. The Fund
would be exposed to possible loss on the position during the interval of
inability to close, and would continue to be required to meet margin
requirements until the position is closed. In addition, many of the contracts
discussed above are relatively new instruments without a significant trading
history. As a result, there can be no assurance that an active secondary market
will develop or continue to exist.
LIMITATIONS ON OPTIONS AND FUTURES. The Fund will not enter into a futures
contract or purchase an option thereon if, immediately thereafter, the initial
margin deposits for futures contracts held by the Fund plus premiums paid by it
for open futures option positions, less the amount by which any such positions
are "in-the-money," /2/ would exceed 5% of the Fund's total assets.
When purchasing a futures contract or writing a put option on a futures
contract, the Fund must maintain with its custodian (or broker, if legally
permitted) cash or cash equivalents (including any margin) equal to the market
value of such contract. When writing a call option on a futures contract, the
Fund similarly will maintain with its custodian cash or cash equivalents
(including any margin) equal to the amount by which such option is in-the-money
until the option expires or is closed out by the Fund.
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/2/ A call option is "in-the-money" if the value of the futures contract that
is the subject of the option exceeds the exercise price. A put option is
"in-the-money" if the exercise price exceeds the value of the futures
contract that is the subject of the option.
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The Fund may not maintain open short positions in futures contracts, call
options written on futures contracts, or call options written on indexes if, in
the aggregate, the market value of all such open positions exceeds the current
value of the securities in its portfolio, plus or minus unrealized gains and
losses on the open positions, adjusted for the historical relative volatility of
the relationship between the portfolio and the positions. For this purpose, to
the extent the Fund has written call options on specific securities in its
portfolio, the value of those securities will be deducted from the current
market value of the securities portfolio.
In order to comply with Commodity Futures Trading Commission Regulation 4.5
and thereby avoid being deemed a "commodity pool operator," the "underlying
commodity value" of each long position in a commodity contract in which the Fund
invests will not at any time exceed the sum of:
(1) The value of short-term U.S. debt obligations or other U.S.
dollar denominated high-quality short-term money market
instruments and cash set aside in an identifiable manner,
plus any funds deposited as margin on the contract;
(2) Unrealized appreciation on the contract held by the broker; and
(3) Cash proceeds from existing investments due in not more than 30 days.
"Underlying commodity value" means the size of the contract multiplied by
the daily settlement price of the contract.
As long as the Fund continues to sell its shares in certain states, the
Fund's options and futures transactions will also be subject to certain non-
fundamental investment restrictions set forth under "Investment Restrictions" in
this SAI. Moreover, the Fund will not purchase puts, calls, straddles, spreads,
or any combination thereof if by reason of such purchase more than 10% of the
Fund's total assets would be invested in such securities.
SWAP AGREEMENTS. A swap agreement is generally individually negotiated and
structured to include exposure to a variety of different types of investments or
market factors. Depending on its structure, a swap agreement may increase or
decrease the Fund's exposure to changes in the value of an index of securities
in which the Fund might invest, the value of a particular security or group of
securities, or foreign currency values. Swap agreements can take many different
forms and are known by a variety of names. The Fund may enter into any form of
swap agreement if WAM determines it is consistent with the Fund's investment
objective and policies, but the Fund will limit its use of swap agreements so
that no more than 5% of its total assets will be placed at risk.
A swap agreement tends to shift the Fund's investment exposure from one
type of investment to another. For example, if the Fund agrees to exchange
payments in dollars at a fixed rate for payments in a foreign currency the
amount of which is determined by movements of a foreign securities index, the
swap agreement would tend to increase the Fund's exposure to foreign stock
market movements and foreign currencies. Depending on how it is used, a swap
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<PAGE>
agreement may increase or decrease the overall volatility of the Fund's
investments and its net asset value.
The performance of a swap agreement is determined by the change in the
specific currency, market index, security, or other factors that determine the
amounts of payments due to and from the Fund. If a swap agreement calls for
payments by the Fund, the Fund must be prepared to make such payments when due.
If the counterparty's creditworthiness declines, the value of a swap agreement
would be likely to decline, potentially resulting in a loss. The Fund expects
to be able to eliminate its exposure under any swap agreement either by
assignment or by other disposition, or by entering into an offsetting swap
agreement with the same party or a similarly creditworthy party.
The Fund will segregate liquid assets (such as cash, U.S. government
securities, or other liquid high grade debt obligations) of the Fund to cover
its current obligations under swap agreements. If the Fund enters into a swap
agreement on a net basis, it will segregate assets with a daily value at least
equal to the excess, if any, of the Fund's accumulated obligations under the
swap agreement over the accumulated amount the Fund is entitled to receive under
the agreement. If the Fund enters into a swap agreement on other than a net
basis, it will segregate assets with a value equal to the full amount of the
Fund's accumulated obligations under the agreement.
ILLIQUID SECURITIES
The Fund may not invest in illiquid securities, if as a result they would
comprise more than 15% of the value of the net assets of ACORN USA./3/
Restricted securities may be sold only in privately negotiated transactions
or in a public offering with respect to which a registration statement is in
effect under the Securities Act of 1933 (the "1933 Act"). Where registration is
required, the Fund may be obligated to pay all or part of the registration
expenses and a considerable period may elapse between the time of the decision
to sell and the time the Fund may be permitted to sell a security under an
effective registration statement. If, during such a period, adverse market
conditions were to develop, the Fund might obtain a less favorable price than
prevailed when it decided to sell. Restricted securities will be priced at fair
value as determined in good faith by the board of trustees. If through the
appreciation of illiquid securities or the depreciation of liquid securities,
ACORN USA should be in a position where more than 15% of the value of its net
assets are invested in illiquid assets, including restricted securities, the
Fund will take appropriate steps to protect liquidity.
Notwithstanding the above, the Fund may purchase securities that have been
privately placed but that are eligible for purchase and sale under Rule 144A
under the 1933 Act. That rule
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/3/ In addition, the Fund must comply with certain state regulations that may
impose additional restrictions. Arkansas regulations currently prohibit
investment of more than 10% of a fund's assets in restricted securities.
9
<PAGE>
permits certain qualified institutional buyers, such as the Fund, to trade in
privately placed securities that have not been registered for sale under the
1933 Act. WAM, under the supervision of the board of trustees, will consider
whether securities purchased under Rule 144A are illiquid and thus subject to
the Fund's restriction of investing no more than 15% of its assets in illiquid
securities. A determination of whether a Rule 144A security is liquid or not is
a question of fact. In making this determination WAM will consider the trading
markets for the specific security taking into account the unregistered nature of
a Rule 144A security. In addition, WAM could consider the (1) frequency of
trades and quotes, (2) number of dealers and potential purchasers, (3) dealer
undertakings to make a market, and (4) nature of the security and of market
place trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer). The liquidity of Rule 144A
securities would be monitored and if, as a result of changed conditions, it is
determined that a Rule 144A security is no longer liquid, the Fund's holdings of
illiquid securities would be reviewed to determine what, if any, steps are
required to assure that the Fund does not invest more than 15% of its assets in
illiquid securities. Investing in Rule 144A securities could have the effect of
increasing the amount of the Fund's assets invested in illiquid securities if
qualified institutional buyers are unwilling to purchase such securities.
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Fund purchases a
security from a bank or recognized securities dealer and simultaneously commits
to resell that security to the bank or dealer at an agreed-upon price, date, and
market rate of interest unrelated to the coupon rate or maturity of the
purchased security. Although repurchase agreements carry certain risks not
associated with direct investments in securities, the Fund will enter into
repurchase agreements only with banks and dealers believed by WAM to present
minimum credit risks in accordance with guidelines approved by the board of
trustees. WAM will review and monitor the creditworthiness of such
institutions, and will consider the capitalization of the institution, WAM's
prior dealings with the institution, any rating of the institution's senior
long-term debt by independent rating agencies, and other relevant factors.
The Fund will invest only in repurchase agreements collateralized at all
times in an amount at least equal to the repurchase price plus accrued interest.
To the extent that the proceeds from any sale of such collateral upon a default
in the obligation to repurchase were less than the repurchase price, the Fund
would suffer a loss. If the financial institution which is party to the
repurchase agreement petitions for bankruptcy or otherwise becomes subject to
bankruptcy or other liquidation proceedings there may be restrictions on the
Fund's ability to sell the collateral and the Fund could suffer a loss.
However, with respect to financial institutions whose bankruptcy or liquidation
proceedings are subject to the U.S. Bankruptcy Code, the Fund intends to comply
with provisions under such Code that would allow it immediately to resell such
collateral.
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<PAGE>
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES; REVERSE REPURCHASE AGREEMENTS
The Fund may purchase securities on a when-issued or delayed-delivery
basis. Although the payment and interest terms of these securities are
established at the time the Fund enters into the commitment, the securities may
be delivered and paid for a month or more after the date of purchase, when their
value may have changed. The Fund makes such commitments only with the intention
of actually acquiring the securities, but may sell the securities before the
settlement date if WAM deems it advisable for investment reasons. The Fund may
utilize spot and forward foreign currency exchange transactions to reduce the
risk inherent in fluctuations in the exchange rate between one currency and
another when securities are purchased or sold on a when-issued or delayed-
delivery basis.
The Fund may enter into reverse repurchase agreements with banks and
securities dealers. A reverse repurchase agreement is a repurchase agreement in
which the Fund is the seller of, rather than the investor in, securities and
agrees to repurchase them at an agreed-upon time and price. Use of a reverse
repurchase agreement may be preferable to a regular sale and later repurchase of
securities because it avoids certain market risks and transaction costs.
At the time the Fund enters into a binding obligation to purchase
securities on a when-issued basis or enters into a reverse repurchase agreement,
liquid assets of the Fund having a value at least as great as the purchase price
of the securities to be purchased will be segregated on the books of the Fund
and held by the custodian throughout the period of the obligation. The use of
these investment strategies, as well as any borrowing by the Fund, may increase
net asset value fluctuation.
The Fund has no present intention of investing in reverse repurchase
agreements.
FOREIGN SECURITIES
The Fund may invest up to 10% of its total assets in foreign securities
(including American Depository Receipts ("ADRs")), which may entail a greater
degree of risk (including risks relating to exchange rate fluctuations, tax
provisions, or expropriation of assets) than does investment in securities of
domestic issuers. ADRs are receipts typically issued by an American bank or
trust company evidencing ownership of the underlying securities. The Fund may
invest in sponsored or unsponsored ADRs. In the case of an unsponsored ADR, the
Fund is likely to bear its proportionate share of the expenses of the depository
and it may have greater difficulty in receiving shareholder communications than
it would have with a sponsored ADR. The Fund does not intend to invest more
than 5% of its net assets in unsponsored ADRs.
With respect to portfolio securities that are issued by foreign issuers or
denominated in foreign currencies, the Fund's investment performance is affected
by the strength or weakness of the U.S. dollar against these currencies. For
example, if the dollar falls in value relative to the Japanese yen, the dollar
value of a yen-denominated stock held in the portfolio will rise even though the
price of the stock remains unchanged. Conversely, if the dollar rises in value
relative
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to the yen, the dollar value of the yen-denominated stock will fall. (See
discussion of transaction hedging and portfolio hedging under "Currency Exchange
Transactions.")
Investors should understand and consider carefully the risks involved in
foreign investing. Investing in foreign securities, positions in which are
generally denominated in foreign currencies, and utilization of forward foreign
currency exchange contracts involve certain considerations comprising both risks
and opportunities not typically associated with investing in U.S. securities.
These considerations include: fluctuations in exchange rates of foreign
currencies; possible imposition of exchange control regulation or currency
restrictions that would prevent cash from being brought back to the United
States; less public information with respect to issuers of securities; less
governmental supervision of stock exchanges, securities brokers, and issuers of
securities; lack of uniform accounting, auditing, and financial reporting
standards; lack of uniform settlement periods and trading practices; less
liquidity and frequently greater price volatility in foreign markets than in the
United States; possible imposition of foreign taxes; possible investment in
securities of companies in developing as well as developed countries; and
sometimes less advantageous legal, operational, and financial protections
applicable to foreign sub-custodial arrangements.
Although the Fund will try to invest in companies and governments of
countries having stable political environments, there is the possibility of
expropriation or confiscatory taxation, seizure or nationalization of foreign
bank deposits or other assets, establishment of exchange controls, the adoption
of foreign government restrictions, or other adverse political, social or
diplomatic developments that could affect investment in these nations.
CURRENCY EXCHANGE TRANSACTIONS.
The Fund may enter into currency exchange transactions. A currency
exchange transaction may be conducted either on a spot (i.e., cash) basis at the
spot rate for purchasing or selling currency prevailing in the foreign exchange
market or through a forward currency exchange contract ("forward contract"). A
forward contract is an agreement to purchase or sell a specified currency at a
specified future date (or within a specified time period) and price set at the
time of the contract. Forward contracts are usually entered into with banks and
broker-dealers, are not exchange-traded, and are usually for less than one year,
but may be renewed.
Forward currency transactions may involve currencies of the different
countries in which the Fund may invest, and serve as hedges against possible
variations in the exchange rate between these currencies. The Fund's currency
transactions are limited to transaction hedging and portfolio hedging involving
either specific transactions or portfolio positions. Transaction hedging is the
purchase or sale of a forward contract with respect to specific payables or
receivables of the Fund accruing in connection with the purchase or sale of
portfolio securities. Portfolio hedging is the use of a forward contract with
respect to a portfolio security position denominated or quoted in a particular
currency. The Fund may engage in portfolio hedging with respect to the currency
of a particular country in amounts approximating actual or anticipated positions
in securities denominated in that currency. When the Fund owns or anticipates
owning
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<PAGE>
securities in countries whose currencies are linked, WAM may aggregate such
positions as to the currency hedged.
If the Fund enters into a forward contract hedging an anticipated purchase
of portfolio securities, liquid assets of the Fund, such as cash, U.S.
government securities, or other liquid high grade debt obligations, having a
value at least as great as the Fund's commitment under such forward contract
will be segregated on the books of the Fund and held by the custodian while the
contract is outstanding.
At the maturity of a forward contract to deliver a particular currency, the
Fund may either sell the portfolio security related to such contract and make
delivery of the currency, or it may retain the security and either acquire the
currency on the spot market or terminate its contractual obligation to deliver
the currency by purchasing an offsetting contract with the same currency trader
obligating it to purchase on the same maturity date the same amount of the
currency.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of a forward contract. Accordingly, it
may be necessary for the Fund to purchase additional currency on the spot market
(and bear the expense of such purchase) if the market value of the security is
less than the amount of currency that the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the currency.
Conversely, it may be necessary to sell on the spot market some of the currency
received upon the sale of the portfolio security if its market value exceeds the
amount of currency the Fund is obligated to deliver.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in forward contract prices. If the Fund engages in an offsetting
transaction, it may subsequently enter into a new forward contract to sell the
currency. Should forward prices decline during the period between the Fund's
entering into a forward contract for the sale of a currency and the date it
enters into an offsetting contract for the purchase of the currency, the Fund
will realize a gain to the extent the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, the Fund will suffer a loss to the extent the price of
the currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell. A default on the contract would deprive the Fund of unrealized
profits or force the Fund to cover its commitments for purchase or sale of
currency, if any, at the current market price.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. The cost to the Fund of
engaging in currency exchange transactions varies with such factors as the
currency involved, the length of the contract period, and prevailing market
conditions. Since currency exchange transactions are usually conducted on a
principal basis, no fees or commissions are involved.
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<PAGE>
TEMPORARY STRATEGIES
The Fund has the flexibility to respond promptly to changes in market and
economic conditions. In the interest of preserving shareholders' capital, WAM
may employ a temporary defensive investment strategy if it determines such a
strategy to be warranted. Pursuant to such a defensive strategy, the Fund
temporarily may hold cash (U.S. dollars, foreign currencies, multinational
currency units) and/or invest up to 100% of its assets in high quality debt
securities or money market instruments of U.S. issuers, and most or all of the
Fund's investments may be made in the United States and denominated in U.S.
dollars. It is impossible to predict whether, when, or for how long the Fund
might employ defensive strategies.
In addition, pending investment of proceeds from new sales of Fund shares
or to meet ordinary daily cash needs, the Fund temporarily may hold cash (U.S.
dollars, foreign currencies, or multinational currency units) and may invest any
portion of its assets in money market instruments.
PORTFOLIO TURNOVER
Although the Fund does not purchase securities with a view to rapid
turnover, there are no limitations on the length of time that portfolio
securities must be held. Portfolio turnover can occur for a number of reasons
such as general conditions in the securities markets, more favorable investment
opportunities in other securities, or other factors relating to the desirability
of holding or changing a portfolio investment. A high rate of portfolio
turnover, if it should occur, would result in increased transaction expenses
which must be borne by the Fund. High portfolio turnover may also result in the
realization of capital gains or losses and, to the extent net short-term capital
gains are realized, any distributions resulting from such gains will be
considered ordinary income for federal income tax purposes.
INVESTMENT RESTRICTIONS
In pursuing its investment objective ACORN USA will not:
1. With respect to 75% of the value of the Fund's total assets, invest
more than 5% of its total assets (valued at time of investment) in securities of
a single issuer, except securities issued or guaranteed by the government of the
U.S., or any of its agencies or instrumentalities;
2. Acquire securities of any one issuer which at the time of investment
(a) represent more than 10% of the voting securities of the issuer or (b) have a
value greater than 10% of the value of the outstanding securities of the issuer;
3. Invest more than 25% of its assets (valued at time of investment) in
securities of companies in any one industry, except that this restriction does
not apply to investments in U.S. government securities;
4. Make loans, but this restriction shall not prevent the Fund from (a)
buying a part of an issue of bonds, debentures, or other obligations that are
publicly distributed, or from
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investing up to an aggregate of 15% of its total assets (taken at market value
at the time of each purchase) in parts of issues of bonds, debentures or other
obligations of a type privately placed with financial institutions, (b)
investing in repurchase agreements, or (c) lending portfolio securities,
provided that it may not lend securities if, as a result, the aggregate value of
all securities loaned would exceed 33% of its total assets (taken at market
value at the time of such loan);
5. Borrow money except (a) from banks for temporary or emergency purposes
in amounts not exceeding 33% of the value of the Fund's total assets at the time
of borrowing, and (b) in connection with transactions in options, futures and
options on futures;
6. Underwrite the distribution of securities of other issuers; however,
the Fund may acquire "restricted" securities which, in the event of a resale,
might be required to be registered under the Securities Act of 1933 on the
ground that the Fund could be regarded as an underwriter as defined by that act
with respect to such resale;
7. Purchase and sell real estate or interests in real estate, although it
may invest in marketable securities of enterprises which invest in real estate
or interests in real estate;
8. Purchase and sell commodities or commodity contracts, except that it
may enter into (a) futures and options on futures and (b) foreign currency
contracts;
9. Make margin purchases of securities, except for use of such short-term
credits as are needed for clearance of transactions and except in connection
with transactions in options, futures and options on futures;
10. Issue any senior security except to the extent permitted under the
Investment Company Act of 1940.
Restrictions 1 through 10 above are "fundamental," which means that they
cannot be changed without the approval of the lesser of (i) 67% of ACORN USA'S
shares present at a meeting if more than 50% of the shares outstanding are
present or (ii) more than 50% of ACORN USA'S outstanding shares.
For the Fund has no present intention of investing in repurchase agreements
or lending its portfolio securities.
In addition, ACORN USA is subject to a number of restrictions that may be
changed by the board of trustees without shareholder approval. Under those
nonfundamental restrictions, ACORN USA will not:
(a) Invest in companies for the purpose of management or the
exercise of control;
(b) Invest in oil, gas or other mineral leases or exploration or
development programs, although it may invest in marketable securities
of enterprises engaged in oil, gas or mineral exploration;
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<PAGE>
(c) Invest more than 2% of its net assets (valued at the time of
investment) in warrants not listed on the New York or American stock
exchanges, nor more than 5% of its net assets (valued at the time of
investment) in all warrants, in each case valued at the lower of cost
or market; provided that warrants acquired in units or attached to
securities shall be deemed to be without value for purposes of this
restriction;
(d) Invest more than 5% of its total assets (valued at time of investment)
in securities of issuers (other than issuers of federal agency
obligations or securities issued or guaranteed by any foreign country
or asset-backed securities) that, together with any predecessors or
unconditional guarantors, have been in continuous operation for less
than three years ("unseasoned issuers") or (b) more than 15% of its
total assets (valued at the time of investment) in restricted
securities and securities of unseasoned issuers;
(e) Acquire securities of other registered investment companies except in
compliance with the Investment Company Act of 1940 and applicable
state law;
(f) Invest more than 15% of its net assets (valued at time of investment)
in illiquid securities, including repurchase agreements maturing in
more than seven days;
(g) Purchase or retain securities of a company if all of the trustees,
directors and officers of the Trust and of its investment adviser who
individually own beneficially more than 1/2% of the securities of the
company collectively own beneficially more than 5% of such securities;
(h) Pledge, mortgage or hypothecate its assets, except as may be necessary
in connection with permitted borrowings or in connection with short
sales, options, futures and options on futures;
(i) Purchase a put or call option if the aggregate premiums paid for all
put and call options exceed 20% of its net assets (less the amount by
which any such positions are in-the-money), excluding put and call
options purchased as closing transactions;
(j) Make short sales of securities unless the Fund owns at least an equal
amount of such securities, or owns securities that are convertible or
exchangeable, without payment of further consideration, into at least
an equal amount of such securities;
(k) Invest more than 10% of its total assets (valued at the time of
investment) in securities of non-U.S. issuers, including securities
represented by American Depository Receipts.
Notwithstanding the foregoing investment restrictions, the Fund may purchase
securities pursuant to the exercise of subscription rights, provided that such
purchase will not result in the Fund's ceasing to be a diversified investment
company.
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PERFORMANCE INFORMATION
From time to time the Fund may quote total return figures. "Total Return"
for a period is the percentage change in value during the period of an
investment in shares of the Fund, including the value of shares acquired through
reinvestment of all dividends and capital gains distributions. "Average Annual
Total Return" is the average annual compounded rate of change in value
represented by the Total Return for the period.
Average Annual Total Return is computed as follows:
n
ERV = P(1+T)
Where: P = the amount of an assumed initial investment in shares of the
Fund
T = average annual total return
n = number of years from initial investment to the end of the
period
ERV = ending redeemable value of shares held at the end of the
period
The Fund imposes no sales charges and pays no distribution expenses.
Income taxes are not taken into account. Performance figures quoted by the Fund
are not necessarily indicative of future results. The Fund's performance is a
function of conditions in the securities markets, portfolio management, and
operating expenses. Although information about past performance is useful in
reviewing the Fund's performance and in providing some basis for comparison with
other investment alternatives, it should not be used for comparison with other
investments using different reinvestment assumptions or time periods.
In advertising and sales literature, the Fund's performance may be compared
with those of market indexes and other mutual funds. In addition to the
performance information described above, the Fund might use comparative
performance as computed in a ranking or rating determined by Lipper Analytical
Services, Inc., an independent service that monitors the performance of over
1,000 mutual funds, Morningstar, Inc., or another service.
The Fund may note its mention or recognition in newsletters, newspapers,
magazines, or other media. The Fund may similarly note mention or recognition
of WAM, or appearances of principals of WAM, in the media.
INVESTMENT ADVISER
The Fund's investment adviser, Wanger Asset Management, L.P. ("WAM"),
furnishes continuing investment supervision to the Fund and is responsible for
overall management of the Fund's business affairs. It furnishes office space,
equipment, and personnel to the funds; it assumes substantially all expenses for
bookkeeping, and assumes the expenses of printing and distributing the Fund's
prospectus and reports to prospective investors.
For its services to ACORN USA WAM receives a fee (calculated daily and paid
monthly) at the annual rate of 1.00% of the net asset value of the Fund up to
$200 million and .95% of the net asset value in excess of $200 million.
17
<PAGE>
The staff of the Securities and Exchange Commission has advised Acorn that
the annual advisory fees paid by most mutual funds are less than .75% of average
net assets.
The Fund pays the cost of custodial, stock transfer, dividend disbursing,
audit and legal services and membership in trade organizations. It also pays
other expenses such as the cost of maintaining the registration of its shares
under federal and state securities laws and of proxy solicitations, printing and
distributing notices and copies of the prospectus and shareholder reports
furnished to existing shareholders, taxes, insurance premiums, and the fees of
trustees not affiliated with WAM.
The investment advisory agreement provides that the total annual expenses
of the Fund, exclusive of taxes, interest, and extraordinary litigation
expenses, but including fees paid to WAM, shall not exceed the limits prescribed
by any state in which the Fund's shares are being offered for sale. Acorn
believes that currently the most restrictive limits are 2.5% of the first $30
million of the average net asset value, 2% of the next $70 million, and 1.5% of
the average net asset value in excess of $100 million. WAM has voluntarily
undertaken to reimburse the Fund for any ordinary operating expenses, with
certain exceptions, in excess of 2.0% of the Fund's average daily net assets
annually. Brokers' commissions and other charges relating to the purchase and
sale of securities are not regarded as expenses for this purpose. Moreover, for
purposes of calculating the expenses subject to this limitation, the excess
custodian costs attributable to investments in foreign securities compared to
the custodian costs which would have been incurred had the investments been in
domestic securities are excluded. For the purpose of determining whether the
Fund is entitled to any reduction in advisory fee or expense reimbursement, the
Fund's expenses are calculated daily and any reduction in fee or reimbursement
is made monthly.
WAM advanced all of ACORN USA'S organizational expenses, which are being
amortized and reimbursed to WAM through September 2001.
WAM employs a team approach to management of the Fund. The management team
is comprised of the lead portfolio manager, other WAM portfolio managers and
research analysts. Team members share responsibility for providing ideas,
information, knowledge and expertise in managing the Fund. Each team member has
one or more areas of expertise that is applied to the management of the Fund.
Daily decisions on portfolio selection rest with the lead portfolio manager who
utilizes the input and advice of the management team in making purchase and sale
determinations.
ROBERT MOHN is the Fund's lead portfolio manager.
Mr. Mohn has been a key member of WAM's domestic analytical team since
August 1992, and a principal of WAM since July 1995. Prior to his position at
WAM, he worked as an analyst for Ariel Capital Management (June to August 1991).
His formal education includes a B.S. from Stanford University (1983) and an
M.B.A. from the University of Chicago (1992).
WAM is a limited partnership managed by its general partner, Wanger Asset
Management, Ltd., which is controlled by Ralph Wanger. WAM commenced operations
in
18
<PAGE>
1992. Ralph Wanger, Charles P. McQuaid, Terence M. Hogan, and Leah J. Zell, who
are officers of the Trust, are limited partners of WAM. WAM has approximately
$4.5 billion under management.
DISTRIBUTOR
Shares of the Fund are distributed by WAM Brokerage Services, L.L.C. ("WAM
BD") under a Distribution Agreement as described in the prospectus dated
September 3, 1996, which is incorporated herein by reference. The Distribution
Agreement continues in effect from year to year, provided such continuance is
approved annually (i) by a majority of the trustees or by a majority of the
outstanding voting securities of the Trust, and (ii) by a majority of the
trustees who are not parties to the Agreement or interested persons of any such
party. The Trust has agreed to pay all expenses in connection with registration
of its shares with the Securities and Exchange Commission and auditing and
filing fees in connection with registration of its shares under the various
state blue sky laws. WAM bears all sales and promotional expenses, including
the cost of prospectuses and other materials used for sales and promotional
purposes by WAM BD.
As agent, WAM BD offers shares of the Fund to investors in states where the
shares are qualified for sale, at net asset value without sales commissions or
other sales loads to the investor. In addition, no sales commission or "12b-1"
payment is paid by the Fund. WAM BD offers the Fund's shares only on a best
efforts basis.
THE TRUST
The Declaration of Trust may be amended by a vote of either the Trust's
shareholders or its trustees. The Trust may issue an unlimited number of
shares, in one or more series as the board of trustees may authorize. Any such
series of shares may be further divided, without shareholder approval, into two
or more classes of shares having such preferences or special or relative rights
or privileges as the trustees may determine. The shares of the Fund are not
currently divided into classes. Acorn Fund, Acorn International and Acorn USA
are the only series of the Trust currently being offered. The board of trustees
may authorize the issuance of additional series if deemed advisable, each with
its own investment objective, policies, and restrictions. All shares issued
will be fully paid and non-assessable and will have no preemptive or conversion
rights.
The Declaration of Trust disclaims liability of the shareholders, trustees
and officers of the Trust for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement, obligation, or contract
entered into or executed by the Trust or the board of trustees. The Declaration
of Trust provides for indemnification out of the Trust's assets for all losses
and expenses of any shareholder held personally liable for obligations of the
Trust. Thus, although shareholders of a business trust may, under certain
circumstances, be held personally liable under Massachusetts law for the
obligations of the Trust, the risk of a shareholder incurring financial loss on
account of shareholder liability is believed to be remote because it is limited
to circumstances in which the disclaimer is inoperative and the Trust itself is
unable to meet its obligations. The risk to any one series of sustaining a loss
on account of liabilities incurred by another series is also believed to be
remote.
On any matter submitted to a vote of shareholders, shares are voted in the
aggregate and not by individual series except that shares are voted by
individual series when required by the Investment Company Act of 1940 or other
applicable law, or when the board of trustees determines that the matter affects
only the interests of one series, in which case shareholders of the unaffected
series are not entitled to vote on such matters. All shares of the Trust are
voted together in the election of trustees.
19
<PAGE>
TRUSTEES AND OFFICERS
The trustees and officers of the Trust and their ages and principal
business activities during the past five years are:
Irving B. Harris, trustee and chairman
Two North LaSalle Street, Chicago, Illinois 60602; age 86; chairman of the
executive committee and director, Pittway Corporation (multi-product
manufacturer and publisher); chairman, William Harris Investors, Inc.
(investment adviser); chairman, The Harris Foundation (charitable
foundation); director, Teva Pharmaceutical Industries, Inc.
(pharmaceutical manufacturer)
Ralph Wanger, trustee and president
227 West Monroe Street, Suite 3000, Chicago, Illinois 60606; age 62;
trustee and president, Wanger Advisors Trust; principal, Wanger Asset
Management, L.P. since July 1992; prior thereto, principal, Harris
Associates L.P.
James H. Lorie, trustee and vice chairman
1101 East 58th Street, Chicago, Illinois 60637; age 74; retired; Eli B. and
Harriet B. Williams Professor of Business Administration Emeritus,
University of Chicago Graduate School of Business; director, Ardco, Inc.
(refrigeration equipment manufacturer); director, Thornburg Mortgage Asset
Corp. (REIT)
Leo A. Guthart, trustee
165 Eileen Way, Syosset, New York 11791; age 58; vice chairman, Pittway
Corporation (multi-product manufacturer and publisher); chief executive
officer, Pittway Corporation's Security Group of Companies which include
ADEMCO (manufacturer of alarm equipment), ADI (distributor of security
equipment), Fire Burglary Instruments (supplier of security control
panels), First Alert Professional (alarm dealers), Cylink Corporation
(supplier of encryption equipment), and Alarm Net (cellular radio service);
director, AptarGroup, Inc. (producer of dispensing valves, pumps and
closures); director, Cylink Corporation; chairman of the board of trustees,
Hofstra University; chairman, Tech Transfer Island Corp. (private
investment partnership); director, Long Island Research Institute.
Jerome Kahn, Jr., trustee
Two North LaSalle Street, Suite 505, Chicago, Illinois 60602; age 62; vice
president, William Harris Investors, Inc. (investment adviser); director,
Pittway Corporation (multi-product manufacturer and publisher)
David C. Kleinman, trustee
1101 East 58th Street, Chicago, Illinois 60637; age 60; senior lecturer in
business administration, University of Chicago Graduate School of Business;
business consultant; director, Irex Corporation (insulation contractor)
Charles P. McQuaid, trustee and senior vice president
227 West Monroe Street, Suite 3000, Chicago, Illinois 60606; age 43;
trustee and senior vice president, Wanger Advisors Trust; principal, Wanger
Asset Management, L.P. since July 1992; prior thereto, principal, Harris
Associates L.P.
20
<PAGE>
Roger S. Meier, trustee
1211 S. W. Fifth Avenue, Portland, Oregon 97204; age 70; president, AMCO,
Inc. (investment and real estate management); director, Fred Meyer, Inc.
(retail chain); director, Red Lion Inns Limited Partnership (hotel chain);
director, Key Bank of Oregon (banking)
Adolph Meyer, Jr., trustee
1511 West Webster Avenue, Chicago, Illinois 60614; age 72; president, Gulco
Corp. (leather manufacturer)
Malcolm N. Smith, trustee
309 Maple Avenue, Highland Park, Illinois 60035; age 75; president, Newmac,
Inc. (importers of Sheffield cutlery); prior thereto, president, Macromatic
Division, Milwaukee Electronics Corporation (electronic timing devices
manufacturer)
Terence M. Hogan, vice president
227 West Monroe Street, Suite 3000, Chicago, Illinois 60606; age 34;
trustee and vice president, Wanger Advisors Trust; principal, analyst, and
portfolio manager, Wanger Asset Management, L.P., since July 1992; prior
thereto, analyst, Harris Associates L.P.
Leah J. Zell, vice president
227 West Monroe Street, Suite 3000, Chicago, Illinois 60606; age 47;
trustee and vice president, Wanger Advisors Trust; principal, analyst, and
portfolio manager, Wanger Asset Management, L.P., since July 1992; prior
thereto, analyst, Harris Associates L.P.
Merrillyn J. Kosier, vice president and secretary
227 West Monroe Street, Suite 3000, Chicago, Illinois 60606; age 36; vice
president and secretary, Wanger Advisors Trust; director of marketing and
shareholder services, Wanger Asset Management, L.P., since September 1993;
prior thereto, vice president of marketing, Kemper Financial Services, Inc.
Bruce H. Lauer, vice president and treasurer
227 West Monroe Street, Suite 3000, Chicago, Illinois 60606; age 39; vice
president and treasurer, Wanger Advisors Trust; chief administrative
officer, Wanger Asset Management, L.P. since April 1995; prior thereto,
first vice president, investment accounting, Kemper Financial Services,
Inc.
Kenneth A. Kalina, assistant treasurer
227 West Monroe Street, Suite 3000, Chicago, Illinois 60603; age 37;
assistant treasurer, Wanger Advisors Trust; Fund controller, Wanger Asset
Management, L.P., since September 1995; prior thereto, treasurer of the
Stein Roe Mutual Funds
Messrs. McQuaid and Wanger are trustees who are interested persons of Acorn
as defined in the Investment Company Act of 1940, and of WAM. Messrs. Harris,
Lorie, and Wanger are members, and Mr. McQuaid is an alternate member, of the
executive committee, which has authority during intervals between meetings of
the board of trustees to exercise the powers of the board, with certain
exceptions.
No shares of the Fund were outstanding on the date of this Statement of
Additional Information. However, prior to the commencement of public offering
of shares of the Fund,
21
<PAGE>
WAM or one or more of its principals, will purchase shares of the Fund at an
initial price of $10.00 per share.
The following table sets forth the total compensation expected to be paid
by the Trust during the fiscal year ending December 31, 1996 to each of the
trustees of the Trust based on the Trust's current compensation schedule. The
Trust has no retirement or pension plan. The officers and trustees affiliated
with WAM serve without any compensation from the Trust.
TOTAL
AGGREGATE COMPENSATION
COMPENSATION FROM
NAME OF TRUSTEES FROM ACORN USA FUND COMPLEX
- -----------------------------------------------------------------
Irving B. Harris $ 9,333 $ 81,000
Leo A. Guthart 2,333 18,000
Jerome Kahn, Jr. 2,333 19,500
David C. Kleinman 2,333 19,500
James H. Lorie 2,333 18,000
Charles P. McQuaid 0 0
Roger S. Meier 2,333 18,000
Adolph Meyer, Jr. 2,333 18,000
Malcolm N. Smith 2,333 19,500
Ralph Wanger 0 0
- -----------------------------------------------------------------
Total $25,664 $212,000
PURCHASING AND REDEEMING SHARES
Purchases and redemptions are discussed in the Fund's prospectus under the
headings "How to Buy Shares," "How to Sell Shares," and "Transaction Services."
All of that information is incorporated herein by reference. In particular, a
minimum investment of $200 is required to open an IRA account.
For purposes of computing the net asset value of a share of the Fund, a
security traded on a securities exchange, or in an over-the-counter market in
which transaction prices are reported, is valued at the last sales price at the
time of valuation. A security for which there is no reported sale on the
valuation date is valued at the mean of the latest bid and ask quotations or, if
there is no ask quotation, at the most recent bid quotation. Securities for
which quotations are not available and any other assets are valued at a fair
value as determined in good faith by the board of trustees. Money market
instruments having a maturity of 60 days or less from the valuation date are
valued on an amortized cost basis. All assets and liabilities initially
expressed in foreign
22
<PAGE>
currencies are converted into U.S. dollars at the mean of the bid and offer
prices of such currencies against U.S. dollars quoted by any major bank or
dealer. If such quotations are not available, the rate of exchange will be
determined in accordance with policies established in good faith by the board of
trustees.
The Fund's net asset values is determined only on days on which the New
York Stock Exchange ("NYSE") is open for trading. The NYSE is regularly closed
on Saturdays and Sundays and on New Year's Day, the third Monday in February,
Good Friday, the last Monday in May, Independence Day, Labor Day, Thanksgiving,
and Christmas. If one of these holidays falls on a Saturday or Sunday, the NYSE
will be closed on the preceding Friday or the following Monday, respectively.
Trading in the portfolio securities of the Fund may take place in various
foreign markets on certain days (such as Saturday) when the Fund is not open for
business and do not calculate their net asset values. Conversely, trading in
the Fund's portfolio securities may not occur on days when the Fund is open.
Therefore, the calculation of net asset value does not take place
contemporaneously with the determinations of the prices of many of the Fund's
portfolio securities and the value of the Fund's portfolios may be significantly
affected on days when shares of the Fund may not be purchased or redeemed.
Computation of net asset value (and the sale and redemption of Fund shares)
may be suspended or postponed during any period when (a) trading on the NYSE is
restricted, as determined by the Securities and Exchange Commission, or that
exchange is closed for other than customary weekend and holiday closings, (b)
the Commission has by order permitted such suspension, or (c) an emergency, as
determined by the Commission, exists making disposal of portfolio securities or
valuation of the net assets of the Fund not reasonably practicable.
Acorn has elected to be governed by Rule 18f-1 under the Investment Company
Act of 1940 pursuant to which it is obligated to redeem shares solely in cash up
to the lesser of $250,000 or 1% of the net asset value of the Fund during any
90-day period for any one shareholder. Redemptions in excess of the above
amounts will normally be paid in cash, but may be paid wholly or partly by a
distribution in kind of securities. If a redemption is made in kind, the
redeeming shareholder would bear any transaction costs incurred in selling the
securities received.
Due to the relatively high cost of maintaining smaller accounts, Acorn
reserves the right to redeem shares in any account for their then-current value
(which will be promptly paid to the investor) if at any time the shares in the
account do not have a value of at least $1,000. An investor will be notified
that the value of his account is less than that minimum and allowed at least 30
days to bring the value of the account up to at least $1,000 before the
redemption is processed. The Agreement and Declaration of Trust also authorizes
Acorn to redeem shares under certain other circumstances as may be specified by
the board of trustees.
In connection with the Switch Plan, WAM acts as a shareholder servicing
agent for the Money Funds. For its services it receives a fee at the rate of
0.35% of the average annual net
23
<PAGE>
assets of each account in a Money Fund established through the Switch Plan,
pursuant to a 12b-1 plan adopted by the Money Funds.
ADDITIONAL TAX INFORMATION
The Fund intends to qualify and to continue to qualify to be taxed as a
regulated investment company under the Internal Revenue Code so as to be
relieved of federal income tax on its capital gains and net investment income
currently distributed to its shareholders.
At the time of your purchase, the Fund's net asset value may reflect
undistributed income, capital gains, or net unrealized appreciation of
securities held by the Fund. A subsequent distribution to you of such amounts,
although constituting a return of your investment, would be taxable either as a
dividend or capital gain distribution.
Foreign currency gains and losses, including the portion of gain or loss on
the sale of debt securities attributable to foreign exchange rate fluctuations,
are taxable as ordinary income. If the net effect of these transactions is a
gain, the income dividend paid by the Fund will be increased; if the result is a
loss, the income dividend paid by the Fund will be decreased.
A portion of the dividends paid by ACORN USA is expected to be eligible for
the dividends-received deduction. Capital gain distributions paid from the Fund
are never eligible for this deduction.
Income received by the Fund from sources within various foreign countries
will be subject to foreign income taxes withheld at the source. Under the
Internal Revenue Code, if more than 50% of the value of the Fund's total assets
at the close of its taxable year comprises securities issued by foreign
corporations, the Fund may file an election with the Internal Revenue Service to
"pass through" to its shareholders the amount of foreign income taxes paid by
the Fund. Pursuant to this election, shareholders will be required to: (i)
include in gross income, even though not actually received, their respective pro
rata share of foreign taxes paid by the Fund; (ii) treat their pro rata share of
foreign taxes as paid by them; and (iii) either deduct their pro rata share of
foreign taxes in computing their taxable income, or use it as a foreign tax
credit against U.S. income taxes (but not both). No deduction for foreign taxes
may be claimed by a shareholder who does not itemize deductions.
ACORN USA does not expect to be able to "pass through" foreign tax credits.
PORTFOLIO TRANSACTIONS
Portfolio transactions of the Fund are placed with those securities brokers
and dealers that WAM believes will provide the best value in transaction and
research services for the Fund, either in a particular transaction or over a
period of time. Although some transactions involve only brokerage services,
many involve research services as well.
In valuing brokerage services, WAM makes a judgment as to which brokers are
capable of providing the most favorable net price (not necessarily the lowest
commission) and the best
24
<PAGE>
execution in a particular transaction. Best execution connotes not only general
competence and reliability of a broker, but specific expertise and effort of a
broker in overcoming the anticipated difficulties in fulfilling the requirements
of particular transactions, because the problems of execution and the required
skills and effort vary greatly among transactions.
In valuing research services, WAM makes a judgment of the usefulness of
research and other information provided to WAM by a broker in managing the
Fund's investment portfolio. In some cases, the information, e.g., data or
recommendations concerning particular securities, relates to the specific
transaction placed with the broker, but for the greater part the research
consists of a wide variety of information concerning companies, industries,
investment strategy, and economic, financial, and political conditions and
prospects, useful to WAM in advising the Fund.
The reasonableness of brokerage commissions paid by the Fund in relation to
transaction and research services received is evaluated by WAM's staff on an
ongoing basis. The general level of brokerage charges and other aspects of the
Fund's portfolio transactions are reviewed periodically by the board of trustees
and its committee on portfolio transactions.
WAM is the principal source of information and advice to the Fund, and is
responsible for making and initiating the execution of investment decisions by
the Fund. However, the board of trustees recognizes that it is important for
WAM, in performing its responsibilities to the Fund, to continue to receive and
evaluate the broad spectrum of economic and financial information that many
securities brokers have customarily furnished in connection with brokerage
transactions, and that in compensating brokers for their services, it is in the
interest of the Fund to take into account the value of the information received
for use in advising the Fund. The extent, if any, to which the obtaining of
such information may reduce WAM's expenses in providing management services to
the Fund is not determinable. In addition, the board of trustees understands
that other clients of WAM might benefit from the information obtained for the
Funds, in the same manner that the Fund might benefit from information obtained
by WAM in performing services to others.
Transactions of the Fund in the over-the-counter market and the third
market are executed with primary market makers acting as principal except where
it is believed that better prices and execution may be obtained otherwise.
Although investment decisions for the Fund are made independently from
those for other investment advisory clients of WAM, it may develop that the same
investment decision is made for the Fund and one or more other advisory clients.
If the Fund and other clients purchase or sell the same class of securities on
the same day, the transactions will be allocated as to amount and price in a
manner considered equitable to each.
CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8502, Boston Massachusetts
02266-8502, is the custodian for the Fund. It is responsible for holding all
securities and cash of the Fund, receiving and paying for securities purchased,
delivering against payment securities sold,
25
<PAGE>
receiving and collecting income from investments, making all payments covering
expenses of the Fund, and performing other administrative duties, all as
directed by authorized persons of the Fund. The custodian does not exercise any
supervisory function in such matters as purchase and sale of portfolio
securities, payment of dividends, or payment of expenses of the Fund. The Fund
has authorized the custodian to deposit certain portfolio securities of the Fund
in central depository systems as permitted under federal law. The Fund may
invest in obligations of the custodian and may purchase or sell securities from
or to the custodian.
INDEPENDENT AUDITORS
Ernst & Young LLP, Sears Tower, 233 South Wacker Drive, Chicago, Illinois
60606 audits and reports on the Fund's annual financial statements, reviews
certain regulatory reports and the Fund's tax returns, and performs other
professional accounting, auditing, tax, and advisory services when engaged to do
so by Acorn.
APPENDIX - DESCRIPTION OF BOND RATINGS
A rating of a rating service represents the service's opinion as to the
credit quality of the security being rated. However, the ratings are general
and are not absolute standards of quality or guarantees as to the
creditworthiness of an issuer. Consequently, WAM believes that the quality of
debt securities in which the Fund invests should be continuously reviewed. A
rating is not a recommendation to purchase, sell or hold a security, because it
does not take into account market value or suitability for a particular
investor. When a security has received a rating from more than one service,
each rating should be evaluated independently. Ratings are based on current
information furnished by the issuer or obtained by the ratings services from
other sources which they consider reliable. Ratings may be changed, suspended
or withdrawn as a result of changes in or unavailability of such information, or
for other reasons.
The following is a description of the characteristics of ratings used by
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation
("S&P").
MOODY'S RATINGS
Aaa--Bonds rated Aaa are judged to be the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt-edge".
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. Although the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such bonds.
Aa--Bonds rated Aa are judged to be high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa bonds or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the long
term risk appear somewhat larger than in Aaa bonds.
26
<PAGE>
A--Bonds rated A possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa--Bonds rated Baa are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B--Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds rated Caa are of poor standing. Such bonds may be in default or
there may be present elements of danger with respect to principal or interest.
Ca--Bonds rated Ca represent obligations which are speculative in a high
degree. Such bonds are often in default or have other marked shortcomings.
S&P RATINGS
AAA--Bonds rated AAA have the highest rating. Capacity to pay principal
and interest is extremely strong.
AA--Bonds rated AA have a very strong capacity to pay principal and
interest and differ from AAA bonds only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this capacity
than for bonds in higher rated categories.
BB--B--CCC--CC--Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation
27
<PAGE>
among such bonds and CC the highest degree of speculation. Although such bonds
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
28
<PAGE>
PART C OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
---------------------------------
(a) Financial statements:
--------------------
(1) Financial statements included in Part A of this
amendment:
None
(2) Financial statements included in Part B of this
amendment:
(i) Acorn Fund (incorporated by reference to the following portions of
Registrant's 1995 Acorn Fund Annual Report; a copy of the annual
report is attached to this amendment, but, except for those portions
incorporated by reference, is furnished for the information of the
Commission and is not deemed to be filed as part of this amendment):
Report of independent auditors
Statement of assets and liabilities at December 31, 1995
Statement of operations for each of the two years in the period
ended December 31, 1995
Statement of changes in net assets for each of the two years in the
period ended December 31, 1995
Statement of investments at December 31, 1995
Notes to financial statements
(ii) Acorn International (incorporated by reference to the following
portions of Registrant's 1995 Acorn International Annual Report; a
copy of the annual report is attached to this amendment, but,
except for those portions incorporated by reference, is furnished
for the information of the Commission and is not deemed to be
filed as part of this amendment):
Report of independent auditors
Statement of assets and liabilities at December 31, 1995
Statement of operations for each of the two years in the period
ended December 31, 1995.
Statement of changes in net assets for each of the two years in
the period ended December 31, 1995.
Statement of investments at December 31, 1995
Notes to financial statements
C-1
<PAGE>
(2) Financial statements included in Part C of this amendment:
None
Note: The following schedules have been omitted for the following reasons:
Schedules I and III - The required information is presented in the
statements of investments at December 31, 1995.
Schedules II, IV, V, VI and VII - The required information is not
present.
(b) Exhibits:
--------
1. Agreement and declaration of trust (exhibit 1 to Post-effective
Amendment No. 53*)
2.1 Bylaws, as amended September 15, 1992 (exhibit 2 to Post-effective
Amendment No. 53*)
2.2 Bylaw amendment adopted February 2, 1993 (exhibit 3 to Post-effective
Amendment No. 53*)
3. None
4.1 Specimen share certificate - Acorn Fund
4.2 Specimen share certificate - Acorn International
5.1 Investment advisory agreement - Acorn Fund (exhibit 5.1 to Post-
effective Amendment No. 53*)
5.2 Investment advisory agreement - Acorn International (exhibit 5.2 to
Post-effective Amendment No. 53*)
5.3 Investment advisory agreement - Acorn USA
5.4 Form of Organizational Expenses Agreement between Acorn Investment
Trust and Wanger Asset Management, L.P. dated as of September __,
1996.
6.1 Distribution Agreement between Acorn Investment Trust and WAM
Brokerage Services, L.L.C. dated as of May 1, 1996 (exhibit 6 to
Post-effective Amendment No. 53*)
6.2 Form of Amendment to Distribution Agreement between Acorn Investment
Trust and WAM Brokerage Services, L.L.C. dated as of September __,
1996.
7. None
8.1 Custodian contract between the Registrant and State Street Bank and
Trust Company dated July 1, 1992 (exhibit 8.1 to Post-effective
Amendment No. 53*)
- ----------------
*Incorporated by reference.
C-2
<PAGE>
8.2 Letter agreement applying custodian contract (exhibit 8.1) to Acorn
International (exhibit 8.2 to Post-effective Amendment No. 53*)
8.3 Form of letter agreement applying custodian contract (exhibit 8.1)
to Acorn USA
9. None
10.1 Opinion and consent of Bell, Boyd & Lloyd dated June 18, 1996 - Acorn
Fund (exhibit 10.1 to Post-Effective Amendment No. 49*)
10.2 Opinion and consent of Bell, Boyd & Lloyd dated June 18, 1996 - Acorn
International (exhibit 10.2 to Post-Effective Amendment No. 49*)
10.3 Opinion and consent of Bell, Boyd & Lloyd dated June 18, 1996 - Acorn
USA
11. Consent of independent auditors
12. None
13. None
14. IRA plan booklet dated September 1, 1996 including general
information, individual retirement plan and custodial agreement and
individual retirement account disclosure statement, Internal Revenue
Service determination letter, transfer form, application form, and
designation of beneficiary form
15. None
16.1 Computation of performance information - Acorn Fund (exhibit 16.1 to
Post-effective Amendment No 53*)
16.2 Computation of performance information - Acorn International (exhibit
16.2 to Post-effective Amendment No. 53*)
17.1 Financial data schedule - Acorn Fund
17.2 Financial data schedule - Acorn International
*Incorporated by reference.
ITEM 25. Persons Controlled By or Under Common Control with Registrant
-------------------------------------------------------------
The Registrant does not consider that there are any persons directly or
indirectly controlling, controlled by, or under common control with the
Registrant within the meaning of this item. The information in the prospectus
for Acorn Fund and Acorn International under the caption "The Funds in Detail -
Organization - Management" and in the prospectus for Acorn USA under the caption
"The Fund in Detail - Organization - Management" and in the statement of
additional information for Acorn Fund and Acorn International in the eighth
paragraph under the caption "Investment Adviser" and in the statement of
additional information for Acorn USA in the tenth paragraph under the caption
"Investment Adviser" is incorporated by reference.
C-3
<PAGE>
ITEM 26. Number of Holders of Securities
-------------------------------
At May 31, 1996, there were 44,968 record holders of Registrant's shares of
beneficial interest of the series designated Acorn Fund, 76,822 record holders
of Registrant's shares of beneficial interest of the series designated Acorn
International and no record holders of Registrant's shares of beneficial
interest of the series designated Acorn USA.
ITEM 27. Indemnification
---------------
Article VIII of the agreement and declaration of trust of Registrant
(exhibit 1) provides in effect that Registrant shall provide certain
indemnification of its trustees and officers. In accordance with Section 17(h)
of the Investment Company Act, that provision shall not protect any person
against any liability to the Registrant or its shareholders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Registrant, its trustees and officers, its investment adviser and persons
affiliated with them are insured under a policy of insurance maintained by
Registrant and its investment adviser, within the limits and subject to the
limitations of the policy, against certain expenses in connection with the
defense of actions, suits or proceedings, and certain liabilities that might be
imposed as a result of such actions, suits or proceedings, to which they are
parties by reason of being or having been such trustees or officers. The policy
expressly excludes coverage for any trustee or officer whose personal
dishonesty, fraudulent breach of trust, lack of good faith, or intention to
deceive or defraud has been finally adjudicated or may be established or who
willfully fails to act prudently.
ITEM 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
The information in the prospectus for Acorn Fund and Acorn International in
the second paragraph under the caption "The Funds in Detail - Organization -
Management" and in the prospectus for Acorn USA in the second paragraph under
the caption "The Fund in Detail - Organization - Management", respectively is
incorporated by reference. Neither Wanger Asset Management, L.P. nor its
general partner has at any time during the past two years been engaged in any
other business, profession, vocation or employment of a substantial nature
either for its own account or in the capacity of director, officer, employee,
partner or trustee.
C-4
<PAGE>
ITEM 29. Principal Underwriters
----------------------
WAM Brokerage Services, L.L.C. also acts as principal
underwriter for Wanger Advisors Trust.
NAME POSITIONS AND OFFICES POSITIONS AND OFFICES
WITH UNDERWRITERS WITH REGISTRANT
Terence M. Hogan President Vice President and Trustee
Merrillyn J. Kosier Vice President and Vice President and Secretary
Secretary
The principal business of each officer of WAM Brokerage L.L.C. is 227 West
Monroe Street, Suite 3000, Chicago, Illinois 60606.
ITEM 30. Location of Accounts and Records
--------------------------------
Bruce H. Lauer, Vice President and Treasurer
Acorn Investment Trust
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606
ITEM 31. Management Services
-------------------
None
ITEM 32. Undertakings
------------
(a) Not applicable.
(b) Registrant undertakes to file a post-effective amendment, using
financial statements of the series designated Acorn USA, that
need not be certified, no later than 60 days after the end of the
four to six month period after effectiveness of this Registration
Statement.
(c) Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report
to shareholders, upon request and without charge.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant has duly caused this amendment
to the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Chicago, Illinois on June 18, 1996.
ACORN INVESTMENT TRUST
By /s/Ralph Wanger
--------------------------------
Ralph Wanger, President
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed below by the following persons in
the capacities and on the dates indicated.
Name Title Date
---- ------ ----
/s/Irving B. Harris Trustee and chairman )
- ----------------------- )
Irving B. Harris )
)
/s/Leo A. Guthart Trustee )
- ----------------------- )
Leo A. Guthart )
)
/s/Jerome Kahn, Jr. Trustee )
- ----------------------- )
Jerome Kahn, Jr. )
)
/s/David C. Kleinman Trustee )
- ----------------------- )
David C. Kleinman )
)
/s/James H. Lorie Trustee )
- ----------------------- )
James H. Lorie )
)
/s/Charles P. McQuaid Trustee ) June 18, 1996
- ----------------------- )
Charles P. McQuaid )
)
/s/Roger S. Meier Trustee )
- ----------------------- )
Roger S. Meier )
)
/s/Adolph Meyer, Jr. Trustee )
- ----------------------- )
Adolph Meyer, Jr. )
)
/s/Malcolm N. Smith Trustee )
- ----------------------- )
Malcolm N. Smith )
)
/s/Ralph Wanger Trustee and President )
- ----------------------- (principal executive )
Ralph Wanger officer) )
)
/s/Bruce H. Lauer Treasurer (principal )
- ----------------------- financial and accounting )
Bruce H. Lauer officer) )
<PAGE>
INDEX OF EXHIBITS FILED WITH THIS AMENDMENT
-------------------------------------------
EXHIBIT SEQUENTIAL
NUMBER EXHIBIT PAGE
- ------- ------- ----------
4.1 Specimen share certificate - Acorn Fund
4.2 Specimen share certificate - Acorn
International
5.3 Investment advisory agreement - Acorn
USA
5.4 Form of Organizational Expenses
Agreement between Acorn Investment
Trust and Wanger Asset Management, L.P.
dated as of September __, 1996
6.2 Form of Amendment to Distribution
Agreement between Acorn Investment
Trust and WAM Brokerage Services,
L.L.C. dated as of September __, 1996
8.3 Form of Letter agreement applying custodian
contract
10.3 Opinion and consent of Bell, Boyd &
Lloyd dated June 18, 1996 - Acorn USA
11 Consent of independent auditors
14 IRA plan booklet dated September 1,
1996 including general information,
individual retirement plan and
custodial agreement and individual
retirement account disclosure
statement, Internal Revenue Service
determination letter, transfer form,
application form, and designation of
beneficiary form
17.1 Financial data schedule - Acorn Fund
17.2 Financial data schedule - Acorn
International
<PAGE>
KC 0001804 ***1***
SEE REVERSE FOR
CERTAIN DEFINITIONS
[ACORN LOGO]
ACORN INVESTMENT TRUST
A MASSACHUSETTS BUSINESS TRUST
THIS CERTIFIES that BOSTON FINANCIAL DATA SERVICES CUSIP 004851 10 1
CORP ACTIONS AUDIT ACCT #1
ACORN FUND
2 HERITAGE DR
QUINCY MA 02171-2138
is the owner of ***ONE***
FULLY PAID AND NONASSESSABLE SHARES (WITHOUT PAR VALUE) OF
ACORN FUND
A Series of Shares ("Shares") established and designated under the Agreement and
Declaration of Trust of Acorn Investment Trust, a Massachusetts business trust
(the "Trust"), dated April 21, 1992, as amended from time to time (the
"Declaration of Trust"). The terms of the Declaration of Trust, a copy of which
is on file with the Secretary of the Commonwealth of Massachusetts, are hereby
incorporated by reference as fully as if set forth herein in their entirety, to
all of which provisions the holder of Shares represented by this certificate
and every transferee or assignee thereof, by accepting or holding the Shares,
agrees to be bound. As provided in the Declaration of Trust, the beneficial
interest in the Trust shall be divided from time to time into shares of such
series as may be established and designated from time to time, and the Shares
evidenced hereby represent a beneficial interest in an undivided proportionate
part of the assets belonging to the above designated Series, subject to the
liabilities of such Series. Such Series and other Series have the relative
rights and preferences set forth in the Declaration of Trust, and the Trust will
furnish to the holder of this certificate upon written request and without
charge a statement of such relative rights and preferences. The Shares
evidenced hereby are subject to redemption by the Trust pursuant to the
procedures that may be determined by the Trustees in accordance with the
Declaration of Trust. This certificate is issued by the Trustees of Acorn
Investment Trust, not individually but as Trustees under the Declaration of
Trust, and represents Shares of the above-designated Series and is binding on
the assets of the above-designated Series of the Trust but does not bind any of
the Trustees, officers, shareholders, employees or agents of the Trust
personally. Subject to the provisions of the Declaration of Trust, the Shares
represented by this certificate are transferable on the books of the Trust by
the holder hereof in person or by attorney upon surrender of this certificate
duly endorsed or assigned. This certificate is not valid until countersigned by
the Transfer Agent.
Witness the facsimile seal of the Trust and the facsimile signatures
of its duly authorized officers.
Dated 06/10/96
/s/ Merrilyn Kosir [SEAL] /s/ Terry M. Harris
VICE-PRESIDENT AND SECRETARY CHAIRMAN
COUNTERSIGNED
STATE STREET BANK AND TRUST COMPANY
TRANSFER AGENT
BY /s/ David W. Barry
AUTHORIZED SIGNATURE
<PAGE>
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT - ________Custodian__________
(Cust) (Minor)
under Uniform Gifts to Minors
Act_________
(State)
Additional abbreviations may also be used though not in the above list
TRANSFER FORM
COMPLETE THIS FORM ONLY WHEN TRANSFERRING TO ANOTHER PERSON
For value received, _______________________________________________ hereby sell,
assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(please typewrite name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------- Shares
represented by the within certificate and do hereby irrevocably constitute and
appoint
- ---------------------------------------------------------------------- attorney,
to transfer the same on the books of the Trust, with full power of substitution
in the premises.
Dated _____________________________
SIGNATURE GUARANTEED BY
___________________________________ ________________________________________
SIGNATURE(S)
NOTICE: The signature(s) to this
assignment must correspond with the name
as written upon the face of the
certificate in every particular, without
alteration or enlargement or any change
whatever.
---------------------
REDEMPTION FORM
COMPLETE THIS FORM ONLY WHEN REDEEMING SHARES
The undersigned hereby tenders the within certificate properly endorsed in
blank or in favor of the Trust with any requisite guarantee of signature and
supporting papers and requests the redemption of
___________________________________________________________(____________) Shares
(Indicate the number of shares to be redeemed. A new certificate will be
issued for any unredeemed balance.)
represented by the within certificate in accordance with the terms of the
Declaration of Trust of the Trust.
Dated _______________________________
SIGNATURE GUARANTEED BY
_____________________________________ ______________________________________
SIGNATURE(S)
NOTICE: The signature(s) to this
redemption form must correspond with
the name as written upon the face of
the certificate in every particular,
without alteration or enlargement or
any change whatever.
______________________________________
______________________________________
Address
<PAGE>
KC 0002238 ***1***
SEE REVERSE FOR
CERTAIN DEFINITIONS
[LOGO OF ACORN INTERNATIONAL]
ACORN INTERNATIONAL
a series of ACORN INVESTMENT TRUST, a Massachusetts business trust
THIS CERTIFIES that BOSTON FINANCIAL DATA SERVICES CUSIP 004851 20 0
CORP ACTIONS AUDIT ACCT #1
ACORN INTERNATIONAL
2 HERITAGE DRIVE 8TH FLOOR
N QUINCY MA 02171-2144
is the owner of ***ONE***
FULLY PAID AND NONASSESSABLE SHARES (WITHOUT PAR VALUE) OF
ACORN INTERNATIONAL
A Series of Shares ("Shares") established and designated under the Agreement and
Declaration of Trust of Acorn Investment Trust, a Massachusetts business trust
(the "Trust"), dated April 21, 1992, as amended from time to time (the
"Declaration of Trust"). The terms of the Declaration of Trust, a copy of which
is on file with the Secretary of the Commonwealth of Massachusetts, are hereby
incorporated by reference as fully as if set forth herein in their entirety, to
all of which provisions the holder of Shares represented by this certificate
and every transferee or assignee thereof, by accepting or holding the Shares,
agrees to be bound. As provided in the Declaration of Trust, the beneficial
interest in the Trust shall be divided from time to time into shares of such
series as may be established and designated from time to time, and the Shares
evidenced hereby represent a beneficial interest in an undivided proportionate
part of the assets belonging to the above-designated Series, subject to the
liabilities of such Series. Such Series and other Series have the relative
rights and preferences set forth in the Declaration of Trust, and the Trust will
furnish to the holder of this certificate upon written request and without
charge a statement of such relative rights and preferences. The Shares
evidenced hereby are subject to redemption by the Trust pursuant to the
procedures that may be determined by the Trustees in accordance with the
Declaration of Trust. This certificate is issued by the Trustees of Acorn
Investment Trust, not individually but as Trustees under the Declaration of
Trust, and represents Shares of the above-designated Series and is binding on
the assets of the above-designated Series of the Trust but does not bind any of
the Trustees, officers, shareholders, employees or agents of the Trust
personally. Subject to the provisions of the Declaration of Trust, the Shares
represented by this certificate are transferable on the books of the Trust by
the holder hereof in person or by attorney upon surrender of this certificate
duly endorsed or assigned. This certificate is not valid until countersigned by
the Transfer Agent.
Witness the facsimile seal of the Trust and the facsimile signatures
of its duly authorized officers.
Dated 06/10/96
/s/ Merrilyn Kosir [SEAL] /s/ Terry M. Harris
VICE-PRESIDENT AND SECRETARY CHAIRMAN
COUNTERSIGNED
STATE STREET BANK AND TRUST COMPANY
TRANSFER AGENT
BY /s/ David W. Barry
AUTHORIZED SIGNATURE
<PAGE>
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT - ________Custodian__________
(Cust) (Minor)
under Uniform Gifts to Minors
Act_________
(State)
Additional abbreviations may also be used though not in the above list.
TRANSFER FORM
COMPLETE THIS FORM ONLY WHEN TRANSFERRING TO ANOTHER PERSON
For value received, _______________________________________________ hereby sell,
assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(please typewrite name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------- Shares
represented by the within certificate and do hereby irrevocably constitute and
appoint
- ---------------------------------------------------------------------- attorney,
to transfer the same on the books of the Trust, with full power of substitution
in the premises.
Dated _____________________________
SIGNATURE GUARANTEED BY
___________________________________ ________________________________________
SIGNATURE(S)
NOTICE: The signature(s) to this
assignment must correspond with the name
as written upon the face of the
certificate in every particular, without
alteration or enlargement or any change
whatever.
---------------------
REDEMPTION FORM
COMPLETE THIS FORM ONLY WHEN REDEEMING SHARES
The undersigned hereby tenders the within certificate properly endorsed in
blank or in favor of the Trust with any requisite guarantee of signature and
supporting papers and requests the redemption of
___________________________________________________________(____________) Shares
(Indicate the number of shares to be redeemed. A new certificate will be
issued for any unredeemed balance.)
represented by the within certificate in accordance with the terms of the
Declaration of Trust of the Trust.
Dated _______________________________
SIGNATURE GUARANTEED BY
_____________________________________ ______________________________________
SIGNATURE(S)
NOTICE: The signature(s) to this
redemption form must correspond with
the name as written upon the face of
the certificate in every particular,
without alteration or enlargement or
any change whatever.
______________________________________
______________________________________
Address
<PAGE>
EXHIBIT 5.3
INVESTMENT ADVISORY AGREEMENT
ACORN USA
Acorn Investment Trust, a Massachusetts business trust registered under the
Investment Company Act of 1940 (the "1940 Act") as an open-end diversified
management investment company (the "Trust"), and Wanger Asset Management, L.P.,
a Delaware limited partnership registered under the Investment Advisers Act of
1940 as an investment adviser ("WAM"), agree that:
1. ENGAGEMENT OF WAM. WAM shall manage the investment and reinvestment of
the assets of Acorn USA, a series of the Trust (the "Fund"), subject to the
supervision of the board of trustees of Trust, for the period and on the terms
set forth in this agreement. WAM shall give due consideration to the investment
policies and restrictions and the other statements concerning the Fund in the
Trust's agreement and declaration of trust, bylaws, and registration statements
under the 1940 Act and the Securities Act of 1933 (1933 Act), and to the
provisions of the Internal Revenue Code applicable to the Fund as a regulated
investment company. WAM shall be deemed for all purposes to be an independent
contractor and not an agent of the Trust or the Fund, and unless otherwise
expressly provided or authorized, shall have no authority to act or represent
the Trust or the Fund in any way.
WAM is authorized to make the decisions to buy and sell securities, options
and futures contracts for the Fund, to place the Fund's portfolio transactions
with broker-dealers, and to negotiate the terms of such transactions including
brokerage commissions on brokerage transactions, on behalf of the Fund. WAM is
authorized to exercise discretion with the Fund's policy concerning allocation
of its portfolio brokerage, as permitted by law, including but not limited to
section 28(e) of the Securities Exchange Act of 1934, and in so doing shall not
be required to make any reduction in its investment advisory fees.
2. EXPENSES TO BE PAID BY WAM. WAM shall furnish to the Trust, at WAM's
own expense, office space and all necessary office facilities, equipment and
personnel for managing that portion of the Trust's business relating to the
Fund. WAM shall also assume and pay all other expenses incurred by it in
connection with managing the assets of the Fund, all expenses of marketing
shares of the Fund, all expenses of maintaining the registration of shares of
the Fund under the 1933 Act (not including typesetting and printing expenses
referred to in section 3), all expenses in determination of daily price
computations, and placement of securities orders and related bookkeeping.
3. EXPENSES TO BE PAID BY TRUST. The Trust shall pay all charges of
depositories, custodians and other agencies for the safekeeping and servicing of
its cash, securities and
1
<PAGE>
other property and of its transfer agents and registrars and its dividend
disbursing and redemption agents, if any; all charges of legal counsel and of
independent auditors; all compensation of trustees other than those affiliated
with WAM and all expenses incurred in connection with their services to the
Trust; all costs of borrowing money; all expenses of publication of notices and
reports to its shareholders and to governmental bodies or regulatory agencies;
all expenses of proxy solicitations of the Fund or of the board of trustees of
the Trust; all expenses of shareholder meetings; all expenses of typesetting of
the Fund's prospectus and of printing and mailing copies of the prospectus
furnished to each then-existing shareholder or beneficial owner; all taxes and
fees payable to federal, state or other governmental agencies, domestic or
foreign, all stamp or other taxes; all expenses of printing and mailing
certificates for shares of the Fund; all expenses of bond and insurance coverage
required by law or deemed advisable by the Trust's board of trustees; all
expenses of qualifying and maintaining qualification of shares of the Fund under
the securities laws of such United States jurisdictions as the Trust may from
time to time reasonably designate and all expenses of maintaining the
registration of the Trust under the 1940 Act and the portion allocable to the
Fund of all fees, dues and other expenses related to membership of the Trust in
any trade association or other investment company organization.
In addition to the payment of expenses, the Trust shall also pay all
brokers' commissions and other charges relative to the purchase and sale of
portfolio securities for the Fund.
Any expenses borne by the Trust that are attributable solely to the
organization, operation or business of the Fund shall be paid solely out of Fund
assets. Any expense borne by the Trust that is not solely attributable to the
Fund, nor solely to any other series of shares of the Trust, shall be
apportioned in such manner as WAM determines is fair and appropriate, or as
otherwise specified by the board of trustees of the Trust.
4. COMPENSATION OF WAM. For the services to be rendered and the charges
and expenses to be assumed and to be paid by WAM hereunder, the Trust shall pay
to WAM solely out of assets of the Fund a fee accrued daily and paid monthly at
the annual rate of 1.00% of the average daily net asset value of the Fund up to
and including $200 million, and .95% of the average daily net asset value of the
Fund in excess of $200 million.
5. LIMITATION OF EXPENSES OF THE FUND. The total expenses of the Fund,
exclusive of taxes, of interest and of extraordinary litigation expenses, but
including fees paid to WAM, shall not in any fiscal year of the Fund exceed the
most restrictive limits prescribed by any state in which the Fund's shares are
then being offered for sale, and WAM agrees to reimburse the Fund for any sums
expended for such expenses in excess of that amount. Brokers' commissions and
other charges relating to the purchase and sale of portfolio securities shall
not be regarded as expenses.
2
<PAGE>
6. SERVICES OF WAM NOT EXCLUSIVE. The services of WAM to the Fund
hereunder are not to be deemed exclusive, and WAM shall be free to render
similar services to others so long as its services under this agreement are not
impaired by such other activities.
7. SERVICES OTHER THAN AS ADVISER. WAM (or an affiliate of WAM) may act
as broker for the Fund in connection with the purchase or sale of securities by
or to the Fund if and to the extent permitted by procedures adopted from time to
time by the board of trustees of the Trust. Such brokerage services are not
within the scope of the duties of WAM under this agreement, and, within the
limits permitted by law and the board of trustees of the Trust, WAM (or an
affiliate of WAM) may receive brokerage commissions, fees or other remuneration
from the Fund for such services in addition to its fee for services as WAM.
Within the limits permitted by law WAM may receive compensation from the Fund
for other services performed by it for the Fund which are not within the scope
of the duties of WAM under this agreement.
8. LIMITATION OF LIABILITY OF WAM. WAM shall not be liable to the Trust
or its shareholders for any loss suffered by the Trust or its shareholders from
or as a consequence of any act or omission of WAM, or of any of the partners,
employees or agents of WAM, in connection with or pursuant to this agreement,
except by reason of willful misfeasance, bad faith or gross negligence on the
part of WAM in the performance of its duties or by reason of reckless disregard
by WAM of its obligations and duties under this agreement.
9. DURATION AND RENEWAL. Unless terminated as provided in Section 10,
this agreement shall continue in effect until June 30, 1998, and thereafter from
year to year only so long as such continuance is specifically approved at least
annually (a) by a majority of those trustees who are not interested persons of
the Trust or of WAM, voting in person at a meeting called for the purpose of
voting on such approval, and (b) by either the board of trustees of the Trust or
vote of the holders of a "majority of the outstanding shares of the Fund" (which
term as used throughout this agreement shall be construed in accordance with the
definition of "vote of a majority of the outstanding voting securities of a
company" in section 2(a)(42) of the 1940 Act).
10. TERMINATION. This agreement may be terminated at any time, without
payment of any penalty, by the board of trustees of the Trust, or by a vote of
the holders of a majority of the outstanding shares of the Fund, upon 60 days'
written notice to WAM. This agreement may be terminated by WAM at any time upon
60 days' written notice to the Trust. This agreement shall terminate
automatically in the event of its assignment (as defined in Section 2(a)(4) of
the 1940 Act).
11. NON-LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any obligation of the
Trust hereunder shall be binding only upon the assets of the Trust (or
applicable series thereof) and shall not be binding upon any trustee, officer,
employee, agent or shareholder of the Trust. Neither the authorization of any
action by the trustees or shareholders of the Trust
3
<PAGE>
nor the execution of this agreement on behalf of the Trust shall impose any
liability upon any trustee, officer or shareholder of the Trust.
12. AMENDMENT. This agreement may not be amended without the affirmative
vote (a) of a majority of those trustees who are not "interested persons" (as
defined in section 2(a)(19) of the 1940 Act) of the Trust or of WAM, voting in
person at a meeting called for the purpose of voting on such approval, and (b)
of the holders of a majority of the outstanding shares of the Fund.
Dated: September __, 1996
ACORN INVESTMENT TRUST
By __________________________________
WANGER ASSET MANAGEMENT, L.P.
By Wanger Asset Management, Ltd.,
Its General Partner
By __________________________________
4
<PAGE>
EXHIBIT 5.4
ACORN USA
ORGANIZATIONAL EXPENSES AGREEMENT
ACORN INVESTMENT TRUST, a Massachusetts business trust (the "Trust") and
WANGER ASSET MANAGEMENT, L.P., a Delaware limited partnership ("WAM"), in
consideration for the engagement by the Trust of WAM as the investment advisor
for the series of the Trust designated Acorn USA (the "Fund") pursuant to a
separate agreement, hereby agree as follows:
1. ADVANCEMENT OF EXPENSES. WAM shall pay all of the organizational
expenses of the Fund, including but not limited to initial franchise taxes,
registration fees and fees for services rendered prior to the commencement of
the initial public offering of shares of the Fund, subject to the right to be
reimbursed pursuant to paragraph 2.
2. REIMBURSEMENT AND AMORTIZATION OF EXPENSES. The Fund shall amortize
the organizational expenses over a period of 60 months from the commencement of
the initial public offering of shares of the Fund, and the Fund shall reimburse
WAM during the period of such amortization by paying to WAM on the last business
day of each month an amount equal to the organizational expenses amortized by
the Fund during that month.
3. LIMITATION ON REIMBURSEMENT. If the Fund should be liquidated during
such five-year period prior to the complete amortization of all organizational
expenses, neither the Fund nor the Trust shall have any duty to reimburse WAM
for organizational expenses unamortized as of the time of liquidation.
4. OBLIGATION OF THE TRUST. This agreement is executed by an officer of
the Trust on behalf of the Trust and not individually. The obligations of this
agreement are binding only upon the assets and property of the Fund and the
Trust and not upon the trustees, officers or shareholders of the Trust
individually, nor upon the assets of any other series of the Trust. The
Agreement and Declaration of Trust under which the Trust was organized and
operates is on file with the Secretary of the Commonwealth of Massachusetts.
Dated: September __, 1996
WANGER ASSET MANAGEMENT, L.P.,
by WANGER ASSET MANAGEMENT, LTD.,
ACORN INVESTMENT TRUST its General Partner
By: ____________________________ By: ____________________________
Ralph Wanger, President Ralph Wanger, President
<PAGE>
EXHIBIT 6.2
AMENDMENT TO
DISTRIBUTION AGREEMENT
between
ACORN INVESTMENT TRUST
and
WAM BROKERAGE SERVICES, L.L.C.
This Amendment to the Distribution Agreement is made this ___ day of
September, 1996 by and between ACORN INVESTMENT TRUST, a business trust
organized existing under the laws of the Commonwealth of Massachusetts ("Acorn")
and WAM BROKERAGE SERVICES, L.L.C., a limited liability company organized and
existing under the laws of the State of Illinois ("WAM BD").
RECITALS
Acorn and WAM BD entered into a Distribution Agreement (the "Agreement")
dated February 27, 1996 by which Acorn appointed WAM BD as principal underwriter
of its Shares.
The Agreement defines Shares as the "shares of beneficial interest [of
Acorn] which are divided into two series, Acorn Fund and Acorn International".
Acorn has designated and wishes to offer for sale to the public shares of
an additional series, Acorn USA, and may from time to time hereafter wish to
offer for sale to the public shares of yet additional series.
Acorn has entered into investment advisory agreements with Wanger Asset
Management, L.P. ("WAM"), an affiliate of WAM BD, pursuant to which WAM has
agreed to pay all expenses incurred in the sale and promotion of shares of
Acorn.
THEREFORE, Acorn and WAM BD agree:
1. ACORN USA. As used in the Distribution Agreement, "Shares" shall include
the shares of beneficial interest of the series of Acorn designated Acorn
USA.
2. ADDITIONAL FUNDS. If Acorn establishes one or more series in addition to
Acorn Fund, Acorn International and Acorn USA and wishes to appoint WAM BD
as principal underwriter of the shares of beneficial interest of such
series, Acorn shall so notify WAM BD in writing, and if WAM BD agrees in
writing to provide such
<PAGE>
services and WAM acknowledges that agreement by WAM BD, the shares of
beneficial interest of such series shall become Shares under the Agreement.
ATTEST: WAM BROKERAGE SERVICES, L.L.C.
_____________________________ By: _________________________________
Secretary Terence M. Hogan, President
ATTEST: ACORN INVESTMENT TRUST
_____________________________ By: _________________________________
Secretary Ralph Wanger, President
ACKNOWLEDGED:
WANGER ASSET MANAGEMENT, L.P.
By: _________________________
Ralph Wanger
ATTEST:
_____________________________
Secretary
<PAGE>
EXHIBIT 8.3
[Acorn Investment Trust letterhead]
August __, 1996
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
Ladies and Gentlemen:
This is to advise you that Acorn Investment Trust has established a new
series of shares to be known as Acorn USA. In accordance with the Additional
Funds provision in Section 17 of the Custodian Contract dated July 1, 1992 and
in Article 10 of the Transfer Agency and Service Agreement dated July 1, 1992
between Acorn Investment Trust and State Street Bank and Trust Company, Acorn
Investment Trust hereby requests that you act as Custodian and Transfer Agent
for the new series under the terms of the respective contracts.
Please indicate your acceptance of this appointment as Custodian and
Transfer Agent by executing three copies of this Letter Agreement, returning two
copies to us and retaining one copy for your records.
ACORN INVESTMENT TRUST
By: ___________________________
[name]
[title]
Agreed to this _____ day of August, 1996.
STATE STREET BANK AND TRUST COMPANY
By: _______________________________
[name]
[title]
<PAGE>
[LETTERHEAD OF BELL, BOYD & LLOYD] Exhibit 10.3
June 18, 1996
Acorn Investment Trust
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606
Ladies and Gentlemen:
ACORN INVESTMENT TRUST
ACORN USA
We have acted as counsel for Acorn Investment Trust (the "Trust") in
connection with the registration under the Securities Act of 1933 (the "Act") of
an indefinite number of shares of beneficial interest of the series of the Trust
designated Acorn USA (the "Shares") in registration statement no. 2-34223 on
form N-1A (the "Registration Statement").
In this connection we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate and other
records, certificates and other papers as we deemed it necessary to examine for
the purpose of this opinion, including the agreement and declaration of trust
(the "Trust Agreement") and bylaws (the "Bylaws") of the Trust, actions of the
board of trustees of the Trust authorizing the issuance of shares of the Funds
and the Registration Statement.
Based on the foregoing examination, we are of the opinion that upon the
issuance and delivery of the Shares of each Fund in accordance with the Trust
Agreement and the actions of the board of trustees authorizing the issuance of
the Shares, and the receipt by the Trust of the authorized consideration
therefor, the Shares so issued will be validly issued, fully paid and
nonassessable (although shareholders of the Fund may be subject to liability
under certain circumstances as described in the statement or additional
information of the Trust included as Part B of the Registration Statement under
the caption "The Trust").
In giving this opinion we have relied upon the opinion of Ropes & Gray to
us dated June 18, 1996, and have made no independent inquiry with respect to any
matter covered by such opinion.
<PAGE>
Acorn Investment Trust
June 18, 1996
Page 2
We consent to the filing of this opinion as an exhibit to the Registration
Statement. In giving this consent, we do not admit that we are in the category
of persons whose consent is required under section 7 of the Act.
Very truly yours,
/s/ BELL, BOYD & LLOYD
<PAGE>
[LETTERHEAD OF ROPES & GRAY]
June 18, 1996
Bell, Boyd & Lloyd
Three First National Plaza
70 West Madison Street, Suite 3300
Chicago, IL 60602
Ladies and Gentlemen:
We are furnishing this opinion in connection with the proposed offer and
sale from time to time by Acorn USA, a Series of Acorn Investment Trust (the
"Trust") of an indefinite number of shares of beneficial interest, without par
value (the "Shares"), pursuant to the Trust's Registration Statement on Form
N-1A (No. 2-34223) under the Securities Act of 1933, as amended.
We are familiar with the action taken by the Trustees of the Trust to
authorize the issuance of the Shares. We have examined the Trust's records of
Trustee action, its By-Laws and its Agreement and Declaration of Trust, as
amended to date. We have examined such other documents as we deem necessary for
the purposes of this opinion.
We assume that, upon sale of the Shares, the Trust will receive the net
asset value thereof.
Based upon the foregoing, we are of the opinion that the Trust is
authorized to issue an unlimited number of Shares, and that, when the Shares
are issued and sold after the Registration Statement has been declared
effective and the authorized consideration therefor is received by the Trust,
they will be validly issued, fully paid and nonassessable by the Trust.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust or
any series of the Trust (a "Series"). However, the Agreement and Declaration of
Trust disclaims shareholder liability for acts or obligations of the Trust or
any Series and requires that notice of such disclaimer be given in every note,
bond, contract, instrument, certificate or undertaking issued by or on behalf of
the
<PAGE>
Ropes & Gray
Bell, Boyd & Lloyd -2- June 18, 1996
Trust. The Agreement and Declaration of Trust provides for indemnification out
of property of a particular Series for all loss and expense of any shareholder
held personally liable solely by reason of his or her having been a record owner
of the Shares. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust
or the particular Series itself would be unable to meet its obligations.
We consent to the filing of this opinion as an exhibit to the aforesaid
Registration Statement.
Very truly yours,
/s/ Ropes & Gray
Ropes & Gray
<PAGE>
Exhibit 11
Consent of Independent Auditors
We consent to the incorporation by reference of our reports with respect to
Acorn Fund and Acorn International dated January 31, 1996 in the Registration
Statement of Acorn Investment Trust on Form N-1A filed with the Securities and
Exchange Commission in this Post-Effective Amendment No. 54 to the Registration
Statement under the Securities Act of 1933 (Registration No. 2-34223) and in
this Amendment No. 29 to the Registration Statement under the Investment Company
Act of 1940 (Registration No. 811-1829).
Ernst & Young LLP
Chicago, Illinois
June 17, 1996
<PAGE>
EXHIBIT 14
Dear Investor:
Thank you for your interest in the Acorn Funds. We hope you find our IRA booklet
informative and helpful. We understand how important it is to plan for your
future. Starting to invest for your retirement today will give your savings as
much time as possible to grow and will let you take advantage of the power of
compounding over the long haul.
Investing with the Acorn Funds helps you save money. How? The Acorn Funds are
100% no-load, which means that all of your money goes to work for you
immediately. There are no sales charges, and no 12b-1 fees or back-end load
fees, so all of your dollars are invested at net asset value. Acorn invests in
companies for the long-term (usually 3-5 years), so our turnover rate is low.
This minimizes both trading costs and shareholders' taxes. All these factors add
up to greater value for our shareholders.
An IRA provides the special advantage of tax-deferred compounding. Your
investment grows year after year with no annual tax payments on the earnings in
your account until you begin to withdraw from your IRA. This means that you can
save more with an IRA than with a comparable taxable investment. What's more,
all or part of your contribution may be deductible from your current taxes,
providing additional tax savings.
Whether you are opening a new IRA, making your annual IRA contribution, moving
an existing IRA from another institution, or rolling over money from an
employer-sponsored retirement plan, Acorn can help you save for your retirement.
This booklet contains everything you need to open an IRA at Acorn. Please take a
moment to read it carefully. If you have any questions or need help with any of
the forms, please call us at 1-800-9-ACORN-9 (1-800-922-6769).
We invite you to squirrel away your acorns for a day when you really need them,
and look forward to a long and mutually rewarding relationship with you.
Very truly yours,
Ralph Wanger
President
<PAGE>
GENERAL INFORMATION ABOUT THE INDIVIDUAL RETIREMENT ACCOUNT PLAN
CAN ANYONE OPEN AN ACORN IRA?
Once you have reached legal age, you may open or contribute to an Acorn IRA in
any year before the year in which you reach age 70 1/2 and in which you have
earnings from employment or self-employment. You may make your contribution for
any year until April 15 of the following year.
HOW MUCH CAN I CONTRIBUTE?
The annual contribution limit for an IRA is the lesser of $2,000 or 100% of
compensation (including alimony and separate maintenance payments) for the year.
You may contribute the maximum amount to your IRA even if you and/or your spouse
participate in an employer-sponsored retirement program or a Keogh plan
(although some or all of your contribution may not be tax-deductible, as
explained below).
WHY USE AN IRA?
One of the keys to successful retirement planning is effectively using the time
you have until you actually retire. This means saving regularly and starting
now. An IRA is an exceptional way to save for retirement because it offers the
opportunity for long-term growth and the benefit of tax-deferred compounding.
This means that your earnings, both dividends and capital gains, grow free of
current taxes. You pay no taxes on the growth of your IRA until you withdraw
from it.
The following table shows the effects of tax-deferred compounding of earnings
compared to a similar taxable investment. This is a hypothetical example for
illustrative purposes only and does not represent the performance of any mutual
fund.
ADVANTAGES OF TAX-DEFERRED COMPOUNDING
[insert table]
This chart shows the value of your IRA's tax-deferred advantage. Our example
assumes a $2,000 contribution at the beginning of each year for 10, 20, and 30
years, a 31% tax bracket, and a constant earnings rate of 10% annually.
In addition to the benefits of tax-deferred compounding, you may be able to
reduce your current income taxes by taking a tax deduction for a part or all of
your contributions in the years you add to your IRA. Whether all or part of your
annual contribution is deductible depends upon the amount of your income for the
year and whether you or your spouse participate in an employer's qualified
retirement plan. Even if your contribution for a given year is non-deductible,
you may contribute the maximum amount to your IRA for that year. (Please see
your tax adviser for additional information and reporting requirements.)
<PAGE>
The following chart shows the extent of your contribution's deductibility under
current IRS regulations.
<TABLE>
<CAPTION>
ADJUSTED GROSS INCOME (BEFORE IRA DEDUCTION) RETIREMENT PLAN DEDUCTIBILITY OF A
JOINT FILING SINGLE FILING* PARTICIPATION** $2,000 CONTRIBUTION
<S> <C> <C> <C>
Under $40,000 Under $25,000 Yes or No Full
$40,000 - $50,000 $25,000 - $35,000 No Full
Yes Partial
Over $50,000 Over $35,000 No Full
Yes No Deduction
</TABLE>
* Applies to married persons filing separate returns only if they lived
apart for the entire year.
** "Yes" refers to either you or your spouse. "No" refers to both you and your
spouse. If you don't know your participation status, refer to the pension
plan box on your W-2 form.
If your IRA contribution is partially deductible, you can calculate the
deductible portion of your contribution amount from the following formula:
<TABLE>
<CAPTION>
FORMULA EXAMPLE YOUR CONTRIBUTION
JOINT SINGLE
<S> <C> <C> <C>
1. Subtract Adjusted Joint AGI=$43,500 AGI = $______ AGI = $______
Gross Income (AGI) $50,000 - $______ $35,000 - $______
from $50,000 (joint) or $50,000-$43,500=$6,500 = $______ = $______
$35,000 (single) $ 6,500 / 5 = $1,300 / 5 $______ / $______
2. Divide by 5 to get
deductible amount*
</TABLE>
* If the deductible amount is not a multiple of $10, round up to the next
highest $10. If it is $1-199, deduct $200. To calculate combined deduction
for regular and Spousal IRA, multiply by .225 (instead of dividing by 5).
You may contribute only this deductible amount or, if you wish, you may
contribute up to the $2,000 annual limit with the excess amount being non-
deductible. If you make a non-deductible contribution, you need to file Form
8606 with your tax return.
If your spouse does not work and if you and your spouse file a joint tax return,
you may be able to deduct up to $2,250 rather than $2,000 by opening a "Spousal
IRA" for your non-working spouse. The total of contributions to your IRA and the
Spousal IRA cannot exceed $2,250, but that amount may be divided between the two
accounts in whatever proportion you and your spouse decide, up to $2,000 for
either account. See your tax adviser for more information.
2
<PAGE>
OPENING A NEW ACORN IRA
Investing in an Acorn IRA gives you the opportunity to save for your retirement
using four different mutual funds: Acorn Fund, Acorn International, Acorn USA,
and Short Term Income Fund Money Market Portfolio. You may invest all of your
contributions in one fund or you may divide your contributions among the funds
as you choose.
To open a new Acorn IRA, complete the application included with this booklet. On
the application, check the box for a regular IRA contribution and indicate the
tax year for which you are making your IRA contribution. Select the fund(s) in
which you want to invest and indicate the amount to be invested in each fund.
Tell us whether you want to make regular investments into your Acorn IRA by
using the Automatic Investment Plan, and provide us with the beneficiary
information requested on the back of the application. Then write a check payable
to "State Street Bank" for the total amount you wish to invest (including the $5
set-up fee for each fund in which you are investing) and mail your check with
the completed application to Acorn in the pre-addressed envelope provided or to
the address shown on the application.
MOVING FUNDS FROM ANOTHER IRA OR A QUALIFIED PLAN TO AN ACORN IRA
Acorn can help you to move funds from other IRA custodians or qualified plans.
This can be done in three ways: a custodian to custodian (or trustee to trustee)
transfer (also known as a direct transfer); a 60-day rollover of a distribution
you have received from a qualified plan or money you have withdrawn from another
IRA; or a direct rollover of a distribution from your employer's qualified
retirement plan. Each method is explained below.
Direct Transfer
Acorn will arrange a direct transfer of assets from your current IRA custodian
or trustee directly to Acorn. In a direct transfer you do not receive the
account proceeds during the transfer process. Your money goes directly from your
old IRA custodian to Acorn. You may make direct transfers between IRAs as often
as you choose.
If you would like the transferred money to go into a new Acorn IRA, complete
both the transfer form, checking the box for a new Acorn IRA, and the
application, checking the box for a Direct Transfer. If the transferred money is
to be invested in an existing Acorn IRA, complete only the transfer form.
The transfer form tells us about the IRA assets you are transferring and
provides information about your current custodian. This information should be on
your most recent account statement. Complete the instructions authorizing your
current custodian to transfer your account to Acorn and sign the transfer form.
Please check with your present custodian to find out whether you will need to
obtain a signature guarantee.
Send the completed form(s) to Acorn in the envelope provided or to the address
shown on the application. Acorn will arrange for the transfer of assets from
your present custodian.
3
<PAGE>
60-day Rollover from an IRA
If you physically receive money that was held in your IRA with another
custodian, you must deposit the money into an IRA within 60 days to avoid paying
income tax. If this is not done within the 60-day time limit, you will have to
pay income tax on the amount you have received, as well as possible penalties if
you are under the age of 59 1/2 when you receive the money. You may make only
one 60-day rollover per IRA in any twelve-month period.
To establish a rollover account with money you have withdrawn from another IRA,
complete the Acorn IRA application, checking the box for a 60-day rollover of an
existing IRA. Indicate whether the rollover is from a Regular IRA or a Rollover
IRA. Be sure that you forward your check in time for the funds to be received by
State Street Bank no later than 60 days from the date on which the distribution
from your IRA was made.
ROLLOVERS FROM AN EMPLOYER'S QUALIFIED PLAN TO AN ACORN IRA
If you have been participating in your employer's qualified retirement plan and
are eligible for a distribution from the plan because of a job change, a lay-
off, disability, retirement, or termination of the plan, you need to decide what
you will do with your retirement plan money before you receive the distribution.
Unless you are eligible to leave your money in the plan and want to do so, you
have two main alternatives: (1) rollover the amount distributed and keep your
money working for you tax-deferred, or (2) take the distribution now--subject to
the applicable taxes and penalties.
If you take your distribution now (even if you are planning to do a 60-day
rollover), your employer must withhold 20% of the distribution for federal
income taxes, so you'll receive only 80% of the money to be distributed. You may
also be responsible for (a) additional federal income tax (depending on your tax
bracket), (b) a penalty tax of 10% for an early withdrawal if you are not yet 59
1/2 (subject to exceptions if you are disabled, spend the distribution on
medical expenses, or have separated from service and are at least age 55), and
(c) state and local income taxes on your distribution.
If you choose to reinvest the amount distributed, you have three options: (1)
use a direct rollover to invest the money in an IRA; (2) use a 60-day rollover
to invest the money in an IRA; or (3) roll over the distribution into a
qualified plan sponsored by a new employer (if the plan accepts rollovers). If
you are reinvesting the money in an IRA, a direct rollover is usually better
than a 60-day rollover. In a direct rollover, you never receive the distribution
(it is sent directly from the plan to the IRA custodian, or the plan gives you a
check payable to the IRA custodian). Because a direct rollover is not treated as
a distribution to you, no tax is withheld.
Direct Rollover
To set up your Acorn IRA by making a direct rollover you should complete the
enclosed application, check the box for a Rollover IRA from an employer-
sponsored plan, and check the appropriate box to tell us whether you are
enclosing a check payable to State Street Bank or your employer will be sending
the check directly to the bank. If your plan administrator gives you a
4
<PAGE>
check payable to State Street Bank, send that check along with the completed
application in the pre-addressed envelope provided or to the address on the
application. If your plan administrator is going to send a check directly to
State Street, send the completed application without the check. We will open the
account and have it ready to receive your distribution check. You may call us at
1-800-922-6769 to request your account number if your plan administrator needs
it to send the distribution check.
60-Day Rollover from a Qualified Plan
If you have already received a distribution directly, you will have had 20%
withheld for taxes, but you can still make a 60-day rollover.
You will avoid income tax and possible penalties on the amount you deposit in
your IRA, up to the entire amount of your distribution (before deduction of the
20% for income tax withholding). You can rollover part of your distribution and
keep part, paying income tax and any applicable penalties on the part you keep.
If you rollover only the amount of your distribution check (the 80% that was
left after the 20% income tax withholding), you will be treated as having kept
the 20%, which will be subject to income taxes and any applicable penalties. You
can avoid taxes and penalties entirely when you make the 60-day rollover by
making up from other funds the 20% that was withheld for tax. The 20% that was
withheld is treated like any other withheld income tax -- to the extent the
total amount of tax withheld (including the 20% and tax withheld from your
compensation) from you plus estimated income tax payments you make exceeds your
tax liability when you file your return, you will receive a refund of the
excess.
If you receive a distribution of property (such as shares of stock) from your
employer's plan, you can make a 60-day rollover by selling the property and
depositing the sales proceeds within the 60-day period. If you had borrowed
against your account in the plan from which you receive the distribution, the
taxable amount of your distribution may be more than the amount of cash you
receive because it will include the unpaid loan balance. In this case, you can
avoid paying tax on the unpaid loan balance by using other funds to complete
rollover, in the same way you can make up the 20% tax withholding.
5
<PAGE>
The following chart summarizes the key features of your alternatives for
reinvesting a distribution from your employer's plan and may help you decide how
to keep your money working for your retirement.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Rollover IRA New Employer's Plan
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TAX CONSIDERATIONS . avoids current taxes . avoids current taxes
. money grows tax-deferred . money grows tax-deferred (but you
may have to wait to transfer money
into plan)
- -------------------------------------------------------------------------------------------------------------------
INVESTMENT OPTIONS . a range of investment choices . options vary among plans
- -------------------------------------------------------------------------------------------------------------------
WITHDRAWAL OPTIONS . can take all or part of your money . choices vary from plan to plan;
out at any time check with your new employer
. earnings taxed when withdrawn; . earnings taxed when withdrawn;
10% penalty applies if younger than 10% penalty applies if younger
59 1/2, unless disabled than 59 1/2 or separated from service
before age 55, with some exceptions
. no mandatory 20% withholding for . 20% withholding for federal income
federal income taxes on withdrawals taxes if withdrawal of eligible
rollover distributions not rolled over
into another plan
- -------------------------------------------------------------------------------------------------------------------
OTHER FEATURES . very easy to set up . can add future contributions to your
. can switch between your Acorn plan
investments tax-free as your needs . enables you to consolidate your
and the market changes retirement plan money
. offers you easy access to your . may be able to borrow from your
investments account
. borrowing not permitted
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
If you put your plan distribution into the same IRA with regular IRA (annual
contributions) money, you forfeit the right to reinvest your plan distribution
in another employer's qualified plan in the future. Because combining regular
IRA and Rollover IRA funds may also have tax implications when you begin
withdrawals from your IRA, you should consult your tax adviser before deciding
to commingle your plan distribution with your regular IRA investments.
SEP-IRAS
An IRA under a Simplified Employee Pension Plan (SEP-IRA) may be an attractive
way to save for retirement if you have any income from self-employment, and may
also be a way to offer an important benefit to your employees if you are a small
business owner. You may open and contribute to a SEP-IRA as a self-employed
individual if you provide any service from which you earn income, even if you
have a full-time occupation in which you participate in an employer's retirement
plan. If you own a small business as a sole proprietor, a partnership, or a
corporation (including a Subchapter-S corporation), you can establish a SEP-IRA
for yourself and your eligible employees.
A SEP-IRA offers the advantage of tax-deferred compounding that is available in
a regular IRA, while allowing annual contributions of up to 15% of earned income
within the limits imposed by the IRS. We have included with this booklet a
worksheet to help in calculating SEP-IRA contributions.
6
<PAGE>
In addition to tax-deferred compounding, a SEP-IRA provides full deductibility
of each annual contribution from current taxable income. This means that, if
your business is incorporated, you can deduct SEP-IRA contributions for yourself
and any eligible employees as a business expense, or, if your business is not
incorporated, you can (a) deduct contributions for any eligible employees as a
business expense and (b) deduct contributions for yourself from your personal
income.
Setting up a SEP-IRA is simple and flexible. Only a simple information form
(Form 5305-SEP, available from the IRS) must be completed and given to eligible
employees. The IRS regulations for SEP-IRAs require that all eligible employees
(other than union members and non-resident aliens) must be covered; eligible
employees are all those who (a) are at least 21 years old, (b) have worked for
your business for three of the last five years, and (c) have earned at least
$400 in 1996 (an amount adjusted periodically for changes in the cost-of-
living). You may establish more liberal requirements to include more of your
employees, but you may not impose more restrictive conditions. You must
generally contribute the same percentage of earned income (based on W-2 wages)
for each eligible employee, but that contribution percentage may vary between 0%
and 15% of earned income each year at your discretion. You may be able to
contribute a higher percentage for employees (including yourself) who earn more
than the Social Security wage base. You may also, if you have no more than 25
eligible employees (including yourself), make contributions only for employees
who elect to reduce their current compensation (a SAR-SEP). If your business has
other employees, you should consult a qualified tax adviser as to the best
contribution formula to use.
If you are self-employed, a new SEP-IRA for a given year must be established by
April 15 of the following year, with each subsequent year's contribution also
due by April 15 of the following year. If you are a business owner establishing
SEP-IRAs for yourself and your employees, you must open the accounts by the due
date of your business's federal tax return for the tax year for which the
contribution will be made. In addition to your SEP-IRA, you may also be able to
contribute to a regular IRA, but you should consult your tax adviser about the
deductibility of your contributions and about the tax consequences of excess
contributions to either account.
To open a new SEP-IRA at Acorn, complete the enclosed application. If you have
employees for whom you are establishing SEP-IRA accounts, please write a
separate check for your contribution for each employee. You should also complete
IRS Form 5305-SEP (available from the IRS), keep the original for your records,
and give a copy to each eligible employee. Do not send Form 5305-SEP to Acorn or
file it with the IRS.
In addition, if your business has other employees, you may be required to
furnish them with certain information to avoid being required to file annual tax
returns for the SEP-IRA.
To transfer your SEP-IRA to Acorn from another custodian, complete the transfer
form, checking the box for a SEP-IRA Transfer. If this is a new Acorn SEP-IRA,
you will also need to complete the application, checking the SEP-IRA and Direct
Transfer boxes. If you have received SEP-IRA funds from another custodian and
are moving your money to Acorn within 60 days of that distribution, complete the
application and check the SEP-IRA and 60-Day Rollover boxes.
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MAKING WITHDRAWALS FROM YOUR ACORN IRA
You must begin withdrawing money from your IRA by April 1 of the year after the
year in which you reach age 70 1/2. You may start to withdraw funds from your
account without penalty when you reach age 59 1/2 or if you are disabled or meet
certain other conditions. Any withdrawals you make before you reach age 59 1/2,
unless you are disabled or meet certain other IRS qualifications, are subject to
tax penalties. Call Acorn at 1-800-962-1585 for an Acorn IRA withdrawal service
form to make a withdrawal from your IRA or to set up a regular withdrawal plan.
State Street Bank can help you in completing this form if you have any
questions.
If you wish to withdraw only the minimum required distribution for each year
after you reach age 70 1/2, State Street Bank can help you make the necessary
calculations and set up a periodic withdrawal plan for your distributions.
Simply check box C of the Withdrawal Instructions on the Acorn withdrawal
service form, provide the other requested information for that section, and
complete the remainder of the form. Certain tax penalties may also apply if you
withdraw too much money from an IRA in a given year. You should consult your tax
adviser concerning the differences among the tax effects which may result from
taking the minimum required distribution and those involved in the other
available withdrawal options.
ACCOUNT FEES
State Street Bank, as custodian, charges the following fees for an Acorn IRA,
per fund account:
Initial set-up fee $ 5.00
Annual maintenance fee $10.00
Disbursement fee $10.00
(per withdrawal, except for automatic installment payments)
The $5.00 per fund set-up fee will be deducted from your initial IRA
contribution; to maximize the contribution that goes to work for you, add $5.00
for each fund in which your initial contribution will be invested to your
contribution (or send us a separate check for the set-up fee). Acorn will also
withdraw the annual maintenance fee(s) from your account(s) unless you send a
check for those fee(s) when you receive Acorn's annual fee statement in
November. If the disbursement fee applies, Acorn will deduct the $10.00 from
each withdrawal.
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Minimum Investments through 4/30/97 beginning 5/1/97
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To open an IRA $200 $1,000
To add to an IRA account 100 100
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Making an active and worry-free retirement possible means taking the time now to
plan for your financial future. We hope that this booklet has been helpful and
that you will make an Acorn IRA part of your retirement plan.
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ACORN INVESTMENT TRUST
INDIVIDUAL RETIREMENT ACCOUNT DISCLOSURE STATEMENT
We are required to give you this Disclosure Statement for the purpose of
assuring that you are informed and understand the nature of an Individual
Retirement Account ("IRA"). This disclosure statement explains the rules
governing IRAs. Your Right to Revoke this IRA. You may revoke this IRA at any
time within seven days after the later of the date you received this Disclosure
Statement or the day you established this IRA. For purposes of revocation, it
will be assumed that you received the Disclosure Statement no later than the
date of your check or transfer direction with which you opened your IRA. If you
did not receive the Disclosure Statement until a later date, your notice of
revocation should state the date on which the Disclosure Statement was received.
To revoke the IRA, you must either mail or deliver a notice of revocation to the
following address:
State Street Bank and Trust Company
Attention: Acorn Investment Trust
P.O. Box 8502
Boston, MA 02266-8502
If a notice of revocation is mailed, it will be deemed mailed on the date of the
postmark (or if sent by certified or registered mail, the date of certification
or registration) if it is deposited in the mail in the United States, first
class postage prepaid and properly addressed. If you revoke your IRA, you are
entitled to a return of the entire amount contributed.
(1) TYPES OF IRAS; ELIGIBILITY
IN GENERAL. An IRA is a trust or custodial account established in the United
States for the exclusive benefit of an individual and his or her beneficiaries
and which, under Section 408(a) of the Internal Revenue Code, meets the
following requirements: annual contributions are limited as described below; the
trustee or custodian is a bank or other approved financial institution; no part
of the IRA can be invested in life insurance contracts; the individual's
interest in the IRA is nonforfeitable; the IRA's assets cannot be commingled
with other property except for certain permitted common funds; and minimum
distributions are required as described below. There are several types of IRAs.
For example, there is a "Regular IRA" to which you may make contributions for
yourself. There is a "Spousal IRA" which you may be able to set up for your
spouse. There is also a "Rollover IRA" which you can set up to receive assets
from a qualified plan, annuity or another IRA. Finally, there is a SEP-IRA
(which is also known as a Simplified Employee Pension Plan) which your employer
can establish for you. Following is a general description of the rules which
apply to each of these types of IRAs and who is eligible to establish them.
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A. REGULAR IRA. You may contribute up to the lesser of $2,000 or 100% of your
compensation if you have not reached age 70 1/2 during the taxable year. You may
make this contribution even if you or your spouse is an active participant in a
qualified employer plan. However, as explained below, the amount of the
contribution which is deductible for federal income tax purposes may be limited.
Compensation includes wages, salary, commissions, bonuses, tips, etc., and also
includes taxable alimony or separate maintenance payments. Compensation does not
include income from interest, dividends or other earnings or profits from
property, or amounts not includible in your gross income.
B. SPOUSAL IRA. You may contribute to your IRA and an IRA for your non-working
spouse if: (1) you have received compensation during the taxable year and (2)
you file a joint income tax return for the year with your spouse. Under such an
arrangement, you may qualify for a total deduction equal to the lesser of $2,250
or 100% of your compensation for the taxable year. You can determine how to
divide the contribution between the two accounts but you cannot contribute more
than $2,000 annually into either one. While you cannot contribute to your IRA in
the taxable year in which you reach 70 1/2, you can still contribute to your
spouse's IRA if he or she has not reached 70. A Spousal IRA does not involve the
creation of a joint account. The account of each spouse is separately owned and
treated independently from the account of the other spouse.
A "non-working spouse" is one who had no compensation for the year, or elects to
be treated as having no compensation for this purpose. Your spouse's election is
made by claiming a spousal IRA deduction on your joint tax return.
C. ROLLOVER IRAS. All or a portion of certain distributions from qualified
retirement plans, annuities and other IRAs may be "rolled over" tax-free within
60 days after receipt of the distribution without regard to the limits on
deductible contributions, but no deduction is allowed with respect to such a
contribution. In general, you can roll over any distribution from a qualified
plan unless it is either (1) one of a series of substantially equal periodic
payments (such as an annuity or certain types of installment payments) or (2) a
minimum distribution required to be made after you reach the age of 70 1/2. You
can generally roll over any distribution from an IRA to another IRA except a
minimum distribution required after you reach 70 1/2.
The amount rolled over cannot exceed the taxable portion of the distribution,
including any portion withheld for payment of taxes. If property, rather than
cash, is distributed, you may either roll over the property distributed
(although Acorn does not accept non-cash contributions), or sell the property
within the 60-day period and roll over all or part of the proceeds. If you make
a rollover from a qualified employer plan to an IRA, you may in turn under
certain circumstances make a later rollover from the IRA into another qualified
plan of a subsequent employer. To preserve that right, however, you must keep
the rollover IRA separate from any other IRA you may have, since you cannot make
a rollover to an employer plan from an IRA to which you have made yearly
contributions.
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You can also transfer assets you hold in one IRA to another IRA by directing the
current trustee or custodian to transfer those assets directly to the new IRA.
You can direct such a so-called "trustee-to-trustee transfer" at any time.
However, you may make a rollover from one IRA to another IRA only once during a
one-year period. You can also direct the trustee or custodian of a qualified
retirement plan to transfer a distribution from the plan directly to an IRA.
This is called a "direct rollover." A direct rollover is generally preferable to
a distribution followed by a 60-day rollover, because a distribution to you from
a qualified plan is subject to 20% income tax withholding. This means that, if
you want to roll over the full amount of your distribution, you will have to
replace the 20% that was withheld with other funds. A direct rollover is not
subject to tax withholding.
Rollover amounts you receive may not be deposited in your spouse's IRA. However,
if your surviving spouse receives a distribution from a qualified plan or IRA as
your beneficiary, he or she can generally roll over the distribution to an IRA
(but not to a qualified plan) to the same extent that you could have. This
rollover right does not apply to beneficiaries other than your surviving spouse.
The amount of the death payout rolled over by a spouse into an IRA may not
subsequently be rolled over into another employer's qualified plan or annuity.
The term "qualified plan" includes tax-qualified pension or profit-sharing plans
(including 401(k) plans) maintained by your employer, and Keogh plans for self-
employed persons and partners. Except for purposes of a surviving spouse's right
to rollover distributions received as a beneficiary, it also includes qualified
annuity plans, tax-sheltered annuities, and custodial accounts maintained by
tax-exempt employers. Strict requirements must be met to qualify for tax-free
rollover treatment. You should consult your personal tax advisor in connection
with rollovers to and from your IRA.
D. SIMPLIFIED EMPLOYEE PENSION (SEP-IRA). An employer may adopt a SEP-IRA and
contribute to your SEP-IRA even if you are covered by another retirement plan.
The maximum contribution is 15% of your compensation (computed without regard to
the contribution) or $30,000 (or such other amount as may be prescribed by the
Secretary of the Treasury), whichever is less. The contributions are deductible
by the employer and are generally not includible in your income until you
receive distributions. If your employer chooses and if certain conditions are
satisfied, you can elect to have your salary reduced by up to $7,000 (or such
higher amount as is specified from time to time by the Secretary of the
Treasury) and to contribute the reduction to your SEP-IRA. This type of SEP-IRA
is called an SAR-SEP. If you reduce your salary under a salary reduction
agreement, your salary subject to federal income tax is reduced. To establish a
SEP-IRA, your employer must sign a SEP-IRA plan agreement and provide you with a
copy of the agreement as well as certain information concerning the rules
applicable to such plans. Your employer can satisfy these requirements by using
Form 5305-SEP, which is issued by the Internal Revenue Service. If you are self-
employed, you may establish a SEP-IRA for your own benefit, but you may also
have to cover any other employees you have.
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II. CONTRIBUTIONS
IN GENERAL. As explained in this part, the amount of your IRA contributions
which you can deduct is subject to limits. All contributions and transfers to
your Acorn IRA must be in cash. Contributions to your Regular IRA or Spousal IRA
may be made up to the due date for filing your tax return for the taxable year
(excluding extensions thereof) even if you file before the due date. In making
contributions, you must indicate the tax year to which the contribution applies.
If no tax year is designated, the custodian will assume that the contribution is
intended to apply to the calendar year in which it is received. The time limit
for designating the applicable tax year is April 15.
Contributions made by an employer to your SEP-IRA for a calendar year may be
made no later than the due date of your employer's tax return (including
extensions). In making a SEP-IRA contribution, the tax year to which the
contribution relates must also be specified or it will be deemed to relate to
the calendar year in which it is received. In a SEP-IRA, this designation of the
tax year of a contribution must be made by the due date for contributions
described above.
DEDUCTIBLE CONTRIBUTIONS. If you are single and are not an "active participant"
in a retirement plan maintained by your employer, you can deduct the full amount
of your IRA contribution up to the lesser of $2,000 or 100% of your compensation
for the year. If you are married, you can deduct the full amount of your IRA
contribution so long as neither you nor your spouse is an "active participant"
in a retirement plan maintained by your respective employers. These plans
include qualified pension, profit-sharing, stock bonus or money purchase plans,
401(k) plans, SEP-IRAs, qualified annuity plans, tax-sheltered annuities and
custodial accounts and governmental retirement plans (other than certain plans
for reserve members of the armed forces and volunteer firemen, and certain
deferred compensation plans). In general, you are considered to be an active
participant in a plan if an employer contribution or forfeiture was credited to
your account during the year in the case of a defined contribution plan or if
you have met the minimum age and service requirements, in the case of a defined
benefit plan (even if you don't actually accrue a benefit during the year). You
are considered to be an active participant in a plan if you make a contribution
to the plan during a year even if your employer does not. For active
participation, it does not matter whether any interest you have in a plan is
vested or unvested.
If you or your spouse is an active participant in a plan, the amount of the
deduction you can claim for an IRA contribution is reduced or totally denied
depending upon the amount by which your adjusted gross income for the year
exceeds the "applicable dollar amount." The applicable dollar amount is $25,000
for single people and $40,000 for married individuals filing a joint tax return.
If you are married but are filing separate tax returns, your applicable dollar
amount is $0.
If your adjusted gross income exceeds your applicable dollar amount by more than
$10,000, you may not deduct any portion of your IRA contribution. However, if it
is between $0 and $10,000 more than your applicable dollar amount, you can claim
a tax deduction for part of your contribution. To determine the amount of the
deduction, follow these steps. First, determine the amount of the contribution
you can make. If, for example, you have compensation in excess of $2,000 you
could make a $2,000 contribution to your Regular IRA. Next, subtract the
applicable
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dollar amount from your adjusted gross income. If you are single and your
adjusted gross income is $30,000, the difference would be $5,000. Next, divide
this difference by $10,000. In the example $5,000/$10,000 equals 50%.
Accordingly, the maximum contribution to a Regular IRA you can deduct is 50% of
$2,000, or $1,000. If the deduction limitation is not a multiple of $10, round
the deduction to the next higher $10. If your adjusted gross income does not
exceed $35,000 and you are single or $50,000 and you are married, you can deduct
$200 regardless of how the computation comes out.
Married persons who file separate returns are treated as unmarried for purposes
of these rules if they did not live together at any time during the year.
NONDEDUCTIBLE CONTRIBUTIONS. Even though you may not be entitled to claim a
deduction for contributions to your IRA, you are still allowed to make the
contributions to the extent described in "Types of IRAs" above. To the extent
that the amount of your contribution exceeds the deduction limit, it is
considered a nondeductible contribution. Earnings on these contributions are not
taxed until distributed, just like the earnings on deductible contributions. It
may therefore be worthwhile making nondeductible contributions.
You are required to report the amount of your nondeductible contributions on
Form 8606 and attach it to your income tax return. You may be liable for a tax
penalty of $50 if you fail to file the form, or $100 if you overstate the amount
of your nondeductible contributions.
III. INVESTMENT AND HOLDING OF CONTRIBUTIONS
Contributions to your IRA, and the earnings thereon, are invested at your
election in shares of Acorn Fund, Acorn International or Acorn USA, each a
series of Acorn Investment Trust, a no-load mutual fund managed by Wanger Asset
Management, L.P., or in Short Term Income Fund, Inc. -- Money Market Portfolio,
a no-load money market fund managed by New England Investment Companies, L.P.
Acorn Fund, Acorn International and Acorn USA are collectively called the "Acorn
Funds."
The money market fund is available in a telephone exchange plan with the Acorn
Funds. If you elect to use this program, you will be able to exchange
investments among any of the Acorn Funds and the money fund. In order to enroll
in the exchange plan, indicate your election on the IRA application. When your
exchange plan is established, you can request a prospectus for the money fund
and you will then be able to exchange by telephoning State Street Bank and Trust
Company. IRA planholders may not use the check-writing redemption privileges
offered by the money fund.
If you wish to add to your IRA plan by putting money into the money fund instead
of one of the Acorn Funds, please call Acorn for instructions.
The assets in your account are held in a custodial account exclusively for your
benefit and the benefit of such beneficiaries as you may designate in writing
delivered to the Custodian. The balance in your IRA represents a separate
account which is clearly identified as your property and generally may not be
combined for investment with the property of another individual. Your
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right to the entire balance in your account is nonforfeitable. No part of the
assets of your account may be invested in life insurance contracts or in
collectibles such as works of art, antiques, coins, stamps, etc.
IV. DISTRIBUTIONS FROM YOUR IRA
DISTRIBUTION DURING YOUR LIFE. The law permits distributions to be made from an
IRA without penalty at any time after you attain age 59 1/2, and requires that
distributions commence no later than April 1 following the calendar year in
which you attain age 70 1/2. Distributions may be in the form of a single
payment or, in accordance with regulations, in substantially equal monthly,
quarterly or annual payments over your life or the joint lives of you and your
designated beneficiary, or over a period certain not extending beyond your life
expectancy or the joint and last survivor life expectancy of you and your
designated beneficiary. However, if your beneficiary is not your spouse, the law
imposes an additional requirement called the minimum distribution incidental
benefit requirement. In general, this requirement puts a further limit on the
maximum payout period. This further limit is based on a table in the income tax
regulations, and if this limit applies to you, you should consult your tax
advisor to determine your minimum distribution.
In general, your life expectancy, your surviving spouse's life expectancy after
your death, and your and your spouse's joint and last survivor life expectancies
will all be recalculated each year based upon your (and your spouse's, if
applicable) age attained during that year. However, you can also elect to have
your (and your spouse's) life expectancies fixed in the year in which
distributions are required to begin, which may be advantageous in some
circumstances. On the other hand, if your beneficiary is someone other than your
surviving spouse, your and your beneficiary's joint and last survivor life
expectancy will ordinarily not be recalculated each year, although you may elect
to have it recalculated. Each of the elections described above must be made
before the date on which distributions are required to commence, and will be
irrevocable after that date. You should consult an qualified tax advisor to
determine whether you should make any of these elections.
If you direct distributions over your life or the joint lives of you and your
designated beneficiary, the Custodian will purchase an immediate annuity
contract from an insurance company you choose with your IRA and your payments
will be made under the annuity. You must provide a completed annuity application
from the insurance company of your choosing.
Any distribution instruction must specify the reason for the distribution.
Examples of such reasons are: premature distributions (i.e. distributions before
age 59 1/2), rollovers, disability, death, normal (59 1/2 or over), excess
contribution returns and other.
DISTRIBUTIONS AFTER YOUR DEATH. If you die on or after the April following the
year in which you reach age 70 1/2, the balance of your IRA must be distributed
to your designated beneficiary at least as rapidly as under the method of
distribution in effect before your death.
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If you die before the April following the year in which you reach age 70 1/2,
the entire balance of the account must be distributed by December 31 of the year
in which the 5th anniversary of your death occurs. However, distribution need
not be made within this 5-year period if your beneficiary receives payments over
a period measured by his or her life or life expectancy beginning no later than
December 31 of the year following the year in which you die. If the beneficiary
is your spouse, those installment payments don't have to begin until the later
of December 31 of the year following the year in which you die or December 31 of
the year in which you would have reached age 70 1/2. In addition, a distribution
need not be made within 5 years of your death if your spouse is your beneficiary
and he or she elects to treat the entire interest in the IRA (or the remaining
part of such interest, if distribution has already begun) as his or her own IRA
subject to the regular IRA distribution requirements. In such a case, your
spouse will be considered to be the covered individual under the IRA. If you die
before the entire IRA has been distributed to you and your spouse is not your
beneficiary, no additional cash contributions or rollover contributions may be
accepted by the IRA.
V. INCOME AND PENALTY TAXES
INCOME TAX TREATMENT. Income tax on deductible IRA contributions and earnings on
both deductible and nondeductible IRA contributions is generally deferred until
you receive distributions. If you have made both deductible and nondeductible
contributions to IRAs you maintain, a portion of each distribution you receive
from any IRA (whether or not it is the one to which you made nondeductible
contributions) will be considered to be a return of nondeductible contributions
and therefore not included in your income for tax purposes. The balance of each
distribution will be taxed as ordinary income regardless of its original source.
The amount of any distribution which is considered to be a return of
nondeductible contributions (and therefore not taxed) is determined by
multiplying the amount of the distribution by a fraction. The numerator of the
fraction is the aggregate amount of nondeductible contributions you have made to
all of your IRAs over the years and the denominator is the balance in all your
IRAs at the end of the year (after adding back any distributions you received
during the year). The aggregate amount which can be excluded from income for all
years cannot exceed the amount of nondeductible contributions that you made in
those years. You must attach Form 8606 to your tax return for any year in which
you receive distributions if you have made any nondeductible contributions to an
IRA.
Taxable distributions from your account are taxed as ordinary income regardless
of their original source. They are not eligible for special tax treatment that
may apply to lump sum distributions from qualified employer plans.
PENALTY TAX FOR PREMATURE DISTRIBUTIONS. Your IRA is intended to provide income
for you upon retirement. Accordingly, the law generally imposes a penalty on
premature distributions. If you receive a taxable distribution from the IRA
before reaching age 59 1/2, a nondeductible 10% penalty will be imposed on the
portion of the distribution which is included in your gross income. This penalty
is in addition to any income tax you must pay on the distribution itself. The
penalty does not apply to the extent that the distribution is considered a
return of nondeductible contributions or a return of an excess contribution
which is permitted tax-free (see below). The
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penalty also will not apply if the distribution is made due to your permanent
disability or death or if the distribution is one of a series of substantially
equal periodic payments made over your life (or life expectancy) or over the
joint lives (or life expectancies) of you and your beneficiary. Further, the
penalty does not apply to the extent the distribution is rolled over to another
IRA or (if permitted) qualified plan.
PENALTY TAX FOR EXCESS CONTRIBUTIONS. Contributions to an IRA above the
permissible limits are nondeductible and are subject to an annual nondeductible
excise tax of 6% of the amount of such excess contributions for each year that
the excess is not withdrawn or eliminated. The tax is paid by the person for
whose benefit the IRA is established. If the person who contributed the excess
takes no deduction for it and withdraws the excess amount plus the net earnings
attributable to such excess on or before the due date (including extensions) for
filing the Federal income tax return for the year for which the contribution was
made, the 6% excise tax will not be applied but the 10% tax on premature
distributions will be applied to the amount of net earnings.
Generally, if the excess is withdrawn after the due date (including extensions)
for filing the tax return for the year for which the contribution was made, not
only will the excess contribution be subject to the 6% excise tax, but the
amount of such excess and the net income attributable to it will also be
includible in income; and if you have not attained the age of 59 1/2, or are not
disabled, you will also be subject to the previously mentioned 10% penalty tax
on premature distributions. The law provides, however, that if an individual has
made a contribution to an IRA for a year which does not exceed $2,250 (excluding
rollover amounts), all or part of which is an excess contribution for which he
did not claim a deduction, and he does not correct the excess contribution
before the due date (including extensions) for filing his tax return for the
year, he nevertheless may withdraw the excess amount contributed (without the
net income attributable thereto) at any time without incurring the 10% penalty
tax on premature distributions or being required to include the amount withdrawn
in income. The 6% excise tax will be imposed even in this special situation for
the year of the excess contribution and each subsequent year until the excess is
withdrawn or eliminated.
The rules discussed above generally apply to SEP-IRAs as well. The law also
allows you to withdraw tax-free and without penalty an excess contribution,
regardless of the amount, made with respect to a rollover contribution
(including an attempted rollover contribution), if the excess contribution
occurred because you reasonably relied on erroneous information required to be
supplied by the plan, trust or institution making the distribution that was the
subject of the rollover.
As an alternative to withdrawing excess contributions made to an IRA, such
amounts may be eliminated by making reduced contributions for subsequent years;
however, you will be required to pay the 6% excise tax on the amount of the
excess for the year of the contribution and for each subsequent year until the
amount of the excess is deducted in a later year for which you have not
contributed the maximum deductible amount. If a contribution is made to your
account in an amount less than the permissible limit in order to correct an
excess contribution for a previous year for which you did not claim a deduction,
you may under certain circumstances, taking into
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account the limits on contributions, be allowed to treat the amount of the
reduction in the current year's contribution as an additional contribution for
the current taxable year.
PENALTY TAX FOR UNDER-DISTRIBUTION. If after April 1 following the year in which
you attain age 70 1/2, the amount distributed is less than the minimum amount
required by law to be distributed, a 50% excise tax may be imposed on any such
deficiency. The minimum amount required by law to be distributed is generally
based on your life expectancy or the joint and survivor life expectancy of you
and your beneficiary. However, if your beneficiary is not your spouse, the law
imposes an additional requirement which is called the minimum distribution
incidental benefit requirement. In general, this requirement is designed to
prevent you from naming a beneficiary who is much younger than yourself in order
to extend your payout period. You should consult your tax advisor to determine
your minimum distribution. This excise tax may also apply if your beneficiary
fails to take the minimum required distribution in any year after your death, as
described above.
The Internal Revenue Service may waive the penalty tax for under-distribution if
the deficiency was due to reasonable error and reasonable steps are being taken
to correct the deficiency.
PENALTY TAX FOR EXCESS DISTRIBUTIONS AND ACCUMULATIONS. A 15% penalty tax is
imposed on annual distributions from retirement arrangements (including IRAs) to
the extent that such distributions in a year are considered "excess
distributions." A distribution is an "excess distribution" if it exceeds
$155,000 (or such higher amount as may be specified by the IRS) during any
calendar year.
In addition, a 15% penalty tax will be imposed on your estate to the extent that
at the time of your death the total balance to your account in all retirement
arrangements exceeds the present value of a life annuity of $155,000 (or such
higher amount as the IRS may specify) per year.
The rules governing the 15% penalty tax are very complex, and may be affected by
certain elections which you may have made in prior years. If you have a
substantial balance to your account in IRAs and qualified retirement plans, you
should consult a qualified tax advisor as to the possible application of this
penalty tax.
PROHIBITED TRANSACTIONS AND PLEDGING ACCOUNT ASSETS. If during any taxable year
you engage in a so-called "prohibited transaction" with respect to your IRA, the
account will lose its tax-exempt status. In this event, the fair market value of
all account assets, valued as of the first day of such taxable year, will be
deemed distributed to you and the taxable portion will be includible in your
gross income for the year. If you are under age 59 1/2, the 10% penalty for
premature distributions may also apply. These prohibited transactions generally
include any type of financial transaction between the IRA and you or your
beneficiary, including borrowing or lending money, buying, selling, or renting
property, paying compensation, or a transaction that indirectly benefits you or
your beneficiary personally. Prohibited transactions may also involve members of
your family, companies in which you have an interest, the sponsoring employer in
the case of a SEP-IRA, any person who provides services to the IRA, and certain
affiliates of such persons. However, prohibited transactions involving persons
other than you or your beneficiary result in penalty taxes on the person
involved, rather than disqualification of the IRA.
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If you pledge your account or any portion thereof as security for a loan, such
pledged portion will be deemed distributed to you and, to the extent that it
does not represent a return of nondeductible contributions, includible in your
gross income. If you have not yet attained age 59 1/2, an additional tax equal
to 10% of the amount pledged will be imposed on such funds includible in gross
income. If your spouse engages in a prohibited transaction with respect to his
or her account, the results will be the same. Any portion of an IRA used to
purchase an endowment contract or collectible is also treated as distributed.
VI. MISCELLANEOUS
FEDERAL INCOME TAX WITHHOLDING. Distributions from an IRA to the covered
individual or to a beneficiary are subject to Federal income tax withholding
unless the covered individual or beneficiary elects to have no withholding
apply. The current withholding rate required by the Internal Revenue Code is 10%
for lump sum payments, and regular wage withholding rates for annuities or other
periodic payments. Additional information concerning withholding and election
forms will be available no later than at the time a distribution is requested.
FEDERAL ESTATE AND GIFT TAXES. Generally, your IRA will be included in your
estate for Federal estate tax purposes. If your spouse is your beneficiary, your
IRA may qualify for a deduction for purposes of that tax. An election under an
IRA to have a distribution payable to a beneficiary on the death of the covered
individual will not be treated as a gift subject to Federal gift tax.
REPORTS TO THE INTERNAL REVENUE SERVICE. As described above, you are required to
attach Form 8606 to your return for any year in which you made nondeductible
contributions, or receive distributions after making nondeductible
contributions. You are required to file Form 5329 with the IRS if you owe one of
the IRA penalty taxes. These are the taxes on excess contributions, premature
distributions, prohibited transactions and under distributions after age 70 1/2,
as described above.
SOCIAL SECURITY AND SELF-EMPLOYMENT TAXES. Contributions to a Regular or Spousal
IRA are not deductible for purposes of the social security (FICA) and self-
employment taxes. Contributions to a SEP-IRA by your employer are not subject to
social security tax unless you elected to reduce your current compensation to
receive the contributions (a SAR-SEP).
FINANCIAL INFORMATION. The growth in value of the mutual fund shares held in
your account can neither be guaranteed nor projected.
CUSTODIAN FEES. State Street Bank and Trust Company as the Custodian of your IRA
currently charges an acceptance fee of $5.00 per IRA application, and an annual
maintenance fee of $10.00 per account, PER FUND IN WHICH YOU HAVE AN INVESTMENT.
An additional $10.00 fee is charged for each disbursement, other than an
automatic installment payout. Note that Spousal IRAs require separate accounts.
Each spouse's account is subject to the above fees.
If you do not add the $5.00 acceptance fee to your initial contribution, it will
be deducted from your account. The $10.00 annual maintenance fee will be
deducted from your account, unless paid separately when billed in December.
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The Custodian may change any of the above fees from time to time.
IRS APPROVAL STATUS. The Internal Revenue Service has determined that the form
of Acorn Investment Trust Individual Retirement Plan and Custodial Agreement, as
revised June 30, 1992, is acceptable under the Internal Revenue Code. This
determination by the IRS relates only to form and not to the merits of your
account. Further information concerning IRAs can be obtained from any district
office of the IRS.
September 1, 1996
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ACORN INVESTMENT TRUST
INDIVIDUAL RETIREMENT PLAN AND CUSTODIAL AGREEMENT
(June 30, 1992 Revision)
The Acorn Fund, Inc. (the "Fund"), a regulated investment company, has
heretofore established The Acorn Fund, Inc. Individual Retirement Plan (the
"Plan"). Effective June 30, 1992, The Acorn Fund, Inc. was reorganized as Acorn
Investment Trust, a Massachusetts business trust (the "Trust"), and the Trust
thereby assumed and succeeded to all of The Acorn Fund, Inc.'s rights and
obligations under the Plan, including the power reserved in Section VIII of the
Plan to amend the Plan. Pursuant thereto, the Trust hereby amends and restates
the Plan in its entirety to read as follows, effective as of June 30, 1992.
The Plan is intended to meet the requirements of section 408 of the Internal
Revenue Code of 1986, as amended. Some words and phrases used herein have a
technical meaning and are defined in Article VIII.
I. ELIGIBILITY
Any person who receives Compensation (including Earned Income of a self-employed
individual and alimony or separate maintenance payments of a divorced person)
during a taxable year is eligible to adopt this Plan for such year. In addition,
any person making a Rollover Contribution or a trustee-to-trustee transfer may
adopt the Plan.
II. PARTICIPATION
A. REGULAR IRA. An individual may contribute to his Custodial Account for any
taxable year an amount not in excess of the lesser of (1) $2,000 or (2) 100
percent of the Individual's Compensation includible in his gross income for such
taxable year. The Fund and the Custodian are not responsible for determining the
amount an Individual may contribute.
B. SPOUSAL IRA.
(1) In addition to the contributions permitted under paragraph A, an Individual
who files a joint federal income tax return for any taxable year and whose
spouse has no Compensation for that year (or elects to be treated as having no
compensation for the year) may contribute an amount to a separate Custodial
Account for the benefit of the Individual's spouse.
The aggregate amounts contributed to the Custodial Accounts of the Individual
and the Individual's spouse for any taxable year may not exceed the lesser of
(a) $2,250 or (b) 100 percent of the Compensation includible in the Individual's
gross income for that year, but in no event shall the amount contributed to
either Custodial Account exceed $2,000.
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(2) In determining marital status the following shall apply:
(a) the determination of whether the Individual is married shall be made as of
the close of the taxable year, except that if the Individual's spouse dies
during the taxable year such determination shall be made as of the time of such
death; and
(b) if the Individual is legally separated from his/her spouse under a decree
of divorce or of separate maintenance they shall not be considered as married.
C. CONTRIBUTIONS AFTER AGE 70 1/2. The Individual may not make a contribution
under paragraph A for any taxable year if he has attained age 70 1/2 before the
close of that year, nor under paragraph B if the spouse has attained age 70 1/2
before the close of that year.
D. REFUND OF EXCESS CONTRIBUTION. If for any taxable year the Individual
contributes an amount for the Individual or the Individual's spouse under
paragraph A or B which exceeds the maximum limits permitted by those paragraphs,
such excess contribution shall upon the written request of the Individual (or
the spouse in the case of a Spousal Account) be paid to the Individual (or the
spouse in the case of a Spousal Account) by the Custodian. If the refund is made
before the due date of the Individual's federal income tax return for that year
(including extensions), the refund shall include any income attributable to the
excess contribution.
E. ROLLOVER CONTRIBUTIONS AND TRANSFERS.
(1) The Individual may also make a Rollover Contribution as defined in Article
IX of the Plan. Any Rollover Contribution and the earnings thereon may be held
by the Custodian in a separate account for the Individual.
(2) In addition, notwithstanding any other provisions hereof, the Individual
may cause the custodian or trustee under any other individual retirement account
established and maintained by the Individual to transfer all or any part of the
funds in such account directly to the Custodian to be held under this Plan.
Effective January 1, 1993, the Individual may also cause the trustee of any plan
to which Section 401(a)(31) of the Code applies to transfer all or any part of
the benefits payable under such plan directly to the Custodian to be held under
this Plan.
(3) In the case of a Rollover Contribution, the Individual shall certify to the
Custodian that the contribution qualifies as such.
F. SIMPLIFIED EMPLOYEE PENSION (SEP-IRA). In the case of an employer
contribution on behalf of the Individual to a Simplified Employee Pension,
notwithstanding the limitations stated in paragraph A, the contribution for any
taxable year shall not exceed the lesser of
(1) 15 percent of the Compensation from the employer includible in the
Individual's gross income for the year (determined without regard to the
employer contribution to the Simplified Employee Pension), or
(2) the amount contributed by the employer to the Simplified Employee Pension
and included in gross income (but not in excess of $30,000).
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Employer contributions to a SEP-IRA may be made on behalf of the Individual
after the Individual reaches age 70 1/2.
G. MINIMUM CONTRIBUTIONS. A contribution is not required for any year. Each
contribution must meet the minimum investment limitations stated from time to
time in the prospectus relating to the Fund Shares in which the contribution is
to be made.
H. NONFORFEITABILITY. The interests of the Individual and the Individual's
spouse in their respective Custodial Accounts shall be nonforfeitable at all
times .
I. FORM OF CONTRIBUTIONS. All contributions and transfers shall be made only
in cash.
III. INVESTMENT OF CONTRIBUTIONS
A. As directed by the Individual in writing, all contributions shall be used
by the Custodian to purchase Fund Shares. All income dividends and capital gains
distributions shall be reinvested in shares of the Fund which declared such
dividends or distributions unless the Individual (or spouse in the case of a
Spousal Account) elects in writing, in accordance with an opportunity to do so
provided by the Fund declaring the dividend or distribution, to apply such
dividend or distribution to purchase other Fund Shares available under the Plan.
B. A telephonic Switch Plan ("Switch Plan"), as described in the
prospectus(es) of the Funds is available hereunder. After the Custodian receives
a Switch Plan authorization deemed by the Custodian to be in proper form, the
Custodian, upon receipt of telephonic instructions from any person representing
himself to be the Individual, may redeem any Fund Shares held by the Custodian
on behalf of the Individual and apply the proceeds toward the purchase of any
other Fund Shares available hereunder, subject to and in accordance with the
terms and conditions of the Switch Plan. The Custodian shall be entitled to rely
and act upon such telephonic instructions, and neither the Custodian, the Trust,
any other Fund whose shares are available hereunder nor their officers,
trustees, directors, employees or agents shall be liable for any liability, cost
or expense for acting on any such instructions. In directing any switch pursuant
to the Switch Plan, the Individual represents that he has obtained a current
prospectus of the Fund into which the switch is to be made. The Individual
authorizes and directs the Custodian to respond to any telephonic inquiries
relating to the status of shares owned, including but not limited to the number
of shares held. The Individual agrees that the authorizations, directions and
restrictions contained herein will continue until the Custodian receives written
notice of any change or revocation. The Individual agrees and understands that
the Funds and the Custodian reserve the right to refuse any telephonic
instructions.
C. All Fund Shares acquired by the Custodian shall be registered in the name
of the Custodian or its nominee.
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D. No part of the custodial funds shall be invested in life insurance
contracts nor in collectibles (within the meaning of section 408(m) of the
Code); nor may the assets of the Custodial Account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of section 408(a)(5) of the Code).
E. All assets in the Custodial Account shall be held by the Custodian for the
exclusive benefit of the Individual and the Individual's designated beneficiary
or beneficiaries.
IV. DISTRIBUTIONS
A. As directed in writing by the Individual, the entire interest of the
Individual in the Custodial Account shall be distributed, or commence to be
distributed, no later than April 1 following the calendar year in which the
Individual attains age 70 1/2 (the "required beginning date"). Not later than
the required beginning date, the Individual shall elect, in such form and at
such time as is acceptable to the Custodian, to have the balance in the
Custodial Account distributed:
(1) In a single sum payment in cash or Fund Shares;
(2) In equal or substantially equal annual installments in cash commencing not
later than the required beginning date and over a specified period certain not
extending beyond the life expectancy of the Individual, or the joint and last
survivor life expectancy of the Individual and his designated beneficiary; or
(3) By the purchase of an annuity contract issued by an insurance company
selected by the Individual and providing equal or substantially equal monthly,
quarterly or annual payments commencing not later than the required beginning
date, for the life of the Individual, or, if he so elects, for the lives of the
Individual and his designated beneficiary, with any period certain limited to
the life expectancy of the Individual or the joint and last survivor life
expectancy of the Individual and his designated beneficiary.
Even though distributions may have commenced pursuant to option (2) the
individual may receive a distribution of any part or all of the balance in the
Custodial Account, either in cash or in Fund Shares, at any time upon written
notice to the Custodian. If the Individual fails to elect any of the methods of
distribution described above before the required beginning date, distribution to
the Individual shall be made on or before the required beginning date in a
single distribution in Fund Shares.
If the Individual elects option (2) as the mode of distribution, the annual
payment required to be made by the Individual's required beginning date is for
the calendar year the Individual reached age 70 1/2. The annual payment for each
subsequent year, including the year in which the Individual's required beginning
date occurs, must be made by December 31 of that year. If the Individual elects
option (3) as the mode of distribution, the annuity contract must satisfy the
requirements of section 408(b)(1), (3) and (4) of the Code.
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B. If the Individual dies before his or her entire interest in the Custodial
Account is distributed, the entire remaining interest shall be distributed as
directed in writing by the beneficiary as follows:
(1) If the Individual dies on or after the Individual's required beginning
date, distribution must continue to be made in accordance with paragraph A.
(2) If the Individual dies before the Individual's required beginning date, the
entire remaining interest shall, at the election of the beneficiary or
beneficiaries, either
(a) Be distributed by December 31 of the year containing the fifth anniversary
of the Individual's death, or
(b) Be distributed in equal or substantially equal annual payments over a
specified period not extending beyond the life expectancy of the designated
beneficiary or beneficiaries.
The election of either (a) or (b) must be made by December 31 of the year
following the year of the Individual's death. If the beneficiary or
beneficiaries do not elect either of the distribution options described in (a)
or (b), distribution shall be made in accordance with (b) if the beneficiary is
the Individual's surviving spouse and in accordance with (a) if the beneficiary
or beneficiaries are or include anyone other than the surviving spouse. In the
case of distributions under (b), distributions must commence by December 31 of
the year following the year of the Individual's death. However, if the
Individual's spouse is the beneficiary, distributions need not commence until
December 31 of the year the Individual would have attained age 70 1/2, if later.
(3) If the designated beneficiary is the Individual's surviving spouse, the
spouse may treat the Custodial Account as his or her own individual retirement
arrangement (IRA). Such an election shall be deemed to have been made if such
surviving spouse makes a regular IRA contribution to the Custodial Account,
makes a rollover to or from the Custodial Account or fails to elect any of the
preceding provisions. If the Individual dies before his or her entire interest
has been distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be accepted in
the Custodial Account.
C. In the case of distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each year,
divide the Individual's entire interest in the Custodial Account as of the close
of business on December 31 of the preceding year by the life expectancy of the
Individual (or the joint and last survivor life expectancy of the Individual and
the Individual's designated beneficiary, or the life expectancy of the
designated beneficiary, whichever applies). For this purpose, however, in the
case of the year ("second distribution year") following the year in which the
Individual reached age 70 1/2, the balance in the Custodial Account as of the
close of business on December 31 of the preceding year shall be reduced by any
distribution made during the second distribution year on or before April 1 to
satisfy the minimum distribution requirement for the year the Individual reached
age 70 1/2, as determined in accordance with paragraph J below.
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D. Effective for distributions after December 31, 1988 and before the
Participant's death, notwithstanding any other provisions in this Plan, if the
distribution period is longer than the Individual's life expectancy and the
Individual's spouse is not the designated beneficiary, the minimum amount
required to be distributed each year, beginning with the year the Individual
reaches age 70 1/2, shall be determined by dividing the balance in the Custodial
Account as of the close of business on December 31 of the preceding year by the
lesser of (1) the joint and last survivor life expectancy of the Individual and
his designated beneficiary determined as provided in paragraph C or (2) the
applicable divisor determined from the table set forth in Q&A-4 of Proposed
Treasury Regulation Section 1.401(a)(9)-2. For this purpose, however, in the
case of the year ("second distribution year") following the year in which the
Participant reached 70 1/2, balance in the Custodial Account as of the close of
business on December 31 of the preceding year shall be reduced by any
distribution made during the second distribution year on or before April 1 to
satisfy the minimum distribution requirement for the year the Individual reached
age 70 1/2.
E. The minimum annual payment may be made in a series of installments (e.g.,
monthly, quarterly, etc.) as long as the total payments for the year made by the
date required are not less than the minimum amounts required.
F. Any annuity contract purchased for the Individual pursuant to the Plan
shall be immediately distributed to the Individual, and the custodial
relationship shall terminate upon such distribution.
G. Except in the case of the Individual's death or Disability or attainment of
age 59 1/2, no distribution shall be made to the Individual of his interest in
the Custodial Account unless the Individual gives the Custodian a statement
explaining how he or she intends to dispose of the amount to be distributed.
H. An Individual shall have the right by written notice to the Custodian to
designate one or more beneficiaries to receive any amount to which the
Individual may be entitled in the event of his death before the complete
distribution of his interest, and to change any such beneficiary. Such
designation or change shall be on the Beneficiary Form provided by the Trust,
and shall be effective only when filed with the Custodian before the death of
the Individual. Such designation may include contingent or successive
beneficiaries. If no such designation is in effect on an Individual's death, or
if no designated beneficiary is living on the date any payment becomes due after
the Individual's death, such payment shall be made to the executor or
administrator of the Individual's estate. However, if after the Individual's
death, his surviving spouse is receiving payments over a specified period, the
surviving spouse may designate a beneficiary to receive the balance of the
Custodial Account, if any, on his or her death in accordance with the foregoing
rules .
I. If any person to whom all or a portion of the Individual's interest is
payable is a minor, payment of the minor's interest shall be made on behalf of
the minor to the person designated by the Individual in the Beneficiary Form to
receive the minor's interest as custodian under the Massachusetts Uniform
Transfers to Minors Act or similar statute. If any person to whom all or a
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portion of the Individual's interest is payable is a minor and if either (a) the
Individual has not so designated a person to receive the minor's interest as
such custodian, or (b) the person so designated is unable to act (because of
incapacity, failing or declining to act, death or otherwise), the Custodian
shall:
(i) Distribute the interest to the legal guardian of such minor; or
(ii) If no guardian has been appointed, designate an adult member of the minor's
family, a guardian or a trust company (including the Custodian), as those terms
are defined in the Massachusetts Uniform Transfers to Minors Act or similar
statute, as custodian for such minor under the Massachusetts Uniform Transfers
to Minors Act or similar statute and distribute such minor's interest to the
person so designated. The person designated as custodian under the Massachusetts
Uniform Transfers to Minors Act or similar statute shall hold, manage and
distribute such property in accordance with the provisions of such statute
including, if such statute so requires, a total distribution prior to age 21.
The distribution of the Individual's interest to the guardian or the person
designated as custodian under the Massachusetts Uniform Transfers to Minors Act
or similar statute shall be a full discharge of the Custodian to the extent of
the distribution so made.
J. For purposes of determining the minimum distribution required for any year
pursuant to paragraph C, if the applicable life expectancy is the life
expectancy of the Individual, the life expectancy of the Individual's surviving
spouse, or the joint and last survivor life expectancy of the Individual and his
spouse, then, unless the Individual or his surviving spouse otherwise elects as
hereinafter provided, such life expectancy shall be determined on the basis of
the age attained by the Individual, his or her spouse, or both of them, on their
birthdays occurring during the year for which the minimum distribution is
calculated (which, in the case of a distribution under paragraph A made in the
year which includes the required beginning date for the year in which the
Individual attains age 70 1/2, shall be the year in which the Individual attains
age 70 1/2). If the applicable life expectancy is that of a beneficiary other
than the Individual's surviving spouse, or the joint and last survivor life
expectancy of the Individual and a beneficiary other than his surviving spouse,
the life expectancy for the first year for which a distribution is required to
be made (the "initial life expectancy") shall be determined on the basis of the
age attained by the Individual, such beneficiary, or both of them on their
birthdays occurring during such year, and the life expectancies for each
subsequent year shall be determined by subtracting from the initial life
expectancies the number of years that have elapsed since such initial year.
Notwithstanding the foregoing, the Individual or, if applicable, the
Individual's surviving spouse may elect to have any of the life expectancies
described in the first sentence of this Paragraph J determined in the manner
described in the second sentence, and the Individual may elect to have the joint
and last survivor life expectancy of the Individual and a beneficiary other than
his surviving spouse redetermined each year in accordance with section
1.401(a)(9)-1, Q&A E-8(b) of the proposed regulations (or any successor
thereto). Any such election shall be made prior to the Individual's required
beginning date (or, in the case of an election by a surviving spouse after the
Individual's
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death, prior to the date on which distributions are required to commence under
paragraph B) and, after such date, shall be irrevocable. All life expectancies
shall be determined in accordance with tables contained or referenced in
regulations promulgated under section 401(a)(9) of the Code.
K. The provisions of this Article V shall determine the minimum distributions
required to be made from the Custodial Account. Nothing contained herein shall
be construed to limit the right of the Individual, or of his or her
beneficiaries, to withdraw a larger amount from the Custodial Account than the
minimum distribution required hereunder but amounts withdrawn in any year in
excess of the minimum distribution required for such year shall not reduce the
minimum amount required to be distributed in any subsequent year (except that
any amount distributed in the year in which an Individual attains the age of 70
1/2 shall reduce the amount required to be distributed by April 1 of the
subsequent year under paragraph A).
L. Notwithstanding any provision of this Plan to the contrary, the
distribution of an Individual's interest in the Custodial Account shall be made
in accordance with the minimum distribution requirements of section 408(b)(6) or
section 408(b)(3) of the Code and the regulations thereunder, including the
incidental death benefit provisions of section 1.401(a)(9)-2 of the proposed
regulations, all of which are incorporated herein by reference (the "minimum
distribution requirements"). Any ambiguity in the provisions of this Article 5
shall be resolved in a manner consistent with the minimum distribution
requirements, and, if any provision of this Article 5 is inconsistent with the
minimum distribution requirements, the minimum distribution requirements shall
control.
M. If distributions from the Custodial Account are to be made to the
Individual's surviving spouse, or to a trust of which the Individual's surviving
spouse is the income beneficiary, the amount which the surviving spouse (or such
trust) is entitled to receive in each year shall not be less than the income of
the Custodial Account (or of the portion of the Custodial Account with respect
to which the surviving spouse or such trust is the beneficiary) for such year,
as determined under section 2056(b)(7) of the Code.
N. Whenever distributions after the death of the Individual are to be made to
the Individual's surviving spouse and to one or more beneficiaries other than
the surviving spouse, and any provision of this Article 5 or the minimum
distribution requirements provides different treatment for the portion of the
Custodial Account to be distributed to the surviving spouse, then such portion,
and the income earned thereon, shall be separated and treated as a separate
Custodial Account with respect to such surviving spouse.
O. Notwithstanding anything herein to the contrary, all distributions shall be
made by the Custodian in such manner and in such amounts as may be specified in
written instructions received from time to time by the Individual or the
beneficiary, as the case may be and all such instructions shall be deemed to
constitute a certification by the Individual or beneficiary that the
distribution so directed is one that the Individual or beneficiary is permitted
to receive. In addition, the Custodian shall have no liability with respect to
any distribution from the Account in accordance with the directions of the
Individual or beneficiary or the failure to make a
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distribution in the absence of such instructions or any consequences thereof
including, but not limited to, excise and other taxes and penalties which might
accrue or be assessed, nor shall the Custodian be under any duty to make any
inquiry or investigation with respect thereto.
V. ADMINISTRATION
Except as otherwise provided in the Plan, the Custodian shall, as directed in
writing, on behalf of the Individual:
(1) Receive contributions pursuant to the provisions of the Plan;
(2) Hold, invest and reinvest the contributions in Fund Shares;
(3) Register any property in the Custodial Account in the name of the custodian
or its nominee; and
(4) Make distributions from the Custodial Account in cash or in Fund Shares
pursuant to the provisions of the Plan.
The Custodian shall deliver or cause to be executed and delivered to the
Individual all notices, prospectuses, financial statements, proxies and proxy
soliciting material relating to assets credited to the custodial account. No
Fund Shares shall be voted, and no other action shall be taken pursuant to such
documents, except upon receipt of adequate written instructions from the
Individual.
The Custodian shall keep accurate and detailed account of its receipts,
investments and disbursements. As soon as practicable after the end of each
calendar year, and whenever required by regulations adopted under the Act or the
Code, the Custodian shall file with the Individual a written report of the
Custodian's transactions relating to the Custodial Account during the period
from the last previous accounting, and shall file such other reports with the
Internal Revenue Service as may be required of the Custodian by regulation.
Unless the Individual sends the Custodian written objection to a report within
60 days after its receipt, the Individual shall be deemed to have approved such
report, and in such case the Custodian shall be forever released and discharged
with respect to all matters and things included therein. The Custodian may seek
a judicial settlement of its accounts. In any such proceeding the only necessary
party thereto in addition to the Custodian shall be the Individual unless
otherwise required by law.
The Custodian shall have no duties whatsoever except such duties as are
specifically provided for herein, and no implied covenant or obligation shall be
read into this Agreement against the Custodian. The Custodian shall not be
liable for a mistake in judgment, for any action taken, or any failure to act,
in good faith, or for any loss that is not a result of its gross negligence,
except as expressly required by the Act and regulations promulgated thereunder.
In performing its duties
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under this Agreement, the Custodian may hire agents, experts and attorneys and
may delegate discretionary powers to, and rely upon information and advice
furnished by, such agents, experts and attorneys.
The Individual agrees to indemnify and hold the Custodian harmless from and
against any liability that the Custodian may incur in the administration of the
Custodial Account, unless arising from the Custodian's own gross negligence or
willful misconduct.
The Custodian shall be under no duty to question any direction of the Individual
with respect to the investment of contributions, or to make suggestions to the
Individual with respect to the investment, retention or disposition of any
contributions or assets held in the Custodial Account.
The Custodian shall pay out of the Custodial Account expenses of administration,
including the fees of counsel employed by the Custodian, taxes, if any, and its
fees for maintaining the Custodial Account, which are set forth in the
Disclosure Statement but may be revised from time to time by the Custodian and
the Trust. The Custodian may sell Fund Shares and use the proceeds of sale to
pay the foregoing fees and expenses.
The Custodian may resign as Custodian of any Individual's Custodial Account or
as Custodian of all accounts adopted under the provisions of this Plan, in
either case upon 30 days' prior notice to the Trust and 30 days' prior notice to
each Individual who will be affected by such resignation. If the Trust or the
Individual does not appoint a successor custodian within 30 days after the
mailing of such notice, the Custodian will terminate the Custodial Account.
The Individual shall be solely and fully responsible for all taxes and penalties
which might accrue or be assessed with respect to any excess contributions,
premature distributions or distributions which are below the annual minimum
distribution required.
The Custodian shall be entitled to receive and may charge against the
Individual's Custodial Account such reasonable compensation for its services in
accordance with its fee schedule as from time to time in effect, and shall also
be entitled to reimbursement of its expenses as Custodian under this Agreement.
The Custodian will notify the Individual in writing of any change in its fee
schedule.
This Agreement and the Custodial Account created hereby shall be subject to the
applicable laws, rules and regulations, as the same may from time to time be
amended, of the Federal government and the Commonwealth of Massachusetts and the
agencies and instrumentalities of each having jurisdiction thereof, and shall be
governed by and construed, administered and enforced according to the law of the
Commonwealth of Massachusetts. All contributions to the Custodial Account shall
be deemed to take place in the Commonwealth of Massachusetts.
The Custodian and Individual hereby waive and agree to waive right to trial by
jury in an action or proceeding instituted in respect to this Custodial Account.
The Individual further agrees that the venue of any litigation between him and
the Custodian with respect to the Custodial Account shall be in the County of
Suffolk, Commonwealth of Massachusetts.
29
<PAGE>
VI. THE TRUST
The Individual delegates to the Trust the following powers with respect to the
Plan: (1) to remove the Custodian and select a successor Custodian; and (2) to
amend the Plan with the Custodian's consent as provided in Section VII.
The powers herein delegated to the Trust shall be exercised by such officer
thereof as the Trust may designate from time to time, and shall be exercised
only when similarly exercised with respect to all other Individuals adopting the
Plan.
Neither the Trust nor any officer director, trustee, board, committee, employee
or member of the Trust shall incur any liability of any nature to the Individual
or beneficiary or other person in connection with any act done or omitted to be
done in good faith in the exercise of any power or authority herein delegated to
the Trust.
If the Trust shall hereafter determine that it is no longer desirable for the
Trust to continue to exercise any of the powers hereby delegated to the Trust,
it may relieve itself of any further responsibilities hereunder by notice in
writing to the Individual and the Custodian at least 60 days before the date on
which the Trust proposes to discontinue the exercise of the powers delegated to
it.
VII. AMENDMENT TERMINATION
The Individual delegates to the Trust and the Custodian the power to amend the
Plan (including retroactive amendment).
The Individual may amend his/her Application (including retroactive amendment)
by submitting to the Custodian (1) a copy of such amended Application, and (2)
evidence satisfactory to the Custodian that the Plan as amended by such amended
Application will continue to qualify as an Individual Retirement Account under
the provisions of section 408 of the Code.
No amendment shall be effective if it would cause or permit (a) any part of the
Custodial Account to be diverted to any purpose that is not for the exclusive
benefit of the Individual and his beneficiaries; (b) the Individual to be
deprived of any portion of his interest in the Custodial Account, unless such
action is taken in order to satisfy qualification requirements under the Code;
or (c) the imposition of an additional duty on the Custodian without its written
consent.
The Individual reserves the right to terminate his adoption of this Plan by
instrument in writing signed by him and filed with the Custodian.
30
<PAGE>
VIII. DEFINITIONS
Whenever used in this Plan, the following terms shall have the meanings set
forth below unless otherwise expressly provided herein:
A. ACT. The Employee Retirement Income Security Act of 1974, as amended from
time to time.
B. APPLICATION. The Individual Retirement Account Application, constituting
an agreement between the Individual and the Custodian, by which the Individual
adopts the Plan.
C. CODE. The Internal Revenue Code of 1986, as amended from time to time.
Reference to a section of the Code shall include that section and any comparable
section or sections of any future legislation that amends, supplements or
supersedes that section.
D. COMPENSATION. The total compensation received by an Individual during a
period, including wages, salaries, professional fees, or other amounts derived
from or received for personal service actually rendered (including, but not
limited to, commissions paid salesmen, compensation for services on the basis of
a percentage of profits, commissions on insurance premiums, tips and bonuses)
and including earned income, as defined in section 401(c) of the Code (reduced,
in the case of a self-employed individual, by any federal income tax deduction
taken for contributions to a qualified retirement (Keogh) plan). Compensation
does not include amounts derived from or received as earnings or profits from
property (including, but not limited to, interest and dividends) or amounts not
includible in gross income. Compensation also does not include any amount
received as a pension or annuity or as deferred compensation. The term
"compensation" shall also include any amount includible in the Individual's
gross income under section 71 of the Code with respect to a divorce or
separation instrument described in section 71(b)(2)(A) of the Code.
E. CUSTODIAL ACCOUNT. The account established for an Individual under the
Plan.
F. CUSTODIAN. The bank named in the Application.
G. DISABILITY. The inability to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or to be of long continued and indefinite duration.
H. TRUST. Acorn Investment Trust, a regulated investment company.
I. FUND SHARES. Shares issued by the Trust or shares of any other regulated
investment company for which the Custodian acts as transfer agent and which may
be available hereunder from time to time pursuant to an agreement between the
Custodian and the Trust. No Fund shall be available for investment under the
Plan (i) before the date the prospectus for that Fund discloses its
availability, (ii) with respect to any Participant who resides in any state or
other
31
<PAGE>
jurisdiction in which shares of the Fund are not available for sale, or
(iii) with respect to any Participant not eligible to purchase Fund shares
directly, when sales of Fund shares are restricted.
J. INDIVIDUAL. An individual who adopts the Plan as provided therein.
K. ROLLOVER CONTRIBUTION. A rollover amount or rollover contribution as
described in section 402(a)(5) or 402(a)(7) (as in effect prior to January 1,
1993), 402(c) (effective January 1, 1993), 403(a)(4), 403(b)(8), or 408(d)(3) of
the Code, and regulations promulgated thereunder.
L. SIMPLIFIED EMPLOYEE PENSION. An Individual Retirement Account with respect
to which the requirements of section 408(k) of the Code are met.
The foregoing Individual Retirement Plan and Custodial Agreement of Acorn
Investment Trust is adopted by the Individual by signing the Individual
Retirement Account Application, which is incorporated herein and made a part
hereof.
32
<PAGE>
<TABLE>
<CAPTION>
INTERNAL REVENUE SERVICE Department of the Treasury
<S> <C>
Plan Name: IRA Custodial Account
FFN: 50127960000-001 Case: 9270228 EIN: 36-7008880 Washington, DC 20224
ACORN INVESTMENT TRUST Person to Contact: Mr. Welty
227 WEST MONROE STREET Telephone Number: (202) 622-8380
CHICAGO, IL 60606 Refer Reply to: E:EP:Q-2
Date: 10/30/92
</TABLE>
Dear Applicant:
In our opinion, the form of the prototype trust, custodial account or annuity
contract identified above is acceptable under section 408 of the Internal
Revenue Code, as amended by the Tax Reform Act of 1986.
Each individual who adopts this approved plan will be considered to have a
retirement savings program that satisfies the requirements of Code section 408,
provided they follow the terms of the program and do not engage in certain
transactions specified in Code section 408(e). Please provide a copy of this
letter to each person affected.
The Internal Revenue Service has not evaluated the merits of this savings
program and does not guarantee contributions or investments made under the
savings program. Furthermore, this letter does not express any opinion as to the
applicability of Code section 4975, regarding prohibited transactions.
Code section 408(i) and related regulations require that the trustee, custodian
or issuer of a contract provide a disclosure statement to each participant in
this program as specified in the regulations. Publication 590, Tax Information
on Individual Retirement Arrangements, gives information about the items to be
disclosed.
The trustee, custodian or issuer of a contract is also required to provide each
adopting individual with annual reports of savings program transactions.
Your program may have to be amended to include or revise provisions in order to
comply with further changes in the law or regulations.
If you have any questions concerning IRS processing of this case, call us at the
above telephone number. Please refer to the Letter Serial Number and File Folder
Number shown in the heading of this letter. Please provide those adopting this
plan with your phone number, and advise them to contact your office if they have
any questions about the operation of this plan.
You should keep this letter as a permanent record. Please notify us if you
terminate the form of this plan.
Sincerely yours,
John Swieca
Chief, Employee Plans
Qualifications Branch
33
<PAGE>
Acorn Investment Trust P.O. Box 8502 [LOGO OF ACORN]
Boston, MA 02266-8502
IRA/SEP-IRA Application
All sections must be completed. Please type or print clearly.
Use this application to open an Acorn IRA or a SEP-IRA. To transfer your IRA
directly to Acorn from another custodian, you must also complete the Acorn
Investment Trust IRA Transfer Form. There is an acceptance fee of $5.00 per IRA
account. If you have questions, call our friendly customer service
representatives at 1-800-9-ACORN-9 (1-800-922-6769), weekdays, 8:00 am to 4:30
pm, Chicago (central) time.
YOUR ACCOUNT REGISTRATION
Social Security Number:
(used for tax reporting) [ | | ] [ | ] [ | | | ]
Date of Birth:
month, day, year [ | ] [ | ] [ | ]
- -----------------------------------------------------------
Owner's Name:
- -----------------------------------------------------------
Street Address and Apartment or Box Number
- -----------------------------------------------------------
City, State, Zip Code
- -----------------------------------------------------------
Daytime phone, including area code
- -----------------------------------------------------------
Existing Acorn or Acorn International account number
[ ] U.S. Citizen [ ] Resident Alien
To invest, you must be a U.S. citizen (or a non-citizen residing in the U.S.)
with a social security or tax identification number.
We are required by the National Association of Securities Dealers (NASD) to ask
for the following information:
- -----------------------------------------------------------
Your Occupation
- -----------------------------------------------------------
Employer
- -----------------------------------------------------------
Employer's Address
- -----------------------------------------------------------
[ ] I am affiliated with or work for a member of the NASD.
CHOOSE YOUR INVESTMENTS
A separate IRA account will be established for each box you check below.
[ ] Acorn Fund (90) $______________________
[ ] Acorn International (100) $______________________
[ ] Acorn USA ( ) $______________________
[ ] Short Term Income
Money Market Portfolio (104) $______________________
Acceptance Fee ($5 per fund) $______________________
Total Amount $______________________
Make check(s) payable to State Street Bank and Trust Company and write the
appropriate fund name on the check. Please indicate on your check the year for
which the contribution is made.
TYPE OF IRA SELECT ONLY ONE CATEGORY
[ ] Regular IRA Contribution for Tax Year 199_
Check this box if your IRA will be used to make annual contributions up to a
maximum of $2,000 per tax year. (A separate Spousal IRA can be opened for a
spouse earning less than $250 per year. Your spouse must complete a separate
application form.)
================================================================================
[ ] Direct transfer of an existing IRA
Check this box if you wish to authorize Acorn to transfer your existing IRA from
another custodian to Acorn. You must also complete the enclosed IRA Transfer
Form. Check type of IRA:
[ ] Regular IRA funded with annual contributions
[ ] Rollover IRA originally funded with a distribution from
an employer-sponsored plan
================================================================================
[ ] 60-day rollover of an existing IRA
Check this box if you are funding this IRA with money you have withdrawn from an
IRA at another custodian and are reinvesting at Acorn. Check type of IRA:
[ ] Regular IRA funded with annual contributions
[ ] Rollover IRA originally funded with a distribution from
an employer-sponsored plan
================================================================================
[ ] Rollover IRA from an employer-sponsored
plan
Check this box only if you are funding this IRA with money you accumulated in an
employer's retirement plan which is eligible for rollover. If you combine
Rollover IRA and regular IRA funds in the same account, you will forfeit the
right to reinvest your Rollover IRA funds in another employer's qualified plan
in the future. Combining IRA funds may also have tax implications at
distribution. Check method of funding:
[ ] A check payable to State Street Bank is enclosed.
[ ] My employer will send a check directly to Acorn.
================================================================================
[ ] SEP-IRA
Please see your tax advisor for the maximum contribution limits on
your SEP-IRA or SARSEP-IRA.
[ ] Regular SEP-IRA Contribution for 199___
[ ] Regular Salary Reduction SEP-IRA (SARSEP)
Contribution for 199___
[ ] 60-Day Rollover
Check this box if you have withdrawn funds from a SEP-IRA at another
custodian and are reinvesting them at Acorn.
[ ] Direct Transfer
Check this box to authorize Acorn to transfer your existing SEP-IRA
directly from another custodian. Please complete both this application
and an IRA Transfer Form. Be sure to notify your employer.
- --------------------------------------------------------------------------------
<PAGE>
IRA/SEP-IRA Application, continued
AUTOMATIC INVESTMENT PLAN
To keep building your investments, you can easily add to your Acorn retirement
accounts by joining the automatic investment plan:
[ ] Automatic Investment Plan: to add to your Acorn IRA or
SEP-IRA automatically.
[ ] Acorn Fund $_______________________________
[ ] monthly [ ] quarterly (check only one box)
[ ] Acorn International $_______________________________
[ ] monthly [ ] quarterly (check only one box)
[ ] Acorn USA $_______________________________
[ ] monthly [ ] quarterly (check only one box)
The minimum automatic investment is $100; the annual maximum investment for an
IRA is $2,000. Your automatic investment will be drawn from your bank account on
or about the 15th of the month; quarterly investments are made in January,
April, July, and October. Attach a voided check from the bank account you will
be using.
IRA BENEFICIARY DESIGNATION
Please indicate your beneficiaries here. If you wish to designate additional
beneficiaries, please attach additional instructions providing the necessary
beneficiary information.
================================================================================
Your Primary Beneficiaries
I hereby designate the person(s) named below as primary beneficiary(ies) to
receive payment of the value of my IRA account upon my death. If any beneficiary
is a trust, please indicate the trust's name and address, the date of the trust,
and the trustee's name.
1
- --------------------------------------------------------------------------------
Name (first, middle, last):
- -------------------- --------------- --------------------------------
Share %:* Relationship Date of Birth (month, day, year)
2
- --------------------------------------------------------------------------------
Name (first, middle, last):
- -------------------- --------------- --------------------------------
Share %:* Relationship Date of Birth (month, day, year)
================================================================================
Your Contingent Beneficiaries
If no primary beneficiary is living at the time of my death, I hereby specify
that the balance be distributed to my contingent beneficiary(ies) named below.
1
- --------------------------------------------------------------------------------
Name (first, middle, last):
- -------------------- --------------- --------------------------------
Share %:* Relationship Date of Birth (month, day, year)
2
- --------------------------------------------------------------------------------
Name (first, middle, last):
- -------------------- --------------- --------------------------------
Share %:* Relationship Date of Birth (month, day, year)
*Share percentages must be whole, not fractional, numbers, and must add up to
100%. Payment to primary and contingent beneficiaries will be made according to
the rules of succession described in the signature section.
SIGNATURE
Please sign at the end of this section. We must have a signature to open the
account.
By signing this application I certify that:
. I understand that the annual IRA maintenance fee of $10 per fund account will
be separately billed or collected by redeeming sufficient shares from each
fund account balance.
. A $10 fee will apply for each disbursement other than an automatic
installment payment.
. Acorn may change the fee schedule from time to time, as provided in the
Custodial Agreement. Acceptance will be evidenced by a Letter of Acceptance
sent by or on behalf of Acorn and State Street Bank and Trust Company.
. I understand that if more than one beneficiary is named and no percentages
are indicated, payment shall be made in equal shares to my primary
beneficiary(ies) who survives me. If a percentage is indicated and a primary
beneficiary(ies) does not survive me, the percentage of that beneficiary's
designated share shall be divided equally among the surviving primary
beneficiary(ies).
. I understand that if I choose not to designate any beneficiary(ies), my
beneficiary will be my estate (unless state law requires otherwise). I am
aware that my beneficiary designation becomes effective when delivered to
Acorn and will remain in effect until I deliver to Acorn another beneficiary
designation with a later date.
. I understand that the beneficiary information provided herein will apply to
all Acorn IRAs for which State Street Bank and Trust Company (SSB&T) (or its
affiliate and/or any successor custodian appointed pursuant to the terms of
such IRAs) acts as custodian, including regular IRAs, SEP-IRAs, and Rollover
IRAs, and will replace all previous designation(s) I have made on any of my
Acorn IRA accounts.
. I hereby adopt the Acorn IRA, appointing SSB&T as Custodian and as agent to
perform administrative services. Although SSB&T is a bank, I recognize that
neither Acorn Investment Trust nor any mutual fund in which this IRA may be
invested is a bank, and that mutual fund shares are not backed or guaranteed
by any bank or insured by the FDIC. This agreement shall be construed,
administered and enforced according to the laws of the Commonwealth of
Massachusetts, except as superseded by federal law or statute.
. I have received and read the prospectus for the fund(s) in which I am making
a contribution, and have read and understand the IRA Custodial Agreement and
Disclosure Statement. I hereby certify under penalties of perjury that my
Social Security Number (above) is correct and that I am of legal age to enter
into this agreement.
. By signing below, I hereby consent to the terms of the Acorn IRA and name the
beneficiary(ies) I have designated in the application.
X
- ------------------------------------------------ ----------------------------
Signature Date
Send this form to State Street Bank in the enclosed postage-paid envelope or to
the address below.
- --------------------------------------------------------------------------------
Acorn Investment Trust P.O. Box 8502 [LOGO OF ACORN]
Boston, MA 02266-8502
<PAGE>
Acorn Investment Trust P.O. Box 8502 [LOGO OF ACORN]
Boston, MA 02266-8502
IRA/SEP-IRA Transfer Form
All sections must be completed. Please type or print clearly.
Use this form to authorize Acorn to transfer your IRA or SEP-IRA directly from
another IRA Custodian and invest it at Acorn. Please read the instructions on
the back of this form before completing the Transfer Form. If you have
questions, call us at 1-800-9-ACORN-9 (1-800-922-6769), weekdays, 8:30 am to
4:30 pm, Chicago (Central) time.
ACCOUNT OWNERSHIP
Social Security Number:
(used for tax reporting) [ | | ] [ | ] [ | | | ]
Date of Birth:
month, day, year [ | ] [ | ] [ | ]
- -----------------------------------------------------------
Name (first, middle initial, last)
- -----------------------------------------------------------
Street Address and Apartment or Box Number
- -----------------------------------------------------------
City, State, Zip Code
- -----------------------------------------------------------
Daytime phone, including area code
TYPE OF IRA ACCOUNT
[ ] Regular IRA [ ] SEP-IRA
[ ] Rollover IRA*
*Check this box only if you are transferring an IRA representing a previous
rollover from an employer-sponsored retirement plan. (See explanation on the
other side--"IRA Transfer Checklist".)
CURRENT IRA CUSTODIAN/TRUSTEE
My IRA is currently invested in:
[ ] Mutual fund name _____________________________________
[ ] CD/Date of Maturity (month-day-year) _________________
[ ] Transfer the proceeds to my Acorn IRA at maturity.
(Send us this Transfer Form at least three weeks prior to
maturity. If the CD matures in less than three weeks, call
1-800-9-ACORN-9 (1-800-922-6769) for procedures.)
[ ] Liquidate the CD immediately and transfer the proceeds
to my Acorn IRA. (If you liquidate a CD prior to maturity,
you may incur a penalty.)
[ ] Other (Specify): _____________________________________
My IRA is currently held at: (Please call your current custodian for the correct
address. If this information is not provided, it could significantly delay your
transfer.)
- -----------------------------------------------------------
Name of Present Custodian
- -----------------------------------------------------------
Name of individual or department responsible for transfers
- -----------------------------------------------------------
Address of Present Custodian
- -----------------------------------------------------------
City, State, Zip Code
- ---------------------------- -----------------------------
Telephone Number Account Number
of Transferor Custodian (Please attach a copy of
your most recent statement)
INVESTING YOUR IRA TRANSFER
A. Please check one of the following:
[ ] I am opening a new Acorn IRA and am attaching my
completed IRA application.
[ ] I already own an Acorn IRA into which I am making this transfer.
B. Please list the name(s) of the fund(s) into which the transfer proceeds are
to be deposited.
[ ] Acorn Fund $____________________
Fund Account # (if existing) ____________________
[ ] Acorn International $____________________
Fund Account # (if existing) ____________________
[ ] Acorn USA $____________________
Fund Account # (if existing) ____________________
[ ] Short Term Income
Money Market Portfolio $____________________
Fund Account # (if existing) ____________________
Total Investment $____________________
If you do not indicate a fund choice, your transfer proceeds will be invested in
Short Term Income Fund, a money market fund.
AUTHORIZATION TO TRANSFER YOUR IRA
Check only one of the following:
[ ] Please liquidate and transfer in cash the IRA account listed
at left.
[ ] Please liquidate and transfer $________ of the assets in the
IRA account listed at left to my IRA.
[ ] Please transfer in-kind my [ ] Acorn Fund [ ] Acorn
International shares listed at left to an IRA with Acorn (see
explanation on other side--"IRA Transfer Checklist") and--
[ ] liquidate and transfer in cash all other assets in the IRA
account listed at left that are not currently invested in
the Acorn Funds.
[ ] liquidate and transfer $________ of the other assets in
the IRA account listed at left.
[ ] do not liquidate or transfer any assets in the IRA account
listed at left other than those invested in the Acorn Funds.
I have received and read the prospectus for the fund(s) in which I am making my
investment. If I am over 70 1/2, I attest that none of the amount to be
transferred will include the required minimum distribution for the current year
pursuant to Section 401(a)(9) of the Internal Revenue Code. If I have indicated
an IRA Transfer which is different from the IRA I currently maintain (e.g.,
Regular IRA versus Rollover IRA), I hereby establish a new IRA, the terms of
which shall be identical with the terms of the agreement for the Acorn IRA
previously established.
- --------------------------------------------------------------------------------
Your Signature Date (month, day, year)
Signature Guarantee: Please call the custodian or other institution you are
transferring from to see if a signature guarantee or other documentation is
required.
- --------------------------------------------------------------------------------
Name of Bank or Firm Providing Signature Guarantee
- --------------------------------------------------------------------------------
Signature of Officer and Title (Be sure to stamp Signature Guarantee)
<PAGE>
Acorn Investment Trust
WAM Brokerage Services, L.L.C.
P.O. Box 8502
Boston, MA 02266-8502
IRA (11/94)
IRA/SEP-IRA Transfer Form, continued
HOW TO TRANSFER YOUR IRA FROM ANOTHER INSTITUTION TO ACORN
1. Carefully read the prospectus of the Acorn fund you have selected.
2. Complete this Transfer Form to authorize Acorn to request your IRA funds
directly from another institution. You can make an unlimited number of direct
transfers without any tax implications.
3. If you do not already own an Acorn IRA, you must also complete the Acorn IRA
Application and check the "Direct Transfer" box.
4. Mail your Transfer Form and Application (if you are opening a new Acorn IRA)
in the enclosed postage-paid envelope or to State Street Bank and Trust
Company, Attention: Acorn Investment Trust, P.O. Box 8502, Boston, MA
02266-8502.
IRA TRANSFER CHECKLIST
X If you combine Rollover IRA and regular IRA funds in the same account, you
will forfeit the right to reinvest your Rollover IRA funds in another
employer's qualified plan in the future. Combining IRA funds may also have
tax implications at distribution.
X This Transfer Form cannot be used to transfer individual stocks (except
shares of one of the Acorn Funds) or bonds in kind. Instead, you must check
the box for liquidation and cash transfer of those investments.
X If you currently hold Acorn shares in an IRA with another custodian, and you
wish to transfer those shares directly to Acorn and avoid liquidating the
shares prior to transfer, please check the box for a transfer "in-kind."
X Be sure you check with your present IRA custodian to see if a signature
guarantee or other documentation is required.
X If possible, identify the individual or department responsible for transfers
at your present IRA custodian and provide this information where requested on
this form. This can help speed up the transfer process.
X If you are directly rolling over a distribution from an employer-sponsored
retirement plan into an Acorn Rollover IRA, please do not use this form.
Simply check the correct box on the IRA Application and send it to State
Street Bank at the indicated address.
ACORN WILL COMPLETE THIS SECTION
Letter of Acceptance and Instructions for Transfer
to an Acorn IRA Account
To Transferor Custodian: State Street Bank and Trust company (and/or any
successor custodian appointed pursuant to the terms of the Acorn IRA) will
accept the transfer described above. Please transfer on a fiduciary-to-fiduciary
basis all or part of the designated account as instructed above, and make check
payable to the custodian, State Street and Trust Company. Please mail check to
State Street Bank and Trust Company, Attention: Acorn Investment Trust, P.O. Box
8502, Boston, MA 02266-8502.
Also include the following information on the check:
- --------------------------- -------------------------------------------------
Reference Number FBO
- ---------------------------------------------------------- ------------------
Authorized Acorn Signature Date
Send this form to State Street Bank in the enclosed postage-paid envelope or to
the address below.
- --------------------------------------------------------------------------------
Acorn Investment Trust P.O. Box 8502 [LOGO OF ACORN]
Boston, MA 02266-8502
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> Acorn Fund
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1,521,023
<INVESTMENTS-AT-VALUE> 2,403,326
<RECEIVABLES> 8,975
<ASSETS-OTHER> 1,351
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,413,652
<PAYABLE-FOR-SECURITIES> 12,187
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,870
<TOTAL-LIABILITIES> 15,057
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,498,780
<SHARES-COMMON-STOCK> 176,315
<SHARES-COMMON-PRIOR> 161,989
<ACCUMULATED-NII-CURRENT> 5,288
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 24,722
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 869,805
<NET-ASSETS> 2,398,595
<DIVIDEND-INCOME> 22,948
<INTEREST-INCOME> 9,264
<OTHER-INCOME> 0
<EXPENSES-NET> 12,613
<NET-INVESTMENT-INCOME> 19,599
<REALIZED-GAINS-CURRENT> 185,690
<APPREC-INCREASE-CURRENT> 211,069
<NET-CHANGE-FROM-OPS> 416,358
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 14,810
<DISTRIBUTIONS-OF-GAINS> 177,941
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 21,831
<NUMBER-OF-SHARES-REDEEMED> 20,322
<SHARES-REINVESTED> 12,817
<NET-CHANGE-IN-ASSETS> 415,519
<ACCUMULATED-NII-PRIOR> 8,696
<ACCUMULATED-GAINS-PRIOR> 27,222
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,429
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,613
<AVERAGE-NET-ASSETS> 2,201,203
<PER-SHARE-NAV-BEGIN> 12.24
<PER-SHARE-NII> .11
<PER-SHARE-GAIN-APPREC> 2.42
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 1.17
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.60
<EXPENSE-RATIO> .57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> Acorn International Fund
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1,077,676
<INVESTMENTS-AT-VALUE> 1,269,204
<RECEIVABLES> 11,373
<ASSETS-OTHER> 15,376
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,295,953
<PAYABLE-FOR-SECURITIES> 16,735
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,974
<TOTAL-LIABILITIES> 19,709
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,103,312
<SHARES-COMMON-STOCK> 76,912
<SHARES-COMMON-PRIOR> 89,381
<ACCUMULATED-NII-CURRENT> 693
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7,197)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 179,436
<NET-ASSETS> 1,276,244
<DIVIDEND-INCOME> 23,529
<INTEREST-INCOME> 3,969
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</TABLE>
