ACORN INVESTMENT TRUST, 485APOS, 1998-06-03

ACORN INVESTMENT TRUST
485APOS, 1998-06-03

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<PAGE>

As filed with the Securities and Exchange Commission on June 3, 1998

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. 62

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 37
______________________________

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 April 30, 1998 pursuant to rule 485(b)
[ ] 60 days after filing pursuant to rule 485(a)(1)
[ ] on ___________ pursuant to rule 485(a)(1)
[X] 75 days after filing pursuant to rule 485(a)(2)
[ ] on ___________ pursuant to rule 485(a)(2).

- --------------------------------------------------------------------------------
<PAGE>

ACORN INVESTMENT TRUST

Cross-reference sheet pursuant to rule 495(a) of Regulation C
<TABLE>
<CAPTION>
Item Location or caption*
- ---- -----------------------------------
Part A
------
<S> <C>
Prospectus of Acorn Fund, Acorn International and Acorn USA
- -----------------------------------------------------------
1 (a) & (b) Cover Page

2 Expenses and Performance - Expenses

3 (a) Financial Highlights
(b) Not applicable
(c) & (d) Expensed and Performance - Performance

4 (a)(i) The Funds in Detail - Organization
(ii) The Funds at a Glance; The Funds in Detail - The Acorn
Philosophy; The Funds in Detail - Securities, Investment
Practices, and Risks; Foreign Securities; Managing
Investment Exposure; Illiquid and Restricted Securities;
Diversification; Other Investment Companies; Lending and
Repurchase Agreements
(b) The Funds in Detail - Securities, Investment Practices,
and Risks; Foreign Securities; Managing Investment
Exposure; Illiquid and Restricted Securities;
Diversification; Other Investment Companies; Lending and
Repurchase Agreements
(c) The Funds at a Glance - Who May Want to Invest; The Acorn
Philosophy; Securities, Investment Practices, and Risks
5 (a) The Funds in Detail - Organization
(b) The Funds at a Glance; The Funds in Detail - Organization;
Management; Expenses and Performance - Expenses;
Highlights - How to Contact Us
(c) The Funds in Detail - Organization; Management
(d) Not applicable
(e) Your Account - How to Buy Shares; How to Sell Shares;
Highlights - How to Contact Us; The Funds in Detail -
Transfer Agent and Custodian
(f) Expenses and Performance - Expenses
5A The information called for is contained in the annual
report

6 (a) The Funds in Detail - Organization; Your Account - How to
Buy Shares; How to Sell Shares; Shareholder and Account
Policies
(b) Not applicable
(c) Shareholder and Account Policies; The Funds in Detail -
Organization; Securities, Investment Practices and Risks
(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.

2
<PAGE>

<TABLE>
<S> <C>
(e) Your Account - Doing Business With Acorn; How to Buy Shares;
How to Sell Shares; Shareholder and Account Policies -
Statements and Reports; Highlights - How to Contact Us
(f) & (g) Dividends, Capital Gains, and Taxes
(h) Not applicable
7 Your Account; Shareholder and Account Policies; Highlights
(a) The Funds in Detail - Distributor
(b) Expenses and Performance - Expenses; Shareholder and Account
Policies - Share Price
(c) Not applicable
(d) Your Account - How to Buy Shares; Shareholder and
Account Policies - Exchange Plan Restrictions
(e) & (f) Not applicable
8(a) Your Account - 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;
Transactions with Dealers
(c) & (d) Shareholder and Account Policies - Redemptions

9 Not applicable
</TABLE>

3
<PAGE>

Item Location or caption*
- ---- --------------------------------
Part A
------
Prospectus of Acorn Twenty and Acorn Foreign Larger Companies Fund
- ------------------------------------------------------------------
<S> <C>
1 (a) & (b) Cover Page

2 Expenses and Performance - Expenses

3 (a) Financial Highlights
(b) Not applicable
(c) & (d) Expensed and Performance - Performance

5 (a) The Funds in Detail - Organization
(b) The Funds at a Glance; The Funds in Detail - Organization;
Management; Expenses and Performance - Expenses; A Quick
Reference Guide - How to Contact Us
(c) The Funds in Detail - Organization; Management
(d) Not applicable
(e) Your Account - How to Buy Shares; How to Sell Shares; A Quick
Reference Guide - How to Contact Us; The Funds in Detail -
Transfer Agent and Custodian
(f) Expenses and Performance - Expenses
(g) Not applicable

5A The information called for is contained in the annual report

6 (a) The Funds in Detail - Organization; Your Account - How to
Buy Shares; How to Sell Shares; Shareholder and Account
Policies
(b) Not applicable
(c) Shareholder and Account Policies; The Funds in Detail -
Organization; Securities, Investment Practices and Risks
(d) Not applicable
(e) Your Account - Doing Business With Acorn; How to Buy Shares;
How to Sell Shares; Shareholder and Account Policies -
Statements and

</TABLE>
- -----------------------

*References are to captions within the part of the registration statement
to which the particular item relates except as otherwise indicated.

<PAGE>

<TABLE>
<S> <C>
Reports; Highlights - How to Contact Us
(f) & (g) Dividends, Capital Gains, and Taxes
(h) Not applicable

7 Your Account; Shareholder and Account Policies; A Quick Reference Guide
(a) The Funds in Detail - Distributor
(b) Expenses and Performance - Expenses; Shareholder and Account
Policies - Share Price
(c) Not applicable
(d) Your Account - How to Buy Shares; Shareholder and Account
Policies - Exchange Plan Restrictions
(e) & (f) Not applicable

8 (a) Your Account - 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; Transactions with
Dealers
(c) & (d) Shareholder and Account Policies - Redemptions

9 Not applicable
</TABLE>

<PAGE>

Item Location or caption*
- ---- ---------------------------------------
Part B
------

Statement of Additional Information of Acorn Fund, Acorn International and
- --------------------------------------------------------------------------
Acorn USA
---------
<S> <C>
10 Cover Page

11 Cover Page

12 Part A - The Funds in Detail - 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

22 Performance Information

23 Information About the Funds
</TABLE>

- ----------------------------
*References are to captions within the part of the registration statement to
which the particular item relates except as otherwise indicated.

<PAGE>

Item Location or caption*
----------------------

Part B
------
Statement of Additional Information of Acorn Twenty and
-------------------------------------------------------
Acorn Foreign Larger Companies Fund
-----------------------------------
<TABLE>
<C> <S>
10 Cover Page
11 Cover Page
12 Part A - The Funds in Detail - 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
22 Performance Information
23 Information About the Funds
</TABLE>

- -------------------
*References are to captions within the part of the registration statement to
which the particular item relates except as otherwise indicated.

<PAGE>

Item Location or caption*
---- -----------------------------
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
29 Principal underwriters
30 Location of accounts and records
31 Management services
32 Undertakings

- ---------------------------------
*References are to captions within the part of the registration statement to
which the particular item relates except as otherwise indicated.

<PAGE>

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

The definitive Prospectus and Statement Additional Information for the series of
the Registrant designated Acorn Fund, Acorn International and Acorn USA, dated
May 1, 1998, were filed in post-effective amendment no. 61 to Registrant's
registration statement, filed pursuant to Rule 485(b) of the Securities Act of
1933, on April 30, 1998 (1933 Act No. 2-34223), and are incorporated by
reference herein.

- -------------------------------------------------------------------------------
<PAGE>

Acorn Twenty
Acorn Foreign Fifty
Subscription Offer

Through September [29], 1998, shares of Acorn Twenty and Acorn Foreign
Fifty (each, a "Fund," and together, the "Funds") are being offered by
subscription. Subscribing for Fund shares allows you to reserve shares that will
be issued by that Fund on September [30], 1998 at the initial offering price
(net asset value) of $10.00 per share. You can subscribe by sending your
completed and signed purchase application, with your check. Your check will be
held, uncashed, until September [30], when it will be used to open your account
and the Funds will begin operations. There can be no assurance that either
Fund's net asset value after the close of the Subscription Period will be more
than $10.00 per share.

Supplement dated September __, 1998 to the
Prospectus dated September __, 1998 of Acorn Twenty
and Acorn Foreign Fifty, each a series of Acorn Investment Trust
<PAGE>

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED _____________, 1998

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

Acorn Twenty
Acorn Foreign Fifty
===============================================================================

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

Acorn Twenty invests for long-term capital growth. The Fund invests
primarily in the stocks of U.S. companies with market capitalizations of $1
billion to $10 billion. Acorn Twenty ordinarily focuses its investments in 15 to
25 U.S. companies.

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

Acorn Foreign Fifty invests for long-term capital growth. The Fund invests
primarily in the stocks of foreign companies with market capitalizations of $1
billion to $10 billion. The Fund ordinarily has investments in 40 to 60
companies and invests primarily in developed markets.

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

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 the date of this
prospectus has been filed with the Securities and Exchange Commission (SEC), 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). You may also obtain the SAI, as well as other
information that has been electronically filed, from the SEC's web site
(www.sec.gov).

Acorn Twenty and Acorn Foreign Fifty are series of Acorn Investment Trust.

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 and Account Application
August ___, 1998
<PAGE>

CONTENTS
========================================
<S> <C>
The Funds at a Glance 1
.Goal & Strategy 1
.Diversification 1
.Management and Organization 1
.Who May Want to Invest 2
.Risks 2
.Buying and Selling Shares 2

Expenses and Performance 3
.Expenses 3
.Performance 4

Your Account 4
.Doing Business with Acorn 4
.Choices for Your Account
Registration 5
.How to Buy Shares 6
.How to Sell Shares 8
.Selling Shares by Telephone 9
.Selling Shares in Writing 9
.Signature Guarantee 10
.Redemption Price 10

Shareholder and Account Policies 11
.Statements and Reports 11
.Share Price 11
.Purchases 12
.Transactions with Dealers 12
.Redemptions 13
.Address Changes 14
.Telephone Transactions 14
.Telephone Exchange Plan
and Money Market Funds 15
.Exchange Plan Restrictions 16

Dividends, Capital Gains,
and Taxes 17
.Distribution Options 17
.Taxes 18
.Foreign Income Taxes 18

The Funds in Detail 18
.Organization 19
.Management 19
.Transfer Agent and Custodian 20
.Distributor 21
.Expenses 21

How the Funds Invest 21
.Acorn Twenty 21
.Acorn Foreign Fifty 22
.Looking for High Quality
Companies 22
.General Information 22

Securities, Investment Practices,
and Risks 23
.Common Stocks 24
.Diversification 24
.Foreign Securities 25
.Managing Investment
Exposure 26
.Debt Securities 28
.Illiquid and Restricted
Securities 29
.Other Investment
Companies 29
.Lending and Repurchase
Agreements 29

A Quick Reference Guide 31
.How to Buy Shares 31
.How to Sell Shares 33
.How to Contact Us 34

Doing Business with Acorn 37
</TABLE>

i
<PAGE>

THE FUNDS AT A GLANCE
================================================================================

Goal and Strategy
- --------------------------------------------------------------------------------

Acorn Twenty invests for long-term capital growth. The Fund invests
primarily in the stocks of U.S. companies with market capitalizations of $1
billion to $10 billion. Acorn Twenty is a non-diversified fund that ordinarily
focuses its investments in 15 to 25 U.S. companies.

Under normal market conditions, Acorn Twenty invests most of its assets in
common stocks, and securities exchangeable or convertible into common stocks of
U.S. companies, but may also invest in other types of securities.

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

Acorn Foreign Fifty invests for long-term capital growth. The Fund invests
primarily in the stocks of foreign companies with market capitalizations of $1
billion to $10 billion. The Fund is a non-diversified fund that ordinarily has
investments in 40 to 60 companies and invests primarily in developed markets.

Under normal market conditions, Acorn Foreign Fifty invests most of its
total assets in equity securities, including common and preferred stocks,
warrants or other similar rights, and convertible securities, of foreign
companies in at least three developed countries, but may also invest in other
types of securities, including debt securities.

Management and Organization
- --------------------------------------------------------------------------------

The Funds are series of Acorn Investment Trust ("Acorn" or the "Trust").
Wanger Asset Management, L.P. (WAM), the Funds' investment adviser, employs a
team approach to management of the Funds. The management team consists of the
Funds' portfolio managers, other WAM portfolio managers, and research analysts.
Each team member has one or more areas of expertise, and shares responsibility
for providing ideas, information, and knowledge in managing the Funds. Daily
decisions on portfolio selection rest with the lead portfolio managers or co-
managers who utilize the input and advice of the management team in making
purchase and sale determinations. Ralph Wanger is the chief investment officer
of WAM, and lead strategist for all of the Acorn funds.

Acorn Twenty. John H. Park and Mark H. Yost are the co-portfolio managers
of Acorn Twenty. Mr. Park is a vice president of the Trust and a principal of
WAM. He has been a member of WAM's investment management team since July 1993.
Mr. Yost has been a member of WAM's investment management team since October
1995.

Acorn Foreign Fifty. Marcel P. Houtzager and Leah J. Zell are the co-
portfolio managers of Acorn Foreign Fifty. Mr. Houtzager is a vice president of
the Trust and a principal of WAM. He has been a member of WAM's investment
management team since 1992.

<PAGE>

Ms. Zell is a vice president of the Trust and a principal of WAM. She has
been analyzing international securities for Acorn since 1984.

Who May Want to Invest
- --------------------------------------------------------------------------------

The Funds are suitable for investors who are willing to hold their shares
through market fluctuations and the accompanying changes in share values. The
Funds are not appropriate investments for those seeking short-term price
appreciation or for "market-timers."

Risks
- --------------------------------------------------------------------------------

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. Because they are non-diversified,
the Funds have the ability to take larger positions in a smaller number of
issuers. While WAM believes that a strategy of investing in a limited number of
securities has the potential for higher total returns than a strategy of
investing in a larger number of securities, this may increase the volatility of
the Funds' investment performance. Also, if the securities in which a Fund
invests perform poorly, the Fund could incur greater losses than it might have
had it invested in a larger number of securities.

The value of the Funds' investments and the returns they generate vary from
day to day. Performance depends on WAM's skills in identifying the trends that
are the basis for the Funds' 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 you paid for them. The Funds are not, alone
or together, a balanced investment plan and there can be no assurance that the
Funds will achieve their investment objectives.

Buying and Selling Shares
- --------------------------------------------------------------------------------

The minimum initial investment in a Fund is $1,000 (lower for some IRAs).
You may buy shares directly from the Funds without payment of any sales charges.
There are no "12b-1" fees or redemption fees. To invest you must be a U.S.
resident with a social security or tax identification number.

See "Your Account" for how to buy and sell shares.

2
<PAGE>

EXPENSES AND PERFORMANCE
================================================================================

Expenses
- --------------------------------------------------------------------------------

Transaction Expenses. Shareholder transaction expenses are charges you pay
when you buy or sell shares of the Funds:

<TABLE>
<CAPTION>
<S> <C>
Maximum sales charge on purchases and
reinvested dividends None
Deferred sales charge on redemptions None
Redemption fee None
Exchange fee None
Wire transaction fee None

</TABLE>

Annual fund operating expenses. Each Fund pays its own operating expenses,
including the management fee to WAM. Expenses are factored into each Fund's
share price daily, and are not charged directly to shareholder accounts.

The Funds expect to incur the following expenses, expressed as a percentage
of the Fund's average net assets:

Acorn Twenty Acorn Foreign Fifty
------------- --------------------
<S> <C> <C>
Management Fee....................................... 0.90% 0.95%
12b-1 fee............................................ None None
Other expenses
Administration Fee................................ 0.05 0.05
Other Operating Expenses (after reimbursement).... 0.40 0.45
---- ----
Total operating expenses (after reimbursement)....... 1.35% 1.45%

</TABLE>

The purpose of the expense table is to help you understand the costs and
expenses of investing in the Funds. WAM has agreed to reimburse Acorn Twenty for
any ordinary operating expenses exceeding 1.35% of its average net assets, and
Acorn Foreign Fifty for any ordinary operating expenses exceeding 1.45% of its
average net assets, over each fiscal year. Absent reimbursement, "Other
Operating Expenses" would be estimated to be 3.65% for Acorn Twenty, and 3.98%
for Acorn Foreign Fifty. The estimate of "Other Operating Expenses" is based on
the estimated expenses the Funds expect to incur during their initial partial
fiscal year ending December 31, 1998.

.Example: Let's say, hypothetically, that a 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 Fund account after the number of years indicated:

3
<PAGE>

Acorn Twenty Acorn Foreign Fifty
------------ -------------------

After 1 year $ 14 $15
After 3 years $ 43 $46

The purpose of the example is to illustrate the effect of expenses, but is
not meant to suggest actual or expected costs or returns, all of which may vary.
Because the Funds are new, the above amounts are estimates.

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 all 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 Funds sometimes show their performance compared to stock indexes
(described in the SAI), or give their ratings or rankings determined by
unrelated organizations.

YOUR ACCOUNT
- ------------

Doing Business with Acorn

Acorn provides investors with service Monday through Friday, except
holidays, from 8:00 a.m. to 4:30 p.m. Central time.

To reach Acorn, call:

> For fund information, prices, or literature--1-800-9-ACORN-9
(1-800-922-6769) (from outside the U.S. 1-312-634-9240)

> To add to your existing account, redeem shares, or exchange
shares by telephone--call our transfer agent at 1-800-962-1585 (outside the
U.S. 1-617-328-5000 ext. 6457). Your transaction request must be received
by 3:00 p.m. Central time (Closing Time) to receive that day's price.
Transaction requests received after Closing Time will receive the price

4
<PAGE>

next calculated after receipt of the request. See "Shareholder and Account
Policies--Share Price."

. For help in setting up your account or for IRA assistance--call our
transfer agent at 1-800-962-1585 (outside the U.S. 1-617-328-5000 ext.
6457)

. For 24-hour account balances, 7 days a week--1-800-962-1585.

Choices for Your Account Registration
- --------------------------------------------------------------------------------

Acorn will register your account in any of the ways described below.

Individual or Joint Ownership
-----------------------------
For your general investment needs

Individual accounts are owned by one person. Joint accounts can have two or
more owners.

Accounts for Minors
-------------------
To invest for a minor's education or other future needs

.Gift or Transfer to Minor (UGMA/UTMA) custodial accounts provide a way to
give money to a minor. The Account Application must include the
minor's social security number.

.Education IRAs may be established on behalf of a beneficiary under age 18
to save for his or her education. Distributions from an Education
IRA are tax-free as long as the proceeds are used to pay for
"qualified higher education expenses." Single taxpayers with income
up to $95,000 per year, and married couples with income up to
$150,000 per year, are allowed to contribute up to $500 per year per
beneficiary. The $500 annual maximum contribution is subject to
reduction if the contributor's income exceeds those amounts. For
more information about the tax advantages and consequences of
investing in any of these plans, please consult your tax adviser.

Transfer on Death (TOD)
-----------------------
To designate a beneficiary for your non-retirement account

TOD registration enables you to designate an individual or entity to
receive the proceeds of your fund account upon your death. TOD registration
differs from a joint account--with TOD registration, the account owner
retains full control over the disposition of shares held in the account
during his or her lifetime, and may change or remove the beneficiary at any
time without the consent of the beneficiary. TOD registration may not be
available to residents of certain states. Call 1-800-962-1585 for more
information.

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 can be opened.

5
<PAGE>

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 Account
Application.

Retirement Plans
- ----------------
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 1-800-962-1585).

.Traditional IRAs allow anyone of legal age and under 70-1/2 with earned income
to save up to $2,000 per tax year. If your spouse has less than $2,000 in
earned income, he or she may still contribute up to $2,000 to an IRA, as
long as you and your spouse's combined earned income is at least $4,000.

.Rollover IRAs retain special tax advantages for certain distributions
from employer-sponsored retirement plans.

.Roth IRAs allow single taxpayers with earned income up to $95,000 per year, and
married couples with earned income up to $150,000 per year, to contribute
up to $2,000, or $4,000, respectively, per year. Contributions to Roth IRAs
are not tax-deductible, but withdrawals are not taxable if the Roth IRA has
been held at least five years, and you are at least 59-1/2, disabled, or
use the proceeds (up to $10,000) to purchase a first home.

.Simplified Employee Pension Plans (SEP-IRAs) allow small business owners or
those with self-employment income to make tax-deductible contributions of
up to 15% of the first $160,000 of compensation per year for themselves and
any eligible employees.

.SIMPLE-IRAs must be established by an employer (including a self-employed
person), and enable all employees of the employer to elect to have up to
$6,000 per year deducted from their paychecks on a before-tax basis and
deposited directly into an account maintained for the individual employee.
The employer is also generally required to make a contribution for each
employee who elects to contribute. SIMPLE-IRAs require a special
application (call 1-800-962-1585).

.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.

<PAGE>

For more information about the tax advantages and consequences of
investing in any of these plans, please consult your tax adviser.

How to Buy Shares
- -------------------------------------------------------------------------------

You can open a new account by:

.mailing in an Account Application with your check or money order payable
to "Acorn Twenty" or "Acorn Foreign Fifty" for $1,000 or more (the Acorn
funds do not accept third party checks, except for IRA rollover checks that
are properly endorsed);

.using the exchange plan to move $1,000 or more from an account with Acorn
Fund, Acorn International, Acorn USA (each of which is a series of Acorn
Investment Trust) or one of the Reich & Tang Funds into a new identically
registered account in Acorn Twenty or Acorn Foreign Fifty. See "Shareholder
and Account Policies" for more exchange plan information; or

.wire by calling 1-800-962-1585 to set up your account and to arrange a
wire transaction. Note: You may not need to submit a new Account
Application if you are a current Acorn shareholder. When you call, a
representative will assist you. Not available for IRA accounts.

After your account is open, you may add to it by:

.wiring money from your bank;

.moving money via ACH transfer from your bank account by telephone if you
participate in the Telephone Purchase Plan (select this option on the
Account Application or request a Doing Business with Acorn form to
establish);

.using the Telephone Exchange Plan to move your investment from another
Acorn fund to Acorn Twenty or Acorn Foreign Fifty, or from one of the Reich
& Tang Funds;

.using the Automatic Investment Plan to move money from your financial
institution via ACH transfer to your Acorn Twenty or Acorn Foreign Fifty
account on a monthly or quarterly basis; or

.mailing your check or money order payable to "Acorn Twenty" or "Acorn
Foreign Fifty" for $100 or more with the stub from one of your account
statements, with a slip from the investment booklet provided by Acorn or
with a letter of instruction. The Acorn funds do not accept third party
checks, except for IRA rollover checks that are properly endorsed.

The Acorn funds use the Automated Clearing House (ACH) to transfer money to
and from your fund accounts and participating financial institutions.
Participants in the ACH network include

<PAGE>

banks, savings banks, brokerage houses, money market funds, and credit unions
which electronically process transactions primarily through the Federal Reserve
System.

Your purchase money and your Account Application must both be received by
Closing Time (usually 3:00 p.m. Central time) for you to receive that day's
price. An order is considered received when the Account Application (for a new
account) or information identifying the account and the money are received and
accepted by Acorn's transfer agent, or by certain authorized agents, some of
which may charge a fee for their services. See "Shareholder and Account
Policies--Share Price" for information about share price and transactions with
certain financial services companies and broker-dealers. If the proceeds of your
wire order are received, but your Account Application has not been received, you
will receive the price for the day on which your Account Application is
received. Your Account Application must be received no later than 12:00 noon
Central time the day after your wire is received, or your wire will be returned
to you.

If you are investing through an Acorn IRA (any kind) for the first time you
will need a special application. Call 1-800-962-1585. For both initial and
subsequent IRA investments, please indicate the year for which the investment is
being made.

<TABLE>
<CAPTION>
Minimum Investments
<S> <C>
To open an account $1,000

To open a Traditional or Roth IRA $1,000

To open an Education IRA $500

To add to an account $100
</TABLE>

The Automatic Investment Plan allows you to request a transfer of money
(minimum $100; maximum $50,000) from your pre-designated bank account to your
fund account on a monthly or quarterly basis. Quarterly investments will be
made in January, April, July, and October. The money will be transferred on or
about the 15th of the month unless you designate a different day. If the day
you selected falls on a Saturday, Sunday, holiday, or any other day on which the
NYSE is closed for trading, the transaction will be processed on the next
business day. To participate in the Automatic Investment Plan, complete the
information on the Account Application or request a Doing Business with Acorn
form.

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.

More details about how to buy shares are in "A Quick Reference Guide" at
the back of this prospectus.

8
<PAGE>

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
NAV (share price) next calculated after your order is received and accepted.
(See "Shareholder and Account Policies--Share Price" for more information about
share price and transactions with certain financial services companies and
broker-dealers). 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 Acorn funds or to the Reich
& Tang Short Term Income Fund Money Market Portfolio, which can be requested by
calling 1-800-962-1585. If you need an IRA Withdrawal Request form, call us at
1-800-9-ACORN-9 (1-800-922-6769).

Selling Shares by Telephone
- --------------------------------------------------------------------------------

The Telephone Redemption Plan lets you redeem $100 to $50,000 per day by
phone. You must make your telephone redemptions by Closing Time to receive that
day's NAV. Transaction requests received after Closing Time will receive the NAV
next calculated after receipt of the request. You automatically have the
Telephone Redemption Plan unless you decline it on your Account 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. Instead, you must
send a letter of instruction signed by all account owners with the signatures
guaranteed. See "Signature Guarantee."

The Systematic Withdrawal Plan lets you establish automatic monthly or
quarterly redemptions from your account in specified dollar amounts if you have
a $25,000 minimum Acorn account balance. If you wish to establish this feature,
call 1-800-9-ACORN-9 (1-800-922-6769) for a Doing Business with Acorn form.

More details about how to sell shares are in "A Quick Reference Guide" at
the back of this prospectus.

Selling Shares in Writing
- --------------------------------------------------------------------------------
Write a letter of instruction including:

. your name,

. the fund's name,

. your fund account number,

. the dollar amount or number of shares to be redeemed,

. the stock certificates representing your shares to be redeemed, if you
hold certificates for your shares, and

<PAGE>

. any other applicable requirements listed under "A Quick Reference Guide
How to Sell Shares."

Mail your letter to:

State Street Bank and Trust Co.
Attn: Acorn Family of Funds
P.O. Box 8502
Boston, MA 02266-8502

If you are using overnight mail:

Boston Financial Data Services
Attn: Acorn Family of Funds
66 Brooks Drive
Braintree, MA 02184
1-617-328-5000 ext. 6457

Do not sign your stock certificates. Send them by registered or certified
mail so that you may receive a confirmation of delivery.

Signature Guarantee
- --------------------------------------------------------------------------------
Certain requests must include a signature guarantee, designed to protect
you and Acorn from fraudulent activities. Your request must be made in writing
and include a signature guarantee if any of the following situations applies:

. you wish to redeem more than $50,000 worth of shares;

. your name has changed by marriage or court order (complete a Changing
Your Account Registration form or 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);

. you wish to establish TOD registration on an existing account or change a
TOD beneficiary (see "Your Account--Choices for Your Account
Registration");

. 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);

. 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 Plan.

<PAGE>

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.

Redemption Price
- --------------------------------------------------------------------------------

The price at which your shares will be redeemed is determined by the time
of day Acorn's transfer agent, or another authorized agent, receives your
redemption request.

Closing Time is the close of New York Stock Exchange (NYSE) regular session
trading, which is usually 3:00 p.m. 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 Funds is 11:00 a.m. Central time).

.Have your written redemption request, with a signature guarantee, if
required, and any supporting documents, delivered to Acorn's transfer
agent, or another authorized agent, before Closing Time.

SHAREHOLDER AND ACCOUNT POLICIES
================================================================================

Statements and Reports
- --------------------------------------------------------------------------------

Statements and reports that Acorn sends to you include:

.Confirmation statements (after every transaction in your account or change
in your account registration), excluding automatic investment plan
purchases, which are confirmed on a quarterly consolidated account
statement. Automatic Investment Plan accounts using the 15th of each month
(or the 15th of the first month of each quarter) as the investment date may
also have purchases confirmed monthly instead of just quarterly. Call
1-800-962-1585 to request this service.

.Quarterly and year-end consolidated 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 telephone. Average
cost statements for shares redeemed are available upon request for most
accounts.

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.

11
<PAGE>

Share Price
- --------------------------------------------------------------------------------

The funds are open for business each day the 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 purchase or redemption order by Acorn or by a broker-dealer or
financial services company authorized by Acorn to accept purchase and redemption
orders on its behalf. Closing Time is the time of the close of regular session
trading on the NYSE, which is usually 3:00 p.m. Central time but is sometimes
earlier.

A 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.

Each 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. Values of foreign securities are
translated from the local currency into U.S. dollars using current exchange
rates. Because of the different trading hours in various foreign markets, the
calculation of NAV does not take place at the same time as the determination of
the prices of many foreign securities held by the Funds. Those timing
differences may have a significant effect on a Fund's NAV.

Your purchase or redemption of Fund shares will be priced at the NAV next
calculated after your investment (including the Account Application, if for a
new account, and the money) or redemption request is received and accepted by
Acorn's transfer agent, or by certain other agents and dealers authorized to
accept purchase and redemption requests on Acorn's behalf. An order received
before Closing Time will get that day's price. Telephone orders received after
Closing Time will be processed at the NAV next calculated after receipt of the
order.

Purchases
- --------------------------------------------------------------------------------

.All of your purchases must be made in U.S. dollars and checks must be
drawn on U.S. banks. Acorn does not accept third party checks, except for
IRA rollover checks that are properly endorsed.

.Acorn does not accept cash, credit cards, or credit card checks.

.If payment for your check or telephone purchase 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. Fund shares are purchased at the
NAV next calculated after you call. See "Doing Business with Acorn."

12
<PAGE>

Acorn reserves the right to reject any specific purchase order, including
certain purchases through the exchange plan. See "Exchange Plan Restrictions." A
purchase may be refused if, in WAM's opinion, it would disrupt management of the
Funds or would not be in the best interests of a Fund's existing shareholders.

Transactions with Dealers
- --------------------------------------------------------------------------------

You may purchase or redeem shares of a Fund through investment dealers,
banks, or other financial institutions. Certain financial institutions that have
entered into sales agreements with Acorn may enter confirmed purchase orders or
redemption requests on behalf of customers on an expedited basis, including
orders by phone, with payment to follow no later than the time when the Funds
are priced on the following business day. If payment is not received by that
time, the financial institution could be held liable for resulting fees or
losses. These institutions may charge for their services or place limitations on
the extent to which you may use the services offered by Acorn. Any such charges
could constitute a substantial portion of a smaller account and may not be in
your best interest. There are no charges or limitations imposed by Acorn other
than those described in this prospectus if shares are purchased (or redeemed)
directly from Acorn.

Acorn may from time to time authorize certain financial services companies,
broker-dealers or their designees ("authorized agents") to accept purchase,
redemption, and exchange requests from their clients on whose behalf the
authorized agent holds shares of the Funds. For purchase orders placed through
an authorized agent, a shareholder will pay a Fund's NAV next computed after the
receipt by the authorized agent of such purchase order, plus any applicable
transaction charge imposed by the agent. For redemption orders placed through an
authorized agent, a shareholder will receive redemption proceeds which reflect
the NAV next computed after the receipt by the authorized agent of the
redemption order, less any redemption fees imposed by the agent. Some financial
institutions that act as Acorn's agent or that otherwise maintain nominee
accounts with the Funds for their clients for whom they hold fund shares might
not charge any transaction fees directly to investors in the Funds. However,
such companies may charge a fee (usually a percentage of the average net assets
held in such accounts) for accounting, shareholder servicing, and distribution
services the institution provides with respect to the underlying fund shares.
WAM pays any such fees.

Redemptions
- --------------------------------------------------------------------------------

.Normally, redemption proceeds will be mailed within seven days after your
redemption request is received by Acorn's transfer agent or another
authorized agent.

.Redemption checks are made payable to the shareholders of record; if you
wish for the check to be made payable to someone other than the account
owners, you must submit your request in writing, and the signatures of all
shareholders of record must be guaranteed. See "Your Account--Signature
Guarantee."

13
<PAGE>

.Each 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 15 days.

.If you elected to participate in the Telephone Redemption Plan, Acorn can
send payment for your redemption to your bank account by wire or ACH
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 falls below $1,000 because of redemptions,
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 issuing the check at
the NAV on the date of cancellation. In addition, after such 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 changed and future dividends and distributions will be
reinvested.

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, a signature guarantee will be required
for any written redemption request unless your change of address was made in
writing with a signature guarantee.

Telephone Transactions
- --------------------------------------------------------------------------------

You may initiate many transactions by telephone.

Transactions over a recorded line (1-800-962-1585):

.Change your address;

.Request duplicate statements to be sent to someone you designate;

14
<PAGE>

.Request an average cost statement for shares redeemed (available for most
accounts);

.Request a current account statement;

.Purchase shares through the Telephone Purchase Plan (plan must be pre-
established);

.Redeem $50,000 or less and request a wire or ACH transfer to your bank
account (bank account information must be pre-designated on your fund
account registration; 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 Plan to your account;

.Add or discontinue the Telephone Redemption Plan to your account;

.Add the Automatic Exchange Plan to your account (to exchange between one
Acorn fund and another each month or quarter);

.Change your distribution option, not including the cash payment via ACH
option (does not apply to IRA accounts);

.Redeem $50,000 or less, with a check mailed to the address of record (does
not apply to IRA accounts, and your address of record must not have changed
within the last 60 days);

.Exchange money from a non-IRA individual account to an existing IRA
account with an identical registration;

.Exchange money between identically registered accounts in Acorn Twenty,
Acorn Foreign Fifty, Acorn Fund, Acorn International, Acorn USA, or certain
Reich & Tang Funds, or exchange money from one fund to establish an
identically registered account in another fund;

.Change the contribution year on an IRA account to the previous year up
until April 15 of the following year; and

.Copy the account options on your account to other identically registered
accounts.

Acorn will not be responsible for any loss resulting from unauthorized
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
purchase or redeem shares by telephone,

15
<PAGE>

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 and Money Market Funds
- -------------------------------------------------------------------------------

Acorn's Telephone Exchange Plan permits you to exchange your investment
between one Acorn fund and another, or between an Acorn fund and one of the
money market mutual funds participating in the plan (Reich & Tang Funds) upon
telephone instructions.

Money Funds

The following Reich & Tang Funds are available under the Telephone Exchange
Plan: 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 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 Short Term Income Fund, Money
Market Portfolio is available for IRA accounts.

The price at which shares are exchanged is determined by the time of day
your request is received. To get today's price:

.For an IRA account, call us at 1-800-962-1585 before Closing Time.

.If you are exchanging from one Acorn fund into another, or into one of the
Reich & Tang Funds, call us at 1-800-962-1585 before Closing Time.

.If you are exchanging from one of the Reich & Tang Funds to one of the
Acorn funds, call Reich & Tang at 1-800-221-3079 before 11:00 a.m. Central
time.

If your call is received after the times noted above, your exchange will be
processed at the NAV next calculated after receipt of your call.

Because of the time needed to transfer money between the Acorn funds and
the Reich & Tang Funds, you may not exchange into and out of a Reich & Tang Fund
on the same or successive days; there must be at least one day between
exchanges.

16
<PAGE>

Exchange Plan Restrictions
- --------------------------------------------------------------------------------

.Generally, you will be limited to 4 round trip exchanges per year (a round
trip is an exchange out of one fund into another fund, and then back
again).

.Shares of the fund you are exchanging into must be available 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.

.The Exchange Plan is not available for shares of a fund for which you have
been issued certificates. (If you want to exchange shares between funds,
call 1-800-962-1585 to get instructions for returning your certificates.)

.If your account is subject to backup withholding, you may not use the
Exchange Plan.

.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. Call 1-800-
922-6769 for a 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 whenever they are reasonably able to
do so.

DIVIDENDS, CAPITAL GAINS AND TAXES
================================================================================

Each Fund distributes substantially all of its net income and net realized
capital gains to shareholders each year. Normally, dividends are paid in June
and December, and capital gains are distributed in December.

Distribution Options
- --------------------------------------------------------------------------------

When you open an account, specify on your Account Application how you would
like to receive your distributions. If you ever want to change your distribution
option, call us at 1-800-962-1585. The Fund offers three options:

17
<PAGE>

.Reinvestment Option. Both your dividends and capital gain distributions
will be automatically reinvested in additional shares of your Fund. If you
do not indicate a choice on your Account Application, you will be assigned
this option.

.Income-Only Option. Your capital gain distributions will be automatically
reinvested, but you may receive a check for each dividend, or have the
proceeds sent to your pre-designated financial institution via ACH
transfer.

.Cash Option. You will be sent a check for each dividend and capital gain
distribution or you may have the proceeds sent to your pre-designated bank
account via ACH transfer.

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 Closing Time
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. The
ex-dividend date is the day after the record date.

Taxes
- -------------------------------------------------------------------------------

As with any investment, you should consider how your investment in a Fund
will be taxed. If your account is a tax-deferred or tax-exempt account (for
example, an IRA or an employee benefit plan account), the following tax
discussion does not apply. If your account is not tax-deferred or tax-exempt,
however, you should be aware of the following tax rules:

Taxes on distributions. Distributions are subject to federal income tax,
and may also be subject to state or local taxes. Your distributions are taxable
when they are paid, whether you take them in cash or reinvest them in additional
shares. However, distributions declared in December and paid in January are
taxable as if they were paid on December 31.

For federal tax purposes, income and short-term capital gain distributions
are taxed as dividends; mid-term capital gain distributions are taxed as mid-
term capital gains (currently taxed at a maximum rate of 28%); and long-term
capital gain distributions are taxed as long-term capital gains (currently taxed
at a maximum rate of 20%). Classification as a mid-term or long-term gain
depends on how long the security sold had been held by the Fund. Long-term gains
are those from securities held more than 18 months; mid-term gains are from
securities held more than one year but not more than 18 months. Every January,
Acorn will send you and the IRS a statement, called a Form 1099-DIV, showing the
amount of each taxable distribution you received in the previous year. A year-
end tax guide will accompany your Form 1099. You may not receive a Form 1099 if
the total distributions you received for the year are less than $10.00.

18
<PAGE>

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 them.

Whenever you sell shares of a 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. Acorn sends you an average cost
statement for shares you redeemed to assist you or your tax preparer. 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.

Foreign Income Taxes
- --------------------------------------------------------------------------------

Investment income received by a Fund from sources within foreign countries
may be subject to foreign income taxes at the source. If a Fund pays
nonrefundable taxes to foreign governments during the year, the taxes will
reduce that Fund's dividends but will still be included in your taxable income.
You may be able to claim an offsetting credit or deduction on your tax return
for your share of foreign taxes paid by Acorn Foreign Fifty (but not Acorn
Twenty because not enough of Acorn Twenty's assets are invested in foreign
securities for Acorn Twenty to be able to pass through the foreign tax credit).
Acorn Foreign Fifty will send you this information along with your annual Form
1099-DIV and year-end tax guide.

When you sign your account 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.

THE FUNDS IN DETAIL
================================================================================

Organization
- --------------------------------------------------------------------------------

Acorn Twenty and Acorn Foreign Fifty are each series of Acorn Investment
Trust ("Acorn" or the "Trust"), an open-end, management investment company. The
Trust is a Massachusetts business trust organized on April 21, 1992. The other
series of the Trust are Acorn Fund, Acorn International and Acorn USA.

Each share of a 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 Acorn funds. The trustees
are experienced executives and professionals who meet at regular intervals to
oversee the activities of the Trust. A majority of the trustees are independent
of WAM.

19
<PAGE>

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 a Fund and any other Acorn fund that you own.
Shareholders not attending these meetings are encouraged to vote by proxy.

Management
- --------------------------------------------------------------------------------

The Funds are managed by Wanger Asset Management, L.P. (WAM), 227 West
Monroe Street, Suite 3000, Chicago, Illinois 60606; WAM chooses the Funds'
investments and handles their business affairs, under the direction of the board
of trustees. WAM is a limited partnership managed by its general partner, Wanger
Asset Management, Ltd. WAM manages more than $7 billion in assets.

WAM employs a team approach to management of the Funds. The management team
is made up of the lead portfolio manager or co-managers, other WAM portfolio
managers and research analysts. Team members share responsibility for providing
ideas, information and knowledge in managing the funds, with each team member
having one or more particular areas of expertise applicable to the management of
the funds. Daily decisions on portfolio selection rest with the lead portfolio
managers or co-portfolio managers who utilize the input and advice of the
management team in making purchase and sale determinations.

Ralph Wanger is the president of the Trust and chief investment officer of
WAM. He has been involved in managing all of the Acorn funds since each fund
began. Mr. Wanger has been a member of the board of Acorn (and its predecessor,
The Acorn Fund, Inc.) since 1970, and is a principal of WAM. Mr. Wanger is
primarily responsible for development of the investment strategies followed by
each of the Acorn funds.

John H. Park and Mark H. Yost are the co-portfolio managers of Acorn
Twenty. Mr. Park is a vice president of the Trust and a principal of WAM. He has
been a member of WAM's investment management team since July 1993. Prior to
joining WAM, he was an analyst for Ariel Capital Management. Mr. Park received
his Chartered Financial Analyst (CFA) designation in 1996 and earned both his
undergraduate and M.B.A. degrees from the University of Chicago.

Mr. Yost has been a member of WAM's investment management team since
October 1995. Mr. Yost has been co-portfolio manager of Wanger U.S. Smaller
Companies Fund, an investment company offering shares to investors outside the
U.S., since its inception on June 23, 1997. Mr. Yost is also the portfolio
manager of the WAM Yost Partnership, L.P., a smaller company focused limited
partnership. Before joining WAM, Mr. Yost was an investment analyst for First
Chicago Corporation. Mr. Yost received his CFA designation in 1996. Mr. Yost
received his B.A. from St. Olaf College and his M.B.A. from the University of
Chicago.

Marcel P. Houtzager and Leah J. Zell are the co-portfolio managers of Acorn
Foreign Fifty. Mr. Houtzager is a vice president of the Trust and a principal of
WAM. He has been a member of WAM's investment management team since 1992. Mr.
Houtzager is the lead portfolio manager of Wanger International Small Cap
Advisor, a mutual fund investing in small cap stocks

20
<PAGE>

outside the United States. Mr. Houtzager received his CFA designation in 1996
and is a Certified Public Accountant. He received his B.A. from Pomona College
in 1983 and his M.B.A. from the University of California at Berkeley in 1985.

Ms. Zell is a vice president of the Trust and a principal of WAM. She has
been analyzing international securities for Acorn since 1984. Ms. Zell is lead
portfolio manager of Acorn International, a mutual fund investing in smaller
foreign companies with assets at June 30, 1998 of more than $__ billion. Ms.
Zell received her CFA designation in 1987. She earned her undergraduate degree
from Radcliffe College and holds a Ph.D. from Harvard University.

Since June 23, 1997, Mr. Houtzager and Ms. Zell have co-managed the Wanger
European Smaller Companies Fund, an investment company offering shares to
investors outside the United States.

Transfer Agent and Custodian
- --------------------------------------------------------------------------------

State Street Bank and Trust Company ("State Street") is the Funds' transfer
agent and custodian.

The smooth operation of the Funds depends on the ability of State Street
and the other service providers to the Fund to provide those services without
interruption. Some computer systems used today are unable to process date-
related information because they are not programmed to distinguish between the
year 2000 and the year 1900. WAM, like many other businesses, is taking steps to
ensure that the computer systems on which the smooth operation of the Funds
depends will continue to function properly. WAM is working with the service
providers to the Funds, such as State Street and various broker-dealers through
which portfolio securities of the Funds are traded, to arrange for testing of
internal and external systems. Based on the information currently available, WAM
does not anticipate any material impact on the delivery of services currently
provided. There can be no assurance, however, that the steps taken by WAM in
preparation for the year 2000 will be sufficient to avoid any adverse impact on
the Funds.

Distributor
- --------------------------------------------------------------------------------

Shares of the Funds are offered for sale through WAM Brokerage Services,
L.L.C. (WAM BD) without any sales commission or charges to the Funds or their
shareholders. WAM BD is wholly-owned by WAM, the Funds' investment advisor, and
the investment advisor's general partner, Wanger Asset Management, Ltd. WAM BD's
address is 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606. All
distribution expenses relating to the Funds are paid by WAM, including the
payment or reimbursement of any expenses incurred by WAM BD.

Expenses
- --------------------------------------------------------------------------------

Like all mutual funds, each Fund pays expenses related to its daily
operations. Expenses paid out of a Fund's assets are reflected in its share
price or dividends. Each Fund pays management and administration fees to WAM for
managing its investments and business affairs.

<PAGE>

See "Expenses and Performance." For services furnished by WAM, Acorn Twenty pays
an annual management fee of 0.90% of its average daily net assets. Acorn Foreign
Fifty pays an annual management fee of 0.95% of its average daily net assets.

While the management fee is a significant component of each Fund's annual
operating costs, the Funds have other expenses as well. The Funds have a
separate administrative services agreement with WAM under which WAM receives a
fee, calculated daily and paid monthly, at the annual rate of 0.05 of 1% of its
average daily net assets. The Funds pay the cost of custodial, stock transfer,
dividend disbursing, audit and legal services, and membership in trade
organizations. They also pay other expenses such as the cost of maintaining the
registration of its shares under federal law, complying with state securities
laws, 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.

HOW THE FUNDS INVEST
================================================================================

Acorn Twenty and Acorn Foreign Fifty seek long-term growth of capital. The
investment philosophy and strategy of each of the Funds is discussed in the
following paragraphs.

Acorn Twenty
- --------------------------------------------------------------------------------

Acorn Twenty invests primarily in the stocks of U.S. companies with market
capitalizations of $1 billion to $10 billion. Acorn Twenty is a non-diversified
fund that ordinarily focuses its investments in 15 to 25 U.S. companies.

Under normal market conditions, Acorn Twenty invests most of its assets in
common stocks, and securities exchangeable or convertible into common stocks, of
U.S. companies, but may also invest in other types of securities. The Fund may
invest up to 15% of its total assets in foreign securities. Generally, the Fund
will invest in the securities of a foreign-based company only if its operations
are primarily located in the United States.

Like all the Acorn funds, Acorn Twenty looks for high quality companies. As
a long-term investor, the Fund expects that its portfolio turnover rate will not
ordinarily exceed 50% annually.

Acorn Foreign Fifty
- --------------------------------------------------------------------------------

Acorn Foreign Fifty invests primarily in the stocks of foreign companies
with market capitalizations of $1 billion to $10 billion. The Fund is a non-
diversified fund that ordinarily has investments in 40 to 60 companies and
invests in developed markets.

Under normal market conditions, Acorn Foreign Fifty invests at least 85% of
its total assets in equity securities of foreign companies, including common and
preferred stocks, warrants or other similar rights, and convertible securities,
but may also invest in any other type of security, including debt securities.
The Fund ordinarily invests in at least three countries. The Fund invests
primarily in developed countries but may invest up to 15% of its total assets in
securities of companies in emerging markets. The Fund's investments in emerging
markets are generally in

<PAGE>

companies that receive a significant portion of their revenues from, or have a
significant portion of their assets in, developed markets. The Fund does not
invest in "frontier" markets. The Funds use the definitions of "developed,"
"emerging," and "frontier" markets published from time to time by the
International Financial Corporation, a member of the World Bank Group. The Fund
may invest up to 15% of its total assets in the securities of U.S. companies.
Generally, the Fund invests in a U.S. company only if its operations are
primarily located outside the United States.

Like all the Acorn funds, Acorn Foreign Fifty looks for high quality
companies. As a long-term investor, the Fund expects that its portfolio turnover
rate will not ordinarily exceed 50% annually.

Looking for high quality companies
- --------------------------------------------------------------------------------

Acorn Twenty and Acorn Foreign Fifty look for quality businesses, with each
investment ideally resting on a solid tripod of growth potential, financial
strength, and fundamental value. The emphasis on fundamentals in relation to
price sets the Funds apart from pure "growth" or "value" funds. Not all of the
companies in which the Funds invest 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. Fundamental value means low relative
price. The existence of a good company does not necessarily make its stock a
good buy. The price of the stock determines value as measured relative to
dividends, earnings, cash flow, growth rate, book value, and economic
replacement value of assets. Sometimes, value is found in a "special situation."
A special situation arises when WAM believes the securities of a particular
company have been overlooked or undervalued by other investors in connection
with a significant change or development affecting the company's business, and
will, within a reasonable time, appreciate in value regardless of general
business conditions or movements of the market as a whole. Developments creating
special situations might include, among others, the following: liquidations,
reorganizations, recapitalizations or mergers; material litigation;
technological breakthroughs; and new management or management policies. Although
investing in securities of special situation companies offers the potential for
above-average returns, if the anticipated development does not occur or produce
the expected results, the value of those securities may decline.

WAM also believes that finding and understanding high quality companies is
important to reduce taxes and transaction costs. In managing the Funds, WAM
tries to reduce these costs by investing with a long-term time horizon (at least
2-5 years) and avoiding frequent turnover of the stocks held by the Funds.
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.

<PAGE>

General Information
- --------------------------------------------------------------------------------

Each 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. If investments in foreign securities appear to be
relatively unattractive because of current or anticipated adverse political or
economic conditions, Acorn Foreign Fifty may hold cash or invest any portion of
its assets in securities of the U.S. government and equity and debt securities
of U.S. companies, as a temporary defensive measure. The Funds use various
techniques to increase or decrease their exposure to the effects of possible
changes in security prices, currency exchange rates, or other factors that
affect the value of its portfolio. These techniques may 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 each Fund is not fundamental and may be changed
by the board of trustees without shareholder approval. If there were such a
change, you should consider whether a Fund would remain an appropriate
investment in light of your then current financial position and needs. The Funds
are not intended, alone or together, to present a balanced investment program.

SECURITIES, INVESTMENT PRACTICES, AND RISKS
================================================================================

The following pages contain more detailed information about types of
investments each Fund may make, and strategies WAM may employ in pursuit of each
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.
Policies and limitations are considered 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 fullest extent permitted, unless it believes that doing so will help the
Fund achieve its goal.

Common stocks
- --------------------------------------------------------------------------------

The Funds invest mostly in common stocks, which represent an equity
interest (ownership) in a corporation. This ownership interest often gives the
Funds the right to vote on measures affecting the company's organization and
operations. The Funds also invest in other types of equity securities, including
preferred stocks and securities convertible into common stocks. Over time,
common stocks have historically provided superior long-term capital growth
potential. However, stock prices may decline over short or even extended
periods. Stock markets tend to move in cycles, with periods of rising stock
prices and periods of falling stock prices. As a result, the Funds should be
considered long-term investments, designed to provide the best results when held
for several years or more. The Funds may not be suitable investments if you have
a short-term investment horizon or are unwilling to accept fluctuations in share
price, including significant declines over a given period.

<PAGE>

Diversification

Diversification is a means of reducing risk by investing in a broad range
of stocks or other securities. Because they are non-diversified, the Funds have
the ability to take larger positions in a smaller number of issuers. The
appreciation or depreciation of a single stock may have a greater impact on the
NAV of a non-diversified fund, because it is likely to have a greater percentage
of its assets invested in that stock. As a result, each Fund's share price can
be expected to fluctuate more than that of broadly diversified funds investing
in similar securities. Because they are non-diversified, the Funds are not
subject to the limitations under the Investment Company Act of 1940 in the
percentage of their assets that they may invest in any one issuer. Both Funds
however, intend to comply with the diversification standards for regulated
investment companies under Subchapter M of the Internal Revenue Code (summarized
below under "Restrictions").

Restrictions:
------------

. A 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;

. With respect to 50% of its total assets, a Fund may not purchase the
securities of any issuer (other than cash items and U.S. government securities
and securities of other investment companies) if such purchase would cause the
Fund's holdings of that issuer to exceed 5% of the Fund's total assets.

. A Fund may not invest more than 25% of its total assets in a single
issuer (other than U.S. government securities); and

. A Fund will not invest more than 25% of its total assets in the
securities of companies in a single industry (excluding U.S. government
securities).*

Foreign Securities
- --------------------------------------------------------------------------------

Acorn Foreign Fifty invests primarily in foreign securities. International
investing allows you to take advantage of changes in foreign economies and
market conditions. From time to time, many foreign economies have grown faster
than the U.S. economy, and the returns on investments in these countries have
exceeded those of similar U.S. investments. During other periods, however, some
foreign markets have declined, and there can be no assurance that a country's
economy will remain stable or more favorable than the U.S. economy.

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; imposition of exchange control regulations or currency

- --------------------
* These restrictions are "fundamental," which means that they cannot be
changed without shareholder approval.

<PAGE>

restrictions that would prevent cash from being brought 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, frequently
greater price volatility, and higher transaction costs in foreign markets than
in the United States; possible imposition of foreign taxes; possible investments
in securities of developing as well as developed countries; and sometimes less
advantageous legal, operational, and financial protections applicable to foreign
sub-custodial arrangements. Investing in countries outside the U.S. also
involves political risk. A foreign government might restrict investments by
foreigners, expropriate assets, seize or nationalize foreign bank deposits or
other assets, establish exchange controls, or enact other policies that could
affect investment in these nations. Economies in individual markets may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross domestic product, rates of inflation, currency depreciation, capital
reinvestment, resource self-sufficiency, and balance of payments positions.

Acorn Foreign Fifty invests primarily in developed markets, but, as
discussed above under "How the Funds Invest--Acorn Foreign Fifty," the Fund may
invest up to 15% of its total assets in emerging markets. The securities markets
of emerging countries are substantially smaller, less developed, less liquid,
and more volatile than the securities markets of the U.S. and other more
developed countries. Disclosure and regulatory standards in many respects are
less stringent than in the United States. There also may be a lower level of
monitoring and regulation in emerging markets of traders, insiders, and
investors. Enforcement of existing regulations has been extremely limited.

Acorn Twenty may invest no more than 15% of its total assets in foreign
securities and will generally invest in a foreign-based company only if that
company's operations are primarily located in the United States. Acorn Twenty's
foreign investments may include securities in developed and emerging markets.

The Funds may invest from time to time in securities of foreign issuers
directly or in the form of American Depositary Receipts (ADRs), European
Depositary Receipts (EDRs), or other securities representing underlying shares
of foreign issuers. Positions in these securities are not necessarily
denominated in the same currency as the common stocks into which they may be
converted. ADRs are receipts typically issued by an American bank or trust
company evidencing ownership of the underlying securities. EDRs are European
receipts evidencing a similar arrangement.

The Funds may invest in both "sponsored" and "unsponsored" ADRs. In a
sponsored ADR, the issuer typically pays some or all of the expenses of the
depository and agrees to provide its regular shareholder communications to ADR
holders. An unsponsored ADR is created independently of the issuer of the
underlying security. The ADR holders generally pay the expenses of the
depository and do not have an undertaking from the issuer of the underlying
security to furnish shareholder communications. Each Fund may invest in ADRs
that are not sponsored by the issuer of the underlying security. To the extent a
Fund does so, it would probably

<PAGE>

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.

Each 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. A 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:
------------

. Under normal market conditions, Acorn Foreign Fifty invests at least 85%
of its total assets in foreign securities. The Fund ordinarily has investments
in at least three developed countries. The Fund may invest up to 15% of its
total assets in securities of companies in emerging markets.

. Acorn Twenty may invest up to 15% of its total assets in foreign
securities. Acorn Twenty's foreign investments are generally in companies whose
operations are primarily in the U.S., and may include securities in developed
and emerging markets.

Managing Investment Exposure
- --------------------------------------------------------------------------------

The Funds use various techniques to increase or decrease their exposure to
the effects of possible changes in security prices, currency exchange rates or
other factors that affect the value of the Funds' portfolios. These techniques
include buying and selling options, futures contracts, or options on futures
contracts, entering into currency exchange contracts or swap agreements, or
selling securities short against the box.

These techniques are used by WAM to adjust the risk and return
characteristics of the Funds' portfolios. If WAM judges market conditions
incorrectly or employs a strategy that does not correlate well with the Funds'
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 a Fund and may involve a small investment of cash
relative to the magnitude of the risk assumed. These techniques are used by the
Funds for hedging, risk management, or portfolio management purposes and are not
used for speculation.

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
foreign currency 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, foreign exchange dealers,
or broker-dealers, are not exchange-traded, and are usually for less than one
year, but may be renewed.

<PAGE>

Currency exchange transactions may involve currencies of the different
countries in which the Funds may invest, and serve as hedges against possible
variations in the exchange rate between these currencies. The Funds' currency
transactions are limited to transaction hedging and portfolio hedging involving
either specific transactions or actual or anticipated portfolio positions.
Transaction hedging is the purchase or sale of a forward contract with respect
to a specific receivable or payable of a Fund accruing in connection with the
purchase or sale of portfolio securities. Portfolio hedging is the use of a
forward contract with respect to an actual or anticipated portfolio security
position denominated or quoted in a particular currency. The Funds 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 Funds own or anticipate owning securities in
countries whose currencies are linked, WAM may aggregate those positions as to
the currency hedged. Although forward contracts may be used to protect the Funds
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.

Options and futures. Each Fund may enter into stock index or currency
futures contracts (or options thereon) to hedge a portion of its portfolio, to
provide an efficient means of regulating its exposure to the equity markets, or
as a hedge against changes in prevailing levels of currency exchange rates. Each
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. A Fund's attempt to use such investments for hedging purposes
may not be successful and could result in reduction of that Fund's total return.

Short sales against the box. Each Fund may make short sales of securities
if, at all times when a short position is open, the Fund owns an equal amount of
such securities or securities convertible into or exchangeable for, without
payment of any further consideration, securities of the same issue as, and equal
in amount to, the securities sold short. This technique is called selling short
"against the box." Selling short against the box may protect the Fund against
the risk of losses in the value of the portfolio securities sold short because
losses on the securities sold short should be wholly or partially offset by
gains in the short position (although this also means that the Fund would be
giving up the opportunity for gain).

Restrictions:

. A 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 each Fund's currencies or portfolio
securities covering call or put options will not exceed 10% of that Fund's net
assets.

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

<PAGE>

amount borrowed at maturity. Debt securities have varying degrees of quality and
varying levels of sensitivity to changes in interest rates.

"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 creditworthiness. 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.

Each 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. If investments in foreign securities appear to be
relatively unattractive because of current or anticipated adverse political or
economic conditions, Acorn Foreign Fifty may hold cash or invest any portion of
its assets in securities of the U.S. government and equity and debt securities
of U.S. companies, as a temporary defensive measure. To meet liquidity needs
(which, under normal market conditions, are not expected to exceed 25% of total
assets) or for temporary defensive purposes, each Fund may hold cash in domestic
and foreign currencies and may invest in domestic and foreign money market
securities.

Restrictions:

. There are no restrictions on the ratings of debt securities in which the
Funds may invest.

. Neither Fund intends 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 sold only pursuant to
certain legal restrictions. Difficulty in selling securities may result in
delays or a loss, or may be costly to the Funds.

Restrictions:

<PAGE>

. Neither Fund may purchase a security if, as a result, more than 15% of
its assets would be invested in illiquid or restricted securities.

Other Investment Companies
- --------------------------------------------------------------------------------

The Funds may invest from time to time in shares of other mutual funds and
other types of investment companies. Investment in another investment company
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, a 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. Neither Fund intends 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:

. Each Fund 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.

Lending and Repurchase Agreements
- --------------------------------------------------------------------------------

A Fund generally may not make loans, but each Fund has the power to invest
in repurchase agreements and reverse repurchase agreements (generally as a cash
management technique). A repurchase agreement involves a sale of securities to a
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 a bankruptcy of the seller, the Fund could
experience both losses and delays in liquidating its collateral.

Restrictions:

A Fund may generally not 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.*

- ----------------
* These restrictions are "fundamental," which means that they cannot be changed
without shareholder approval.

30
<PAGE>

A QUICK REFERENCE GUIDE
================================================================================

How to Buy Shares
- --------------------------------------------------------------------------------

Mail

To open an account:

. Complete and sign the Account Application. Make your check payable to
"Acorn Twenty" or "Acorn Foreign Fifty."

Mail to the address on the Account Application, or for overnight
delivery:

Boston Financial Data Services
Attn: Acorn Family of Funds
66 Brooks Drive
Braintree, MA 02184
1-617-328-5000 ext. 6457

. Acorn does not accept third party checks, except properly endorsed IRA
rollover checks.

To add to an account:

. Make your check payable to "Acorn Twenty" or "Acorn Foreign Fifty."
Put your fund account number on your check.

Use the return envelope that comes with your statements, or mail to the
address on your statement.

. Acorn does not accept third party checks, except properly endorsed IRA
rollover checks.

Telephone: 1-800-962-1585

To open an account:

. You generally may not open a new account by telephone; however, you may
open a new account by faxing your Account Application to us and wiring
your purchase money. Note: You may not need to submit a new Account
Application if you are a current Acorn shareholder. When you call, a
representative will assist you. See "Your Account--How to Buy Shares."

. Exchange between the Acorn funds, or from a Reich & Tang Fund account
with the same registration, including name, address, and taxpayer ID
number.

To add to an account:

31
<PAGE>

. 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 the Acorn funds
by Closing Time (usually 3:00 p.m. Central time) to receive that day's
price.

Wire
To open an account:

. Call 1-800-962-1585 to set up your account and to arrange a wire
transaction. Note: You may not need to submit a new Account Application
if you are a current Acorn shareholder. When you call, a representative
will assist you. (This service is not available for IRA accounts.)

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 "Acorn Twenty" or "Acorn Foreign Fifty," the account name and the
account number.

Minimum wire amount: $100.

Automatic Investment Plan

To open an account:

. You may not open a new account through the Automatic Investment Plan.

To add to an account:

. Sign up on the Account 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 to establish this on your
account. If you already have this service, you can easily change the
frequency or amount of your automatic investments over the telephone by
calling 1-800-962-1585.

32
<PAGE>

TDD service for the deaf and hearing-impaired: 1-800-306-4567

How to Sell Shares
- -------------------------------------------------------------------------------

Telephone 1-800-962-1585

All accounts types, except IRAs:

. To verify that the Telephone Redemption Plan is in place, call
1-800-962-1585. You automatically have this feature on your new account
unless you tell us that you do not want it. To receive redemption proceeds
via ACH transfer, complete the information on the Account Application or
request a Doing Business with Acorn form to establish this on your account.

. Minimum: $100; maximum: $50,000;

All account types:

. To exchange between identically registered accounts:

. You must make your telephone redemptions by Closing Time (usually
3:00 p.m. Central time) to receive that day's price.

Mail

Individuals, Joint Owners, Sole Proprietorships, UGMA, UTMA

. The letter of instruction must be signed by all persons required to sign
for transactions (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 (1-800-962-1585) to request this form.

Trust

. The trustee(s) must sign the letter indicating capacity as trustee(s). If
the account registration does not include the name of the trustee(s),
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.

33
<PAGE>

. If redeeming more than $50,000, include a corporate resolution certified
within 60 days and a letter of instruction with the signature guaranteed.

Executor, Administrator, Conservator, Guardian

. Call 1-800-962-1585 for instructions.

Wire

All account types, except IRAs

. You must sign up for payment of redemptions by wire before using this
feature. Call to verify that this service is in place--1-800-962-1585.

. Minimum wire: $1,000; maximum: $50,000.

. Minimum ACH transfer: $100; maximum: $50,000

. You must make your telephone redemptions by Closing Time (usually
3:00 p.m. Central time) to receive that day's price.

Automatic Exchange

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. Your automatic
exchange will occur on or about the 15th day of each month unless you
designate a different day (if quarterly, in January, April, July and
October).

TDD service for the deaf and hearing-impaired: 1-800-306-4567

Note: Some redemptions require signature guarantees. Please see the
information under "Your Account--Signature Guarantee."

How to Contact Us
- -------------------------------------------------------------------------------

Mail
. for regular mail delivery, including purchases, written exchanges,
redemptions, and IRA contributions:

State Street Bank & Trust Co.
Attn: Acorn Family of Funds
P. O. Box 8502
Boston, MA 02266-8502

34
<PAGE>

. for overnight deliveries of purchases, written exchanges, redemptions, or
IRA contributions

Boston Financial Data Services
Attn: Acorn Family of Funds
66 Brooks Drive
Braintree, MA 02184

. the Funds' advisor

Wanger Asset Management, L.P.
227 W. Monroe St., Suite 3000
Chicago, IL 60606-5016

. the Funds' distributor

WAM Brokerage Services, L.L.C.
227 W. Monroe St., Suite 3000
Chicago, IL 60606-5016

Telephone

. for Fund information, literature, prices, and performance information
1-800-9-ACORN-9 (1-800-922-6769) (from outside the U.S. 1-312-634-9240)

. for account balances, telephone purchases, exchanges and redemptions, and
for IRA information 1-800-962-1585 (from outside the U.S.: 1-617-328-5000
ext. 6457)

. to exchange out of a money fund 1-800-221-3079

. TDD service for the deaf and hearing impaired 1-800-306-4567

Customer service is available on business days from 8:00 a.m. to 4:30 p.m.
Central time.

Telephone requests for purchases, redemptions or exchanges from the Acorn
funds must be made by Closing Time (usually 3:00 p.m. Central time) to
receive that day's price.

Internet
Web site: www.wanger.com
E-mail: [email protected]

Wire

. to wire money from your bank to add to an existing account

35
<PAGE>

State Street Bank & Trust Co.
Attn: Mutual Funds
Boston, MA 02110
Routing #0110-0002-8
Deposit DDA 9902-990-2

Specify "Acorn Twenty" or "Acorn Foreign Fifty" and the name and the number
of your account.

36
<PAGE>

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 services . Doing Business with Acorn

For re-registering your current . Changing Your Account Registration
account

For re-registering your Acorn . Broker-Dealer Transfer Form
shares held by a broker to an
account with Acorn

For changes to your IRA . Change of Beneficiary
beneficiary designations

For transferring money from . IRA Transfer Form
an IRA account with another
institution to Acorn

For redeeming shares from your . Education IRA Withdrawal
Education IRA account Request Form

For redeeming shares from your . IRA Withdrawal Form
IRA account

For adding or deleting accounts . Consolidated Account Statement
to/from your Consolidated Maintenance Form
Account Statement

37
<PAGE>

SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION
DATED _____________, 1998

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS STATEMENT OF ADDITIONAL
INFORMATION SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN
WHICH SUCH OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

ACORN INVESTMENT TRUST 227 West Monroe Street
STATEMENT OF ADDITIONAL INFORMATION Suite 3000
August [ ], 1998 Chicago, Illinois 60606
1-800-9-ACORN-9
(1-800-922-6769)

ACORN TWENTY
ACORN FOREIGN FIFTY

A No-Load Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

TABLE OF CONTENTS
-----------------
Page
----
<S> <C>
Information About the Funds................................................... 2
Investment Objectives and Policies............................................ 2
Investment Techniques and Risks............................................... 2
Performance Information.......................................................21
Investment Adviser............................................................22
Distributor...................................................................23
The Trust.....................................................................24
Trustees and Officers.........................................................24
Purchasing and Redeeming Shares...............................................28
Additional Tax Information....................................................30
Portfolio Transactions........................................................31
Custodian.....................................................................33
Independent Auditors..........................................................33
Appendix - Description of Bond Ratings........................................34
</TABLE>
- --------------------------------------------------------------------------------

<PAGE>

This Statement of Additional Information ("SAI") is not a prospectus but
provides information that should be read in conjunction with the prospectus of
Acorn Twenty and Acorn Foreign Fifty (each, a "Fund," together, the "Funds")
dated the date of this SAI 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.

Information About the Funds

Acorn Foreign Fifty invests for long-term capital growth. The Fund invests
primarily in the stocks of foreign companies with market capitalizations of $1
billion to $10 billion. The Fund is a non-diversified fund that ordinarily has
investments in 40 to 60 companies and invests in developed markets.

The Funds are non-diversified under the federal securities laws. However,
the Funds comply with the diversification standards established by the tax laws.
See "Investment Techniques and Risks Diversification" for more information.

The Funds are series of Acorn Investment Trust ("Acorn" or the "Trust").
The discussion below supplements the description in the prospectus of the Funds'
investment objectives, policies, and restrictions. For information about any of
the other Acorn funds, request a copy of that fund's prospectus and SAI, which
may be obtained free of charge by writing or telephoning Acorn at its address or
telephone number shown on the cover page of this SAI.

Investment Objectives and Policies

The Funds invest with the objective of long-term growth of capital. The
Funds are not, alone or together, a balanced investment program, and there can
be no assurance that either Fund will achieve its investment objective.

The Funds use the techniques and invest in the types of securities
described below and in the prospectus.

Investment Techniques and Risks

Common Stocks

<PAGE>

stocks. Over time, common stocks have historically provided superior long-term
capital growth potential. However, stock prices may decline over short or even
extended periods. Stock markets tend to move in cycles, with periods of rising
stock prices and periods of falling stock prices. As a result, the Funds should
be considered long-term investments, designed to provide the best results when
held for several years or more. The Funds may not be suitable investments if you
have a short-term investment horizon or are unwilling to accept fluctuations in
share price, including significant declines over a given period.

Diversification

Foreign Securities

The Funds invest in foreign securities, 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. Under normal market conditions, Acorn Foreign Fifty invests at least
85% of its total assets in foreign securities; Acorn Twenty investments in
foreign securities are limited to not more than 15% of its total assets.

The Funds may invest in securities of foreign issuers directly or in the
form of American Depositary Receipts (ADRs), European Depositary Receipts
(EDRs), or other securities representing underlying shares of foreign issuers.
Positions in these securities are not necessarily denominated in the same
currency as the common stocks into which they may be converted. ADRs are
receipts typically issued by an American bank or trust company evidencing
ownership of the underlying securities. EDRs are European receipts evidencing a
similar arrangement. Generally ADRs, in registered form, are designed for use in
the U.S. securities markets and EDRs, in bearer form, are designed for use in
European securities markets. The Funds may invest in both "sponsored" and
"unsponsored" ADRs. In a sponsored ADR, the issuer typically pays some or all of
the expenses of the depository and agrees to provide its regular shareholder
communications to ADR holders. An unsponsored ADR is created independently of
the issuer of the underlying security. The ADR holders generally pay the
expenses of the depository and do not have an undertaking from the issuer of the
underlying security to furnish shareholder communications. Therefore, in the
case of an unsponsored ADR, a Fund is likely to bear its proportionate share of
the expenses of the depository and it may have greater difficulty in

3
<PAGE>

receiving shareholder communications than it would have with a sponsored ADR.
Neither Fund expects to invest 5% or more of its total assets in unsponsored
ADRs.

The Funds' investment performance is affected by the strength or weakness
of the U.S. dollar against the currencies of the foreign markets in which its
securities trade or in which they are denominated. 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 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," below.)

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 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 subcustodial
arrangements. In addition, the costs of investing in foreign securities are
higher than the costs of investing in U.S. securities.

Although the Funds 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.

Acorn Foreign Fifty invests primarily in developed countries but may invest
up to 15% of its total assets in securities of companies in emerging markets.
Acorn Foreign Fifty's investments in emerging markets are generally in companies
which receive a significant portion of their revenues from, or have a
significant portion of their assets in, developed markets. Although there is no
limit on the percentage of its assets that may be invested in emerging markets,
Acorn Twenty's aggregate investments in foreign securities (including both
developed and emerging markets) are limited to no more than 15% of its total
assets. The Funds use the definitions of "developed," "emerging," and "frontier"
markets published from time to time by the International Financial Corporation,
a member of the World Bank Group ("IFC"). The Funds do not invest in "frontier"
markets.

4
<PAGE>

The securities markets of emerging markets are substantially smaller, less
developed, less liquid, and more volatile than the securities markets of the
United States and other more developed countries. Disclosure and regulatory
standards in many respects are less stringent than in the United States. There
also may be a lower level of monitoring and regulation of emerging markets of
traders, insiders, and investors. Enforcement of existing regulations has been
extremely limited.

Currency Exchange Transactions

The Funds 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,
foreign exchange dealers or 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 a Fund may invest, and serve as hedges against possible
variations in the exchange rate between these currencies. The Funds' currency
transactions are limited to transaction hedging and portfolio hedging involving
either specific transactions or portfolio positions, except to the extent
described below under "Synthetic Foreign Money Market Positions." Transaction
hedging is the purchase or sale of a forward contract with respect to specific
payables or receivables of a 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. Either 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 a Fund
owns or anticipates owning securities in countries whose currencies are linked,
WAM may aggregate such positions as to the currency hedged.

If a Fund enters into a forward contract hedging an anticipated purchase of
portfolio securities, assets of the Fund 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 State Street Bank and Trust Company, the Funds' custodian
("State Street") 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.

5
<PAGE>

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 a 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 that fund is obligated to deliver.

If a 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 a 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 a 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 a 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 a 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.

Synthetic Foreign Money Market Positions. The Funds may invest in money
market instruments denominated in foreign currencies. In addition to, or in lieu
of, such direct investment, the Funds may construct a synthetic foreign money
market position by (a) purchasing a money market instrument denominated in one
currency (generally U.S. dollars) and (b) concurrently entering into a forward
contract to deliver a corresponding amount of that currency in exchange for a
different currency on a future date and at a specified rate of exchange. For
example, a synthetic money market position in Japanese yen could be constructed
by purchasing a U.S. dollar money market instrument and entering concurrently
into a forward contract to deliver a corresponding amount of U.S. dollars in
exchange for Japanese yen on a specified date and at a specified rate of
exchange. Because of the availability of a variety of highly liquid short-term
U.S. dollar money market instruments, a synthetic money market position
utilizing such U.S. dollar instruments may offer greater liquidity than direct
investment in foreign money market instruments. The results of a direct
investment in a foreign currency and a concurrent construction of a synthetic
position in such foreign currency, in terms of both

6
<PAGE>

income yield and gain or loss from changes in currency exchange rates, in
general should be similar, but would not be identical, because the components of
the alternative investments would not be identical. Except to the extent a
synthetic foreign money market position consists of a money market instrument
denominated in a foreign currency, the synthetic foreign money market position
shall not be deemed a "foreign security" for purposes of the policies that,
under normal conditions, Acorn Twenty will not invest more than 15% of its total
assets in foreign securities and Acorn Foreign Fifty will invest at least 85% of
its total assets in foreign securities.

Options and Futures

The Funds may purchase and write both call options and put options on
securities and on indexes, 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 Funds 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 Funds' 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.)

A 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 consideration (or,
if additional consideration is required, assets having a value at least equal to
that amount are segregated on the books of the Fund) upon conversion or exchange
of other securities held in its portfolio.

If an option written by a 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 a 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,

7
<PAGE>

exercise price and expiration). There can be no assurance, however, that a
closing purchase or sale transaction can be effected when a Fund desires.

A 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 a Fund is an asset of that Fund and is
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. 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 Funds may buy and sell over-the-counter ("OTC")
derivatives (derivatives not traded on exchanges). 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
generally are established through negotiation with the other party to the
contract. While this type of arrangement allows the Funds 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 Funds will
limit their investments so that no more than 5% of its total assets will be
placed at risk in the use of OTC derivatives. See "Illiquid Securities" below
for more information on the risks associated with investing in 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 a Fund seeks
to close out an option position. If a 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
a 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, a 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

8
<PAGE>

option on a foreign currency, a Fund foregoes, during the option's life, the
opportunity to profit from currency appreciation.

If trading were suspended in an option purchased or written by a Fund, it
would not be 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 Funds 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; the Russell
2000 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 Funds may purchase and write call and put options on futures. Options
on futures 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 Funds, the Fund will limit their use of futures contracts and futures
options to hedging transactions. For example, a 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 its securities or the price of the securities that the Fund
intends to purchase. A 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, a Fund may be able to hedge its exposure more effectively
and perhaps at a lower cost by using futures contracts and futures options.

/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.

9
<PAGE>

The success of any hedging technique depends on WAM's ability to correctly
predict changes in the level and direction of stock prices, interest rates,
currency exchange rates, and other factors. 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 a Fund, it is
required to deposit with State Street or its broker 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 generally set
by the exchange on which the contract is traded; however, the margin requirement
may be modified during the term of the contract, and the Fund's broker may
require margin deposits in excess of the minimum required by the exchange. 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 Funds
expect to earn interest income on their initial margin deposits. A futures
contract held by a 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 a 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 been offset at the close of the previous day. In
computing daily NAV, the Funds will mark-to-market their open futures positions.

The Funds are also required to deposit and maintain margin with respect to
put and call options on futures contracts they write. 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 Funds.

Although some futures contracts require 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

10
<PAGE>

futures, futures options, and the related securities, including technical
influences in futures and futures options trading and differences between the
Funds' investments being hedged and the securities underlying the standard
contracts available for trading. For example, in the case of index futures
contracts, the composition of the index, including the issues and the weighting
of each issue, may differ from the composition of a 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 a 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 a
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 (liquid) market will develop
or continue to exist.

Limitations on Options and Futures. A 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.

- ---------------------------
/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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<PAGE>

When purchasing a futures contract or writing a put option on a futures
contract, a Fund must maintain with State Street or its broker readily-
marketable securities having a fair market value (including any margin) at least
equal to the market value of such contract. When writing a call option on a
futures contract, the Fund similarly will maintain with State Street readily-
marketable securities having a fair market value (including any margin) at least
equal to the amount by which such option is in-the-money until the option
expires or is closed out by the Fund.

A 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 a 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
Funds invest 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.

Neither Fund will purchase puts, calls, straddles, spreads, or any
combination thereof if by reason of such purchase more than 10% of its total
assets would be invested in such securities.

Taxation of Options and Futures. If a Fund exercises a call or put option
that it holds, the premium paid for the option is added to the cost basis of the
security purchased (call) or deducted from the proceeds of the security sold
(put). For cash settlement options and futures options exercised by the Fund,
the difference between the cash received at exercise and the premium paid is a
capital gain or loss.

If a call or put option written by a Fund is exercised, the premium is
included in the proceeds of the sale of the underlying security (call) or
reduces the cost basis of the security purchased (put). For cash settlement
options and futures options written by a Fund, the difference between the cash
paid at exercise and the premium received is a capital gain or loss.

12
<PAGE>

Entry into a closing purchase transaction will result in capital gain or
loss. If an option written by a Fund is in-the-money at the time it was written
and the security covering the option was held for more than the long-term
holding period prior to the writing of the option, any loss realized as a result
of a closing purchase transaction will be long-term. The holding period of the
securities covering an in-the-money option will not include the period of time
the option is outstanding.

If a Fund writes an equity call option/3/ other than a "qualified covered
call option," as defined in the Internal Revenue Code, any loss on such option
transaction, to the extent it does not exceed the unrealized gains on the
securities covering the option, may be subject to deferral until the securities
covering the option have been sold.

A futures contract held until delivery results in capital gain or loss
equal to the difference between the price at which the futures contract was
entered into and the settlement price on the earlier of delivery notice date or
expiration date. If a Fund delivers securities under a futures contract, the
Fund also realizes a capital gain or loss on those securities.

For federal income tax purposes, the Funds generally are required to
recognize for each taxable year their net unrealized gains and losses as of the
end of the year on futures, futures options, and non-equity options positions
("year-end mark-to-market"). Generally, any gain or loss recognized with respect
to such positions (either by year-end mark-to-market or by actual closing of the
positions) is considered to be 60% long-term and 40% short-term, without regard
to the holding periods of the contracts. However, in the case of positions
classified as part of a "mixed straddle," the recognition of losses on certain
positions (including options, futures and futures options positions, the related
securities and certain successor positions thereto) may be deferred to a later
taxable year. Sale of futures contracts or writing of call options (or futures
call options) or buying put options (or futures put options) that are intended
to hedge against a change in the value of securities held by a fund may affect
the holding period of the hedged securities.

If a Fund were to enter into a short index future, short index futures
option, or short index option position and the Fund's portfolio were deemed to
"mimic" the performance of the index underlying such contract, the option or
futures contract position and the Fund's stock positions may be deemed to be
positions in a mixed straddle, subject to the above-mentioned loss deferral
rules.

___________________________

/3/ An equity option is defined to mean any option to buy or sell stock, and
any other option the value of which is determined by reference to an index
of stocks of the type that is ineligible to be traded on a commodity
futures exchange (e.g., an option contract on a sub-index based on the
price of nine hotel-casino stocks). The definition of equity option
excludes options on broad-based stock indexes (such as the Standard &
Poor's 500 index).

13
<PAGE>

The Taxpayer Relief Act of 1997 (the "Act") imposed constructive sale
treatment for federal income tax purposes on certain hedging strategies with
respect to appreciated securities. Under these rules taxpayers will recognize
gain, but not loss, with respect to securities if they enter into short sales of
"offsetting notional principal contracts" (as defined by the Act) with respect
to, or futures or "forward contracts" (as defined by the Act) with respect to,
the same or substantially identical property, or if they enter into such
transactions and then acquire the same or substantially identical property. The
Secretary of the Treasury is authorized to promulgate regulations that will
treat as constructive sales certain transactions that have substantially the
same effect as short sales, offsetting notional principal contracts, and futures
or forward contracts to deliver the same or substantially similar property .

In order for each Fund to qualify for federal income tax treatment as a
regulated investment company, at least 90% of its gross income for a taxable
year must be derived from qualifying income, i.e., dividends, interest, income
derived from loans of securities, and gains from the sale of securities or
foreign currencies, or other income (including but not limited to gains from
options, futures, or forward contracts). Any net gain realized from futures (or
futures options) contracts will be considered gain from the sale of securities
and therefore be qualifying income for purposes of the 90% requirement.

Each Fund intends to distribute to shareholders annually any capital gains
that have been recognized for federal income tax purposes (including year-end
mark-to-market gains) on options and futures transactions, together with gains
on other Fund investments, to the extent such gains exceed recognized capital
losses and any net capital loss carryovers of the Fund. Shareholders will be
advised of the nature of such capital gain distributions.

For further information, see the discussion under "Additional Tax
Information."

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 a 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. A Fund may enter into any form of
swap agreement if WAM determines it is consistent with its investment objective
and policies, but each Fund will limit its use of swap agreements so that no
more than 5% of its total assets will be invested in such agreements.

A swap agreement tends to shift a Fund's investment exposure from one type
of investment to another. For example, if a 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 agreement may increase
or decrease the overall volatility of a Fund's investments and its NAV.

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

14
<PAGE>

and from the Fund. If a swap agreement calls for payments by a 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. WAM expects to be able to eliminate
each Fund's 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.

Each Fund will segregate its assets to cover its current obligations under
a swap agreement. If a 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 its
accumulated obligations under the swap agreement over the accumulated amount the
Fund is entitled to receive under the agreement. If a 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 its accumulated obligations under the agreement.

Short Sales Against the Box. Each Fund may make short sales of securities
if at all times, when a short position is open, the Fund owns an equal amount of
such securities or securities convertible into or exchangeable for, without
payment of any further consideration, securities of the same issue as, and equal
in amount to, the securities sold short. This technique is called selling short
"against the box." Although permitted by its investment restrictions, the Funds
do not currently intend to sell securities short.

In a short sale against the box, a Fund does not deliver from its portfolio
the securities sold and does not receive immediately the proceeds from the short
sale. Instead, the Fund borrows the securities sold short from a broker-dealer
through which the short sale is executed, and the broker-dealer delivers such
securities, on behalf of the Fund, to the purchaser of such securities. Such
broker-dealer is entitled to retain the proceeds from the short sale until the
Fund delivers to such broker-dealer the securities sold short. In addition, the
Fund is required to pay to the broker-dealer the amount of any dividends paid on
shares sold short. Finally, to secure its obligation to deliver to such broker-
dealer the securities sold short, the Fund must deposit and continuously
maintain in a separate account with State Street an equivalent amount of the
securities sold short or securities convertible into or exchangeable for such
securities without the payment of additional consideration. The Fund is said to
have a short position in the securities sold until it delivers to the broker-
dealer the securities sold, at which time the Fund receives the proceeds of the
sale. Because the Fund ordinarily will want to continue to hold securities in
its portfolio that are sold short, the Fund will normally close out a short
position by purchasing on the open market and delivering to the broker-dealer an
equal amount of the securities sold short, rather than by delivering portfolio
securities.

Short sales may protect a Fund against the risk of losses in the value of
its portfolio securities because any unrealized losses with respect to such
portfolio securities should be wholly or partially offset by a corresponding
gain in the short position. However, any potential gains in such portfolio
securities should be wholly or partially offset by a corresponding loss in the
short position. The extent to which such gains or losses are offset will depend
upon the amount of securities sold short relative to the amount the Fund owns,
either directly or indirectly,
15
<PAGE>

and, in the case where the Fund owns convertible securities, changes in the
conversion premium. The Funds will incur transaction costs in connection with
short sales.

In addition to enabling the Funds to hedge against market risk, short sales
may afford a Fund an opportunity to earn additional current income to the extent
the Fund is able to enter into arrangements with broker-dealers through which
the short sales are executed to receive income with respect to the proceeds of
the short sales during the period the Fund's short positions remain open.

The Taxpayer Relief Act of 1997 (the "Act") imposed constructive sale
treatment for federal income tax purposes on certain hedging strategies with
respect to appreciated securities. Under these rules taxpayers will recognize
gain, but not loss, with respect to securities if they enter into short sales of
"offsetting notional principal contracts" (as defined by the Act) with respect
to the same or substantially identical property, or if they enter into such
transactions and then acquire the same or substantially identical property.
These changes generally apply to constructive sales after June 8, 1997.
Furthermore, the Secretary of the Treasury is authorized to promulgate
regulations that will treat as constructive sales certain transactions that have
substantially the same effect as short sales.

Debt Securities

Both Funds 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 either Fund or the portion of each
Fund's assets that may be invested in debt securities in a particular ratings
category. Neither Fund intends 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 a Fund may have greater difficulty selling its

16
<PAGE>

portfolio securities. See "Purchasing and Redeeming Shares--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.

Illiquid Securities

Neither Fund may invest in illiquid securities, including restricted
securities and OTC derivatives, if as a result, they would comprise more than
15% of the value of its net assets.

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, a 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 a
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,
either Fund should be in a position where more than 15% of the value of its net
assets are invested in illiquid assets, including restricted securities and OTC
derivatives, that Fund will take appropriate steps to protect liquidity.

Notwithstanding the above, either 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 permits certain qualified institutional
buyers, such as the Funds, 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 each Fund's restriction of investing no more
than 15% of the value 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, a Fund's holdings of illiquid securities would be reviewed to
determine what, if any, steps are required to assure that it 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 a Fund's assets
invested in illiquid securities if qualified institutional buyers are unwilling
to purchase such securities.

17
<PAGE>

Repurchase Agreements

Repurchase agreements are transactions in which a 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 Funds will enter into repurchase
agreements only with banks and dealers WAM believes 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.

A 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, each Fund intends to comply
with provisions under such Code that would allow it immediately to resell such
collateral.

When-Issued and Delayed Delivery Securities; Reverse Repurchase Agreements

A 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 a 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. A 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. A 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.

A 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 a Fund enters into a binding obligation to purchase securities
on a when-issued basis or enters into a reverse repurchase agreement, 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

18
<PAGE>

books of the Fund and held by State Street throughout the period of the
obligation. The use of these investment strategies, as well as any borrowing by
the Fund, may increase NAV fluctuation. The Funds have no present intention of
investing in reverse repurchase agreements.

Temporary Strategies

Both Funds have 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, each 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. or foreign 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 a
Fund might employ defensive strategies.

In addition, pending investment of proceeds from new sales of Fund shares
or to meet ordinary daily cash needs, a 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 Funds do 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. Each Fund's portfolio turnover
rate is not expected to exceed 50% under normal market conditions. A high rate
of portfolio turnover, if it should occur, would result in increased transaction
expenses which must be borne by the Funds. 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.

Line of Credit

Acorn maintains a line of credit with a bank in order to permit borrowing
on a temporary basis to meet share redemption requests in circumstances in which
temporary borrowing may be preferable to liquidation of portfolio securities.
Any borrowings under that line of credit by the Funds would be subject to the
Funds' restrictions on borrowing under "Investment Restrictions," below.

Investment Restrictions

In pursuing their investment objectives, neither Fund will:

19
<PAGE>

1. 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;

2. With respect to 50% of its total assets, purchase the securities of
any issuer (other than cash items and U.S. government securities and
securities of other investment companies) if such purchase would cause the
Fund's holdings of that issuer to exceed more than 5% of the Fund's total
assets;

3. Invest more than 25% of its total assets in a single issuer (other
than U.S. government securities);

4. Invest more than 25% of its total assets in the securities of
companies in a single industry (excluding U.S. government securities);

5. Make loans, but this restriction shall not prevent the Fund from (a)
investing in debt securities, (b) investing in repurchase agreements, or
(c) lending its 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);

6. 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;

7. 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;

8. 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;

9. Purchase and sell commodities or commodity contracts, except that it
may enter into (a) futures and options on futures and (b) foreign currency
contracts;

10. 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;

11. Issue any senior security except to the extent permitted under the
Investment Company Act of 1940.

20
<PAGE>

The above restrictions for each Fund are "fundamental," which means that
they cannot be changed without the approval of the lesser of (i) 67% of each
fund's shares present at a meeting if more than 50% of the shares outstanding
are present or (ii) more than 50% of each fund's outstanding shares.

In addition, the Funds are subject to a number of restrictions that may be
changed by the board of trustees without shareholder approval. Under those non-
fundamental restrictions, neither Fund will:

(a) Invest in companies for the purpose of management or the exercise of
control;

(b) Acquire securities of other registered investment companies except in
compliance with the Investment Company Act of 1940;

(c) 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;

(d) 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;

(e) 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;

(f) [Acorn Twenty only] Invest more than 15% of its total assets in the
securities of foreign issuers.

(g) [Acorn Foreign Fifty only] Invest more than 15% of its total assets in
securities of United States issuers, under normal market conditions.

Notwithstanding the foregoing investment restrictions, the Funds may
purchase securities pursuant to the exercise of subscription rights.

Performance Information

From time to time the Funds 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.

21
<PAGE>

Average Annual Total Return is computed as follows:

ERV = P(1+T)/n/

Where: P = the amount of an assumed initial investment in shares of a 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 Funds impose no sales charges and pay no distribution expenses. Income
taxes are not taken into account. Performance figures quoted by the Funds are
not necessarily indicative of future results. The Funds' 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 Funds' 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 Funds' 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 Funds may note their mention or recognition in newsletters, newspapers,
magazines, or other media. The Funds may similarly note mention or recognition
of WAM, or appearances of principals of WAM, in the media.

Investment Adviser

Wanger Asset Management, L.P. ("WAM"), serves as the investment adviser for
the Funds, the other Acorn funds, and institutional accounts. As of the date of
this SAI, WAM has approximately $7 billion under management, including the
Funds. WAM is a limited partnership managed by its general partner, Wanger Asset
Management, Ltd. ("WAM Ltd."), whose stockholders are Ralph Wanger, Charles P.
McQuaid, Leah J. Zell, Marcel P. Houtzager, Robert A. Mohn, and John H. Park.
Ralph Wanger is the president and Howard L. Kastel is the chief executive
officer of WAM Ltd. On matters submitted to the shareholders of WAM Ltd., each
shareholder has one vote (or a lesser vote in the case of new shareholders).
With certain exceptions (including for extraordinary transactions, for which Mr.
Wanger's consent is required), decisions are made by majority vote. WAM
commenced operations in 1992.

WAM furnishes continuing investment supervision to the Funds under an
investment advisory agreement (the "Agreement") and is responsible for overall
management of the Funds' business affairs. It furnishes office space, equipment
and personnel to the Funds and assumes the expenses of printing and distributing
the Funds' prospectus and reports to prospective investors. The Agreement will
continue in

22
<PAGE>

effect as to each of the Funds through [June 30, 1999], and thereafter from year
to year so long as its continuance is approved at least annually by (i) the
board of trustees of Acorn Investment Trust or by the holders of a majority of
each Fund's outstanding voting securities as defined by the Investment Company
Act of 1940 and (ii) a majority of the members of Acorn's board of trustees who
are not otherwise affiliated with Acorn or WAM, cast in person at a meeting
called for that purpose. Any amendment to the Agreement must be approved in the
same manner. The Agreement may be terminated as to either Fund without penalty
by the vote of the board of trustees of Acorn or the shareholders of that Fund
(by a majority as defined in the 1940 Act) on 60 days' written notice to WAM or
by WAM on 60 days' notice to the Fund, and will terminate automatically in the
event of its assignment.

The advisory fees the Funds pay to WAM are calculated daily and paid
monthly, at the following annual rates: Acorn Twenty, 0.90% of average net
assets; Acorn Foreign Fifty, 0.95% of average net assets.

Acorn has a separate administrative services agreement with WAM under which
WAM provides various administrative and clerical services such as the
maintenance of books and records, the calculation and publication of each Fund's
net asset value, and the calculation of dividends, distributions and performance
data for each Fund. WAM also furnishes corporate secretarial services to Acorn
and provides Acorn with administrative offices and data processing facilities.
Under the administrative services agreement, WAM receives a fee, calculated
daily and paid monthly, at the annual rate of 0.05 of 1% of the Funds' average
daily net assets. The Funds pay the cost of custodial, stock transfer, dividend
disbursing, audit and legal services, and membership in trade organizations.
They also pay other expenses such as the cost of maintaining the registration of
their shares under federal law, complying with state securities laws, 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.

Distributor

Shares of the Funds are offered for sale by WAM Brokerage Services, L.L.C.
("WAM BD") without any sales commissions, 12b-1 fees, or other charges to the
Funds or their shareholders. WAM BD is wholly-owned by WAM and WAM Ltd. All
distribution expenses relating to the Funds are paid by WAM, including the
payment or reimbursement of any expenses incurred by WAM BD. The Distribution
Agreement will continue in effect through June 30, 1999 and thereafter 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 any auditing and
filing fees required in compliance with various state securities 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.

23
<PAGE>

WAM BD offers the Funds' shares only on a best efforts basis. WAM BD is located
at 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606.

The Trust

The Trust is a Massachusetts business trust organized under an Agreement
and Declaration of Trust dated April 21, 1992 (the "Declaration of 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 Acorn funds are not currently
divided into classes. The board of trustees may authorize the issuance of
additional series of the Trust 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.

Under Massachusetts law, the shareholders of the Trust may, under certain
circumstances believed to be remote, be held personally liable for the Trust's
obligations. However, the Declaration of Trust disclaims liability of
shareholders and the Trust's trustees and officers 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 assets of the Trust of all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
remote, since it is limited to circumstances in which the disclaimer is
inoperative and the Trust itself is unable to meet its obligations.

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.

Trustees and Officers

The trustees and officers of the Trust, their dates of birth and their
principal business activities during the past five years are:

Irving B. Harris, trustee and chairman
Two North LaSalle Street, Chicago, Illinois 60602; date of birth 8/4/1910;
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).

24
<PAGE>

Ralph Wanger, trustee and president*
227 West Monroe Street, Suite 3000, Chicago, Illinois 60606; date of birth
6/21/1934; trustee and president, Wanger Advisors Trust; principal, Wanger
Asset Management, L.P.

James H. Lorie, trustee and vice chairman
1101 East 58th Street, Chicago, Illinois 60637; date of birth 2/23/1922;
retired; Eli B. and Harriet B. Williams Professor of Business
Administration Emeritus, University of Chicago Graduate School of Business;
director, Thornburg Mortgage Asset Corp. (REIT) and Santa Fe Natural
Tobacco.

Leo A. Guthart, trustee
165 Eileen Way, Syosset, New York 11791; date of birth 9/26/1937; 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), Alarm Net
(cellular radio service) and Cylink Corporation (supplier of encryption
equipment)(chairman); director, AptarGroup, Inc. (producer of dispensing
valves, pumps and closures); chairman of the board of trustees, Hofstra
University; chairman, Tech Transfer Island Corp. (private investment
partnership).

Jerome Kahn, Jr., trustee
Two North LaSalle Street, Suite 400, Chicago, Illinois 60602; date of birth
4/13/1934; 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; date of birth 10/12/1935;
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; date of birth
8/27/1953; trustee and senior vice president, Wanger Advisors Trust;
principal and director of research, Wanger Asset Management, L.P.

Roger S. Meier, trustee
1211 S. W. Fifth Avenue, Portland, Oregon 97204; date of birth 1/18/1926;
president, AMCO, Inc. (investment and real estate management); director,
Fred Meyer, Inc. (retail chain); director and advisory board member, Key
Bank of Oregon (banking); chairman of Investment Council and member of
Committee of Legacy Systems (hospital); executive director and chairman of
investment committee, Portland Art Museum.

Adolph Meyer, Jr., trustee
1511 West Webster Avenue, Chicago, Illinois 60614; date of birth
11/26/1923; president, Gulco Corp. (leather manufacturer).

Leah J. Zell, vice president
227 West Monroe Street, Suite 3000, Chicago, Illinois 60606; date of birth
5/23/1949; vice president, Wanger Advisors Trust; principal, analyst and
portfolio manager, Wanger Asset Management, L.P.

Marcel P. Houtzager, vice president

25
<PAGE>

227 West Monroe Street, Suite 3000, Chicago, Illinois 60606; date of birth
10/26/1960; vice president, Wanger Advisors Trust; principal, analyst, and
portfolio manager, Wanger Asset Management, L.P.

26
<PAGE>

Robert A. Mohn, vice president
227 West Monroe Street, Suite 3000, Chicago, Illinois 60606; date of birth
9/13/1961; vice president, Wanger Advisors Trust; principal, analyst and
portfolio manager, Wanger Asset Management, L.P.

John H. Park, vice president
227 West Monroe Street, Suite 3000, Chicago, Illinois 60606; date of birth
5/30/1967; vice president, Wanger Advisors Trust; principal (since 1998),
analyst and portfolio manager, Wanger Asset Management, L.P. (since July
1993); prior thereto, analyst, Ariel Capital Management.

Merrillyn J. Kosier, senior vice president and secretary
227 West Monroe Street, Suite 3000, Chicago, Illinois 60606; date of birth
12/10/1959; 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; date of birth
7/22/1957; 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; date of birth
8/4/1959; 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. As of [May 1, 1998], the trustees and officers of Acorn as a
group owned beneficially less than 1% of the outstanding shares of the funds.

The following table sets forth the total compensation paid by the Trust
during the fiscal year ended December 31, 1997 to each of the trustees of the
Trust:

<TABLE>
<CAPTION>
Aggregate Aggregate Aggregate Total
Compensation Compensation Compensation Compensation
Name of Trustee from Acorn from Acorn from Acorn from
Fund International USA Fund Complex(3)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Irving B. Harris $53,900 $33,340 $1,760 $89,000

Leo A. Guthart 21,665 13,605 730 36,000

Jerome Kahn, Jr. 24,085 14,625 790 39,500

David C. Kleinman 24,085 14,625 790 39,500

</TABLE>

27
<PAGE>

<S> <C> <C> <C> <C>
James H. Lorie 18,775 11,100 625 30,500
Charles P. McQuaid 0 0 0 0
Roger S. Meier 21,665 13,105 730 35,500
Adolph Meyer, Jr. 19,600 11,740 660 32,000
Ralph Wanger 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The officers and trustees affiliated with WAM serve without any
compensation from the Trust. Acorn has adopted a deferred compensation plan (the
"Plan") which permits the trustees who are not "interested persons" of Acorn or
WAM ("participating trustees") to defer receipt of all or a portion of their
compensation from the Trust. Under the Plan, participating trustees may defer
receipt of all or a portion of their compensation in order to defer payment of
income taxes or for other reasons. The deferred compensation payable to a
participating trustee is credited to a book reserve account as of the business
day such compensation would have been paid to such trustee. The deferred
compensation accrues income from the date of credit in an amount equal to the
amount that would have been earned had such deferred compensation (and all
income earned thereon) been invested and reinvested in shares of one or more of
the funds. If a participating trustee retires, such trustee may elect to receive
payments under the plan in a lump sum or in equal annual installments over a
period of five years. If a participating trustee dies, any amount payable under
the Plan will be paid to that trustee's beneficiaries. Each fund's obligation to
make payments under the Plan is a general obligation of that fund. No other fund
will be liable for any other fund's obligations to make payments under the Plan.

Purchasing and Redeeming Shares

Purchases and redemptions are discussed in the Funds' prospectus under the
headings "Your Account--How to Buy Shares" and "Your Account--How to Sell
Shares." All of that information is incorporated herein by reference.

Acorn may authorize from time to time certain financial services companies,
broker-dealers or their designees ("authorized agents") to accept share purchase
and redemption orders on behalf of the Funds. Some of those authorized agents
may charge transaction fees for their services. For purchase orders placed
through an authorized agent, a shareholder will pay the Fund's net asset value
("NAV") per share (see "Net Asset Value," below) next computed after the receipt
by the authorized agent of such purchase order, plus any applicable transaction
charge imposed by the agent. For redemption orders placed through an authorized
agent, a shareholder will receive redemption proceeds which reflect the NAV per
share next computed after the receipt by the authorized agent of the redemption
order, less any redemption fees imposed by the agent.

In some instances, an authorized agent will not charge any transaction fees
directly to investors in the Funds. However, for accounting and shareholder
servicing services provided by such agent with respect to Fund share accounts
held on behalf of its customers, the agent may

28
<PAGE>

charge a fee (usually a percentage of the average net assets held in such
accounts) for accounting, shareholder servicing, and distribution services the
institution pays with respect to the underlying Fund shares. WAM pays any such
fees.

Net Asset Value

Share purchase and redemption orders will be priced at each Fund's NAV next
computed after such orders are received and accepted by: (i) Acorn's transfer
agent; (ii) a broker-dealer or other financial services company authorized by
Acorn to accept purchase and redemption orders on the Funds' behalf; or (iii)
such authorized broker-dealer's designee. The Funds' NAVs are 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 January, 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.

Computation of NAV (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 funds not reasonably practicable.

For purposes of computing the NAV of a Fund share, 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 sale 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
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.

Trading in the foreign securities of the Funds may take place in various
foreign markets at certain times and on certain days (such as Saturday) when the
NYSE is not open for business and the Funds do not calculate their NAVs.
Conversely, trading in a Fund's foreign securities may not occur at times and on
days when the NYSE is open. Because of the different trading hours in the
various foreign markets, the calculation of NAV does not take place
contemporaneously with the determinations of the prices of many of the Funds'
foreign securities. Those timing differences may have a significant effect on a
Fund's NAV.

29
<PAGE>

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 NAV of a 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 account value
falls below $1,000 because of share redemptions. 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 Declaration of Trust also authorizes Acorn to
redeem shares under certain other circumstances as may be specified by the board
of trustees.

WAM acts as a shareholder servicing agent for the Reich & Tang Money Funds
(the "Money Funds") in connection with an exchange plan between the Acorn funds
and the Money Funds (the "Switch Plan"). For its services it receives a fee at
the rate of 0.35% of the average annual net 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

Each Fund intends to qualify to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code (the "Code") so as to avoid
payment of federal income tax on its capital gains and net investment income
currently distributed to its shareholders.

At the time of your purchase, a Fund's NAV 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, will be taxable either as a dividend or capital gain
distribution, whether received in cash or reinvested in additional shares. For
federal income tax purposes, any distribution that is paid in January but was
declared in the prior calendar year is deemed paid in the prior calendar year.

You will be subject to income tax at ordinary rates on income dividends and
distributions of net short-term capital gains. Distributions of net mid-term
capital gains are taxable to you as mid-term capital gains (currently taxed at a
maximum rate of 28%); distributions of net long-term capital gains are taxable
to you as long-term capital gains (currently taxed at a maximum rate of 20%).
Classification as mid-term or long-term gain depends on how long the security
sold had been held by the Fund. Long-term gains are those from securities held
more than 18 months; mid-term gains are from securities held more than one year
but not more than 18 months.

30
<PAGE>

You will be advised annually as to the source of distributions for tax
purposes. If you are not subject to tax on your income, you will not be
required to pay tax on these amounts. If you realize a loss on the sale of fund
shares held for six months or less, your short-term loss is recharacterized as
long-term to the extent of any long-term capital gain distributions you have
received with respect to those shares.

Under certain circumstances, a Fund may be required to withhold 31% federal
income tax ("backup withholding") from dividend, capital gain and redemption
payments to you. Backup withholding may be required if: (a) you fail to
furnish your social security or other tax identification number; (b) you fail to
certify that your social security or tax identification number is correct and
that you are not subject to backup withholding due to the underreporting of
certain income; or (c) the IRS informs the Fund that your tax identification
number is incorrect.

These certifications are contained in the application that you complete
when you open your Fund account. Each Fund must promptly pay the IRS all
amounts withheld. Therefore, it is usually not possible for a Fund to reimburse
you for amounts withheld. You may, however, claim the amount withheld as a
credit on your federal income tax return.

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 Funds will be increased; if the result is
a loss, the income dividend paid by the Funds will be decreased.

A portion of the dividends paid by the Funds 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 Funds from sources within various foreign countries
will be subject to foreign income taxes withheld at the source. Under the Code,
if more than 50% of the value of a 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 IRS 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. The Funds do not expect to be able to "pass
through" foreign tax credits.

Portfolio Transactions

Portfolio transactions of the funds are placed with those securities
brokers and dealers that WAM believes will provide the best value in transaction
and research services for each 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.

31
<PAGE>

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 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 each
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 that 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
Funds' portfolio transactions are reviewed periodically by the board of
trustees.

WAM is the principal source of information and advice to the Funds, and is
responsible for making and initiating the execution of investment decisions by
the Funds. However, the board of trustees recognizes that it is important for
WAM, in performing its responsibilities to the Funds, 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 Funds to take into account the value of the information received
for use in advising the Funds. The extent, if any, to which the obtaining of
such information may reduce WAM's expenses in providing management services to
the Funds 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 Funds might benefit from information obtained
by WAM in performing services to others.

Transactions of the Funds 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.

The Funds and WAM each have adopted a code of ethics that, among other
things, regulates the personal transactions in securities of certain officers,
directors, partners, and employees of the Funds and WAM. Although investment
decisions for the Funds are made independently from those for other investment
advisory clients of WAM, it may develop that the same investment decision is
made for the Funds and one or more other advisory clients. If the Funds 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.

32
<PAGE>

Custodian

State Street Bank and Trust Company, P.O. Box 8502, Boston Massachusetts
02266-8502, is the custodian for the Acorn funds. It is responsible for holding
all securities and cash of the Acorn funds, receiving and paying for securities
purchased, delivering against payment securities sold, receiving and collecting
income from investments, making all payments covering expenses of the funds, and
performing other administrative duties, all as directed by authorized persons of
the funds. State Street 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 Acorn funds. The Acorn funds have authorized State
Street to deposit certain portfolio securities of the funds in central
depository systems as permitted under federal law. The Acorn funds may invest
in obligations of the custodian and may purchase or sell securities from or to
State Street.

Independent Auditors

Ernst & Young LLP, Sears Tower, 233 South Wacker Drive, Chicago, Illinois
60606 audits and reports on the Funds' annual financial statements, reviews
certain regulatory reports and the Acorn funds' tax returns, and performs other
professional accounting, auditing, tax, and advisory services when engaged to do
so by the Acorn funds.

33
<PAGE>

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 funds invest 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.

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.

34
<PAGE>

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 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.

35
<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 1997 Annual Report; a copy of the report was filed
with the Commission on February 24, 1998 and is not included in
this amendment):

Statement of Investments at December 31, 1997

Report of Independent Auditors

Statement of Assets and Liabilities at December 31, 1997

Statement of Operations for the year ended December 31, 1997

Statement of Changes in Net Assets for the year ended December 31,
1997

Notes to financial statements

(ii) Acorn International (incorporated by reference to the following
portions of Registrant's 1997 Annual Report; a copy of the report
was filed with the Commission on February 24, 1998 and is not
included in this amendment):

Statement of Investments at December 31, 1997

Report of Independent Auditors

Statement of Assets and Liabilities at December 31, 1997

Statement of Operations for the year ended December 31, 1997

Statement of Changes in Net Assets for the year ended December 31,
1997

Notes to financial statements

(iii) Acorn USA (incorporated by reference to the following portions of
Registrant's 1997 Annual Report; a copy of the report was filed
with the Commission on February 24, 1998 and is not included in
this amendment):

Statement of Investments at December 31, 1997

Report of Independent Auditors

Statement of Assets and Liabilities at December 31, 1997

Statement of Operations for the year ended December 31, 1997

1
<PAGE>

Statement of Changes in Net Assets for the year ended December 31,
1997

Notes to financial statements

(3) 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, 1997.

Schedules II, IV and V - The required information is not present.

(b) Exhibits:
--------
1. Agreement and declaration of trust(1)

2. Bylaws, as amended October 24, 1997 (exhibit 2.3 to post-effective
amendment no. 60)(6)

3. None

4.1 Specimen share certificate - Acorn Fund(2)

4.2 Specimen share certificate - Acorn International(2)

4.3 Specimen share certificate - Acorn USA(3)

4.4 Specimen share certificates - Acorn Twenty and Acorn Foreign Fifty

5.1 Investment Advisory Agreement among Acorn Fund, Acorn International,
Acorn USA and Wanger Asset Management, L.P., dated January 1,
1998(7)

5.2 Administration Agreement among Acorn Fund, Acorn International,
Acorn USA and Wanger Asset Management, L.P., dated January 1,
1998(7)

5.3 Organizational Expenses Agreement between Acorn Investment Trust and
Wanger Asset Management, L.P. dated September 3, 1996(7)

5.4 Form of Supplement to the Investment Advisory Agreement between
Acorn Investment Trust and Wanger Asset Management, L.P., to Acorn
Twenty and Acorn Foreign Fifty, dated ___________, 1998

5.5 Form of amendment to the Administration Agreement between Acorn
Investment Trust and Wanger Asset Management, L.P., relating to
Acorn Twenty and Acorn Foreign Fifty, dated ______________, 1998

6. Distribution Agreement between Acorn Investment Trust and WAM
Brokerage Services, L.L.C. dated January 1, 1998(7)

2
<PAGE>

6.1 Form of amendment to the Distribution Agreement between Acorn
Investment Trust and WAM Brokerage Services, L.L.C., relating to
Acorn Twenty and Acorn Foreign Fifty, dated ________, 1998

7. None

8.1 Custodian contract between the Registrant and State Street Bank and
Trust Company dated July 1, 1992(1)

8.2 Letter agreement applying custodian contract(1)

8.3 Letter agreement applying custodian contract (exhibit 8.1) to Acorn
USA(7)

8.4 Form of letter agreement applying custodian contract (exhibit 8.1)
to Acorn Twenty and Acorn Foreign Fifty

9. None

10. Opinion and consent of Bell, Boyd & Lloyd

11. Consent of Ernst & Young LLP

12. None

13. None

14.1 IRA plan booklet dated January 1998 including general information,
individual retirement plan and custodial agreement and individual
retirement account disclosure statement, transfer form,
application form, and designation of beneficiary form

14.2 SIMPLE-IRA plan and application(4)

15. None

16.1 Computation of performance information - Acorn Fund(1)

16.2 Computation of performance information - Acorn International(1)

16.3 Computation of performance information - Acorn USA(5)

17.1 Financial data schedule - Acorn Fund

17.2 Financial data schedule - Acorn International

17.3 Financial data schedule - Acorn USA
________________________________________
(1) Previously filed. Incorporated by reference to the exhibit of the same
number filed in post-effective amendment No. 53 to the registrant's registration
statement, Securities Act file number 2-34223 (the "Registration Statement"),
filed on April 30, 1996.

(2) Previously filed. Incorporated by reference to the exhibit of the same
number filed in post-effective amendment No. 54 to the Registration Statement,
filed on June 18, 1996.

3
<PAGE>

(3) Previously filed. Incorporated by reference to the exhibit of the same
number filed in post-effective amendment No. 55 to the Registration Statement,
filed on September 3, 1996.

(4) Previously filed. Incorporated by reference to the exhibit of the same
number filed in post-effective amendment No. 56 to the Registration Statement,
filed on April 30, 1997.

(5) Previously filed. Incorporated by reference to the exhibit of the same
number filed in post-effective amendment No. 59 to the Registration Statement,
filed on November 25, 1997.

(6) Previously filed. Incorporated by reference to the exhibit of the same
number filed in post-effective amendment No. 60 to the Registration Statement,
filed on December 30, 1997.

(7) Previously filed. Incorporated by reference to the exhibit of the same
number filed in post-effective amendment No. 61 to the Registration Statement,
filed on April 30, 1998.

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
under the caption "The Funds in Detail - Organization" and "The Funds in Detail-
Management" and in the Statement of Additional Information under the caption
"Investment Adviser" is incorporated by reference.

Item 26. Number of Holders of Securities
-------------------------------

At March 31, 1998, there were 56,590 record holders of Registrant's shares
of beneficial interest of the series designated Acorn Fund; 61,540 record
holders of Registrant's shares of beneficial interest of the series designated
Acorn International; and 8,529 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 the 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 of 1940, 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 (the "Securities Act") 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 Securities 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
Securities Act and will be governed by the final adjudication of such issue.

4
<PAGE>

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 under the caption "The Funds in Detail -
Management" and in the Statement of Additional Information under the caption
"Investment Adviser" 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.

Item 29. Principal Underwriters

WAM Brokerage Services, L.L.C. also acts as principal underwriter for
Wanger Advisors Trust.

<TABLE>
<CAPTION>
Name Positions and Offices with Positions and Offices with
Underwriters Registrant
<S> <C> <C>
Bruce H. Lauer President Vice President and Treasurer

Merrillyn J. Kosier Vice President and Secretary Senior Vice President and
Secretary
</TABLE>

The principal business of each officer of WAM Brokerage Services, 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.

<PAGE>

(b) 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.

<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 1, 1998.

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.

<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C> <C>
/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 ) June 1, 1998
- ----------------------- Trustee )
Charles P. McQuaid )
)
/s/Roger S. Meier )
- ----------------------- Trustee )
Roger S. Meier )
)
/s/Adolph Meyer, Jr. )
- ----------------------- Trustee )
Adolph Meyer, Jr. )
)
/s/Ralph Wanger )
- ----------------------- Trustee and President )
Ralph Wanger (principal executive )
officer) )
)
/s/Bruce H. Lauer )
- ----------------------- Treasurer (principal )
Bruce H. Lauer financial and accounting )
officer) )
</TABLE>

<PAGE>

Index of Exhibits Filed with this Amendment
-------------------------------------------
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<C> <S>
4.4 Specimen share certificates - Acorn Twenty and Acorn Foreign Fifty

5.4 Form of Supplement to the Investment Advisory Agreement between Acorn
Investment Trust and Wanger Asset Management, L.P., to Acorn Twenty and Acorn
Foreign Fifty, dated ______________, 1998

5.5 Form of amendment to the Administration Agreement between Acorn Investment
Trust and Wanger Asset Management, L.P., relating to Acorn Twenty and Acorn
Foreign Fifty, dated ___________, 1998

6.1 Form of amendment to the Distribution Agreement between Acorn Investment
Trust and WAM Brokerage Services, L.L.C., relating to Acorn Twenty and Acorn
Foreign Fifty, dated ____________, 1998

8.4 Form of letter agreement applying custodian contract (exhibit 8.1) to Acorn
Twenty and Acorn Foreign Fifty

10. Opinion and consent of Bell, Boyd & Lloyd

11. Consent of Ernst & Young LLP

14.1 IRA plan booklet dated January 1998 including general information, individual
retirement plan and custodial agreement and individual retirement account
disclosure statement, transfer form, application form, and designation of
beneficiary form

17.1 Financial data schedule - Acorn Fund

17.2 Financial data schedule - Acorn International

17.3 Financial data schedule - Acorn USA
</TABLE>

<PAGE>

Exhibit 4.4

KC0002238 ***1***

SEE REVERSE FOR
CERTAIN DEFINITIONS

[LOGO OF ACORN TWENTY]
ACORN TWENTY

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 TWENTY
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 TWENTY

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

/s/ Merrilyn Kosier [SEAL] /s/ Irving B. Harris
SENIOR 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 through 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 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.

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

---------------------------------------------------
Address
<PAGE>

KC 0002238 ***1***
SEE REVERSE FOR
CERTAIN DEFINITIONS

[LOGO OF ACORN FOREIGN FIFTY]
ACORN FOREIGN FIFTY

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 FOREIGN FIFTY
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 FOREIGN FIFTY

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 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

/s/ Merrilyn Kosier [SEAL] /s/ Irving B. Harris
SENIOR 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

( ) 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 5.4

SUPPLEMENT TO THE ADVISORY AGREEMENT

This Supplement to the Investment Advisory Agreement dated January 1, 1998,
between Acorn Investment Trust, a Massachusetts business trust ("Acorn"), on
behalf of its series, Acorn Fund, Acorn International and Acorn USA (the
"Funds"), and Wanger Asset Management, L.P., a Delaware limited partnership
("WAM") (the "Agreement"), is made this ___ day of _________, 1998.

RECITALS

In the Agreement, Acorn appointed WAM as the investment adviser to the
Funds.

The Agreement provides that "if Acorn establishes one or more series in
addition to the Funds named above with respect to which it desires to retain WAM
as investment adviser hereunder, and if WAM is willing to provide such services
under this agreement, Acorn and WAM may add such new series to this agreement,
by written supplement to this agreement. Such supplement shall include a
schedule of compensation to be paid to WAM by Acorn with respect to such series
and such other modifications of the terms of this agreement with respect to such
series as Acorn and WAM may agree. Upon execution of such a supplement by Acorn
and WAM, that series will become a Fund hereunder and shall be subject to the
provisions of this agreement to the same extent as the Funds named above, except
as modified by the supplement."

Acorn has established two new series, designated Acorn Twenty and Acorn
Foreign Fifty, respectively, and desires to retain WAM as the investment adviser
to each series. WAM is willing to provide such investment advisory services
under the Agreement.

THEREFORE, Acorn and WAM agree:

1. The series of Acorn designated Acorn Twenty and Acorn Foreign Fifty
are Funds under the Agreement.

2. For the services to be rendered and the expenses to be assumed on
behalf of Acorn Twenty and Acorn Foreign Fifty and to be paid by WAM under this
agreement, Acorn shall pay to WAM fees accrued daily and paid monthly at the
annual rates shown below:

Fund Rate of Fee
---- -----------

Acorn Twenty .90%
Acorn Foreign Fifty .95%

<PAGE>

The fees attributable to each Fund shall be a separate charge to that Fund
and shall be the several (and not joint or joint and several) obligation of that
Fund.

ATTEST: WANGER ASSET MANAGEMENT, L.P.

By:
- --------------------------------- ---------------------------------
Secretary

ATTEST: ACORN INVESTMENT TRUST

By:
- --------------------------------- ---------------------------------
Secretary

<PAGE>

Exhibit 5.5

ADMINISTRATION AGREEMENT

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 ("Acorn"), on its own behalf and on behalf of each
of the Funds listed on Schedule A, as such Schedule shall be amended from time
to time (each, a "Fund," together, the "Funds"), and Wanger Asset Management,
L.P., a Delaware limited partnership ("WAM"), agree that:

1. Appointment and Acceptance. Acorn hereby appoints WAM to act as
Administrator of the Funds, subject to the supervision and direction of the
Board of Trustees of Acorn (the "Board"), as hereinafter set forth. WAM hereby
accepts such appointment and agrees to furnish or cause to be furnished the
services contemplated by this Agreement.

2. Duties of WAM.

(a) WAM shall perform or arrange for the performance of the following
administrative and clerical services:

1) maintain and preserve the books and records, including financial and
corporate records, of Acorn as required by law or otherwise for the
proper operation of Acorn;

2) supervise the preparation and, subject to approval by Acorn, filing of
registration statements and amendments thereto, notices, reports, tax
returns and other documents required by U.S. Federal, state and other
applicable laws and regulations (other than state "blue sky" laws),
including proxy materials and periodic reports to Fund shareholders;

3) oversee the preparation and filing of registration statements, notices,
reports and other documents required by state "blue sky" laws, and
oversee the monitoring of sales of shares of the Funds for compliance
with state securities laws;

4) calculate and publish the net asset value of each Fund's shares,
including provision of and payment for any third party pricing
services;

5) calculate dividends and distributions and performance data for each
Fund, and prepare other financial information regarding Acorn;

6) oversee and assist in the coordination of, and, as the Board may
reasonably request or deem appropriate, make reports and
recommendations to the Board on, the performance of administrative and
professional services rendered to the Funds by others, including the
custodian, registrar, transfer agent and dividend disbursing agent,
shareholder servicing agents, accountants, attorneys, underwriters,
brokers and

<PAGE>

dealers, corporate fiduciaries, insurers, banks and such other persons
in any such other capacity deemed to be necessary or desirable;

7) furnish corporate secretarial services to Acorn, including, without
limitation, preparation or supervision of the preparation by Acorn's
counsel, of materials necessary in connection with meetings of the
Board, including minutes, notices of meetings, agendas and other Board
materials;

8) provide Acorn with the services of an adequate number of persons
competent to perform the administrative and clerical functions
described herein;

9) provide Acorn with administrative office and data processing
facilities;

10) arrange for payment of each Fund's expenses;

11) provide routine accounting services to the Funds, and consult with
Acorn's officers, independent accountants, legal counsel, custodian,
and transfer and dividend disbursing agent in establishing the
accounting policies of Acorn;

12) prepare such financial information and reports as may be required by
any banks from which Acorn borrows funds;

13) develop and implement procedures to monitor each Fund's compliance with
regulatory requirements and with each Fund's investment policies and
restrictions as set forth in each Fund's currently effective Prospectus
and Statement of Additional Information filed under the Securities Act
of 1933, as amended;

14) provide for the services of principals and employees of WAM who may be
appointed as officers of Acorn, including the President, Vice
Presidents, Treasurer, Secretary and one or more assistant officers;

15) provide services to shareholders of the Funds, including responding to
shareholder inquiries regarding, among other things, share prices,
account balances, dividend amounts and payment dates, and changes in
account registrations or options, to the extent not provided by a
Fund's transfer agent; and

16) provide such assistance to the Investment Adviser, the custodian, other
Trust service providers and Acorn's counsel and auditors as generally
may be required to carry on properly the business and operations of
Acorn.

Acorn agrees to deliver, or cause to be delivered, to WAM, on a timely
basis, such information as may be necessary or appropriate for WAM's performance
of its duties and responsibilities hereunder, including but not limited to,
shareholder reports, records of transactions, valuations of investments and
records of expenses borne by each Fund, and WAM shall be entitled to rely on the
accuracy and completeness of such information in performing its duties
hereunder.

<PAGE>

Exhibit 6.1

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
___________, 1998 by and between ACORN INVESTMENT TRUST, a business trust
organized and 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 January 1, 1998 by which Acorn appointed WAM BD as principal underwriter
of its Shares.

The Agreement defines Shares as the "shares of beneficial interest...which
currently are divided into three series, Acorn Fund, Acorn International and
Acorn USA, and including shares of any additional series which may from time to
time be offered for sale to the public."

Acorn has designated and wishes to offer for sale to the public shares of
two additional series, Acorn Twenty and Acorn Foreign Fifty, and may from time
to time hereafter wish to offer for sale to the public shares of yet additional
series.

Acorn has entered into an investment advisory agreement dated January 1,
1998 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:

As used in the Distribution Agreement, "Shares" shall include the shares of
beneficial interest of the series of Acorn designated Acorn Twenty and Acorn
Foreign Fifty.
<PAGE>

ATTEST: WAM BROKERAGE SERVICES, L.L.C.

By:
- --------------------------------- ---------------------------------
Secretary Bruce H. Lauer, President

ATTEST: ACORN INVESTMENT TRUST

By:
- --------------------------------- ---------------------------------
Secretary Ralph Wanger, President

ACKNOWLEDGED:

WANGER ASSET MANAGEMENT, L.P.

By:
------------------------------
Ralph Wanger

ATTEST:

- ---------------------------------
Secretary

<PAGE>

Exhibit 8.4

Acorn Investment Trust
227 West Monroe
Suite 3000
Chicago, Illinois 60606-5016
1-800-9-ACORN-9
(-800-922-6769)

________, 1998

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 two new
series of shares to be known as Acorn Twenty and Acorn Foreign Fifty. In
accordance with the Additional Funds provision in Section 17 of the Custodian
Contract dated July 1, 1992, as amended from time to time, 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 each new
series.

Please indicate your acceptance of this appointment as Custodian and
Transfer Agent one copy for your records.

ACORN INVESTMENT TRUST

By:
-------------------
Merrilyn J. Kosier
Vice President

Agreed to this day of , 1998.
------- -------
STATE STREET BANK AND TRUST COMPANY

By:
------------------------
Name:
------------------
Title:
-----------------

<PAGE>

Exhibit 10

BELL, BOYD & LLOYD
Three First National Plaza
70 West Madison Street, Suite 3300
Chicago, Illinois 60602-4207
312 372-1121
Fax 312 372-2098

June 2, 1998

Acorn Investment Trust
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606
Ladies and Gentlemen:

Acorn Investment Trust
Acorn Twenty and Acorn Foreign Fifty

We have acted as counsel for Acorn Investment Trust (the "Trust") in
connection with the registration under the Securities Act of 1933, as amended
(the "Act") of an indefinite number of shares of beneficial interest (the
"Shares") of the series of the Trust designated Acorn Twenty and Acorn Foreign
Fifty (each, a "Fund," and collectively, the "Funds"), pursuant to a post-
effective amendment to the Trust's registration statement on Form N-1A, No.
2-34223 (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 deem 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.

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 on unlimited number of Shares, and that, when the Share are
issued and sold after the post-effective amendment to the Registration Statement
has become effective and the authorized consideration therefore 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 Trust. The Agreement and Declaration of Trust provides for the
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 of the particular Series itself would be unable to meet its
obligations.

<PAGE>

In giving this opinion we have relied upon the opinion of Ropes & Gray to
us dated May 29, 1998, and have made no independent inquiry with respect to any
matter covered by such opinion.

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>

Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624

(617)951-7000

Fax (617) 951-7050

One Franklin Square
1301 K Street, N.W.
30 Kennedy Plaza Suite 800 East
Providence, RI 02903-2328 Washington, DC 20005-3333
(401) 455-4400 (202) 626-3900
Fax: 401 455-4401 Fax: (202) 626-3961

May 29, 1998

Bell, Boyd & Lloyd
Three First National Plaza
70 West Madison Street, Suite 3300
Chicago, IL 60602

Ladies & Gentlemen:

We are furnishing this opinion in connection with the proposed offer and
sale from time to time by Acorn Twenty and Acorn Foreign Fifty (each, a "Fund",
and collectively, the "Funds"), each a series of Acorn Investment Trust (the
"Trust") of an indefinite number of shares, of beneficial interest, without par
value of the Funds (the "Shares"), pursuant to a post-effective amendment 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 post-effective amendment to the Registration Statement
has become 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

<PAGE>

Ropes & Gray

Bell, Boyd & Lloyd -2- May 29, 1998

the Trust or any Series and requires that notice of such disclaimer by given in
every note, bond, contract, instrument, certificate or undertaking issued by or
on behalf of the 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
post-effective amendment to the Registration Statement.

Very truly yours,

/s/ Ropes & Gray

Ropes & Gray

<PAGE>

Exhibit 11

CONSENT OF INDEPENDENT AUDITORS

We consent to the references to our firm under the caption "Independent
Auditors" and to the use of our report dated February 4, 1998 on the 1997
financial statements of the Acorn Investment Trust (comprising Acorn Fund, Acorn
International and Acorn USA) and its incorporation by reference in the
Registration Statement (Form N-1A) and in the related Prospectus and Statement
of Additional Information, filed with the Securities and Exchange Commission in
this Post-Effective Amendment No. 62 to the Registration Statement under the
Securities Act of 1933 (Registration No. 2-34223) and in the Amendment No. 37 to
the Registration Statement under the Investment Company Act of 1940
(Registration No. 811-1829).

/s/ Ernst & Young LLP

Chicago, Illinois
June 2, 1998

<PAGE>

Exhibit 14.1

The Acorn Family of Funds
Traditional IRA
SEP-IRA
Roth IRA
Education IRA

IRA plan
1998

[PICTURE OF ACORNS APPEARS HERE]

Managed by Wanger Asset Management, L.P.
<PAGE>

Dear Investor:

Thank you for your interest in a retirement account with the Acorn Family of
Funds.

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 term.

Individual Retirement Accounts are smart investments. Why? A Traditional
IRA provides the special advantage of tax-deferred compounding. Your investment
grows year after year with no annual tax payments on the earnings 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.

Beginning in 1998, you also have the opportunity to save through two new
types of IRAs: the Roth IRA and the Education IRA. The Roth IRA can provide
qualified investors a permanent tax exemption, rather than just a tax deferral,
on their IRA earnings. An Education IRA offers the benefits of tax-exempt growth
of funds used for a minor's future college tuition and expenses.

Whether you are opening a new retirement account, making an annual IRA
contribution, moving an existing IRA from another institution, or rolling over
money from an employer-sponsored retirement plan, Acorn can help. This booklet
contains important information about Acorn IRAs. Please take a moment to read it
carefully. If you have any questions, please call a shareholder services
representative at 1-800-962-1585.

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,

/s/ Ralph Wanger

Ralph Wanger
Chief Investment Officer, Wanger Asset Management
Lead Portfolio Manager, Acorn Fund

. Acorn Investment Trust 227 West Monroe Street Suite 3000 Chicago, Illinois
60606

<PAGE>
<TABLE>v

Contents

<S> <C>
General Information 2
Types of Individual Retirement Accounts 3

. Traditional IRA 3
. Roth IRA 5
. SEP-IRA 7
. SIMPLE-IRA 8
. Education IRA 8

IRA Summary 10

Moving Funds from Another IRA or Qualified Plan 11

Making Withdrawals from Your Acorn IRA 15

Account Fees 15

Individual Retirement Account
Disclosure Statement 16

Custodial Agreement for a Traditional or SEP-IRA 27

Custodial Agreement for a Roth-IRA 35

Custodial Agreement for an Educational IRA 42
</TABLE>

1
<PAGE>

Acorn Individual Retirement Account Plan
.General Information

What is an IRA?

"IRA" stands for "Individual Retirement Account". It is a special type of
account created by the government to encourage individuals to save for
retirement needs. This type of savings is especially important, because many
sources of retirement funds that our parents once had at their disposal are not
available today. Corporations are not guaranteeing large pensions to loyal
employees as they did decades ago. The Social Security system is struggling to
support the enormous retiring Baby Boomer population with funds from a smaller
working population. With these changing times, we must manage our own savings to
ensure a secure and relaxing retirement for ourselves.

Why should I save in an IRA account?

IRA account owners enjoy tax relief in one or more of the following ways: tax
deductions, tax-deferred growth, and tax-exempt growth. The specific type of tax
relief depends on many factors, including the type of IRA, the account owner's
income level, marital status, and whether the account owner and his or her
spouse has other qualified retirement plans available through an employer. The
guidelines for each IRA are outlined later in this booklet.

All IRAs, however, offer the advantage of tax-deferred compounding. This means
that an account owner's earnings grow free of current taxes. The following chart
illustrates 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
- -------------------------------------------------------------------------------
[GRAPH APPEARS HERE]

$29,400
$35,062

$86,697
$126,005

198,360

$361,887

[_] Taxable Investment
[_] Tax-deferred IRA

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.

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

Which type of IRA will offer me the greatest amount of tax relief?

This will depend on many factors specific to each investor. The following
section outlines the different types of IRAs available and their respective
guidelines.

2
<PAGE>

.Types of Individual Retirement Accounts

In general, there are five types of IRAs from which to choose:

. Traditional IRA

. Roth IRA

. SEP-IRA

. SIMPLE-IRA

. Education IRA

In some cases, an individual may own more than one type of IRA. Some types
of IRAs, however, are not available to all individuals. Please read this section
carefully before deciding which IRA is best for you.

Traditional IRA

Anyone of legal age may open or contribute to a Traditional IRA in any year
before the year in which the individual reaches age 70 1/2 and in which the
individual has earnings from employment or self-employment. Individuals may make
contributions for any year until April 15 of the following year.

The annual contribution limit for a Traditional IRA is the lesser of $2,000
or 100% of compensation (including alimony and separate maintenance payments)
for the year. An individual may contribute the maximum amount to an IRA even if
the individual, or his or her spouse, participates in an employer-sponsored
retirement program or a Keogh plan (although some or all of the IRA contribution
may not be tax-deductible, as explained in the following tables).

Married individuals filing a joint tax return may contribute a total of
$4,000. Each spouse may contribute up to $2,000 to an IRA, even if one spouse
has less than $2,000 in compensation for the year, provided that the couple's
combined compensation is at least $4,000.

The following table shows the extent to which a Traditional IRA contribution for
1997 is tax-deductible.

<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
No Full
-------------------------------------
$40,000 - $50,000 $25,000 - $35,000 Yes Partial
No Full
-------------------------------------
Over $50,000 Over $35,000 Yes No Deduction
</TABLE>

* Adjusted gross income is the amount on line 31 of your 1997 Form 1040, before
you deduct your IRA contribution, plus the following amounts that are tax
exempt: the proceeds of any US savings bonds that you redeem to pay college
expenses, any adoption expenses paid by your employer, and amounts paid to you
while working outside the US. If you file Form 1040A, use line 16 instead of
line 31. You cannot use Form 1040-EZ if you make deductible IRA contributions.

** Applies to married persons filing separate returns only if they lived apart
for the entire year. Married persons filing separate returns and not living
apart should consult a tax adviser to determine if any portion of their
contribution is deductible.

*** "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.

<PAGE>

. Types of Individual Retirement Accounts, continued

In 1998, the maximum amount of adjusted gross income you can earn if you
participate in a retirement plan and still make a fully deductible contribution
is $30,000 for a single taxpayer and $50,000 for a married taxpayer filing a
joint return. (These limits will be increased by $1,000 in each year from 1999
through 2002.) In addition, if your spouse is a participant in a retirement plan
but you are not, you can make a fully deductible contribution provided that your
combined adjusted gross income does not exceed $150,000.

The following table shows the extent to which a Traditional IRA
contribution beginning in 1998 is tax-deductible. (All of these dollar limits,
except the $150,000-$160,000 limit, are increased by $1,000 for each year from
1999 through 2002.)

<S> <C> <C> <C> <C>
Adjusted Gross Income (Before IRA Deduction) Retirement Plan Participation
- ---------------------------------------------------------------------------- Deductibility of a
Joint Filing Single Filing You Your Spouse $2,000 Contribution
- ------------------------------------------- --------------------------------------------------
Under $50,000 Under $30,000 Yes or No Yes or No Full
- -------------------------------------------------------------------------------------------------
$50,000-$60,000 $30,000-$40,000 Yes Yes or No Partial
- -------------------------------------------------------------------------------------------------
N/A Over $40,000 No N/A Full
Yes N/A No Deduction
- -------------------------------------------------------------------------------------------------
$60,000-$150,000 N/A No Yes or No Full
Yes Yes or No No Deduction
- -------------------------------------------------------------------------------------------------
$150,000-$160,000 N/A No No Full
No Yes Partial
Yes Yes or No No Deduction
- -------------------------------------------------------------------------------------------------
Over $160,000 N/A No No Full
Yes Yes or No No Deduction
Yes or No Yes No Deduction
- -------------------------------------------------------------------------------------------------
</TABLE>

If your IRA contribution is partially deductible, you can calculate the
deductible portion of your contribution using the following formula:

1. Enter the appropriate number from the following table:

Enter this number for your:
------------------------------------------------
If you are 1997 contribution 1998 contribution
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Single $35,000 $ 40,000
Married and participating in a retirement plan 50,000 $ 60,000
Married and your spouse participates in a plan (but you don't) 50,000 $160,000

$ ___________

2. Subtract your adjusted gross income: .$ ___________

= $ ___________

3. Divide by 5 to get your deductible amount + 5 = $ ___________

4. If the deductible amount is not a multiple of $10, you can round to the
next highest $10. If it is $1-199, you can deduct $200.
</TABLE>

4
<PAGE>

If you and your spouse are both participants in retirement plans, you can simply
double the amount from this formula to determine your total deductible amount.
However, if only one of you is a retirement plan participant, you may have to
apply the formula separately to each of you, because the number inserted in step
1 will be different for each of you.

.Example: Assume that in 1998 you and your spouse have a combined adjusted gross
income of $57,225, and that you each contribute $2,000 to a Traditional IRA.
Also assume that you are a participant in a retirement plan sponsored by your
employer, but your spouse is not. Since you are a participant, you would insert
$60,000 in the first line of the formula, and your deductible contribution would
be:

<S> <C>
Step 1 amount: $ 60,000

Minus adjusted gross income: -$ 57,225

Difference: =$ 2,775

Divided by 5: =$ 555

Rounded to next highest $10: $ 560
</TABLE>

Thus, the deductible portion of your $2,000 contribution is $560. However,
since your spouse is not a participant in a retirement plan (even though you
are), and your adjusted gross income is less than $150,000, your spouse is
entitled to deduct the full amount of his or her $2,000 contribution. Thus your
total combined deductible contribution is $2,560.

You may contribute only the deductible portion of your contribution or, if
you wish, you may contribute up to the $2,000 annual limit to a Traditional IRA,
with the excess amount being non-deductible. If you make a non-deductible
contribution, you must file Form 8606 with your tax return. In addition,
beginning in 1998 you may also have the option of making a non-deductible
contribution to a Roth IRA (see below), regardless of whether your contribution
to a Traditional IRA is deductible.

.Important: A Traditional IRA owner must pay a 10% penalty if he or she
withdraws money from the IRA before reaching age 59 1/2 (subject to exceptions
if the IRA owner is disabled, spends the distribution on certain medical,
educational, or home purchase expenses, or has separated from service and is at
least age 55).

Roth IRA

Beginning in 1998, an individual may contribute to a new type of IRA, called a
Roth IRA. Contributions to a Roth IRA are always non-deductible. However, if one
leaves money in the Roth IRA for at least five years, any amount that is
withdrawn, including the income earned by the IRA, is completely tax exempt
provided that the IRA owner:

. has reached age 59 1/2,
. has become permanently disabled, or
. uses the withdrawal for a qualified first-time home purchase (subject to a
$10,000 lifetime limit).

This is uniquely different from a Traditional IRA, which only defers taxes until
distribution. Amounts paid to a beneficiary after the death of a Roth IRA owner
are also tax exempt, as long as the money remained in the Roth IRA for at least
five years. If the withdrawn amount does not satisfy the five-year investment
period requirement, the earnings portion of the withdrawal is taxed, as with a
Traditional IRA. In general, you can qualify for a tax-free withdrawal from any
Roth IRA five years after your first contribution to a Roth IRA. For example, if
you make a Roth IRA contribution in 1998, you (or your beneficiary) will become
potentially eligible to make a tax-free withdrawal beginning in 2003. The
withdrawal can be made from any Roth IRA (even one that you opened after 1998),
provided that the withdrawal is after you reach age 59 1/2 or satisfies one of
the other requirements listed above. However, if you convert or roll over a
Traditional IRA to a Roth IRA, a separate five-year requirement applies to the
converted or rolled over IRA.

5
<PAGE>

.Types of Individual Retirement Accounts, continued

The maximum allowable contribution to a Roth IRA depends on the IRA owner's
marital status and income level. For a single person with an adjusted gross
income of not more than $95,000, the maximum contribution in any year is $2,000.
Single persons with adjusted gross incomes between $95,000 and $110,000 may only
contribute a portion of $2,000, however. If you fall into this category, use the
following formula to calculate the portion of $2,000 that is your maximum
allowable contribution to a Roth IRA.

1. Begin with your adjusted gross income amount
2. Subtract $95,000
3. Divide the difference by $15,000
4. Multiply the result of Step 3 by $2,000.
5. Round to the next highest $10.

.Example: Assume that your adjusted gross income is $102,500. Your maximum
allowable contribution would be:

1. Adjusted gross income = $102,500
2. $102,500 - $95,000 = $ 7,500
3. $7,500 (divided by) $15,000 = .5
4. .5 X $2,000 = $1,000 =
maximum allowable contribution to a Roth IRA

A married couple filing a joint tax return can contribute up to a total of
$4,000 if the couple's adjusted gross income is not more than $150,000. If the
couple's adjusted gross income is between $150,000 and $160,000, the couple can
make a partial contribution. If you and your spouse fall into this category, use
the following formula to calculate the portion of $4,000 that is your maximum
allowable contribution to a Roth IRA.

1. Begin with your combined adjusted gross income amount
2. Subtract $150,000
3. Divide the difference by $10,000
4. Multiply the result of Step 3 by $4,000.

You cannot contribute to a Roth IRA if you are single and have income in excess
of $110,000, or are married and have income in excess of $160,000. If you are
married but file separate returns you can make a partial contribution to a Roth
IRA only if your individual adjusted gross income does not exceed $15,000.
However, if you and your spouse lived apart for the entire year, you can make
the same contribution as a single person.

.Important: The maximum allowable contribution to a Roth IRA is also reduced by
any amount that one contributes to a Traditional IRA in the same year, whether
or not the Traditional IRA contribution is deductible. In other words, an
investor is allowed to make a total IRA contribution of up to $2,000 in any year
($4,000 for a married couple), which one can divide between Traditional and Roth
IRAs, subject to the limits on contributions to Roth IRAs.

.Important: A Roth IRA owner must pay a 10% penalty on the IRA's earnings if he
or she withdraws money from the IRA before reaching age 59 1/2 (subject to
exceptions if the Roth IRA owner is permanently disabled, spends the
distribution on certain medical, educational, or first-time homebuyer expenses,
or has separated from service and is at least age 55).

Is a Roth IRA or a Traditional IRA better?

If you are eligible for a Roth IRA and are not eligible to deduct your
contributions to a Traditional IRA, you should almost always choose the Roth
IRA. With a Roth IRA, you will always have the opportunity to qualify for a
permanent tax exemption of your IRA earnings. Even if you don't qualify for a
permanent tax exemption (for example, because you do not leave your money in the
Roth IRA for at least five years), you will still enjoy the same benefit of tax-
deferred growth that you would have received with a Traditional IRA.

If you qualify for deductible contributions to a Traditional IRA, the
choice is not quite as simple, because the tax deduction for contributions to a
Traditional IRA will

6
<PAGE>

reduce your current taxes and make it easier to make the contribution. However,
if you plan to leave your money in your IRA until retirement, you should still
strongly consider choosing a Roth IRA. Over the long term, the permanent tax
exemption of your Roth IRA earnings, if you qualify, will probably be worth more
in total tax savings than the deduction of your initial contribution.

If you have a pre-existing Traditional IRA, you may even want to consider
converting it into a Roth IRA, if you are eligible. Even though you will have to
pay current taxes on the amount that you convert, there are potential long-term
tax savings that may make this a worthwhile investment decision, particularly if
you do so in 1998. See Moving Funds from Another IRA or Qualified Plan to an
Acorn IRA for instructions.

Of course, Acorn cannot provide you with legal or tax advice, and there may
be reasons why, in your specific circumstances, a Traditional IRA is better than
a Roth IRA. You should always consult a qualified tax adviser before choosing
between different types of IRAs.

Opening a new Acorn Traditional IRA or Roth 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
IRA contribution in one fund, or you may divide your contributions among the
funds as you choose, provided that you satisfy the minimum investment
requirements.

To open a new Acorn Traditional IRA or Roth IRA, complete the Acorn IRA
Application. The instructions attached to the IRA Application will guide you in
its completion.

If you are transferring or rolling over an IRA to an Acorn IRA, see Moving
Funds from Another IRA or Qualified Plan to an Acorn IRA for instructions.

SEP-IRA

If you have any income from self-employment, an IRA under a Simplified
Employee Pension (SEP-IRA) may be an attractive way to save for your retirement,
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 an 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 an SEP-IRA for yourself and your eligible employees.

An SEP-IRA offers the same benefit of tax-deferred compounding that is
available with a Traditional IRA, while allowing annual contributions of up to
15% of earned income within the limits imposed by the IRS. In addition to tax-
deferred compounding, an SEP-IRA provides full deductibility of each annual
contribution from current taxable income. If your business is incorporated, this
means that you can deduct SEP-IRA contributions for yourself and any eligible
employees as a business expense. 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.

To establish an SEP-IRA, you must complete a simple information form (Form
5305-SEP, available from the IRS) and distribute copies of the form to all
eligible employees. Each eligible employee must also open an SEP-IRA, using the
IRA Application. 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

7
<PAGE>

.Types of Individual Retirement Accounts, continued

(c) have earned at least $400 in 1997 or 1998 (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. 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 Traditional or Roth 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.

Opening a new Acorn SEP-IRA

To open a new Acorn SEP-IRA, complete the Acorn IRA Application. The
instructions attached to the IRA Application will guide you in its completion.

If you have employees for whom you are establishing SEP-IRAs, please write
a separate check for your contribution for each employee, and each employee must
also open an SEP-IRA. You should also complete 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.

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. Please consult your tax adviser to determine if this applies to
you.

If you are transferring or rolling over an SEP-IRA to an Acorn SEP-IRA, see
Moving Funds from Another IRA or Qualified Plan to an Acorn IRA for
instructions.

SIMPLE-IRA

A SIMPLE-IRA is a type of individual retirement account that became available
for the first time in 1997. A SIMPLE-IRA is very similar to an SEP-IRA in that
it is established by an employer for the benefit of employees. The employer
contributes pre-tax money directly to the IRA, and each eligible employee can
generally elect to have up to $6,000 per year of his or her compensation
contributed. The employer must generally make a matching contribution to the IRA
equal to the amount that the employee elects to defer, up to a maximum of 3% of
compensation, although there are exceptions to this rule. In general, an
employer can establish a SIMPLE-IRA in any year in which it has no more than 100
eligible employees and does not maintain any other tax-qualified pension or
profit-sharing plan (other than a frozen plan).

The Acorn IRA Application and Transfer Form cannot be used to open a
SIMPLE-IRA. If you are interested in establishing a SIMPLE-IRA with the Acorn
Family of Funds, please call a shareholder service representative toll-free at
1-800-962-1585 for the necessary forms.

Education IRA

The Education IRA is a new type of IRA, available for the first time in 1998.
This savings vehicle offers the benefits of tax-deferred or tax-exempt growth of
funds that are used for a minor's future college tuition and expenses.

An Education IRA may be opened to pay for future college tuition and
expenses for a child, grandchild, niece or nephew, or anyone else who is under
the age of 18. The

8
<PAGE>

maximum contribution for each beneficiary (i.e., the minor named on the account)
is $500 per year, no matter how many different persons contribute to the
Education IRA. In addition, the same adjusted gross income limitations that
determine eligibility to contribute to a Roth IRA apply to any contributions to
an Education IRA (some minor differences apply -- see the Disclosure Statement
in this booklet for details). Refer to the same formula used to find your
maximum allowable contribution to a Roth IRA on page 6 to help you determine
your maximum allowable contribution to an Education IRA.

.Example: Suppose you are single, have adjusted gross income of $102,500 in
1998, and wish to make a contribution to an Education IRA for your niece. As
described in the example under "Roth IRA" on page 6, you would be eligible to
contribute .5 X $2,000, or $1,000 to a Roth IRA. To determine your maximum
allowable contribution to an Education IRA, you would use the same factor (.5)
and multiply it by the maximum limitation for an Education IRA contribution, or
$500. Thus, in this example, you would be able to contribute a total of .5 X
$500, or $250 to an Education IRA for your niece. Anyone else who met the income
requirements could contribute the other $250 to your niece's Education IRA.
There is no limit to the number of Education IRAs to which you can contribute
for different beneficiaries, so you could also contribute up to $250 to
Education IRAs for your nephew, child, or any other beneficiary.

Contributions to Education IRAs are not tax-deductible. However, any amount
that a beneficiary withdraws from his or her Education IRA to pay for qualified
education expenses before the beneficiary reaches the age of 30 is completely
tax exempt, including earnings. If the beneficiary uses a withdrawal from an
Education IRA for anything other than to pay for education expenses, the
earnings portion is subject to tax and may also be subject to a 10% penalty tax,
unless the beneficiary has died, become disabled, or received a scholarship
which makes use of the Education IRA unnecessary. The beneficiary must withdraw
the balance in his or her Education IRA upon reaching the age of 30. Amounts
that are not used by the initial beneficiary for a college education can be
rolled over to an Education IRA for other members of his or her family.

.Important: The 1997 Tax Act also created other tax incentives for saving for
higher education, some of which may be incompatible with the use of an Education
IRA. The Act authorized states to maintain "qualified tuition programs," under
which one can contribute to a state-run program and purchase tuition credits in
advance. If one makes contributions to both a state-run qualified tuition
program and an Education IRA in the same year for the same beneficiary, a 6%
penalty tax may apply.

Opening a new Acorn Education IRA

To open an Acorn Education IRA, complete the separate Education IRA Application.
Since the beneficiary of an Education IRA must be under 18 years of age (by
definition, a minor), a contributor to the IRA must name himself/herself or
another adult as custodian for the beneficiary under a Uniform Gift to Minors or
Uniform Transfer to Minors Act.

9
<PAGE>

.IRA Summary

Type of IRA Who May Contribute Tax Benefit Maximum Contribution
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Traditional IRA Anyone with earned income Tax deduction for The lesser of $2,000 or
qualifying investors 100% of earned income

Tax-deferred growth ($4,000 for married couples
of earnings filing jointly)

- --------------------------------------------------------------------------------------------------------------
Roth IRA Singles with income Permanent tax exemption Up to $2,000 ($4,000 for
less than $110,000 of earnings for qualified married couples), depending
distributions on income level. (See Roth
IRA section for details.)

Married couples with income Tax-deferred growth of earnings
less than $160,000 in any case

- --------------------------------------------------------------------------------------------------------------
SEP-IRA Self-employed individuals, Tax-deferred growth Up to the lessor of 15%
small business owners of earnings of earned income or $24,000

Tax deduction

- --------------------------------------------------------------------------------------------------------------
SIMPLE-IRA Small business owners Pre-tax contributions; Up to $6,000 of employee's
(100 employees) tax-deferred earnings compensation; employer matches
up to 3% of compensation

- --------------------------------------------------------------------------------------------------------------
Education IRA Singles with income Permanent tax exemption Up to $500 per minor
less than $110,000 of earnings used for college beneficiary depending on
tuition and expenses income level of donor.
Married couples with income (See Education IRA section
less than $160,000 Tax-deferred earnings if for details.)
not used for education
expenses
</TABLE>

10
<PAGE>

.Moving Funds from Another IRA or Qualified Plan

You may move funds from other IRA custodians or qualified plans to an Acorn IRA
in three ways:

. direct transfer (custodian-to-custodian or trustee-to-trustee),

. 60-day rollover of a distribution you have received from a qualified plan or
money you have withdrawn from another IRA, or

. direct rollover of a distribution from your employer's qualified retirement
plan.

Direct Transfer

The Acorn Family of Funds can arrange a direct transfer of assets from your
current IRA custodian or trustee to a new or existing IRA with Acorn. With a
direct transfer, you do not physically receive the account proceeds during the
transfer process. Your money goes directly from your old IRA custodian to the
Acorn funds. You may make direct transfers between IRAs as often as you choose.

To make a direct transfer from your current IRA custodian or trustee into a
new Acorn IRA, complete both the Transfer Form (checking the box for a new Acorn
IRA) and the IRA Application (checking the box for a Direct Transfer of an
Existing IRA). If the money you are transferring will be invested in an existing
Acorn IRA, you must complete only the Transfer Form.

The Transfer Form tells Acorn about the IRA assets you are transferring and
provides information about your current custodian. You should find this
information on your most recent account statement. Complete the instructions
authorizing your current custodian to transfer your account to the Acorn Family
of Funds and sign the Transfer Form. Please check with your present custodian to
determine whether you will need to obtain a signature guarantee.

Send the completed IRA Application (for a new account) and Transfer Form to
State Street Bank in the envelope provided with your Acorn IRA investment kit,
or to the address shown on the IRA Application. Upon receipt of these forms,
Acorn will contact your present custodian and arrange for the direct transfer of
assets.

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 another IRA within 60 days to avoid
paying income tax. This is called an IRA Rollover. If you do not roll over the
funds 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 an Acorn IRA with money you have physically withdrawn from
another IRA, complete the Acorn IRA Application, checking the appropriate box
for a 60-day rollover. Be sure to forward your check in time for the funds to be
received by State Street Bank no later than 60 days from the date of your
original IRA distribution.

Rollovers Between Traditional and Roth IRAs

In general, you can only make tax-free transfers, whether by direct rollover or
60-day rollover, between two IRAs of the same kind -- i.e., only from one
Traditional or SEP-IRA to another, or from one Roth IRA to another. However, you
can transfer or roll over money from a Traditional IRA to a Roth IRA, provided
that your adjusted gross income for the year (before the transfer) does not
exceed $100,000. (The same $100,000 limit applies to both single taxpayers and
married taxpayers filing joint returns. Married taxpayers filing single returns
are not eligible.)

When you transfer funds from a Traditional IRA to a Roth IRA, you will have
to pay tax on the money that you transfer. However, you will not have to pay the
10% penalty tax that normally applies to distributions from an IRA before the
age of 59 1/2. Furthermore, if you leave the money in the Roth IRA for at least
five years, any additional income you earn in the Roth IRA may become
permanently tax-exempt, as discussed earlier in this booklet. (See Roth
IRAsection.)

There is a special added incentive for transferring money from a
Traditional IRA to a Roth IRA during 1998. For transfers in 1998 only, you can
spread the tax on the amount that is transferred out of the Traditional IRA over

11
<PAGE>

.Moving Funds from Another IRA or Qualified Plan, continued

four years. In other words, you will only have to pay tax on one-fourth of the
income in each of the years from 1998 through 2001. Beginning in 1999, you will
have to pay the entire tax in the year of the transfer. (If you wish to take
advantage of this for an existing Acorn Traditional IRA, you don't need a
Transfer Form. Just complete a new IRA Application, checking the box for
Conversion of an Existing IRA, and fill in the existing IRA account number and
the amount you wish to convert.)

Rollover from an Employer-Sponsored Qualified Plan to an Acorn IRA

Participants in employer-sponsored qualified retirement plans who are eligible
for a distribution from the plan because of a job change, a lay-off, disability,
retirement, or termination of the plan, must decide what to do with their
retirement plan money before receiving the distribution. Some participants are
eligible to leave their money in their current plan. If a participant is not
eligible or does not choose to leave his or her money in the current plan, he or
she has two main alternatives:

. take the distribution now -- subject to the applicable taxes and penalties, or

. roll over the amount distributed and keep the money working as a tax-deferred
investment.

If the plan participant chooses the first alternative -- to take the
distribution now -- his or her employer must withhold 20% of the distribution
for federal income taxes, even if the participant is planning to make a 60-day
rollover. Therefore, the participant will only receive 80% of the full amount to
be distributed. The participant may also be responsible for

. additional federal income tax (depending on his or her tax bracket),

. a penalty tax of 10% for an early withdrawal if he or she is not yet 59 1/2
(subject to exceptions if the participant is disabled, spends the distribution
on certain qualified medical expenses or health insurance, or had separated from
service and is at least age 55), and

. state and local income taxes (depending on the state of residence).

If the participant chooses the second alternative -- to reinvest the amount
distributed -- however, he or she must also choose between the following:

. use a direct rollover to invest the money in a Rollover IRA,

. use a 60-day rollover to invest the money in a Rollover IRA, or

. roll over the distribution into a qualified plan sponsored by a new employer
(if the new plan accepts rollovers).

Important: A Rollover IRA is classified as a Traditional IRA. You cannot roll
over funds from an employer-sponsored plan to a Roth IRA. However, under current
law, you can roll over funds to a Rollover IRA and then convert the Rollover IRA
into a Roth IRA, if you are otherwise eligible to convert a Traditional IRA into
a Roth IRA.

Direct Rollover

If you choose to reinvest your qualified money in a Rollover IRA, a direct
rollover is usually better than a 60-day rollover. With a direct rollover, you
never physically receive the distribution (it is sent directly from the plan to
the new IRA custodian, or the plan gives you a check made payable to the new IRA
custodian). Because a direct rollover is not treated as a distribution to you,
your employer is not required to withhold the 20% tax.

To establish an Acorn IRA via a direct rollover, complete the enclosed IRA
Application, checking the box for a Rollover IRA from an employer-sponsored
plan. Also, check the appropriate box to indicate whether you are enclosing a
check made payable to State Street Bank and Trust (SSB&T) or whether your
employer will be sending a check directly to SSB&T. If your plan administrator
gives you a check made payable to SSB&T, send that check along with the
completed application in the envelope provided with this investment kit, or to
the address on the application. If your plan administrator plans to send a check
directly to SSB&T, send the completed application without the check. We will
open the account and have it ready to accept your distribution check. Some plan
administrators require your new Acorn Rollover IRA account number before they
will

12
<PAGE>

send the check to Acorn. Call a shareholder services representative toll-free at
1-800-922-6769 to obtain this information.

60-Day Rollover from a Qualified Plan

If you have already physically received a distribution from your qualified plan,
your employer has already withheld 20% of your total distribution for taxes.
However, you can still make a 60-day rollover.

With 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 may also choose to
roll over part of your distribution and keep part, paying income tax and any
applicable penalties on the part you keep. If you roll over 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 adding back (from your personal
funds) the 20% amount that was withheld for tax. The 20% that was withheld is
treated like any other withheld income tax. That is, you will receive a refund
if the sum of the total amount of tax withheld from you (including regular
paycheck withholding as well as the 20% withheld from your distribution) and the
estimated income tax payments you make exceeds your tax liability when you file
your return.

If you receive a distribution of property (such as shares of stock) from
your employer-sponsored plan, you can make a 60-day rollover by selling the
property and depositing the sale proceeds into a Rollover IRA 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 personal funds to complete the rollover, in the same way you can
make up the 20% tax withholding.

Rollover from a Tax-Sheltered Annuity

Some tax-exempt or government employers sponsor "tax-sheltered annuities," also
called "403(b) plans" for their employees. You may also transfer lump sum
distributions from a tax-sheltered annuity to a Rollover IRA, either by direct
rollover or 60-day rollover, under the same rules described above. You should
not mix funds from a qualified plan and a tax-sheltered annuity in the same
Rollover IRA.

13
<PAGE>

. Moving Funds from Another IRA or Qualified Plan, continued

The following chart summarizes the key features of each alternative for
reinvesting a distribution from an 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 . choices vary from plan to plan; check with
money out at any time your new employer

. earnings taxed when withdrawn; . earnings taxed when withdrawn; 10%
10% penalty applies if younger penalty applies if younger than 59 1/2
than 59 1/2, unless disabled or or separated from service before age 55
for certain health, education unless disabled or for certain
or home purchase expenses medical expenses

. no mandatory 20% withholding for . 20% withholding for federal income taxes
federal income taxes on if withdrawal of eligible rollover
withdrawals distributions not rolled over into another plan

- -------------------------------------------------------------------------------------------------------------------
Other Features . very easy to set up . can add future contributions to your plan

. can switch between your . enables you to consolidate your retirement
Acorn investments tax-free as plan money
your needs and the market changes

. offers you easy access to . may be able to borrow from your account
your investments

. borrowing not permitted
</TABLE>

. Important: If you invest the distribution from your employer-sponsored plan
into the same IRA that contains Traditional IRA (annual contributions) money,
you forfeit the right to reinvest your plan distribution into another employer's
qualified plan in the future. Because combining Traditional 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 Traditional IRA investments.

14
<PAGE>

.Making Withdrawals from Your Acorn IRA

You must begin withdrawing money from your IRA (other than a Roth 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. You must complete an Acorn IRA
Withdrawal Request form to make a withdrawal from your IRA or to establish a
regular withdrawal plan. To obtain this form, or if you have any questions about
making a withdrawal from your IRA, call an Acorn shareholder services
representative toll-free at 1-800-962-1585. (As noted earlier, different rules
apply to withdrawals from an Education IRA.)

.Account Fees

State Street Bank & Trust (SSB&T), as Custodian for the Acorn IRA plan, charges
the following fees for an Acorn IRA:

<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
Initial set-up fee: $5.00 per fund
- --------------------------------------------------------------------------------
Annual maintenance fee: $10.00 per fund
- --------------------------------------------------------------------------------
Disbursement fee: $10.00 per withdrawal
(except for automatic installment payments)
</TABLE>

SSB&T will deduct the $5.00 set-up fee 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 check
(or send a separate check for the set-up fee). SSB&T will also withdraw the
annual maintenance fee from your account unless you send a check for that fee
when you receive Acorn's annual fee statement each November. If the disbursement
fee applies, SSB&T will deduct the $10.00 from each withdrawal.

<TABLE>
<S> <C>
Minimum Investments
To open an IRA
(excluding Education IRAs) $1,000
To open an Education IRA $ 500
To add to an IRA $ 100
</TABLE>

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.

<PAGE>

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 Family of Funds
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.

I. 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 individualOs
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,
as follows: (1) a "Traditional IRA" to which you may make contributions for
yourself or for your spouse, which may be partially or fully tax-deductible, as
described below; (2) beginning in 1998, a "Roth IRA" to which you may also make
nondeductible annual contributions, and the distributions from which may be
excludible from your taxable income; (3) a "Rollover IRA" which you can
establish to receive assets from a qualified plan, annuity or another IRA; (4)
an "SEP-IRA" (which is also known as a Simplified Employee Pension) which your
employer can establish for you; (5) a "SIMPLE-IRA" (also known as a Salary
Incentive Match Plan IRA) which an employer can use for a salary reduction plan;
and (6) beginning in 1998, an "Education IRA" which can allow you to make
contributions for the benefit of children under the age of 18 to be used for
their college education. The following is a general description of the rules
which apply to each of these types of IRAs and who is eligible to establish
them.

A. Traditional IRAs. 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 that 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.

Your spouse may also establish and contribute to an IRA, even if he or she
has less than $2,000 in compensation for the year, provided that you and your
spouse file a joint income tax return for the year. Under such an arrangement,
you and your spouse may qualify for a total deduction equal to the lesser of
$4,000 or 100% of your combined 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 spouseOs IRA if he or she has not reached 70 1/2. 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.

B. Roth IRAs. In general, the same limits that apply to contributions to
Traditional IRAs also apply to Roth IRAs, with the fol-

<PAGE>

lowing differences. First, Roth IRAs are only available beginning in 1998, so a
contribution cannot be made to a Roth IRA that relates to 1997, even if it is
made before April 15, 1998. Second, you can make a contribution to a Roth IRA
even after you have attained the age of 70 1/2. Third, only taxpayers whose
adjusted gross income is below certain levels are eligible to contribute to a
Roth IRA. A single taxpayer can make a full $2,000 contribution in a year if his
adjusted gross income is not more than $95,000. Married taxpayers who file a
joint return can make a full $4,000 contribution if their combined adjusted
gross income is not more than $150,000. Partial contributions are permitted for
a single taxpayer whose adjusted gross income is between $95,000 and $110,000,
or for married taxpayers who file a joint return and whose adjusted gross income
is between $150,000 and $160,000. A married taxpayer who files an individual
return can make a partial contribution if his/her adjusted taxable income is
less than $15,000. These partial contributions are calculated in the same manner
as the limitation on the deductibility of contributions to a Traditional IRA,
including the adjustments to adjusted gross income, as described under
Contributions--Deductible Contributions on page 20.

A single $2,000 limit ($4,000 for married taxpayers filing joint returns)
applies to contributions to both Traditional IRAs and Roth IRAs. Thus, a single
taxpayer who is otherwise eligible to contribute to both a Traditional IRA and a
Roth IRA can contribute a total of $2,000, which he or she can divide between
the Traditional and the Roth IRA in any manner. A married couple filing a joint
return can similarly divide their maximum $4,000 total contribution between
Traditional and Roth IRAs. These rules apply regardless of whether the
contributions to the Traditional IRA are deductible.

C. Rollover IRAs. All or a portion of certain distributions from qualified
retirement plans, annuities and other IRAs may be "rolled over" tax-free without
regard to the limits on annual contributions to an IRA, but no deduction is
allowed with respect to such a contribution. There are three basic types of
rollovers: rollovers from a qualified pension or profit-sharing plan, rollovers
from another IRA, and rollovers from a tax-sheltered annuity. All distributions
must be rolled over within 60 days after you receive the distribution to receive
tax-free treatment.

From a Qualified Plan. In general, you may roll over to a Traditional IRA any
portion of a distribution that you receive from a qualified employer-sponsored
pension or profit-sharing plan (including a 401(k) plan), except that you cannot
roll over (1) one of a series of substantially equal periodic payments (such as
an annuity), (2) a minimum distribution required to be made after you reach the
age of 70 1/2, or (3) the portion of a distribution that represents the return
of your own after-tax contributions. If you receive a distribution of property
rather than cash, you can sell the property and roll over the sale proceeds, as
long as you complete the rollover within 60 days from the original date of
distribution.

If you make a rollover from a qualified employer plan to an IRA, you may in
turn, under certain circumstances, make a rollover from the IRA into the
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. (A law now pending in Congress would prevent you from
rolling over a hardship distribution from a 401(k) plan.)

Instead of receiving a distribution from a qualified plan and rolling it
over, you may also direct the trustee or custodian of any qualified retirement
plan to transfer a distribution from the plan directly to an IRA. If a
distribution from a plan can be rolled over, the plan is required by law to
transfer the distribution directly to an IRA, or another employer's plan, if you
so direct. If you do not direct the distribution to be transferred directly to
an IRA or another plan, the plan making the distribution will be required to
withhold 20% of the distribution for the payment of income taxes, even if you
subsequently roll over the distribution.

Rollover amounts you receive from a qualified employer plan may not be
deposited in your spouse's IRA, but if you should die while still a participant
in a qualified plan, in certain cases your spouse may be allowed to make a tax-
free rollover to an IRA. 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. Beneficiaries other than a spouse are not allowed to
roll over distributions they receive after your death.

Money from an employer plan cannot be rolled over into a Roth IRA, but you
may be eligible to convert a Rollover IRA into a Roth IRA.

<PAGE>

.IRA Disclosure Statement, continued

From Another IRA. In general, any distribution or withdrawal that you receive
from an IRA can be rolled over into another IRA within 60 days, except that (1)
you cannot roll over the minimum distributions you are required to receive after
age 70 1/2, (2) you can only make a rollover from one IRA to another once in any
twelve-month period, (3) a distribution from a SIMPLE-IRA that is made within
the first two years after you first begin to participate in the SIMPLE-IRA can
only be rolled over to another SIMPLE-IRA, and (4) special rules apply to
rollovers to and from Roth IRAs and Education IRAs as described below. You may
also request the trustee or custodian of an IRA to make a direct transfer to the
trustee or custodian of another IRA. Such direct transfers are not limited to
one per twelve-month period. Unlike the trustees of qualified retirement plans,
trustees of IRAs are not legally required to make direct transfers, but most of
them do. Your spouse may generally roll over distributions that he or she
receives from your IRA after your death, but no beneficiaries other than your
spouse may do so.

Tax Sheltered Annuities. Tax-sheltered annuity plans, sometimes called "403(b)
plans", are retirement benefits offered by certain governmental and not-for-
profit employers, such as schools and hospitals. If you receive a distribution
from a tax-sheltered annuity plan other than in the form of an annuity, it may
generally be rolled over into an IRA under rules similar to those that apply to
distributions from qualified employer plans, as described above. As with a
rollover distribution from an employer plan, you should keep a rollover from a
tax-sheltered annuity plan in a separate IRA account and not make any other
contributions to it (including rollovers from other types of plans) if you wish
to preserve the right to roll it over to another tax-sheltered annuity plan in
the future. Distributions from other types of governmental retirement plans may
or may not be eligible for a rollover depending on whether the employer has
chosen to comply with IRS guidelines. Distributions from voluntary deferred
compensation plans maintained by government and not-for-profit employers,
sometimes known as "Section 457 plans", are not eligible for a rollover to an
IRA.

Rollovers to and from Roth IRAs. The rules described above generally apply to
rollovers to any type of IRA other than a Roth IRA, regardless of whether it was
originally established as a Rollover IRA or as a Traditional IRA, SEP-IRA, or
SIMPLE-IRA. Generally speaking, tax-free rollovers to a Roth IRA can only be
made from another Roth IRA, and a distribution from a Roth IRA can only be
rolled over to another Roth IRA. However, you can roll over a distribution from
a Traditional IRA (or any other type of IRA that is not a Roth IRA) to a Roth
IRA, provided that your adjusted gross income for the year (determined prior to
the rollover) does not exceed $100,000. The same $100,000 limit applies to both
single taxpayers and married taxpayers filing joint returns; a married taxpayer
who files a separate return cannot roll over a distribution from a non-Roth IRA
into a Roth IRA. A rollover from a non-Roth IRA to a Roth IRA is not tax-free;
the owner of the non-Roth IRA must include the distribution in taxable income as
if it were not rolled over. However, if a rollover is made in 1998, one-fourth
of the distribution is included in income in the years 1998 through 2001. After
1998, the entire amount must be included in income in the year received. In
addition, rollovers from a non-Roth IRA into a Roth IRA are not subject to the
10% penalty tax described below, and are not taken into account in determining
the taxpayer's eligibility to make annual contributions to the Roth IRA.

Education IRAs. Rollovers and direct transfers to and from an Education IRA can
only be made to or from another Education IRA. A 60-day rollover can only be
made once in every twelve months, as with other 60-day rollovers between IRAs. A
rollover from an Education IRA for one beneficiary can be made either to another
Education IRA for the same beneficiary, or for a member of the same
beneficiary's family. For this purpose, the beneficiary's family includes his or
her spouse or ancestors, any lineal descendant of the beneficiary or his or her
spouse or parents, or any spouse of such a descendant. At this point it is not
clear whether a rollover can be made to an Education IRA for a beneficiary
(whether the original beneficiary or a member of his family) who is over the age
of 18. However, changing the beneficiary on an Education IRA from the original
beneficiary to a member of his or her family is not considered a distribution,
and is not subject to the limitation on rollovers.

Strict requirements must be met to qualify for tax-free rollover treatment.
You should consult your personal tax adviser regarding rollovers to and from
your IRA.

D. Simplified Employee Pension (SEP-IRAs). An employer may adopt an 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

<PAGE>

contribution) or $24,000 (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. You may also be able to elect to have your salary reduced
by up to $9,500 for 1997 or $10,000 for 1998 (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, but only if prior to 1997 your employer had
established a special type of SEP-IRA (called a SAR-SEP) that permitted such
elections. SAR-SEPs were replaced in 1997 by SIMPLE-IRAs (discussed below), and
new SAR-SEPs are not permitted. To establish an SEP-IRA, your employer must sign
an 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 an
SEP-IRA for your own benefit, but you may also have to cover any other employees
you have.

E. Salary Incentive Match Plan (SIMPLE-IRAs). Before 1997, employers with up to
25 eligible employees could allow employees to elect to have a portion of their
pay withheld and contributed to a special type of SEP-IRA, called a "salary
reduction SEP", or SAR-SEP. SAR-SEPs were abolished in 1997, and a new type of
IRA, called a SIMPLE-IRA, has been established instead. Although new SAR-SEPs
can no longer be established, SAR-SEPs that were in existence on December 31,
1996, can remain in existence and continue to receive contributions in future
years, including contributions for new employees. Employers with up to 100
eligible employees can establish SIMPLE-IRAs. In a SIMPLE-IRA, you can elect to
have up to $6,000 of your compensation in any year withheld and deposited into
an IRA, and your employer must generally make an additional contribution to
match the amount that you have withheld, up to a maximum of 3% of your
compensation. The employer may elect to lower the maximum matching contribution
to as low as 1% in some years, but may not lower the maximum match in more than
two years out of every five. The employer may also elect to make a contribution
equal to 2% of compensation for all eligible employees in any year instead of
making matching contributions. All employees who have been paid at least $5,000
in two prior years and expect to be paid $5,000 in the current year are eligible
to participate (excluding nonresident aliens and union workers whose collective
bargaining agreement does not provide for them to participate). SIMPLE-IRAs are
otherwise very similar to SEP-IRAs.

If you wish to establish a SIMPLE-IRA for your employees, you must give all
eligible employees notice of their right to elect to defer part of their
compensation, and comply with certain other notice requirements. The Acorn IRA
Application and Transfer Form cannot be used to establish a SIMPLE-IRA. Call 1-
800-962-1585 to request the necessary forms.

F. Education IRAs.

Beginning in 1998, you may establish an Education IRA for any beneficiary who is
under the age of 18. The beneficiary does not have to be a member of your
family. The maximum amount that can be contributed to an Education IRA by all
contributors for any year, up to and including the year in which the beneficiary
reaches the age of 18, is $500. After the beneficiary reaches age 18, no more
contributions may be made.

In addition to the $500 per beneficiary limitation, the maximum amount that
a donor can contribute to any one Education IRA in any year is limited by the
donor's adjusted gross income. These limits are basically the same that apply to
contributions to a Roth IRA. Thus, a single donor whose adjusted gross income
does not exceed $95,000 can contribute the full $500, and the amount that a
single donor can contribute is reduced proportionately until the donor's
adjusted gross income reaches $110,000. A married couple filing a joint return
can make a full $500 contribution if their adjusted gross income does not exceed
$150,000, which is proportionately reduced until their adjusted gross income
reaches $160,000. There are two differences between the computation of the
limitation on contributions to Roth IRAs and contributions to Education IRAs.
First, the definition of adjusted gross income is slightly different. For
purposes of contributing to an Education IRA, the only adjustments to adjusted
gross income as shown on the donor's tax return is that income which is exempt
from tax because it is earned while one lives outside of the United States, or
which is derived from certain US territories or Puerto Rico, is counted as part
of adjusted gross income. Second, it appears that married taxpayers who file
separate returns can contribute to an

<PAGE>

.IRA Disclosure Statement, continued

Education IRA on the same basis as single taxpayers.

The rules governing Education IRAs are very different from the rules
governing other types of IRAs. In reading this Disclosure Statement, you should
not assume that any of the general discussion of IRAs applies to Education IRAs
unless it is specifically so stated.

II. Contributions

In General. As explained in this part, the amount of your contributions to a
Traditional IRA that you can deduct is subject to limits. All contributions and
transfers to your Acorn IRA must be in cash. Contributions to your or your
spouse's Traditional or Roth 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. Under present law, contributions to an Education IRA must be made by the
end of the year.

Contributions made by an employer to your SEP-IRA or SIMPLE-IRA for a
calendar year may be made no later than the due date of your employer's tax
return (including extensions). In making an SEP-IRA or SIMPLE-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 an SEP-IRA
or SIMPLE-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 Traditional 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 Traditional IRA contribution provided that 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 and SIMPLE-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 commonly
known as "Section 457 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 a Traditional 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 for
1997 contributions is $25,000 for single people and $45,000 for married couples
filing a joint tax return if either spouse is an active participant. For 1998
contributions, the applicable dollar amounts are increased to $30,000 for single
people and $50,000 for married couples if the spouse who is making the
contribution is an active participant. These applicable dollar amounts are
increased by an additional $1,000 for each year from 1999 through 2002.
Beginning in 1998, if the spouse making the contribution is not an active
participant, but the other spouse is an active participant, the applicable
dollar amount for the spouse who is not an active participant is $150,000. For
both years, the applicable dollar amount for married individuals who file
separate tax returns is $0, unless they live apart for the entire year, in which
case the applicable dollar amount is the same as for single individuals.

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 Traditional IRA. Next,
subtract the applicable dollar amount from your adjusted gross income. If you
are single and your adjusted gross income for 1998 is $35,000, the difference

<PAGE>

would be $5,000. Next, divide this difference by $10,000. In this example,
$5,000/$10,000 equals 50%. Accordingly, the maximum contribution to a
Traditional IRA that 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 $40,000 if you are
single, $60,000 if you are married and an active participant, or $160,000, if
you are married to an active participant, you can deduct $200 regardless of how
the computation comes out. (These amounts apply to 1998 contributions. For 1997
contributions, substitute $35,000 for single individuals and $50,000 for married
individuals regardless of which spouse is the active participant.) After 1998,
increase each limit (other than the $160,000 limit) by $1,000 per year.

For this purpose, your "adjusted gross income" is the amount shown on the
appropriate line of your tax return (line 31 of your 1997 Form 1040 or line 16
of your Form 1040A), before you deduct your Traditional IRA contribution, plus
the following amounts that are tax-exempt: the proceeds of any US savings bonds
that you cash in to pay college expenses, any adoption expenses paid by your
employer, and amounts paid to you while working outside the US. 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 Traditional 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 Form 8606, or $100 if you overstate the
amount of your nondeductible contributions.

Contributions to a Roth IRA or Education IRA are not deductible under any
circumstances.

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 Reich & Tang Asset Management, 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
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

Distributions 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 (except from a Roth IRA) 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

21
<PAGE>

>IRA Disclosure Statement, continued

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 adviser 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 a qualified tax adviser 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 instructions 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 1 following the
year in which you reach age 70 1/2, the balance of your IRA (other than a Roth
IRA) must be distributed to your designated beneficiary at least as rapidly as
under the method of distribution in effect before your death.

If you die before the April 1 following the year in which you reach age
70 1/2, the entire balance of the account (including a Roth IRA) must be
distributed by December 31 of the year in which the 5th anniversary of your
death occurs. This rule also applies to a Roth IRA, regardless of your age at
death. 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
from a Traditional IRA 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 either a Traditional or Roth IRA (or the
remaining part of such interest, if distribution has already begun) as his or
her own IRA subject to the normal 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.

Distributions from an Education IRA.

Distributions from an Education IRA are not subject to the rules described
above. The entire remaining balance in an Education IRA must be distributed not
later than the date on which the beneficiary attains the age of 30, or within 30
days after the death of the beneficiary. However, as described above, such a
distribution can be rolled over to an Education IRA for a member of the
beneficiary's family.

V. Income and Penalty Taxes

Income Tax Treatment of IRAs. Income tax on deductible IRA contributions and
earnings on both deductible and nondeductible IRA contributions are 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 deter-

22
<PAGE>

mined 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.

Nontaxable Distributions from Roth IRAs.

Unlike most IRAs, "qualified distributions" from a Roth IRA are not subject to
tax at all, either on the original contribution or on any accumulated income. In
order to be a "qualified distribution", a distribution from a Roth IRA (1) may
not be made until after the end of the fifth year beginning with the first year
in which either you or your spouse first make a contribution to a Roth IRA, and
(2) must either be made after you attain the age of 59 1/2, after you have
become permanently disabled, to your beneficiary after your death, or must be
used to pay qualified first time homebuyer expenses, as described in the section
on penalty taxes below. The five year requirement is generally satisfied five
years after you or your spouse make your first contribution to any Roth IRA,
even if it is not the same Roth IRA that you are receiving the distribution
from. However, if you make a taxable rollover from a Traditional IRA to a Roth
IRA, or convert a Traditional IRA into a Roth IRA, the five year rule applies
separately to the amount that you roll over or convert. If you receive
distributions from a Roth IRA that are not qualified distributions, such
distributions will first be treated as nontaxable returns of your contributions,
and the excess will be taxed as ordinary income.

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. If you receive a distribution from a SIMPLE-IRA
during the first two years after you begin to participate, the penalty tax is
25% rather than 10%. 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 penalty
also will not apply if the distribution is made due to your permanent disability
or death; 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; or if the total amount of
distributions you receive during a year do not exceed the sum of the following:
(1) the amount of tax-deductible medical expenses you incur during the year (or
the amount that you could deduct if you itemized your deductions); (2) the
amount of medical insurance premiums that you pay after you have been receiving
unemployment compensation for at least 12 weeks, provided that you don't receive
the distribution after you have been re-employed for at least 60 days; (3) the
amount that you pay for "qualified higher education expenses" (as defined under
Special Rules for Education IRAs on the following page) for you, your spouse, or
your children or grandchildren; and (4) "qualified first time homebuyer
expenses." A "qualified first time homebuyer expense" is any amount that you pay
(including settlement, financing and closing expenses) for the purchase or
construction of a principal residence for you, or one of your or your spouse's
children, grandchildren, or ancestors, provided that the person whose residence
is purchased or built (and his or her spouse) has not owned a principal
residence in the past two years. The total amount that you can treat as
qualified first-time homebuyer expenses during your lifetime (either for
purposes of avoiding tax on a distribution from a Roth IRA or avoiding the 10%
penalty on a premature distribution from a Traditional IRA) is $10,000. This
lifetime $10,000 limit applies to the person making the IRA withdrawal, not the
person who is buying or building the residence. Finally, the penalty does not
apply to the extent that the distribution is rolled over to another IRA or (if
permitted) qualified plan.

Special Rules for Education IRAs.

Distributions from an Education IRA, including the earnings, are

23
<PAGE>

>IRA Disclosure Statement, continued

not taxable to the extent that the distributions do not exceed the beneficiary's
"qualified higher education expenses" in the year of the distribution. Qualified
higher education expenses include amounts paid for tuition, fees, books,
supplies and equipment required for attendance at an accredited, post-secondary
educational institution offering credit toward a bachelor's degree, an
associate's degree, a graduate-level or professional degree, or other recognized
post-secondary credential. Certain proprietary and post-secondary vocational
institutions may also be eligible. A portion of room and board expenses may also
be eligible if the beneficiary is enrolled on at least a half-time basis. A
beneficiary who has any question as to whether the school that he or she is
attending qualifies, or the amount that may qualify for room and board expenses,
should contact the scholarship office of the school. Qualified higher education
expenses may also include amounts used to purchase tuition credits or
certificates under a qualified state tuition program. A beneficiary's "qualified
higher education expenses" for a year are reduced by any other scholarships,
government tuition assistance programs, or gifts that are used to pay education
expenses and are not included in the beneficiary's taxable income.

If any portion of the amount distributed from an Education IRA is not used
to pay qualified higher education expenses (and is not rolled over into another
Education IRA), the portion of the distribution that represents earnings of the
Education IRA is subject to tax. There is also a 10% penalty tax similar to the
one described above for distributions from other types of IRAs before age
59 1/2, on the taxable portion of the distribution. The penalty tax is waived if
the distribution is made because of the beneficiary's death or disability. In
addition, if the beneficiary receives any of the other types of scholarships or
educational assistance described in the preceding paragraph, and therefore does
not need the Education IRA for educational expenses, the 10% penalty tax is
waived to the extent of such other assistance received during the year. Finally,
a beneficiary may waive the right to exclude payments from income even though
they are used for qualified higher education expenses (which the beneficiary may
wish to do in order to qualify for other types of assistance), in which case the
10% penalty also does not apply.

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 you will also be subject to the previously mentioned
10% penalty tax on premature distributions if you do not qualify for one of the
exceptions. The law provides, however, that if an individual has made a
contribution (excluding rollover amounts) to an IRA for a year which does not
exceed the maximum deductible limit for the year, 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, with some special rules and
exceptions, to Roth IRAs, SEP-IRAs, SIMPLE-IRAs and Education IRAs as well as
Traditional IRAs. In the case of an Education IRA, the penalty tax also applies
if any amount is contributed to a qualified state tuition program for the same
beneficiary in the same year. 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 (includ-

24
<PAGE>

ing 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 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 from any type of IRA other than a Roth IRA or Education IRA 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 adviser to determine your minimum distribution. This excise tax may
also apply to any type of IRA, including a Roth IRA, 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.

Prohibited Transactions and Pledging Account Assets. If during any taxable year
you engage in a so-called "prohibited transaction" with respect to your IRA
(including an Education 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. The applicable 10%
(or 25%) penalty for premature distributions may also apply if you do not
qualify for one of the exceptions. 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 an SEP-IRA or SIMPLE-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. 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. Taxable 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. At present, no withholding is required on Education
IRAs.

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 pur-

25
<PAGE>
. IRA Disclosure Statement, continued

poses 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. The amount that you contribute to an Education IRA
for a beneficiary will generally be treated as a gift to that beneficiary when
the contribution is made, and no additional gift will occur when distributions
are paid to the beneficiary. The balance in an Education IRA will not be
included in your or the beneficiary's estate, unless it is distributed to the
beneficiary's estate or beneficiary following the beneficiary's death.

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 Traditional IRA
are not deductible for purposes of the social security (FICA) and self-
employment taxes. Contributions to an SEP-IRA by your employer are not subject
to social security tax unless you elected to reduce your current compensation to
receive the contributions under a SAR-SEP established prior to 1997. The amount
that you elect to defer under a SIMPLE-IRA is subject to social security tax,
but the contributions made by your employer are not. Contributions to an
Education IRA are not subject to social security or self-employment tax.

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 account, 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 November.

The Custodian may change any of the above fees from time to time.

IRS Approval Status. Acorn uses prototype Forms 5305-A, 5305-RA, and 5305-EA,
which have been promulgated and approved by the Internal Revenue Service, for
the establishment of Traditional, Roth and Education IRAs, respectively. The
approval of the IRS relates only to forms used and not to the merits of your
account or an investment in any of the Acorn funds. Further information
concerning IRAs can be obtained from any district office of the IRS.

January 1, 1998

26
<PAGE>

. Custodial Agreement for a Traditional or SEP-IRA

Form 5305-A
(Revised January 1998)
Department of the Treasury
Internal Revenue Service

Acorn Investment Trust
Custodial Agreement for a Traditional or SEP-IRA
(Under Section 408(a) of the Internal Revenue Code)
(January 1, 1998)

Article I

The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or an
employer contribution to a simplified employee pension plan as described in
section 408(k).

Article II

The Depositor's interest in the balance in the custodial account is
nonforfeitable.

Article III

1. No part of the custodial funds may be invested in life insurance contracts,
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)).

2. No part of the custodial funds may be invested in collectibles (within the
meaning of section 408(m)) except as otherwise permitted by section 408(m)(3),
which provides an exception for certain gold, silver, and platinum coins, coins
issued under the laws of any state, and certain bullion.

Article IV

1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be made
in accordance with the following requirements and shall otherwise comply with
section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.

2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under paragraph 3, or to the surviving spouse under paragraph 4,
other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the Depositor
and the surviving spouse and shall apply to all subsequent years. The life
expectancy of a non-spouse beneficiary may not be recalculated.

3. The Depositor's entire interest in the custodial account must be, or begin to
be, distributed by the Depositor's required beginning date, April 1 following
the calendar year end in which the Depositor reaches age 70 1/2. By that date,
the Depositor may elect, in a manner acceptable to the Custodian, to have the
balance in the custodial account distributed in:

(a) A single sum payment.

(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor.

(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of
the Depositor and his or her designated beneficiary.

(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.

(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy of
the Depositor and his or her designated beneficiary.

4. If the Depositor dies before his or her entire interest is distributed to him
or her, the entire remaining interest will be distributed as follows:

(a) If the Depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with
paragraph 3.

(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the Depositor
or, if the Depositor has not so elected, at the election of the beneficiary
or beneficiaries, either

(i) Be distributed by December 31 of the year containing the fifth
anniversary of the Depositor's death, or

(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or beneficiaries
starting by December 31 of the year following the year of the
Depositor's death. If, however, the

27
<PAGE>

.Custodial Agreement for a Traditional or SEP-IRA, continued

beneficiary is the Depositor's surviving spouse, then this
distribution is not required to begin before December 31 of the year
in which the Depositor would have reached age 70 1/2.

(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Depositor's required beginning date, even though payments may actually have
been made before that date.

(d) If the Depositor 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 account.

5. In the case of a distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment for
each year, divide the Depositor'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 Depositor (or the joint life and last survivor expectancy of
the Depositor and the Depositor's designated beneficiary, or the life expectancy
of the designated beneficiary, whichever applies). In the case of distributions
under paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Depositor and designated
beneficiary as of their birthdays in the year the Depositor reaches age 70 1/2.
In the case of a distribution in accordance with paragraph 4(b)(ii), determine
life expectancy using the attained age of the designated beneficiary as of the
beneficiary's birthday in the year distributions are required to commence.

6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.

Article V

1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) and
Regulations section 1.408-5 and 1.408-6.

2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor prescribed by the Internal Revenue Service.

Article VI

Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and the related
regulations will be invalid.

Article VII

This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear below.

Article VIII

1. Form of Contributions. All contributions and transfers shall be made only
in cash.

2. Investment of Contributions.

(a) As directed by the Depositor 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 Depositor 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 this Agreement.

(b) A Telephone Exchange Plan ("Exchange Plan"), as described in the
prospectus(es) of the Funds is available hereunder. After the Custodian
receives an Exchange 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 Depositor, may redeem any Fund
Shares held by the Custodian on behalf of the Depositor 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 Exchange
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 exchange pursuant to the
Exchange Plan, the Depositor represents that he has obtained a current
prospectus of the Fund into which the switch is to be made. The Depositor
authorizes

<PAGE>

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 Depositor agrees that the authorizations, directions and
restrictions contained herein will continue until the Custodian receives
written notice of any change or revocation. The Depositor agrees and
understands that the Funds and the Custodian reserve the right to refuse
any telephonic instructions.

3. Beneficiaries; Distributions to Minors.

(a) A Depositor shall have the right by written notice to the Custodian to
designate one or more beneficiaries to receive any amount to which the
Depositor 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 Depositor. Such designation may include contingent or
successive beneficiaries. If no such designation is in effect on a
Depositor's death, or if no designated beneficiary is living on the date
any payment becomes due after the Depositor's death, such payment shall be
made to the executor or administrator of the Depositor's estate. However,
if after the Depositor'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.

(b) If any person to whom all or a portion of the Depositor'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 Depositor 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 portion of the Depositor's interest is payable is a minor and if
either the Depositor has not so designated a person to receive the minor's
interest as such Custodian, or 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 Depositor'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.

(c) The determination of the Custodian as to the person entitled to
receive any distribution from the Custodial Account following the death of
the Depositor, if made in good faith, shall be conclusive and binding on
all persons claiming an interest in the Custodial Account; provided that
nothing provided herein shall be construed to preclude the Custodian from
filing an action in the nature of interpleader or other appropriate
proceeding in a court of competent jurisdiction to determine the person
entitled to receive such distribution. Any expenses incurred by the
Custodian in determining the person entitled to receive a distribution from
the Custodial Account, including without limitation attorneys fees in any
such action, shall be reimbursed from the Custodial Account.

4. Inalienability of Benefits. The benefits provided hereunder shall not be
subject to alienation, assignment, garnishment, attachment, execution or levy of
any kind of any attempt to cause such benefits to be so subjected shall not be
recognized except to the extent as may be required by law.

5. Distributions to Surviving Spouse. If distributions from the Custodial
Account are to be made to the Depositor's surviving spouse, or to a trust of
which the Depositor'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

29
<PAGE>

.Custodial Agreement for a Traditional or SEP-IRA, continued

such trust is the beneficiary) for such year, as determined under section
2056(b)(7) of the Code.

6. Minimum Distributions; Election not to Recalculate Life Expectancies. The
following provisions supplement the provisions of Article IV with respect to
minimum required distributions, and shall control over the provisions of Article
IV in the event of any inconsistency. All paragraph references in this paragraph
6 are to paragraphs of Article IV unless otherwise provided.

(a) If the Depositor fails to withdraw the entire balance in the Custodial
Account by the April 1 of the year following the year in which he attains
age 70 1/2, he shall be deemed to have elected to receive payments under
paragraph 3(d) or, if he has a designated beneficiary (as determined under
Part D of Proposed Regulations section 1.401(a)(9)-1) under paragraph 3(e).
A beneficiary shall be deemed to have elected the method described in
paragraph 4(b)(ii) if either he withdraws the minimum amount required for
the first year under the method described in paragraph 4(b)(ii) and does
not specifically elect the method described in paragraph 4(b)(i) by the end
of such year, or if the date specified in paragraph 4(b)(i) occurs first
and he has not withdrawn the entire balance in the Custodial Account by
that time; otherwise, the beneficiary shall be deemed to have elected the
method described in paragraph 4(b)(i).

(b) If there is more than one beneficiary entitled to receive
distributions on equal priority upon the death of the Depositor or a prior
beneficiary then, to the extent permitted by Proposed Regulations section
1.401(a)(9)-1, Q&A H-2, and subject to such requirements and limitations as
the Custodian may establish, the Custodial Account may be divided into
separate accounts for purposes of Article IV and this paragraph. Whenever
distributions after the death of the Depositor are to be made to the
Depositor's surviving spouse and to one or more beneficiaries other than
the surviving spouse, and any provision of Article IV, this paragraph 6, 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.

(c) Notwithstanding the references to "equal or substantially equal"
payments, if the Depositor or a beneficiary is receiving distributions
under paragraph 3(d), 3(e), or 4(b)(ii), he may withdraw amounts that
exceed the minimum amount required by paragraph 5 in any year, provided
that any excess shall not be credited against the minimum amount required
to be withdrawn in subsequent years. Withdrawals may also be made at
irregular intervals, provided that the minimum amount required for each
year shall be withdrawn by the last day of such year, except that the
minimum amount for the year in which the Depositor attains age 70 1/2, but
no subsequent year, may be withdrawn by April 1 of the following year.

(d) In lieu of the methods of recalculating life expectancies annually as
specified in paragraph 2, the Depositor may elect for purposes of paragraph
3(d) or 3(e), and the Depositor's surviving spouse may elect for purposes
of paragraph 4(b)(ii), to have his life expectancy, or his and his
designated beneficiary's joint and last survivor life expectancy, or the
surviving spouse's life expectancy, initially calculated in the year
specified in paragraph 5 and thereafter reduced by one year in each
subsequent year. All elections described in this paragraph 6(d) shall be
made in writing in accordance with procedures established by the Custodian
and the Proposed Regulations or successors thereto. Such elections must be
made and, if made, shall be irrevocable after the date upon which
distributions are required to commence under paragraph 3 or 4(b)(ii).

(e) All references to the Proposed Regulations section 1.401(a)(9)-1 and
1.401(a)(9)-2 contained in Article IV and this paragraph 6 include the
applicable provisions of Proposed Regulations section 1.408-8 applying such
Proposed Regulations to individual retirement accounts, any subsequent
amendments to any such Proposed Regulations, and the applicable provisions
of the permanent Regulations, when issued, all of which are incorporated by
reference and shall control over any contrary provision of this Agreement.
Reference to specific provisions of the Proposed Regulations shall not be
construed to limit reference to other provisions where appropriate in the
interpretation of Article IV and this paragraph 6.

(f) For all purposes of Article IV and this paragraph 6, life expectancy
and joint-life and last-survivor expectancy are calculated based on
information provided by the Depositor (or the Depositor's authorized agent,
beneficiary, executor, or administrator) using the expected return
multiples under Treasury Regulations Section 1.72-9. The Custodian will not
be

30
<PAGE>

liable for errors in such calculations resulting Form its reliance on such
information.

(g) 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
Depositor or the beneficiary, as the case may be and all such instructions
shall be deemed to constitute a certification by the Depositor or
beneficiary that the distribution so directed is one that the Depositor 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 Depositor or beneficiary or the
failure to make a 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.
If any assets held on the Depositor's behalf in a Custodial Account are
transferred directly to a trustee or Custodian of another individual
retirement account described in Code Section 408(a) established for the
Depositor, it shall be the Depositor's responsibility to ensure that any
requested minimum distribution required by Article IV is made prior to
giving the Custodian such transfer instructions.

(h) Any annuity contract purchased for the Depositor pursuant to this
Agreement shall be immediately distributed to the Depositor, and the
custodial relationship shall terminate upon such distribution.

7. Administration.

(a) Except as otherwise provided in this Agreement, the Custodian shall,
as directed in writing, on behalf of the Depositor:

(i) Receive contributions pursuant to the provisions of the
Agreement;

(ii) Hold, invest and reinvest the contributions in Fund Shares;

(iii) Register any property in the Custodial Account in the name of
the Custodian or its nominee; and

(iv) Make distributions from the Custodial Account in cash or in Fund
Shares pursuant to the provisions of this Agreement.

(b) In addition to the provisions of Article V, the Custodian shall
deliver or cause to be executed and delivered to the Depositor 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 Depositor.

(c) 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 Depositor 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.

(d) Unless the Depositor sends the Custodian written objection to a report
within 60 days after its receipt, the Depositor 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 Depositor unless otherwise required by law.

(e) 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 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.

(f) The Depositor 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.

(g) The Custodian shall be under no duty to question any

<PAGE>

.Custodial Agreement for a Traditional or SEP-IRA, continued

direction of the Depositor with respect to the investment of contributions,
or to make suggestions to the Depositor with respect to the investment,
retention or disposition of any contributions or assets held in the
Custodial Account.

(h) 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.

(i) The Custodian may resign as Custodian of any Depositor'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 Depositor who will be affected by such
resignation. If the Trust or the Depositor does not appoint a successor
Custodian within 30 days after the mailing of such notice, the Custodian
will terminate the Custodial Account.

(j) The Depositor 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.

(k) The Custodian shall be entitled to receive and may charge against the
Depositor'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 Depositor in writing of any
change in its fee schedule.

(l) 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.

(m) The Custodian and Depositor hereby waive and agree to waive right to
trial by jury in an action or proceeding instituted in respect to this
Custodial Account. The Depositor 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.

(n) All communications or notices required or permitted to be given herein
shall be deemed to be given upon receipt by the Custodian at P.O. Box
8502, Boston, MA 02266-8502, by the Trust at 227 W. Monroe St., Suite 3000,
Chicago, IL, 60606, or the Depositor at his most recent address shown in
the Custodian's records. The Depositor agrees to advise the Custodian
promptly, in writing, of any change of address.

(o) Subject to the last paragraph of this subparagraph (o), the Depositor
may revoke the Custodial Account established hereunder by mailing or
delivering a written notice of revocation to the Custodian within seven
days after the Depositor first receives the Disclosure Statement related to
the Custodial Account. Mailed notice is treated as given to the Custodian
on the date of the postmark (or on the date of Post Office certification or
registration in the case of notice sent by certified or registered mail).
Upon timely revocation, the Depositor will receive a payment equal to the
initial contribution, without adjustment for administrative expenses,
commissions or sales charges, fluctuations in market value or other
changes. The Depositor may certify in the Application that the Depositor
received the Disclosure Statement related to the Custodial Account at least
seven days before signing the Application to establish the Custodial
Account, and the Custodian may rely on such certification.

(p) The Depositor may in writing appoint an investment advisor with
respect to the Custodial Account on a form acceptable to the Custodian and
the Trust. The investment advisor's appointment will be in effect until
written notice to the contrary is received by the Custodian and the Trust.
While an investment advisor's appointment is in effect, the investment
advisor may issue investment directions or may issue orders for the sale or
purchase of shares of one or more Funds to the Trust, and the Trust and its
agents will be fully protected in carrying out such investment directions
or orders to the same extent as if they had been given by the Depositor.
The Depositor's appointment of any investment advisor will also be

<PAGE>

deemed to be instructions to the Custodian and the Trust to pay such
investment advisor's fees to the investment advisor from the Custodial
Account hereunder without additional authorization by the Depositor or the
Custodian.

8. The Trust

(a) The Depositor delegates to the Trust the power with respect to this
Agreement: (i) to remove the Custodian and select a successor Custodian;
and (ii) to amend this Agreement as provided in paragraph 9.

(b) 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
Depositors establishing IRA accounts.

(c) 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 Depositor 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.

(d) 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 Depositor 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.

9. Amendment and Termination.

(a) The Depositor delegates to the Trust the power to amend this Agreement
(including retroactive amendment). A copy of any such amendment shall be
furnished to the Custodian, and no such amendment shall have the effect of
increasing the duties or obligations of the Custodian until it has been
approved by the Custodian. A copy of any such amendment shall also be
furnished to the Depositor, but no delay in furnishing such copy shall
affect the effectiveness of such amendment.

(b) The Depositor may amend his/her Application (including retroactive
amendment) by submitting to the Custodian (i) a copy of such amended
Application, and (ii) evidence satisfactory to the Custodian that the
Agreement as amended by such amended Application will continue to qualify
as an Individual Retirement Account under the provisions of section 408(a)
of the Code.

(c) No amendment shall be effective if it would cause or permit (i) any
part of the Custodial Account to be diverted to any purpose that is not for
the exclusive benefit of the Depositor and his beneficiaries; (ii) the
Depositor 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 (iii) the imposition of an additional duty
on the Custodian without its written consent.

(d) The Depositor reserves the right to terminate his adoption of this
Agreement by instrument in writing signed by him and filed with the
Custodian.

(e) In the event that the assets of any investment company (including any
series of the Trust) in which the Custodial Account is invested are
transferred to or acquired by any other investment company or other
commingled investment fund which is a permissible investment for an
individual retirement account, by merger or otherwise, the Trust may make
such amendments to this Agreement, or take such other action, as it may
determined to be necessary or appropriate to accomplish such transaction
and the exchange of Fund Shares for shares or other appropriate units of
ownership in such successor fund. The consent of the Depositor shall not be
required for any such amendment or action, but the Depositor shall be
promptly notified thereof, and shall have the right to withdraw the funds
in the Custodial Account without fee, charge, load or penalty of any kind.

10. Definitions.

Whenever used in this Agreement, 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) Agreement. This Custodial Agreement for a Regular or SEP-IRA Account,
including the Application, as amended from time to time.

(c) Application. The IRA Application Form, constituting an agreement
between the Depositor and the Custodian, by which the Depositor adopts this
Agreement

(d) 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.

33
<PAGE>

.Custodial Agreement for a Traditional or SEP-IRA, continued

(e) Custodial Account. The account established for the Depositor pursuant
to this Agreement.

(f) Custodian. The bank named in the Application.

(g) Depositor. The individual who adopts this Agreement as provided
therein.

(h) 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 this Agreement (i) before the date the prospectus for
that Fund discloses its availability, (ii) with respect to any Depositor
who resides in any state or other jurisdiction in which shares of the Fund
are not available for sale, or (iii) with respect to any Depositor not
eligible to purchase Fund shares directly, when sales of Fund shares are
restricted.

(i) Trust. Acorn Investment Trust, a regulated investment company.

11. Conflict in Provisions. To the extent that any of the provisions of Article
VIII shall conflict with the provisions of Articles IV, V, or VII, the
provisions of Article VIII shall prevail.

12. Loss of Exemption. If the Custodian receives notice that the Custodial
Account has lost its tax-exempt status under section 408(a) of the Code for any
reason, including by reason of a transaction prohibited by section 4975 of the
Code, the Custodian shall distribute to the Depositor the entire balance in the
Account, in cash or in kind, in the sole discretion of the Custodian no later
than 90 days after the date the Custodian receives such notice.

<PAGE>

.Custodial Agreement for a Roth-IRA

Form 5305-RA
(January 1998)
Department of the Treasury
Internal Revenue Service

Acorn Investment Trust
Custodial Agreement for a Roth IRA
(Under Section 408A of the Internal Revenue Code)
(January 1, 1998)

Article I

1. If this Roth IRA is not designated as a Roth Conversion IRA, then, except in
the case of a rollover contribution described in section 408A(e), the Custodian
will accept only cash contributions and only up to a maximum amount of $2,000
for any tax year of the Depositor.

2. If this Roth IRA is designated as a Roth Conversion IRA, no contributions
other than IRA Conversion Contributions made during the same tax year will be
accepted.

Article II

The $2,000 limit described in Article I is gradually reduced to $0 between
certain levels of adjusted gross income (AGI). For a single Depositor, the
$2,000 annual contribution is phased out between AGI of $95,000 and $110,000;
for a married Depositor who files jointly, between AGI of $150,000 and $160,000;
and for a married Depositor who files separately, between $0 and $10,000. In the
case of a conversion, the Custodian will not accept IRA Conversion Contributions
in a tax year if the Depositor's AGI for that tax year exceeds $100,000 or if
the Depositor is married and files a separate return. Adjusted gross income is
defined in section 408A(c)(3) and does not include IRA Conversion Contributions.

Article III

The Depositor's interest in the balance in the custodial account is
nonforfeitable.

Article IV

Article V

1. If the Depositor dies before his or her entire interest is distributed to
him or her and the grantor's surviving spouse is not the sole beneficiary, the
entire remaining interest will, at the election of the Depositor or, if the
Depositor has not so elected, at the election of the beneficiary or
beneficiaries, either:

(a) Be distributed by the December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(b) Be distributed over the life expectancy of the designated beneficiary
starting no later than December 31 of the year following the year of the
Depositor's death.

If distributions do not begin by the death described in (b), distribution
method (a) will apply.

2. In the case of a distribution method 1.(b) above, to determine the minimum
annual payment for each year, divide the grantor's entire interest in the trust
as of the close of business on December 31 of the preceding year by the life
expectancy of the designated beneficiary using the attained age of the
designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence and subtract 1 for each subsequent year.

3. If the Depositor's spouse is the sole beneficiary on the Depositor's date
of death, such spouse will then be treated as the Depositor.

Article VI

1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under sections 408(i) and
408A(d)(3)(E), and Regulations sections 1.408-5 and 1.408-6, and under guidance
published by the Internal Revenue Service.

2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor prescribed by the Internal Revenue Service.

Article VII

Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through IV and this sentence will be controlling. Any
additional articles that are not consistent with section 408A, the related
regulations, and other published guidance will be invalid.

35
<PAGE>

.Custodial Agreement for a Roth-IRA, continued

Article VIII

This agreement will be amended from time to time to comply with the provisions
of the Code, related regulations, and other published guidance. Other amendments
may be made with the consent of the persons whose signatures appear below.

Article IX

1. Form of Contributions. Except as provided in Paragraph 2 of Article I, all
contributions and transfers shall be made only in cash.

2. Investment of Contributions.

3. Beneficiaries; Distributions to Minors.

(i) Distribute the interest to the legal guardian of such minor; or

36
<PAGE>

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 Depositor'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.

6. Minimum Distributions; Election not to Recalculate Life Expectancies. The
following provisions supplement the provisions of Article V with respect to
minimum required distributions to a beneficiary following the death of the
Depositor, and shall control over the provisions of Article V in the event of
any inconsistency. All paragraph references in this paragraph 6 are to
paragraphs of Article V unless otherwise provided.

(a) A beneficiary shall be deemed to have elected the method described in
paragraph 1(b) if either he withdraws the minimum amount required for the
first year under the method described in paragraph 1(b) and does not
specifically elect the method described in paragraph 1(a) by the end of
such year, or if the date specified in paragraph 1(a) occurs first and he
has not withdrawn the entire balance in the Custodial Account by that time;
otherwise, the beneficiary shall be deemed to have elected the method
described in paragraph 1(a).

(c) Notwithstanding the references to "equal or substantially equal"
payments, if a beneficiary is receiving distributions under paragraph 1(b),
he may withdraw amounts that exceed the minimum amount required by
paragraph 2 in any year, provided that any excess shall not be credited
against the minimum amount required to be withdrawn in subsequent years.
Withdrawals may also be made at irregular intervals, provided that the
minimum amount required for each year shall be withdrawn by the last day of
such year.

(d) Notwithstanding paragraph (3), a surviving spouse of a deceased
Depositor may elect not to be treated as the Depositor, but instead to be
subject to paragraph (1), in which event the required starting date for the
method provided in paragraph 1(b) shall be the later of the date specified
therein or December 31 of the year in which the Depositor would have
attained the age of 70 1/2. In addition, a surviving spouse may, in lieu of
the method specified in paragraph 2, elect to have his or her life
expectancy determined each year on the basis of his or her age attained in
such year. All elections described in this paragraph 6(d) shall be made in
writing referring explicitly to this paragraph 6(d) and in accordance with
procedures established by the Custodian and the Proposed Regulations or
successors thereto. Such elections must be made and, if made,

<PAGE>

.Custodial Agreement for a Roth-IRA, continued

shall be irrevocable after the date upon which distributions are required
to commence under paragraph 1.

(e) All references to the Proposed Regulations section 1.401(a)(9)-1
contained in Article V and this paragraph 6 include the applicable
provisions of Proposed Regulations section 1.408-8 applying such Proposed
Regulations to individual retirement accounts, any subsequent amendments to
any such Proposed Regulations, and the applicable provisions of the
permanent Regulations, when issued, all of which are incorporated by
reference and shall control over any contrary provision of this Agreement.
Reference to specific provisions of the Proposed Regulations shall not be
construed to limit reference to other provisions where appropriate in the
interpretation of Article V and this paragraph 6.

7. Administration.

(a) Except as otherwise provided in this Agreement, the Custodian shall,
as directed in writing, on behalf of the Depositor:

(i) Receive contributions pursuant to the provisions of the
Agreement;
(ii) Hold, invest and reinvest the contributions in Fund Shares;
(iii) Register any property in the Custodial Account in the name of
the Custodian or its nominee; and
(iv) Make distributions from the Custodial Account in cash or in Fund
Shares pursuant to the provisions of this Agreement.

(b) In addition to the provisions of Article VI, the Custodian shall
deliver or cause to be executed and delivered to the Depositor 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 Depositor.

(e) 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

<PAGE>

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 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.

(g) The Custodian shall be under no duty to question any direction of the
Depositor with respect to the investment of contributions, or to make
suggestions to the Depositor with respect to the investment, retention or
disposition of any contributions or assets held in the Custodial Account.

(n) All communications or notices required or permitted to be given herein
shall be deemed to be given upon receipt by the Custodian at P. O. Box
8502, Boston, MA 02266-8502, by the Trust at 227 W. Monroe St., #3000,
Chicago, IL, 60606, or the Depositor at his most recent address shown in
the Custodian's records. The Depositor agrees to advise the Custodian
promptly, in writing, of any change of address.

39
<PAGE>

Custodial Agreement for a Roth-IRA, continued

Account at least seven days before signing the Application to establish the
Custodial Account, and the Custodian may rely on such certification.

(p) The Depositor may in writing appoint an investment advisor with respect
to the Custodial Account on a form acceptable to the Custodian and the
Trust. The investment advisor's appointment will be in effect until written
notice to the contrary is received by the Custodian and the Trust. While an
investment advisor's appointment is in effect, the investment advisor may
issue investment directions or may issue orders for the sale or purchase of
shares of one or more Funds to the Trust, and the Trust and its agents will
be fully protected in carrying out such investment directions or orders to
the same extent as if they had been given by the Depositor. The Depositor's
appointment of any investment advisor will also be deemed to be
instructions to the Custodian and the Trust to pay such investment
advisor's fees to the investment advisor from the Custodial Account
hereunder without additional authorization by the Depositor or the
Custodian.

8. The Trust

(c) 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 Depositor 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.

9. Amendment and Termination.

(b) The Depositor may amend his/her Application (including retroactive
amendment) by submitting to the Custodian (i) a copy of such amended
Application, and (ii) evidence satisfactory to the Custodian that the
Agreement as amended by such amended Application will continue to qualify
as a Roth Individual Retirement Account under the provisions of section
408A of the Code.

(d) The Depositor reserves the right to terminate his adoption of this
Agreement by instrument in writing signed by him and filed with the
Custodian.

40
<PAGE>

the funds in the Custodial Account without fee, charge, load or penalty of
any kind.

10. Definitions.

Whenever used in this Agreement, 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) Agreement. This Custodial Agreement for a Roth IRA Account, including
the Application, as amended from time to time.

(c) Application. The IRA Application Form, constituting an agreement
between the Depositor and the Custodian, by which the Depositor adopts this
Agreement

(e) Custodial Account. The account established for the Depositor pursuant
to this Agreement.

(f) Custodian. The bank named in the Application.

(g) Depositor. The individual who adopts this Agreement as provided
therein.

(i) Trust. Acorn Investment Trust, a regulated investment company.

11. Conflict in Provisions. To the extent that any of the provisions of Article
IX shall conflict with the provisions of Articles V, VI, or VIII, the provisions
of Article IX shall prevail.

12. Loss of Exemption. If the Custodian receives notice that the Custodial
Account has lost its tax-exempt status under section 408A of the Code for any
reason, including by reason of a transaction prohibited by section 4975 of the
Code, the Custodian shall distribute to the Depositor the entire balance in the
Account, in cash or in kind, in the sole discretion of the Custodian no later
than 90 days after the date the Custodian receives such notice.

41
<PAGE>

. Custodial Agreement for an Education IRA

Form 5305-EA
(January 1998)
Department of the Treasury
Internal Revenue Service

Acorn Investment Trust
Custodial Agreement for an Education IRA Account
(Under Section 530 of the Internal Revenue Code)
(January 1, 1998)

Article I

The Custodian may accept additional cash contributions. These contributions may
be from the Depositor, or from any other individual, for the benefit of the
Designated Beneficiary, provided the Designated Beneficiary has not attained the
age of 18 as of the date such contributions are made. Total contributions that
are not rollover contributions described in section 530(d)(5) are limited to a
maximum amount of $500 for the taxable year.

Article II

The maximum aggregate contribution that an individual may make to the custodial
account in any year may not exceed the $500 in total contributions that the
custodial account can receive. In addition, the maximum aggregate contribution
that an individual may make to the custodial account in any year is phased out
for unmarried individuals who have modified adjusted gross income (AGI) between
$95,000 and $110,000 for the year of the contribution and for married
individuals who file joint returns with modified AGI between $150,000 and
$160,000 for the year of the contribution. Unmarried individuals with modified
AGI above $110,000 for the year and married individuals who file joint returns
and have modified AGI above $160,000 for the year may not make a contribution
for that year. Modified AGI is defined in section 530(c)(2).

Article III

No part of the custodial account funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with other
property except in a common investment fund (within the meaning of section
530(b)(1)(D)).

Article IV

1. Any balance to the credit of the Designated Beneficiary on the date on which
such Designated Beneficiary attains age 30 shall be distributed to the
Designated Beneficiary within 30 days of such date.

2. Any balance to the credit of the Designated Beneficiary shall be distributed
to the estate of the Designated Beneficiary within 30 days of the date of such
Designated Beneficiary's death.

Article V

The Depositor shall have the power to direct the Custodian regarding the
investment of the above-listed amount assigned to the custodial account
(including earnings thereon) in the investment choices offered by the Custodian.
The Responsible Individual, however, shall have the power to redirect the
Custodian regarding the investment of such amounts, as well as the power to
direct the Custodian regarding the investment of all additional contributions
(including earnings thereon) to the custodial account. In the event that the
Responsible Individual does not direct the Custodian regarding the investment of
additional contributions (including earnings thereon), the initial investment
direction of the Depositor also will govern all additional contributions made to
the custodial account until such time as the Responsible Individual otherwise
directs the Custodian. Unless otherwise provided in this agreement, the
Responsible Individual also shall have the power to direct the Custodian
regarding the administration, management, and distribution of the accounts.

Article VI

The "Responsible Individual" named by the Depositor shall be a parent or
guardian of the Designated Beneficiary. The custodial account shall have only
one Responsible Individual at any time. If the Responsible Individual becomes
incapacitated or dies while the Designated Beneficiary is a minor under state
law, the successor Responsible Individual shall be the person named to succeed
in that capacity by the preceding Responsible Individual in a witnessed writing
or, if no successor is so named, the successor Responsible Individual shall be
the Designated Beneficiary's other parent or successor guardian. At the time
that the Designated Beneficiary attains the age of majority under state law, the
Designated Beneficiary becomes the Responsible Individual.

42
<PAGE>

Article VII

The Responsible Individual may change the beneficiary designated under this
agreement to another member of the Designated Beneficiary's family described in
section 529(e)(2) in accordance with the Custodian's procedures.

Article VIII

1. The Depositor agrees to provide the Custodian with the information necessary
for the Custodian to prepare any reports required under section 530(h).

2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Responsible Individual as prescribed by the Internal Revenue Service.

Article IX

Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through IV will be controlling. Any additional articles
that are not consistent with section 530 and related regulations will be
invalid.

Article X

This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the Depositor and the Custodian whose signatures appear below.

Article XI

1. Form of Contributions. All contributions and transfers shall be made only in
cash.

2. Investment of Contributions.

(a) As directed by the Designated Beneficiary 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 Designated
Beneficiary 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 this
Agreement.
(b) A Telephone Exchange Plan ("Exchange Plan"), as described in
the prospectus(es) of the Funds is available hereunder. After the Custodian
receives an Exchange 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 Designated Beneficiary, may redeem any
Fund Shares held by the Custodian on behalf of the Designated Beneficiary
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 Exchange 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
exchange pursuant to the Exchange Plan, the Designated Beneficiary
represents that he has obtained a current prospectus of the Fund into which
the switch is to be made. The Designated Beneficiary 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
Designated Beneficiary agrees that the authorizations, directions and
restrictions contained herein will continue until the Custodian receives
written notice of any change or revocation. The Designated Beneficiary
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.

3. Responsible Individual.

(a) The Application shall name a Responsible Individual for the Designated
Beneficiary, who shall be either the parent, guardian, or (not withstanding
the first sentence of Article VI) an adult member of the Designated
Beneficiary's family (including the Depositor) as those terms are defined in
the Massachusetts Uniform Transfers to Minors Act or similar statute. Such
Responsible Individual shall be the custodian for Designated Beneficiary
under the Massachusetts Uniform Transfers to Minors Act or similar statute.
The Responsible Individual shall execute the Application and, while the
Designated Beneficiary is a minor, shall have all powers and authority of
the Designated Beneficiary hereunder, including specifically all powers with
respect to investments and distributions. The Custodian, the Trust, and all
persons acting under their authority or on their behalf, shall be fully
protected in rely-

43
<PAGE>

>Custodial Agreement for an Education IRA, continued

ing upon any instruction given by the Responsible Individual.

(b) Nothing contained herein shall obligate the Custodian or the Trust to
determine whether any Responsible Individual has the legal right or
capacity to act as custodian for the Designated Beneficiary, and the
Designated Beneficiary and such Responsible Individual shall jointly and
severally indemnify and hold the Custodian, the Trust and their respective
agents harmless for any loss occasioned by any such person's reliance that
the Responsible Individual is qualified to act as custodian of the
Designated Beneficiary.

(c) Upon attainment of the age of majority under the laws of the Designated
Beneficiary's state of residence at such time, the Designated Beneficiary
may advise the Custodian in writing that he or she is assuming sole
responsibility to exercise all rights, powers, obligations,
responsibilities, authorities or requirements associated with the Custodial
Account. Upon such notice to the Custodian, the Designated Beneficiary
shall have and shall be responsible for all of the foregoing, the Custodian
will deal solely with the Designated Beneficiary as the person controlling
the administration of the Account, and the Responsible Individual shall
thereafter have or exercise none of the foregoing. Notwithstanding the
last sentence of Article VI, absent such written notice by Designated
Beneficiary, Custodian shall be under no obligation to acknowledge
Designated Beneficiary's right to exercise such powers and authority.

5. Distributions Upon Designated Beneficiary's Attaining Age 30. Any balance
remaining in the Custodial Account when the Designated Beneficiary attains age
30 is, pursuant to Code Section 530, to be distributed to the Designated
Beneficiary. The Responsible Individual has the responsibility to notify the
Custodian to make such distribution and the Designated Beneficiary will be
responsible for any tax consequences of not so directing the Custodian. However,
the Custodian may, based upon its records, make a distribution to the Designated
Beneficiary upon the Designated Beneficiary's attaining age 30 to the extent
required by law, and/or the Custodian will report the balance in the Account at
such time as a ''deemed distribution'' to the extent required by law, and the
Custodian will have no responsibility for so doing.

6. Change in Designated Beneficiary. The Responsible Individual may, in
writing on such form as may be acceptable to the Custodian designate any Family
Member of the Designated Beneficiary who is under the age of 30 as the successor
Designated Beneficiary and Designated Beneficiary with respect to the Custodial
Account hereunder, and thereafter such individual will be the Designated
Beneficiary for all purposes hereof. The Designated Beneficiary may also direct
a transfer of the Custodial Account to an Education IRA established for a Family
Member. Neither the Custodian nor the Trustee shall be responsible for
determining whether a person is a Family Member eligible to be a successor
Designated Beneficiary.

7. Administration.

(a) Except as otherwise provided in this Agreement, the Custodian shall, as
directed in writing, on behalf of the Designated Beneficiary:

(i) Receive contributions pursuant to the provisions of the Agreement;

(ii) Hold, invest and reinvest the contributions in Fund Shares;

(iii) Register any property in the Custodial Account in the name of
the Custodian or its nominee; and

(iv) Make distributions from the Custodial Account in cash or in Fund
Shares pursuant to the provisions of this Agreement.

(b) In addition to the provisions of Article VIII, the Custodian shall
deliver or cause to be executed and delivered to the Designated Beneficiary
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 Designated Beneficiary.

44
<PAGE>

Custodian shall file with the Designated Beneficiary 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. (d) Unless the Designated Beneficiary sends the Custodian
written objection to a report within 60 days after its receipt, the
Designated Beneficiary 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
Designated Beneficiary unless otherwise required by law.

(f) The Responsible Individual and Designated Beneficiary agree, jointly
and severally, 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.

(g) The Custodian shall be under no duty to question any direction of the
Designated Beneficiary with respect to the investment of contributions, or
to make suggestions to the Designated Beneficiary with respect to the
investment, retention or disposition of any contributions or assets held in
the Custodial Account.

(i) The Custodian may resign as Custodian of any Designated Beneficiary'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 Designated Beneficiary who will be
affected by such resignation. If the Trust or the Designated Beneficiary
does not appoint a successor Custodian within 30 days after the mailing of
such notice, the Custodian will terminate the Custodial Account.

(j) The Designated Beneficiary 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.

(k) The Custodian shall be entitled to receive and may charge against the
Designated Beneficiary'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 Designated
Beneficiary in writing of any change in its fee schedule.

(m) The Custodian and Designated Beneficiary hereby waive and agree to
waive right to trial by jury in an action or proceeding instituted in
respect to this Custodial Account. The Designated Beneficiary further
agrees that the venue of any litigation between him and the Custodian with
respect to the

45
<PAGE>

. Custodial Agreement for an Education IRA, continued

Custodial Account shall be in the County of Suffolk, Commonwealth of
Massachusetts.

(n) All communications or notices required or permitted to be given herein
shall be deemed to be given upon receipt by the Custodian at P. O. Box
8502, Boston, MA 02266-8502, by the Trust at 227 W. Monroe St., #3000,
Chicago, IL, 60606, or the Designated Beneficiary at his most recent
address shown in the Custodian's records. The Designated Beneficiary agrees
to advise the Custodian promptly, in writing, of any change of address.

(o) Subject to the last paragraph of this subparagraph (o), the Depositor
may revoke the Custodial Account established hereunder by mailing or
delivering a written notice of revocation to the Custodian within seven
days after the Depositor first receives the Disclosure Statement related to
the Custodial Account. Mailed notice is treated as given to the Custodian
on date of the postmark (or on the date of Post Office certification or
registration in the case of notice sent by certified or registered mail).
Upon timely revocation, the Depositor will receive a payment equal to the
initial contribution, without adjustment for administrative expenses,
commissions or sales charges, fluctuations in market value or other
changes. The Depositor may certify in the Application that the Depositor
received the Disclosure Statement related to the Custodial Account at least
seven days before signing the Application to establish the Custodial
Account, and the Custodian may rely on such certification.

(p) The Designated Beneficiary may in writing appoint an investment
advisor with respect to the Custodial Account on a form acceptable to the
Custodian and the Trust. The investment advisor's appointment will be in
effect until written notice to the contrary is received by the Custodian
and the Trust. While an investment advisor's appointment is in effect, the
investment advisor may issue investment directions or may issue orders for
the sale or purchase of shares of one or more Funds to the Trust, and the
Trust and its agents will be fully protected in carrying out such
investment directions or orders to the same extent as if they had been
given by the Designated Beneficiary. The Designated Beneficiary's
appointment of any investment advisor will also be deemed to be
instructions to the Custodian and the Trust to pay such investment
advisor's fees to the investment advisor from the Custodial Account
hereunder without additional authorization by the Designated Beneficiary or
the Custodian.

8. The Trust

(a) The Designated Beneficiary delegates to the Trust the power with
respect to this Agreement: (i) to remove the Custodian and select a
successor Custodian; and (ii) to amend this Agreement as provided in
paragraph 9.

(c) 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 Designated Beneficiary 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.

(d) 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 Designated Beneficiary 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.

9. Amendment and Termination.

(a) The Designated Beneficiary delegates to the Trust the power to amend
this Agreement (including retroactive amendment). A copy of any such
amendment shall be furnished to the Custodian, and no such amendment shall
have the effect of increasing the duties or obligations of the Custodian
until it has been approved by the Custodian. A copy of any such amendment
shall also be furnished to the Designated Beneficiary, but no delay in
furnishing such copy shall affect the effectiveness of such amendment.

(b) The Designated Beneficiary may amend his/her Application (including
retroactive amendment) by submitting to the Custodian (i) a copy of such
amended Application, and (ii) evidence satisfactory to the Custodian that
the Agreement as amended by such amended Application will continue to
qualify as an Education Individual Retirement Account under the provi-

46
<PAGE>

sions of section 530 of the Code.
(c) No amendment shall be effective if it would cause or permit (i) any
part of the Custodial Account to be diverted to any purpose that is not for
the exclusive benefit of the Designated Beneficiary and his beneficiaries;
(ii) the Designated Beneficiary 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 (iii) the imposition
of an additional duty on the Custodian without its written consent.
(d) The Responsible Individual reserves the right to terminate his
adoption of this Agreement by instrument in writing signed by him and filed
with the Custodian.
(e) In the event that the assets of any investment company (including any
series of the Trust) in which the Custodial Account is invested are
transferred to or acquired by any other investment company or other
commingled investment fund which is a permissible investment for an
individual retirement account, by merger or otherwise, the Trust may make
such amendments to this Agreement, or take such other action, as it may
determined to be necessary or appropriate to accomplish such transaction
and the exchange of Fund Shares for shares or other appropriate units of
ownership in such successor fund. The consent of the Responsible Individual
shall not be required for any such amendment or action, but the Responsible
Individual shall be promptly notified thereof, and shall have the right to
withdraw the funds in the Custodial Account without fee, charge, load or
penalty of any kind.

10. Definitions.
Whenever used in this Agreement, 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) Agreement. This Custodial Agreement for an Education IRA Account,
including the Application, as amended from time to time.
(c) Application. The IRA Application Form, constituting an agreement
between the Designated Beneficiary and the Custodian, by which the
Designated Beneficiary adopts this Agreement
(d) 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.
(e) Custodial Account. The account established for the Designated
Beneficiary pursuant to this Agreement.
(f) Custodian. The bank named in the Application.
(g) Depositor. The person who establishes the Custodial Account, and
designates the Responsible Individual.
(h) Designated Beneficiary. The individual under the age of 18 for whose
benefit the Custodial Account is established.
(i) Family Member. A person who is (i) a son or daughter of the Designated
Beneficiary or a descendant of either, (ii) a stepson or stepdaughter of
the Designated Beneficiary, (iii) a brother, sister, stepbrother or
stepsister of the Designated Beneficiary, (iv) an aunt, uncle, niece or
nephew of the Designated Beneficiary, (v) the spouse of any of the
foregoing, or (vi) any other person who is a "member of the family" of the
Designated Beneficiary within the meaning of section 529(e)(3) of the Code.
(j) 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 this Agreement (i) before the date the prospectus for
that Fund discloses its availability, (ii) with respect to any Designated
Beneficiary who resides in any state or other jurisdiction in which shares
of the Fund are not available for sale, or (iii) with respect to any
Designated Beneficiary not eligible to purchase Fund shares directly, when
sales of Fund shares are restricted.
(k) Responsible Individual. A parent or legal guardian of the Designated
Beneficiary, or an adult member of the family of the Designated
Beneficiary, who is so designated on the Application and exercises the
rights of the Designated Beneficiary while he or she is a minor in
accordance with paragraph 3. In the event of the death or incapacity of the
Responsible Individual while the Designated Beneficiary is a minor, the
Depositor may appoint a new Responsible

<PAGE>

.Custodial Agreement for an Education IRA, continued

Individual, and if the Depositor fails to do so the Custodian may appoint a
new Responsible Individual in accordance with the Massachusetts Uniform
Transfers to Minors Act or other applicable statute.
(l) Trust. Acorn Investment Trust, a regulated investment company.

11. Conflict in Provisions. To the extent that any of the provisions of Article
XI shall conflict with the provisions of Articles V, VII, VIII or IX, the
provisions of Article XI shall prevail.

12. Loss of Exemption. If the Custodian receives notice that the Custodial
Account has lost its tax-exempt status under section 530 of the Code for any
reason, including by reason of a transaction prohibited by section 4975 of the
Code, the Custodian shall distribute to the Designated Beneficiary the entire
balance in the Account, in cash or in kind, in the sole discretion of the
Custodian no later than 90 days after the date the Custodian receives such
notice.

48
<PAGE>

Acorn
- ------------------------------
Family of Funds

WAM Brokerage Services, L.L.C.
P.O. Box 8502
Boston, MA 02266-8502

<PAGE>

<ARTICLE> 6
<LEGEND>
The following information is extracted from and qualified by reference to
registrant's report on form N-SAR for the period ended December 31, 1997 and the
audited financial statements included in registrant's annual report to
shareholders.
</LEGEND>
<SERIES>
<NUMBER> 01
<NAME> Acorn Fund
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 2181507
<INVESTMENTS-AT-VALUE> 3670886
<RECEIVABLES> 23109
<ASSETS-OTHER> 220
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3694215
<PAYABLE-FOR-SECURITIES> 3720
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9038
<TOTAL-LIABILITIES> 12758
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2146869
<SHARES-COMMON-STOCK> 216645
<SHARES-COMMON-PRIOR> 188918
<ACCUMULATED-NII-CURRENT> 498
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 47522
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1486568
<NET-ASSETS> 3681547
<DIVIDEND-INCOME> 27215
<INTEREST-INCOME> 15566
<OTHER-INCOME> 0
<EXPENSES-NET> 18276
<NET-INVESTMENT-INCOME> 24505
<REALIZED-GAINS-CURRENT> 345404
<APPREC-INCREASE-CURRENT> 356307
<NET-CHANGE-FROM-OPS> 726216
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 31681
<DISTRIBUTIONS-OF-GAINS> 320289
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 42779
<NUMBER-OF-SHARES-REDEEMED> 34056
<SHARES-REINVESTED> 19004
<NET-CHANGE-IN-ASSETS> 839405
<ACCUMULATED-NII-PRIOR> 2578
<ACCUMULATED-GAINS-PRIOR> 32756
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14349
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 18276
<AVERAGE-NET-ASSETS> 3238157
<PER-SHARE-NAV-BEGIN> 15.04
<PER-SHARE-NII> .15
<PER-SHARE-GAIN-APPREC> 3.57
<PER-SHARE-DIVIDEND> .16
<PER-SHARE-DISTRIBUTIONS> 1.61
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.99
<EXPENSE-RATIO> .56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1306891
<INVESTMENTS-AT-VALUE> 1614235
<RECEIVABLES> 13170
<ASSETS-OTHER> 450
<OTHER-ITEMS-ASSETS> 6117
<TOTAL-ASSETS> 1633972
<PAYABLE-FOR-SECURITIES> 4000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7033
<TOTAL-LIABILITIES> 11033
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1306205
<SHARES-COMMON-STOCK> 88273
<SHARES-COMMON-PRIOR> 90383
<ACCUMULATED-NII-CURRENT> 3986
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 15568
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 297180
<NET-ASSETS> 1622939
<DIVIDEND-INCOME> 24755
<INTEREST-INCOME> 8098
<OTHER-INCOME> 0
<EXPENSES-NET> 22105
<NET-INVESTMENT-INCOME> 10748
<REALIZED-GAINS-CURRENT> 99464
<APPREC-INCREASE-CURRENT> (99759)
<NET-CHANGE-FROM-OPS> 10453
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 33072
<DISTRIBUTIONS-OF-GAINS> 77970
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 23235
<NUMBER-OF-SHARES-REDEEMED> 30846
<SHARES-REINVESTED> 5501
<NET-CHANGE-IN-ASSETS> (149604)
<ACCUMULATED-NII-PRIOR> 2144
<ACCUMULATED-GAINS-PRIOR> 12674
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 16235
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 22105
<AVERAGE-NET-ASSETS> 1835981
<PER-SHARE-NAV-BEGIN> 19.61
<PER-SHARE-NII> .40
<PER-SHARE-GAIN-APPREC> (.34)
<PER-SHARE-DIVIDEND> .38
<PER-SHARE-DISTRIBUTIONS> .90
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.39
<EXPENSE-RATIO> 1.19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>

<ARTICLE> 6
<LEGEND>
The following information is extracted from and qualified by reference to
registrant's report on form N-SAR for the period ended December 31, 1997 and the
audited financial statements included in registrant's annual report to
shareholders
</LEGEND>
<SERIES>
<NUMBER> 03
<NAME> ACORN USA
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 156426
<INVESTMENTS-AT-VALUE> 187792
<RECEIVABLES> 508
<ASSETS-OTHER> 80
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 188380
<PAYABLE-FOR-SECURITIES> 3537
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 219
<TOTAL-LIABILITIES> 3756
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 151677
<SHARES-COMMON-STOCK> 12212
<SHARES-COMMON-PRIOR> 4556
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1581
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 31366
<NET-ASSETS> 184624
<DIVIDEND-INCOME> 568
<INTEREST-INCOME> 470
<OTHER-INCOME> 0
<EXPENSES-NET> 1627
<NET-INVESTMENT-INCOME> (589)
<REALIZED-GAINS-CURRENT> 5521
<APPREC-INCREASE-CURRENT> 27198
<NET-CHANGE-FROM-OPS> 32130
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 3351
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9880
<NUMBER-OF-SHARES-REDEEMED> 2436
<SHARES-REINVESTED> 212
<NET-CHANGE-IN-ASSETS> 131539
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 19
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1199
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1629
<AVERAGE-NET-ASSETS> 119292
<PER-SHARE-NAV-BEGIN> 11.65
<PER-SHARE-NII> (.07)
<PER-SHARE-GAIN-APPREC> 3.83
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .29
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.12
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>