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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
Acorn Investment Trust
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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IMPORTANT NEWS
For Acorn Investment Trust Shareholders
While we encourage you to read the full text of the enclosed proxy statement,
here's a brief overview of matters to be voted upon.
Q & A
Q WHAT AM I bEING ASKED TO VOTE "FOR" ON THIS PROXY?
A This proxy contains two proposals:
1. Approval of a new investment advisory agreement between the Trust, on behalf
of each of the Acorn Funds, and Wanger Asset Management, L.P. (WAM), on
substantially similar terms as the current investment advisory agreement, but
with WAM operating as a wholly owned subsidiary of Liberty Financial
Companies, Inc. (LFC);
2. Ratification of the selection of Ernst & Young LLP as the Trust's independent
public accountants for the fiscal year ending December 31, 2000.
Q WHY ARE WE BEING ASKED TO VOTE ON A NEW INVESTMENT ADVISORY AGREEMENT?
A WAM has agreed to be acquired by LFC. That acquisition will terminate the
current investment advisory agreement between Acorn and WAM. The acquisition
won't be completed unless a number of conditions are met. One condition is
that shareholders of Acorn Fund, Acorn International and Acorn USA must
approve the proposed new advisory agreement. As a result, you are being asked
to vote on a new investment advisory agreement with WAM, operating under its
new ownership and its new name, Liberty Wanger Asset Management, L.P.
[LOGO]
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Q WHAT PROMPTED THE SALE OF WAM TO LIBERTY?
A WAM looked for strategic alternatives that would:
. address succession challenges surrounding the eventual retirement of Ralph
Wanger;
. address challenges relating to distribution of shares of the Funds in a
rapidly evolving market;
. provide management support to WAM, which had grown substantially in recent
years; and
. provide a broader range of investment products to investors in the Funds.
Q HOW WILL THE SALE OF WAM TO LIBERTY BENEFIT ME?
A WAM and Liberty believe that the merger will result in an allocation of
resources between them that should benefit the shareholders of the Funds.
Liberty has the size and resources to effectively promote and sell mutual
fund shares and provide efficient administration and shareholder servicing to
mutual funds. Liberty believes that, by utilizing its management,
distribution and administrative resources, it can enhance the quality of
shareholder services and introduce operational efficiencies. WAM and Liberty
believe that the management and distribution strength of Liberty and its
affiliates will allow Liberty WAM to concentrate on portfolio management for
its Funds.
Q WILL THIS CHANGE MY STATUS AS A NO-LOAD FUND SHAREHOLDER?
A No. As an existing Fund shareholder, shares of the Acorn Funds will continue
to be offered to you without a sales charge or 12b-1 fee. Shareholders of
record before the close of the merger, which likely will be early fall,
maintain their no-load status. In fact, Acorn shareholders will be allowed
to exchange and purchase shares of certain funds distributed by an affiliate
of LFC without paying a sales charge (however, some of those funds pay 12b-1
fees). These funds include international and domestic stock funds, bond funds
and money market funds.
Q HOW IS THE PROPOSED NEW INVESTMENT ADVISORY AGREEMENT DIFFERENT FROM THE
EXISTING INVESTMENT ADVISORY AGREEMENT?
A The proposed agreement is substantially similar to the current agreement. A
comparison of the proposed new agreement and the existing agreement is
included in the proxy statement under Proposal 1 under the heading
"Comparison of the Current and Proposed Agreements."
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Q WILL THIS CHANGE THE ADVISORY FEES ON MY FUND?
A No. Advisory fees will remain the same.
Q WILL THERE BE ANY FUND MANAGER CHANGES?
A No. The portfolio managers who currently manage your funds are expected to
continue to manage the funds after the merger, using the same investment
strategies and objectives currently in place. Each of the portfolio
managers, including Ralph Wanger, has signed an employment agreement in which
each portfolio manager has agreed to remain an employee of Liberty Wanger
Asset Management, L.P. until December 31, 2005.
Q HOW DOES THE BOARD OF TRUSTEES RECOMMEND SHAREHOLDERS VOTE ON THESE
PROPOSALS?
A The board of trustees recommends that shareholders vote "FOR" each of the
proposals. The board believes that each of these proposals is in the best
interests of the Funds and their shareholders.
Q HOW CAN I VOTE MY PROXY?
A For your convenience, there are several ways you can vote:
. By Mail: vote, sign and return the enclosed proxy card
. By Telephone: 800-769-5414
. By Facsimile (if you are a registered Acorn Funds shareholder): vote, sign
and fax the enclosed proxy card to 212-269-2796
. By touch-tone: 888-221-0697
. By Internet: www.acornfunds.com
. In person: Sept. 26, 2000, 9:00 a.m., Bank One Auditorium, Plaza Level, 38
South Dearborn Street, Chicago, Illinois 60602
See your proxy card for specific instructions on how to vote via telephone,
facsimile or the Internet.
It is important that you vote your proxy promptly.
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ACORN INVESTMENT TRUST
227 WEST MONROE STREET, SUITE 3000
CHICAGO, ILLINOIS 60606-5016
1-800-9-ACORN-9
July 28, 2000
Dear Shareholder:
You are cordially invited to attend a special meeting of shareholders of
Acorn Investment Trust which will be held on September 26, 2000 at 9:00 a.m.,
Central time, Bank One Auditorium, Plaza Level, 38 South Dearborn Street,
Chicago, Illinois 60602.
The primary purpose of the meeting is to ask you to vote on a proposed new
investment advisory agreement between the Trust (on behalf of each of Acorn
Fund, Acorn International, Acorn USA, Acorn Twenty and Acorn Foreign Forty)
and Wanger Asset Management, L.P. ("WAM") but with WAM operating as a wholly
owned subsidiary of Liberty Financial Companies, Inc. and under its new name,
Liberty Wanger Asset Management, L.P.
Liberty Wanger Asset Management, L.P. will be the name of WAM after a
pending transaction that will result in WAM becoming a wholly owned subsidiary
of Liberty Financial Companies, Inc. You are being asked to approve the
proposed new investment advisory agreement so that the merger can be completed
and the management of each Fund can continue uninterrupted after the
transaction. The proposed new investment advisory agreement is substantially
similar to the Trust's current investment advisory agreement. THE INVESTMENT
ADVISORY FEES THAT EACH FUND PAYS WILL STAY THE SAME. The portfolio managers
managing your Fund are expected to continue to do so after the merger,
following the same investment strategies and objectives currently in place.
Ralph Wanger will continue as president of Acorn.
YOUR VOTE IS IMPORTANT. The board encourages you to read the enclosed
materials carefully. The board has approved the proposed new investment
advisory agreement and recommends that you approve it. Please complete, sign
and date the enclosed proxy card and return it in the enclosed postage-paid
return envelope. This will ensure that your vote is counted, even if you can't
attend the meeting in person.
If you prefer, you may vote by telephone with a toll-free call to the
telephone number that appears on your proxy card voting instructions or to our
proxy solicitor, D.F. King & Co., at 800-769-5414. You may also vote by faxing
the enclosed card to the number that appears on your proxy card, if you are a
registered Acorn shareholder, or via the Internet in accordance with the
instructions set forth on your proxy card. It is important that proxies be
voted promptly. Please call D.F. King & Co. at 800-769-5414 with any questions
about voting.
Sincerely,
Irving B. Harris
Chairman of the Board
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ACORN INVESTMENT TRUST
227 WEST MONROE STREET, SUITE 3000
CHICAGO, ILLINOIS 60606-5016
1-800-9-ACORN-9
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
September 26, 2000
A special meeting of shareholders of Acorn Investment Trust ("Acorn" or
the "Trust") will be held at Bank One Auditorium, Plaza Level, 38 South
Dearborn Street, Chicago, Illinois 60602, at 9:00 a.m., Central time, on
September 26, 2000. At the meeting, shareholders will be asked to vote on the
following proposals:
1. To approve a proposed new investment advisory agreement between the
Trust (on behalf of Acorn Fund, Acorn International, Acorn USA, Acorn
Twenty and Acorn Foreign Forty) and Wanger Asset Management, L.P.
("WAM"), on substantially similar terms as the current investment
advisory agreement, but with WAM operating as a wholly owned
subsidiary of Liberty Financial Companies, Inc.;
2. To ratify the selection of Ernst & Young LLP as the Trust's
independent public accountants for the fiscal year ending December 31,
2000; and
3. To transact any other business that properly comes before the meeting.
Shareholders of record as of the close of business on July 21, 2000 are
entitled to vote at the meeting (or any adjournments of the meeting). This
proxy statement and proxy card are being mailed to shareholders on or about
August 3, 2000.
By Order of the Board of Trustees,
STEVEN A. RADIS
Steven A. Radis
Secretary
July 28, 2000
Chicago, Illinois
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE
COMPLETE AND RETURN THE ENCLOSED PROXY CARD(S). YOU MAY STILL
VOTE IN PERSON IF YOU ATTEND THE MEETING.
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ACORN INVESTMENT TRUST
227 WEST MONROE STREET, SUITE 3000
CHICAGO, ILLINOIS 60606-5016
1-800-9-ACORN-9
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
SEPTEMBER 26, 2000
This proxy statement is being sent to you by the board of trustees of
Acorn Investment Trust. The board is asking you to complete and return the
enclosed proxy card(s), permitting your shares of Acorn Fund, Acorn
International, Acorn USA, Acorn Twenty and/or Acorn Foreign Forty to be voted
at the meeting, even if you cannot attend the meeting in person. The meeting
will be held at Bank One Auditorium, Plaza Level, 38 South Dearborn Street,
Chicago, Illinois 60602, at 9:00 a.m., Central time, on September 26, 2000
(the "Meeting"). Shareholders of record at the close of business on July 21,
2000 (the "record date") are entitled to vote at the meeting.
You should also have received Acorn's annual report to shareholders for
the fiscal year ended December 31, 1999. If you would like another copy of the
annual report, please write to Acorn at the address shown at the top of this
page or call at 800-922-6769. The report will be sent to you without charge.
For convenience, Acorn Investment Trust is referred to in this proxy
statement as "Acorn" or the "Trust." Acorn Fund, Acorn International, Acorn
USA, Acorn Twenty and Acorn Foreign Forty are each referred to individually as
a "Fund" and together as the "Funds."
SUMMARY OF PROPOSALS
You are being asked to vote on two Proposals--a proposed new investment
advisory agreement (called the "Proposed Agreement") and the ratification of
the board's selection of Ernst & Young LLP as the Trust's independent
auditors. The shareholders of each Fund will vote separately on the Proposed
Agreement and on the ratification of the selection of auditors.
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PROPOSAL 1
PROPOSED NEW INVESTMENT ADVISORY AGREEMENT
INTRODUCTION
As of June 9, 2000, Wanger Asset Management, L.P. ("WAM"), the Funds'
investment adviser; Wanger Asset Management, Ltd. (WAM's general partner);
Liberty Financial Companies, Inc. ("Liberty"); and WAM Acquisition L.P.
("Liberty Sub") entered into an Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which WAM will become a wholly owned subsidiary of
Liberty. Under the Merger Agreement, Liberty Sub will be merged with and into
WAM (the "Merger"). WAM, the surviving entity, will be renamed "Liberty Wanger
Asset Management, L.P." ("Liberty WAM"). Shareholders are being asked to
approve the Proposed Agreement so that, as further described below, the Merger
can be completed and the management of each Fund can continue uninterrupted
after the transaction. The Proposed Agreement is substantially similar to the
current investment advisory agreement between the Trust (on behalf of each
Fund) and WAM (the "Current Agreement"). WAM, under its new name and its new
ownership, would continue to be each Fund's investment adviser if shareholders
approve the Proposed Agreement. The portfolio managers who currently manage
your Funds are expected to continue to manage the Funds after the Merger,
following the same investment strategies and objectives currently in place.
For a comparison of the Current and Proposed Agreements, see "The Investment
Advisory Agreements--Comparison of Current and Proposed Agreements" below.
It is a condition to completion of the Merger that the shareholders of
Acorn Fund, Acorn International and Acorn USA approve the Proposed Agreement.
If shareholders of those Funds do not approve the Proposed Agreement, Liberty
has the contractual right to abandon the Merger. In that event, the Current
Agreement would remain in effect for ALL Funds until further notice. If
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shareholders of those Funds do approve the Proposed Agreement, the Proposed
Agreement will become effective for those Funds (along with any other Funds
which have approved the Proposed Agreement) as of the completion of the
Merger, which is expected to be in the early fall of this year. Although
approval of the Proposed Agreement by the shareholders of Acorn Twenty and
Acorn Foreign Forty is not a condition to completion of the Merger, approval
of these Funds is also sought because at the close of the Merger, the Current
Agreement will be deemed to be "assigned" (as that term is defined under the
Investment Company Act of 1940 (the "1940 Act")), and the Current Agreement
will automatically terminate for ALL Funds. In the event that shareholders of
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Acorn Twenty and Acorn Foreign Forty do not approve the Proposed Agreement,
the Acorn board will take such action as it deems appropriate. Such action may
include entering into an interim agreement for investment advisory services
with
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Liberty WAM substantially in the form of the Proposed Agreement in accordance
with the 1940 Act until the board determines that another course of action is
appropriate.
At special meetings of the Acorn board held on June 1, 2000, June 8, 2000
and July 6, 2000, the trustees met to consider the Merger and its anticipated
effects on the Funds. On July 6, 2000, the trustees, including the
disinterested trustees, unanimously voted to approve the Proposed Agreement
with respect to each Fund and to recommend the Proposed Agreement to Fund
shareholders for approval. For more information about the trustees'
deliberations and the reasons for their recommendation, please see the
discussion relating to this Proposal under the heading "The Investment
Advisory Agreements--Factors Considered by the Board."
The board of trustees, including the disinterested trustees, unanimously
recommends that shareholders of the Funds vote for approval of the Proposed
Agreement.
THE MERGER
BACKGROUND
WAM has advised Acorn that it began consideration in late 1999 of
strategic alternatives that would:
. address succession challenges surrounding the eventual retirement of Ralph
Wanger;
. address challenges relating to distribution of shares of the Funds in a
rapidly evolving market;
. provide management support to WAM, which had grown substantially in recent
years; and
. provide a broader range of investment products to investors in the Funds.
After consideration of the alternatives, WAM advised Acorn that WAM had
concluded that an outright sale of its business would best address each of
these challenges. After a detailed evaluation process by WAM, discussions with
Liberty culminated in the execution of the Merger Agreement dated June 9,
2000.
Liberty is a publicly traded asset accumulation and management company,
headquartered in Boston, Massachusetts. Liberty Mutual Insurance Company, a
mutual insurance company, owned (through a number of intermediate
corporations) 71% of the combined voting power of Liberty's stock at June 30,
2000. Through its subsidiaries, Liberty provides fixed, indexed and variable
annuities; mutual funds; private wealth management and
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institutional money management services. At March 31, 2000, it had assets
under management, through its subsidiaries, in excess of $67 billion.
Subsidiaries of Liberty, including the Crabbe Huson Group, Inc., Colonial
Management Associates, Inc., Liberty Asset Management Company, Stein Roe &
Farnham Incorporated and Newport Pacific Management, Inc., act as investment
advisers to approximately 114 mutual funds.
WAM and Liberty believe that the Merger will result in an allocation of
resources between them that should benefit the shareholders of the Funds.
Liberty has the size and resources to promote and sell mutual fund shares
effectively and provide efficient administration and shareholder servicing to
mutual funds. Liberty believes that, by utilizing its management, distribution
and administrative resources, it can enhance the quality of shareholder
services and introduce operational efficiencies. WAM and Liberty believe that
the management and distribution strength of Liberty and its affiliates will
allow Liberty WAM to concentrate on portfolio management for the Funds.
In addition, as a current shareholder of the Funds, you will have expanded
investment options because you will be allowed to exchange your shares in the
Funds for shares of other funds distributed by Liberty Funds Distributor,
Inc., an affiliate of Liberty, (these funds are called the "Liberty Funds"),
and purchase shares of certain Liberty Funds, without paying a sales charge.
For a more detailed discussion of proposed changes to the Funds following the
completion of the Merger, see "Other Proposed Changes to the Funds."
SUMMARY OF MERGER AGREEMENT
Pursuant to the terms of the Merger Agreement, upon the closing of the
Merger, Liberty Sub will merge with and into WAM, with WAM continuing as the
surviving entity. WAM will be an operating subsidiary of Liberty, and will be
renamed Liberty WAM. Ralph Wanger will serve as president of Liberty WAM, the
overall policies of which will be set by a board of directors that will
consist of Mr. Wanger and two Liberty executives. Additional officers of
Liberty WAM are expected to be Bruce Lauer and two Liberty representatives.
The Merger Agreement provides that each limited partnership interest and
general partnership interest of WAM issued and outstanding immediately prior
to the Merger will be cancelled, and each holder will receive in return the
right to receive an amount equal to a certain specified percentage of the
initial purchase price of $272 million (subject to certain adjustments).
Another payment of $8 million is guaranteed three years after the completion
of the Merger. Additional purchase price amounts, up to a maximum of $170
million
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in the aggregate, will be payable by Liberty if Liberty WAM's earnings (as
defined for this purpose in the Merger Agreement) meet certain targets for the
thirty-six and sixty month periods beginning with the month following the
completion of the Merger. As limited partners of WAM and stockholders of
Wanger Asset Management Ltd., Ralph Wanger and Charles McQuaid, members of the
board of trustees, will receive a portion of the purchase price.
Completion of the Merger is subject to a number of conditions, including,
among others: (i) the approval of the Proposed Agreement by the shareholders
of Acorn Fund, Acorn International and Acorn USA; (ii) the approval of a new
advisory agreement by shareholders of Wanger U.S. Small Cap and Wanger
International Small Cap, also advised by WAM; (iii) the receipt of certain
regulatory approvals; and (iv) the advisory fee revenue received by WAM
remaining above a designated level. See also the discussion under the
"Introduction" above.
WAM has entered into employment agreements with each of the principals of
WAM, including the portfolio managers of each of the Funds, which will become
effective upon completion of the Merger. Pursuant to the terms of the
employment agreements, these individuals have agreed to remain employees of
Liberty WAM until December 31, 2005. The employment agreement of each of the
portfolio managers includes an agreement by each of them that (with certain
exceptions) if they end their relationship with Liberty WAM they will not,
through the earlier of (i) December 31, 2005 or (ii) the second anniversary of
the termination of their employment with Liberty WAM, participate in any other
investment management business, or solicit any Liberty WAM client or employee.
SECTION 15(F) CONSIDERATIONS
Section 15(f) of the 1940 Act provides that an investment adviser to a
registered investment company may receive any amount or benefit in connection
with a sale of an interest in such adviser which results in an assignment of
an investment advisory contract if two conditions are satisfied. The first
condition is that, for a period of three years after the assignment, at least
75% of the members of the board of the investment company not be "interested
persons" (as defined in the 1940 Act) of the new investment adviser or its
predecessor. The second condition is that no "unfair burden" be imposed on the
investment company as a result of the assignment or any express or implied
terms, conditions or undertakings related to the assignment. An "unfair
burden" on an investment company exists if, during the two-year period after
any such transaction occurs, the investment adviser or its predecessor or
successor, or any interested person of such adviser, predecessor or successor,
receives or is entitled to receive any compensation from any person in
connection with the purchase or sale of securities or other
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property from or on behalf of the investment company, or from the investment
company or its shareholders, other than for bona fide underwriting, investment
advisory or other services.
Under the terms of the Merger Agreement, Liberty agreed that it and
Liberty WAM, to the extent it is within their control, would cause the two
conditions set forth in Section 15(f) of the 1940 Act to be complied with. The
current board of trustees consists of 12 individuals, only two of whom are
interested persons of WAM or will be interested persons of Liberty WAM. As a
result, no change in board composition is contemplated at this time.
THE INVESTMENT ADVISORY AGREEMENTS
On July 6, 2000, the board of trustees unanimously approved the Proposed
Agreement. As described in more detail under "--Factors Considered by the
Board," the board evaluated a substantial amount of information before making
this recommendation.
THE PROPOSED AGREEMENT IS SUBSTANTIALLY SIMILAR TO THE CURRENT AGREEMENT.
A copy of the Proposed Agreement is attached as Exhibit A.
THE BOARD OF TRUSTEES, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS OF THE FUNDS VOTE FOR APPROVAL OF THE PROPOSED
AGREEMENT.
FACTORS CONSIDERED BY THE BOARD
At special meetings of the Acorn board held on June 1, 2000, June 8, 2000
and July 6, 2000, the board reviewed a variety of factors relating to the
Merger and the Proposed Agreement. Senior management of Liberty and WAM
presented a review of the Merger, including a discussion of proposed changes
to the Funds in connection with the Merger. The Board reviewed the history,
strategy and general plans of Liberty, and a variety of documents regarding
Liberty. There were extended discussions regarding Liberty's plans for the
Funds, including ongoing investment management, administration and
distribution of the Funds.
The board took into account WAM's assertions that: (i) the Merger was
important to provide stability to WAM when Mr. Wanger eventually retires, and
WAM believes the stability will enhance its ability to attract and retain
talented employees; (ii) Liberty had assured WAM that Liberty intends to
maintain the integrity of WAM's investment process; (iii) WAM was eager for
Liberty to assume responsibility for certain administrative services for the
Funds and provide management support for WAM so that WAM principals could
focus their energies entirely on portfolio management; and (iv) WAM did not
believe that remaining independent was a viable option for it.
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The board noted that the employment agreements into which Mr. Wanger and
each other portfolio manager have entered and which will become effective upon
closing of the Merger, provide for their continued employment with Liberty WAM
through December 31, 2005. The board also took into account Mr. Wanger's
assurance that he has no present intention to retire before that date and that
the structure of the Merger, with additional purchase price amounts payable in
three and five years if financial targets are met, provided an incentive for
each of the portfolio managers to remain committed to the success of the Funds
and Liberty WAM after the Merger.
In evaluating the Proposed Agreement, the board considered that the
Proposed Agreement, including the terms relating to the services to be
provided, were substantially similar to the Current Agreement. The board noted
that, in approving the continuation of the Current Agreement on May 23, 2000,
the board had evaluated a number of factors, including the nature, quality and
scope of services provided by WAM, the performance of each Fund compared to
relevant benchmarks, and comparative fees and expense ratios.
The board also considered changes in the market for distribution of mutual
fund shares. Liberty presented information to the board showing that the share
of investments in mutual funds made directly by retail investors, without an
intermediary, had steadily declined over the last five years, while sales of
fund shares through intermediaries (including brokers and financial advisors)
had remained fairly stable. The board believes that at least moderate net
investments in the Funds are important for portfolio management in order to
avoid having to sell securities, bear associated transaction costs and realize
related capital gains, to meet redemption needs. The board took into account
Liberty's plans to sell shares of each Fund through intermediaries, providing
the potential for increased investments in the Funds, and considered Liberty's
record in mutual fund sales.
The board considered plans to stop selling shares of the Funds to most new
investors without a sales charge. The board took into account the ability of
the Funds' current shareholders and members of their immediate families to
continue to invest without a sales charge, not only in the Funds but also in
other intermediary distributed Liberty Funds. Many of those Liberty Funds,
however, pay 12b-1 distribution and shareholder service fees.
The board considered how the Merger would affect other services provided
to the Funds. Liberty proposed that affiliates of Liberty assume
responsibility for most administrative services to the Funds, including
transfer agency, shareholder servicing (for new Fund shareholders), fund
accounting and general administration. The board noted that the proposed
changes would not result in an increase in overall expenses borne by the
Funds' current shareholders.
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The board considered the potential advantages and disadvantages of the
two-year initial term of the Proposed Agreement and Acorn's ability to
terminate the Proposed Agreement on 60 days' notice. The trustees discussed
with representatives of WAM how they expected WAM would operate within the
Liberty organization, including responsibility for its day to day management.
Recent performance of the Funds was discussed, as was the profitability to WAM
of its relationship with the Funds. Finally, the board noted that all expenses
in connection with the implementation of changes required by the Merger,
including this proxy solicitation, would be paid by Liberty or, in some
circumstances, WAM.
During the review process, the board consulted with Bell, Boyd & Lloyd
LLC, counsel to the Funds.
COMPARISON OF THE CURRENT AND PROPOSED AGREEMENTS
The Current Agreement with respect to Acorn Fund, Acorn International and
Acorn USA was approved by shareholder vote at a special meeting of
shareholders held on December 9, 1997. The board of trustees voted to approve
an addendum to the Current Agreement for the provision of advisory services to
Acorn Twenty and Acorn Foreign Forty on May 27, 1998. The Current Agreement
was renewed on May 23, 2000 by unanimous vote of the board of trustees. The
Current Agreement expires on June 30, 2001.
If approved by the shareholders, the Proposed Agreement will be signed and
become effective on the date of completion of the Merger (the "Effective
Date"), which is currently expected to be as soon as reasonably practicable
after the conditions to which the Merger is subject (including the required
shareholder approvals) have been satisfied. The Proposed Agreement will
continue in effect through the second anniversary of the Effective Date, and
like the Current Agreement, will continue year to year as long as its
continuance as to each Fund is approved at least annually thereafter (i) by
the board of trustees or by the holders of a "majority of the outstanding
securities" (as defined in the 1940 Act) of that Fund; and (ii) by a vote of
the majority of the disinterested trustees, cast in person at a meeting called
for that purpose. Like the Current Agreement, the Proposed Agreement may be
terminated as to a 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 sixty days' written notice to Liberty WAM and will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
The Current Agreement and Proposed Agreement sometimes are referred to
below as the "Agreements," and WAM and Liberty WAM are referred to as the
"Adviser."
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General Terms of the Agreements. Under the Agreements, subject to the
overall supervision and control of the board of trustees, the Adviser has
supervisory responsibility for the general management and investment of the
Funds' assets. The Adviser is authorized to make the decisions to buy and sell
securities, options, futures contracts and any other investments in which the
Funds may invest pursuant to each Fund's investment objectives, policies and
restrictions, to place the Funds' portfolio transactions with broker-dealers,
and to negotiate the terms of such transactions, including brokerage
commissions on brokerage transactions, on behalf of the Funds. The Adviser is
authorized to exercise discretion concerning portfolio brokerage allocation
consistent with each Fund's policy and the Trust's registration statement and
under the supervision of the Trust's board of trustees, and as permitted by
law, including but not limited to Section 28(e) of the Securities Exchange Act
of 1934, and in so doing shall not be required to make any reduction in its
investment advisory fees. The Agreements also provide that the Adviser will
furnish to the Trust at the Adviser's own expense, office space and all
necessary office facilities, equipment and personnel required to provide its
services.
Under the Agreements, each Fund is obligated to pay all of its expenses
other than those paid by the Adviser as set forth above, including taxes and
charges for auditing and legal services, custodian, depository and transfer
agent fees, all costs for borrowing money, registration, filing and other fees
in connection with the requirements of regulatory authorities, the printing
and mailing of reports to shareholders, expenses of shareholder and trustees
meetings, expenses of trustees, other than those affiliated with the Adviser,
expenses related to membership in any trade association and brokers'
commissions and other charges relative to the purchase or sale of portfolio
securities. The Adviser also is responsible for paying all expenses in
connection with managing the assets of the Funds, including placement of
securities orders and related bookkeeping.
The Agreements provide that the Adviser shall not be liable to the Funds
or their shareholders for any loss suffered by the Funds or their shareholders
as a result of any error of judgement, or any loss arising out of any
investment, or as a consequence of any act or omission of the Adviser, or of
any of the partners, employees or agents of the Adviser, in connection with or
pursuant to the Agreements, except for liability resulting from willful
misfeasance, bad faith or gross negligence on the part of the Adviser in the
performance of its duties, or by reason of reckless disregard by the Adviser
of its obligations and duties under the Agreements.
The Agreements may be terminated by a Fund (by action of the board of
trustees or shareholders) or the Adviser on 60 days' written notice to the
other. The Agreements terminate automatically in the event of their assignment
(as defined in the 1940 Act).
9
<PAGE>
Advisory Fees. The following table shows the rates of the Trust's
compensation to WAM under the Current Agreement. THE PROPOSED AGREEMENT
PROVIDES FOR IDENTICAL COMPENSATION TO LIBERTY WAM.
<TABLE>
<CAPTION>
RATE OF COMPENSATION PAID TO WAM
FUND (AS A PERCENTAGE OF AVERAGE NET ASSETS)
---- ---------------------------------------
<S> <C>
Acorn Fund........................ 0.75% of the first $700 million
0.70% of the next $1.3 billion
0.65% in excess of $2 billion
Acorn International............... 1.20% of the first $100 million
0.95% of the next $400 million
0.75% in excess of $500 million
Acorn USA......................... 0.95% of the first $200 million
0.90% in excess of $200 million
Acorn Twenty...................... 0.90% of all assets
Acorn Foreign Forty............... 0.95% of all assets
</TABLE>
Acorn has 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 each Fund's average daily net assets. Acorn will enter into
an administrative services agreement with Liberty WAM that is substantially
similar to the current administrative services agreement between Acorn and
WAM. The proposed administrative services agreement provides for compensation
identical to that currently provided to WAM under the current administrative
services agreement. WAM has undertaken to reimburse Acorn Twenty and Acorn
Foreign Forty to the extent their ordinary operating expenses exceed 1.35% and
1.45%, respectively. This undertaking is voluntary and may be terminated by
either WAM or the Trust on 30 days' notice to the other. Liberty WAM intends
to continue these voluntary undertakings, subject to the same termination
rights, for the class of no load shares that will be available to current
Acorn shareholders following the completion of the Merger.
For the fiscal year ended December 31, 1999, the advisory and
administration fees paid to WAM were:
<TABLE>
<CAPTION>
ADVISORY
FEE ADMINISTRATION FEE
----------- ------------------
<S> <C> <C>
Acorn Fund................................ $23,436,860 $1,698,989
Acorn International....................... 15,668,082 961,025
Acorn USA................................. 2,805,167 150,256
Acorn Twenty.............................. 480,321* 27,970
Acorn Foreign Forty....................... 383,825* 22,426
</TABLE>
---------
* net of expense reimbursements of $23,136 for Acorn Twenty and $42,270 for
Acorn Foreign Forty.
10
<PAGE>
No other fees or payments were made by any Fund to WAM or any of its
affiliates during the fiscal year ended December 31, 1999.
See the discussion below under the heading "Information about WAM--Other
Investment Companies Advised by WAM" for information about other funds managed
by WAM having similar investment objectives as the Funds.
Differences Between the Current Agreement and the Proposed Agreement. In
addition to the General Terms of the Agreements described above, the Proposed
Agreement includes other provisions that generally are necessary to take into
account operating differences resulting from the change in ownership structure
of Liberty WAM. In particular, the Proposed Agreement includes provisions not
found in the Current Agreement that:
. permit a broker associated with Liberty WAM to effect transactions on a
national securities exchange for the Funds to the extent permitted by
applicable regulations;
. memorialize Liberty WAM's existing authority to aggregate orders for the
Funds with orders of other clients or clients of affiliates of Liberty WAM
(in the event that Liberty WAM and the affiliated advisers share common
trading facilities) as long as the trades are allocated in a fair and
equitable manner and consistent with each adviser's fiduciary duty to its
clients;
. document existing practice by requiring the Trust to provide Liberty WAM
with financial statements, proxy statements, reports and other information
relating to the business and affairs of each Fund that Liberty WAM may
reasonably require to discharge its obligations under the Proposed
Agreement;
. permit Liberty WAM, upon receipt of approval from the board of trustees,
to contract with unaffiliated and affiliated parties to provide certain
services that Liberty WAM is obligated under the Proposed Agreement to
provide (other than advisory services) and limit the liability of any
affiliate of Liberty WAM in the performance of Liberty WAM's duties under
the agreement to those resulting from willful misfeasance, bad faith or
gross negligence on the part of Liberty WAM or the affiliate;
. permit affiliates of Liberty WAM to receive compensation from Liberty
Acorn for other services provided by the affiliate that are not within the
scope of the duties of Liberty WAM under the agreement; and
. permit the Trust to use the name "Liberty" for the duration of the
Proposed Agreement.
11
<PAGE>
In addition certain provisions in the Current Agreement are not in the
Proposed Agreement:
. Under the Proposed Agreement, Liberty WAM will not assume all the expenses
of marketing the shares of the Funds (for the classes of shares other than
the no-load shares available to current Acorn shareholders).
. A clause has been deleted that currently requires WAM to treat all records
and other information relating to Acorn as confidential and proprietary
information of Acorn and to not use the records and information for
purposes other than in the performance of WAM's duties and
responsibilities under the agreement unless certain conditions are met.
OTHER PROPOSED CHANGES TO THE FUNDS
In addition to the Proposed Agreement, a number of other changes to the
Funds (not requiring your approval) are conditions to the completion of the
Merger. The Acorn board approved these changes at its special meeting held on
July 6, 2000. These changes are described briefly below, and will be explained
in more detail in the Funds' prospectus that you will receive after the
completion of the Merger.
NAME CHANGES
At the time of the completion of the Merger, the name of the Trust will be
changed to "Liberty Acorn Trust," and the names of the Funds will be changed
to "Liberty Acorn Fund," "Liberty Acorn International," "Liberty Acorn USA,"
"Liberty Acorn Twenty" and "Liberty Acorn Foreign Forty."
CREATION OF NEW CLASSES AND CLOSING OF FUND TO NEW PURCHASERS
Following the completion of the Merger, shares of each Fund will be
offered in at least four different classes, which will represent interests in
the same Fund but will have different distribution structures.
THE SHARES THAT YOU CURRENTLY OWN WILL CONTINUE TO HAVE NO SALES LOAD AND
NO 12B-1 FEE. These shares will be designated as Class Z shares. After the
completion of the Merger, only eligible investors will be permitted to
purchase Class Z shares (including by exchanges). Eligible investors include:
. a shareholder of any of the Acorn Funds at the time of the completion of
the Merger who continues to own shares of any of the Acorn Funds or any
fund distributed by Liberty Funds Distributors, Inc. or a member of the
shareholder's family;
12
<PAGE>
. a trustee of Acorn; an employee of Liberty WAM; or a member of the family
of the trustee or employee;
. certain institutional investors; and
. certain investors with relationships with Liberty, other Liberty advisory
affiliates or certain intermediaries.
Each Fund also will offer Class A, Class B and Class C shares (and perhaps
other classes) that will have varying front-end, back-end and contingent
deferred sales loads, and varying 12b-1 fees. Other classes with different
features may be added in the future.
At its board meeting on July 6, 2000, the Acorn board approved (i) the
creation of these three new classes of shares, (ii) the adoption of a Rule
12b-1 plan relating to the service and distribution-related fees on the Class
A, B and C shares and (iii) a Rule 18f-3 plan setting forth the
characteristics of each class of shares, including the characteristics of
Class Z shares.
EXCHANGE AND NO LOAD PURCHASE PRIVILEGES WITH OTHER LIBERTY FUNDS
Following the Merger, you will be able to exchange your Class Z shares of
the Funds, without any additional charge or sales load, for (i) Class Z shares
of certain other Liberty Funds or (ii) Class A shares of certain other Liberty
Funds that do not offer Class Z shares. Class A shares are subject to 12b-1
fees (which are described in the applicable fund's prospectus). The Liberty
Funds or classes of shares available by exchange may change from time to time.
The exchange privilege will be administered on substantially the same
terms as the exchange privilege currently in place for the Funds. This means
that an exchange will occur at the next-determined net asset value; the
exchange is a taxable event to you; and a Fund may terminate the exchange
privilege if Liberty WAM determines that your exchange activity is likely to
adversely impact its ability to manage the Fund.
Shares of any Liberty Fund available for exchange on a no load basis also
may be purchased directly, without an initial sales charge, by holders of
Acorn Class Z shares.
The current exchange privilege with certain Reich & Tang money market
funds will be terminated at the time of completion of the Merger. Shareholders
instead will have the ability to exchange into one or more Liberty money
market funds.
Additional information relating to the exchange privilege and no load
purchase will be included in your Fund's prospectus sent to you following the
completion of the Merger.
13
<PAGE>
OTHER AGREEMENTS AND SERVICE PROVIDER CHANGES
Following the completion of the Merger, the providers of distribution and
transfer agency services to your Fund will be different. In connection with
the Merger, Acorn will enter into new agreements with Liberty affiliates for
the provision of these services to the Funds. Acorn will enter into an
underwriting agreement for distribution services with Liberty Funds
Distributor, Inc. and a transfer agency agreement with Liberty Funds Services
Inc., in each case on terms and conditions and in the form approved by the
board of trustees of Acorn. The fees for transfer agency services to the
holders of Class Z shares will be the same as the fees paid to Acorn's current
transfer agent (State Street Bank and Trust Company) under the current
agreement. The underwriting agreement with Liberty Funds Distributor, Inc.
will contain provisions providing for the payment of asset-based service and
distribution fees by the Funds with respect to classes of shares other than
Class Z shares, but no such compensation will be paid with respect to the
Class Z shares.
Acorn will also enter into an administrative services agreement with
Liberty WAM that is substantially similar to the current administrative
services agreement between Acorn and WAM. The proposed administrative services
agreement provides for compensation to Liberty WAM identical to that which is
currently provided to WAM under the current administrative services agreement.
Some or all of the administrative services now provided by WAM pursuant to the
administrative services agreement will be delegated by Liberty WAM, at Liberty
WAM's expense, to affiliates of Liberty. Liberty WAM will continue to be
responsible for the performance of services it delegates to others.
Liberty has informed the Acorn board that it is in the process of
reviewing the existing custodial relationships of the Liberty Funds, and that
it is Liberty's intention to recommend that each of the Liberty Funds and the
Funds use the same custodian. While no decision has been made, Liberty's
decision may result in a change in the Funds' custodian, subject to the
approval of the board of trustees.
PROPOSAL 2
RATIFICATION OF SELECTION OF AUDITORS
The board of trustees recommends that the shareholders of each Fund ratify
the board of trustees' selection of Ernst & Young LLP as independent public
accountants for each Fund for the fiscal year ending December 31, 2000.
For the year ended December 31, 1999, Ernst & Young LLP examined the
financial statements of the Trust and provided consultation on financial
14
<PAGE>
accounting, reporting and tax matters. Representatives of Ernst & Young LLP
will be present at the Meeting and will have an opportunity to make a
statement if they desire to do so. They also will be available to respond to
appropriate questions presented at the Meeting.
THE BOARD OF TRUSTEES, INCLUDING THE DISINTERESTED TRUSTEES WHO ARE NOT
AFFILIATED WITH ACORN, UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE FUNDS
VOTE FOR RATIFICATION OF THE SELECTION OF AUDITORS.
INFORMATION ABOUT WAM
MANAGEMENT AND ORGANIZATION OF WAM
WAM serves as the investment adviser for the Funds and for other
institutional accounts. As of June 30, 2000, WAM had approximately $9 billion
under management, including the Funds. Portfolio management decisions for the
Funds are made by their portfolio managers, working with WAM's team of
analysts. WAM is a limited partnership managed by its general partner, Wanger
Asset Management, Ltd. ("WAM Ltd."), whose stockholders, directly or
indirectly, are Ralph Wanger, Charles P. McQuaid, Leah J. Zell, Marcel P.
Houtzager and Robert A. Mohn. Ralph Wanger is the president of WAM Ltd. WAM
and WAM Ltd. are located at 227 West Monroe Street, Suite 3000, Chicago,
Illinois 60606.
WAM also serves as administrator to the Funds.
OTHER INVESTMENT COMPANIES ADVISED BY WAM
In addition to serving as investment adviser to Acorn, WAM is also
investment adviser to Wanger Advisors Trust ("WAT"), an open-end management
investment company with four series--Wanger U.S. Small Cap, Wanger
International Small Cap, Wanger Twenty and Wanger Foreign Forty (the "WAT
Funds"). Shares of the WAT Funds are sold only to life insurance company
separate accounts to fund variable annuity and variable life insurance
contracts, and certain pension plans.
Completion of the Merger is also contingent upon approval of a new
advisory agreement between Liberty WAM and WAT, on behalf of the WAT Funds, by
the WAT board and by the shareholders of Wanger U.S. Small Cap and Wanger
International Small Cap.
15
<PAGE>
The following table shows the total net assets of each of the WAT Funds as
of June 30, 2000, and the current rates of WAT's compensation to WAM:
<TABLE>
<CAPTION>
ASSETS AS OF RATE OF COMPENSATION PAID TO WAM
6/30/00 (AS A PERCENTAGE
NAME OF FUND (000S) OF AVERAGE NET ASSETS)
------------ ------------ --------------------------------
<S> <C> <C>
Wanger U.S. Small Cap............. $362,379 1.00% of the first $100 million;
0.95% of the next $150 million;
0.90% in excess of $250 million
Wanger International Small Cap.... 340,642 1.30% of the first $100 million;
1.20% of the next $150 million;
1.10% in excess of $250 million
Wanger Twenty..................... 8,574 0.95% of all assets
Wanger Foreign Forty.............. 11,185 1.00% of all assets
</TABLE>
WAM has undertaken to reimburse Wanger U.S. Small Cap, Wanger
International Small Cap, Wanger Twenty and Wanger Foreign Forty to the extent
each Fund's ordinary operating expenses exceed 2.0%, 2.0%, 1.35% and 1.45%,
respectively, of its average annual net assets.
MORE INFORMATION ABOUT THE TRUST
ORGANIZATION AND MANAGEMENT OF THE TRUST
The Trust is a Massachusetts business trust organized on April 21, 1992.
The Trust is an open-end management investment company, currently with five
series: Acorn Fund; Acorn International; Acorn USA; Acorn Twenty; and Acorn
Foreign Forty. Acorn Fund began operations in 1970 as The Acorn Fund, Inc.,
and was reorganized as the Acorn Fund series of the Trust effective June 30,
1992. Acorn International began operations on September 23, 1992; Acorn USA
began operations on September 4, 1996; and each of Acorn Twenty and Acorn
Foreign Forty began operations on November 23, 1998.
16
<PAGE>
The Trust is governed by a board of trustees, which is responsible for
protecting the interests of the shareholders of the Funds. The trustees are
experienced executives and professionals who meet at regular intervals to
oversee the activities of the Trust and the Funds. The officers and trustees
of the Funds are:
<TABLE>
<CAPTION>
NAME AND POSITION(S) HELD PRINCIPAL OCCUPATION(S)
DATE OF BIRTH WITH ACORN DURING PAST FIVE YEARS
------------- ---------------- -----------------------
<S> <C> <C>
IRVING B. HARRIS Trustee and Chairman, William Harris
8/4/1910 chairman Investors, Inc. (investment
adviser); Chairman, The Harris
Foundation (charitable
foundation); Chairman of the
executive committee and
director, Pittway Corporation
(multi-product manufacturer and
publisher) until February 2000.
RALPH WANGER Trustee and Principal and portfolio
6/21/1934 president* manager, WAM; President, WAM
Ltd. since July 1992; Trustee
and president, Wanger Advisors
Trust; Director, Wanger
Investment Company plc.
JAMES H. LORIE Trustee and Retired; Eli B. and Harriet B.
2/23/1922 vice chairman 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 Executive vice president,
9/26/1937 Honeywell International (home
and building control);
Chairman, Cylink Corporation
(supplier of encryption
equipment); Director,
AptarGroup, Inc. (producer of
dispensing values, pumps and
closures); Former chairman of
the board of trustees, Hofstra
University; Director, Symbol
Technologies, Inc. since
December 1999; Chairman, Long
Island Venture Fund, L.P.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION(S) HELD PRINCIPAL OCCUPATION(S)
DATE OF BIRTH WITH ACORN DURING PAST FIVE YEARS
------------- ---------------- -----------------------
<S> <C> <C>
JEROME KAHN, JR. Trustee President, William Harris
4/13/1934 Investors, Inc. (investment
adviser); Director, Pittway
Corporation (multi-product
manufacturer and publisher)
until February 2000.
STEVEN N. KAPLAN Trustee Neubauer Family Professor of
12/21/1959 Entrepreneurship and Finance,
Graduate School of Business,
University of Chicago;
Director, ImageMax (provider of
document management products
and services); Director, divine
interVentures, Inc. (business
to business e-commerce).
DAVID C. KLEINMAN Trustee Adjunct professor of strategic
10/12/1935 management, University of
Chicago Graduate School of
Business; Business consultant;
Chairman of the board, Irex
Corporation (insulation
contractor); Director, Sonic
Foundry, Inc. (software);
FirstCom Corp. (competitive
local exchange carrier);
Organics Management Company
(organic waste processor);
Wisconsin Paper & Products
(paper merchant); Plymouth Tube
Company (seamless and welded
metal tubing); Member of the
advisory board, DSC Logistics
Company (warehousing and
logistics services).
CHARLES P. MCQUAID Trustee and Principal, portfolio manager
8/27/1953 senior vice and director of research, WAM
president* since July 1992; Trustee and
senior vice president, Wanger
Advisors Trust.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION(S) HELD PRINCIPAL OCCUPATION(S)
DATE OF BIRTH WITH ACORN DURING PAST FIVE YEARS
------------- ---------------- -----------------------
<S> <C> <C>
ROGER S. MEIER Trustee CEO and chairman of the board,
1/18/1926 AMCO, Inc. (investment and real
estate management); President,
AMCO, Inc. 1986-1999; Director,
Fred Meyer, Inc. (retail chain)
until 1999; Advisory board
member, Key Bank of Oregon
(banking); Chairman of
Investment Counsel of Legacy
Systems (hospital); Executive
director and chairman of
investment committee and
trustee, Portland Art Museum.
ALLAN B. MUCHIN Trustee Partner, Katten, Muchin & Zavis
1/10/1936 (law firm); Director, Alberto-
Culver Company (toiletries).
ROBERT E. NASON Trustee Consultant and private investor
7/29/1936 since 1998; executive partner
and chief executive officer,
member of the executive
committee of Grant Thornton,
LLP (public accounting firm)
and member of the policy board
of Grant Thornton International
from 1990-1998; Director, Fruit
of the Loom, Ltd. (apparel
manufacturer) since February
2000; Director, Fairfax
Insurance Limited (privately
owned insurance company) since
October 1994.
KATHERINE SCHIPPER Trustee Professor (since September
10/04/1949 2000) and visiting professor
(1999-2000), Fuqua School of
Business, Duke University;
Prior thereto, professor of
accounting, University of
Chicago Graduate School of
Business.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
POSITION(S)
NAME AND HELD PRINCIPAL OCCUPATION(S)
DATE OF BIRTH WITH ACORN DURING PAST FIVE YEARS
------------- ----------- -----------------------
<S> <C> <C>
MARGARET M. FORSTER vice president Principal, WAM since 1999;
1/28/1960 Analyst and portfolio manager,
WAM since 1994.
MARCEL P. HOUTZAGER vice president Principal, WAM since 1995;
10/26/1960 Analyst and portfolio manager,
WAM since 1992.
KENNETH A. KALINA assistant Assistant treasurer, Wanger
8/4/1959 treasurer Advisors Trust; Chief financial
officer, WAM since April 2000;
Fund controller, WAM since
September 1995; Prior thereto,
treasurer of the Stein Roe
Mutual Funds.
BRUCE H. LAUER vice president, Principal, WAM since January
7/22/1957 assistant 2000; Chief operating officer,
secretary and WAM since April 1995; Vice
treasurer president, treasurer and
assistant secretary, Wanger
Advisors Trust; Director,
Wanger Investment Company plc
and New Americas Small Cap
Fund.
STEVEN A. RADIS secretary Chief marketing officer and
8/24/1962 managing director, WAM since
April 1999; Prior thereto, vice
president of corporate and
marketing communications,
Zurich Kemper Life, January
1998 to March 1999, and first
vice president corporate
communications, Zurich Kemper
Investments, January 1987 to
December 1997.
ROBERT A. MOHN vice president Principal, WAM since 1995;
9/13/1961 Analyst and portfolio manager,
WAM since August 1992; Vice
president, Wanger Advisors
Trust.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
POSITION(S)
NAME AND HELD PRINCIPAL OCCUPATION(S)
DATE OF BIRTH WITH ACORN DURING PAST FIVE YEARS
------------- -------------- -----------------------
<S> <C> <C>
JOHN H. PARK vice president Principal, WAM since 1998;
5/30/1967 Analyst and portfolio manager,
WAM since July 1993; Vice
president, Wanger Advisors
Trust.
ROGER D. EDGELY vice president Principal, WAM since January
4/18/1955 2000; Analyst, WAM since 1994;
Director of international
research, WAM since 1998.
LEAH J. ZELL vice president Principal, analyst, and
5/23/1949 portfolio manager, WAM since
July 1992; Vice president,
Wanger Advisors Trust; Managing
director and member of trust
committee, Chai Trust Company.
</TABLE>
---------
*Messrs. McQuaid and Wanger are trustees who are "interested persons" of the
Trust, as defined in the 1940 Act, and of WAM. Mr. Wanger and Ms. Zell are
married to each other.
The address for Mr. Wanger, Mr. McQuaid, Mr. Edgely, Ms. Forster, Mr.
Houtzager, Mr. Kalina, Mr. Lauer, Mr. Mohn, Mr. Park, Mr. Radis and Ms. Zell
is Wanger Asset Management, L.P., 227 West Monroe Street, Suite 3000, Chicago,
Illinois 60606. The address of Messrs. Harris and Kahn is Two North LaSalle
Street, Suite 4000, Chicago, Illinois 60602. The address for Messrs. Lorie,
Kaplan and Kleinman is 1101 East 58th Street, Chicago, Illinois 60637. The
address for Mr. Guthart is 165 Eileen Way, Syosset, New York 11791. The
address for Mr. Meier is 1211 S.W. Fifth Avenue, Portland, Oregon 97204. The
address for Mr. Muchin is 525 W. Monroe Street, Suite 1600, Chicago, Illinois
60661-3693. The address for Mr. Nason is 567 Rockefeller Road, Lake Forest,
Illinois 60045. The address for Ms. Schipper is Fuqua School of Business, Duke
University, Durham, North Carolina 27708.
21
<PAGE>
The following table shows certain information regarding the beneficial
ownership of shares of each Fund as of June 30, 2000 by each trustee and by
all trustees and executive officers of Acorn as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF OUTSTANDING
NAME FUND SHARES SHARES HELD
---- ---- --------- -------------
<S> <C> <C> <C>
Irving B. Harris(a) Acorn Fund 2,067,864.000 * %
Acorn International 1,097,938.769 1.21
Acorn USA 24,374.000 *
Acorn Twenty 26,734.480 *
Acorn Foreign Forty 483,049.014 6.57
Ralph Wanger(b) Acorn Fund 547,874.589 *
Acorn International 243,292.194 *
Acorn USA 98,419.741 *
Acorn Twenty 35,977.543 *
Acorn Foreign Forty 33,540.358 *
James H. Lorie Acorn Fund 63,541.200 *
Acorn International 6,000.891 *
Leo Guthart Acorn Fund 2,378.551 *
Acorn International 1,489.656 *
Acorn USA 2,519.940 *
Jerome Kahn, Jr.(c) Acorn Fund 10,931.000 *
Acorn International 4,650.000 *
Acorn USA 4,231.000 *
Steven N. Kaplan Acorn Fund 140.397 *
Acorn International 69.372 *
Acorn USA 168.346 *
Acorn Twenty 192.781 *
Acorn Foreign Forty 116.998 *
David C. Kleinman Acorn Fund 782.796 *
Acorn International 1,478.695 *
Charles P. McQuaid(d) Acorn Fund 224,060.957 *
Acorn International 39,290.632 *
Acorn USA 67,301.590 *
Acorn Twenty 60,539.968 1.30
Acorn Foreign Forty 37,590.340 *
Roger S. Meier Acorn International 11,602.523 *
Acorn Twenty 8,197.298 *
Acorn Foreign Forty 3,633.743 *
Allan B. Muchin Acorn International 1,907.259 *
Acorn Foreign Forty 4,241.217 *
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF OUTSTANDING
NAME FUND SHARES SHARES HELD
---- ---- ------------- -------------
<S> <C> <C> <C>
Robert E. Nason Acorn Fund 3,027.106 * %
Acorn International 1,656.419 *
Acorn USA 1,727.000 *
Acorn Twenty 1,531.898 *
Acorn Foreign Forty 1,378.578 *
Katherine Schipper Acorn International 379.325 *
Acorn USA 1,202.199 *
Acorn Twenty 2,598.118 *
Trustees and executive officers
as a group Acorn Fund 2,804,248.009 1.26
Acorn International 1,409,017.411 1.55
Acorn USA 197,620.473 *
Acorn Twenty 134,532.274 2.90
Acorn Foreign Forty 563,549.898 7.65
</TABLE>
---------
* less than 1%
(a) Includes shares over which Mr. Harris has power to vote and dispose, but
no economic beneficial interest. Of the shares disclosed, Mr. Harris has
economic beneficial interest in 111,271 shares of Acorn Fund, 78,894
shares of Acorn International and 95,232 shares of Acorn Foreign Forty.
(b) Includes shares held for Mr. Wanger's economic beneficial interest in the
WAM employees' profit sharing plan over which Mr. McQuaid has voting
discretion as trustee of the plan. These shares are also included under
Mr. McQuaid's name.
(c) Excludes shares over which Mr. Kahn shares investment and voting power
with Mr. Harris.
(d) Includes shares in which, as trustee of WAM employees' profit sharing
plan, Charles McQuaid has beneficial interest by virtue of having voting
discretion over the shares held in the plan. Of the shares disclosed,
Charles McQuaid has economic beneficial interest in 92,865 shares of Acorn
Fund, 22,308 shares of Acorn International, 30,796 shares of Acorn USA,
20,519 shares of Acorn Twenty and 11,552.35 shares of Acorn Foreign Forty.
DISTRIBUTION OF SHARES OF THE FUNDS
Shares of each Fund are currently offered for sale by WAM Brokerage
Services, L.L.C. ("WAM BD") without any sales commissions, Rule 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 currently
paid by WAM, including the payment and reimbursement of any expenses incurred
by WAM BD. 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.
23
<PAGE>
See "Other Proposed Changes to the Funds--Other Agreements and Service
Provider Changes" for more information about how distribution of shares of the
Funds will change after completion of the Merger.
MORE INFORMATION ABOUT THE MEETING
EXPENSES
Liberty has agreed to bear the costs of preparing, printing and mailing
the proxy materials for the Meeting of shareholders of the Trust and all costs
of solicitation of proxies, subject to certain conditions. Any such expenses
not paid by Liberty will be paid by WAM. Acorn has engaged D.F. King & Co.,
Inc. and Management Information Services Corp. ("MIS") to assist in the
solicitation of proxies. It is anticipated that the cost of the proxy
solicitation services provided by D.F. King will be approximately $15,000, and
the cost of services provided by MIS will be approximately $150,000, in each
case, plus reimbursement of reasonable out of pocket expenses.
DATE OF MAILING
This proxy statement and enclosed proxy are being mailed to shareholders
on or about August 3, 2000.
SHARES AND SHAREHOLDERS
At the record date, the Funds had the following numbers of shares
outstanding:
<TABLE>
<CAPTION>
FUND # SHARES
---- ----------------
<S> <C>
Acorn Fund............................................... 220,674,919.6665
Acorn International...................................... 91,948,411.1292
Acorn USA................................................ 21,258,883.5040
Acorn Twenty............................................. 4,661,784.3380
Acorn Foreign Forty...................................... 7,364,501.0460
</TABLE>
Each share is entitled to one vote; fractional shares are entitled to
fractional votes.
24
<PAGE>
Of the shares outstanding on June 30, 2000, the only persons known to own
of record or beneficially 5% or more of the outstanding shares of any Fund as
of the record date were, as shown under "More Information About The Trust--
Organization and Management of the Trust" and:
<TABLE>
<CAPTION>
PERCENTAGE
OF
NUMBER OF OUTSTANDING
NAME AND ADDRESS FUND SHARES SHARES HELD
---------------- ---- --------- -----------
<S> <C> <C> <C>
Charles Schwab & Co. Inc.(/1/) Acorn Fund 15,906,461.56 7.2%
101 Montgomery Street Acorn International 17,664,108.25 19.4%
San Francisco, CA 94101-4122 Acorn USA 4,630,050.69 20.9%
Acorn Twenty 503,449.54 10.9%
Acorn Foreign Forty 1,493,183.94 20.3%
National Financial Services
Corp.(/1/) Acorn Fund 16,600,767.81 7.5%
One World Financial Center Acorn International 7,469,676.58 8.2%
200 Liberty Street Acorn USA 2,227,263.52 10.0%
New York, NY 10008-3908 Acorn Twenty 269,707.58 5.8%
Acorn Foreign Forty 964,017.06 13.1%
State of Illinois Deferred Acorn Fund 25,064,454.10 11.3%
Compensation Plan(/2/)
200 W. Washington
Springfield, IL 62706-0001
</TABLE>
---------
(1) Shares are held of record on behalf of customers, and not beneficially.
(2) Shares are held of record on behalf of plan participants, and not
beneficially.
HOW PROXIES WILL BE VOTED
All proxies solicited by the board of trustees that are properly executed
and received prior to the Meeting, and which are not revoked, will be voted at
the Meeting. Shares represented by those proxies will be voted in accordance
with the instructions marked on the proxy. If no instructions are specified,
shares will be voted FOR each proposal. See also "Quorum, Voting at the
Meeting and Adjournment."
REVOKING A PROXY
At any time before it has been voted, you may revoke your proxy by: (1)
sending a letter saying that you are revoking your proxy to the Secretary of
Acorn Investment Trust at the Trust's offices located at 227 West Monroe
Street, Suite 3000, Chicago, Illinois 60606; (2) properly executing a later-
dated proxy; or (3) attending the Meeting, requesting return of any previously
delivered proxy and voting in person.
25
<PAGE>
HOW YOU MAY VOTE
You may vote your shares by mail (by signing and returning the enclosed
proxy card), by facsimile (if you are a registered Acorn Funds shareholder),
by telephone or electronically. The trustees have been advised by counsel that
Massachusetts law and Acorn's Agreement and Declaration of Trust and Bylaws
permit voting by shareholders in accordance with these procedures.
ELECTRONIC VOTING
You may give your voting instructions via the Internet or by touchtone
telephone by following the instructions set forth on the proxy card. MIS,
which has been engaged by Acorn to provide proxy-related services, will record
your instructions and, within 72 hours, send you a letter or mailgram to
confirm your vote. That letter will also provide you with instructions on how
to proceed if the confirmation does not reflect your voting instructions
correctly.
TELEPHONE VOTING
You may give your voting instructions over the telephone by calling 1-800-
769-5414. A representative of D.F. King will answer the call. When receiving
your instructions by telephone, the D.F. King representative is required to
ask you for your full name, address, social security or employer
identification number, title (if the person giving the proxy is authorized to
act for an entity, such as a corporation that is the record owner of the
shares), the number of shares of a Fund owned and to confirm that you have
received the proxy statement in the mail. If the information you provide
matches the information provided to D.F. King by Acorn, then the D.F. King
representative will explain the process. D.F. King is not permitted to
recommend to you how to vote, other than to read any recommendation included
in the proxy statement. D.F. King will record your instructions and transmit
them to the official tabulator and, within 72 hours, send you a letter or
mailgram to confirm your vote. That letter will also ask you to call D.F. King
immediately if the confirmation does not reflect your instructions correctly.
VOTING BY MAIL
If you wish to participate in the Meeting, but do not wish to give a proxy
by telephone or electronically, you can still complete, sign and mail the
proxy card received with the proxy statement and/or attend the Meeting in
person. You can revoke any proxy, whether given in writing, by telephone or
electronically, in accordance with the procedures outlined above under
"Revoking a Proxy."
MORE INFORMATION ABOUT HOW PROXIES MAY BE SOLICITED
Solicitation of proxies by personal interview, mail, telephone and
electronic mail may be made by officers and trustees of Acorn and employees of
WAM, none of whom will receive any additional compensation for such service,
and third-party solicitation agents.
26
<PAGE>
As the Meeting date approaches, you may receive a call from a
representative of D.F. King if Acorn has not yet received your vote. D.F. King
may ask you for authority, by telephone or by electronically transmitted
instructions, to permit D.F. King to sign a proxy on your behalf. D.F. King
will record all instructions it receives from shareholders by telephone or
electronically, and the proxies it signs in accordance with those
instructions, in accordance with the procedures set forth above. The trustees
believe those procedures are reasonably designed to determine accurately the
shareholder's identity and voting instructions.
QUORUM, VOTING AT THE MEETING AND ADJOURNMENT
Thirty percent of the shares entitled to vote present in person or
represented by proxy constitutes a quorum for the transaction of business at
the Meeting. On proposals for which shareholders of a Fund vote separately,
thirty percent of the shares of the Fund entitled to vote at the Meeting
present in person or represented by proxy constitutes a quorum of that Fund.
For purposes of determining the presence or absence of a quorum and for
determining whether sufficient votes have been received for approval of any
matter to be acted upon at the Meeting, abstentions and broker non-votes will
be treated as shares that are present at the Meeting but have not been voted.
Approval of Proposal 1 for each Fund will require the affirmative vote of
the lesser of (a) 67 percent or more of the voting shares of that Fund present
at the Meeting, if the holders of more than 50 percent of the outstanding
voting shares of that Fund are present or represented by proxy, or (b) more
than 50 percent of the outstanding voting shares of that Fund. Abstentions and
broker non-votes will have the practical effect of a "No" vote.
Approval of Proposal 2 for a Fund will require the affirmative vote of a
majority of the shares of that Fund represented at the Meeting in person or by
proxy, if a quorum is present. Abstentions and broker non-votes will have the
practical effect of a "No" vote on Proposal 2.
If a quorum is not present in person or by proxy at the Meeting, or if a
quorum is present at the Meeting but not enough votes to approve a proposal
are received, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. Any
proposal for adjournment for a Fund will require the vote of a majority of the
shares of that Fund represented at the Meeting in person or by proxy. All
proxies returned may be voted in favor of adjournment, including proxies
voting "no" on Proposal 1 or Proposal 2. A vote may be taken on one of the
proposals in this proxy statement before adjournment if a quorum is present
and sufficient votes have been received for approval.
27
<PAGE>
OTHER MATTERS
The board of trustees of Acorn knows of no other matters that are intended
to be brought before the Meeting. If other matters are presented for action,
the proxies named in the enclosed form of proxy will vote on those matters in
their sole discretion.
SHAREHOLDER PROPOSALS
Acorn is not required, and does not intend, to hold annual meetings of
shareholders. Therefore, no date can be given by which a proposal by a
shareholder for consideration at such a meeting must be submitted. Any such
proposal should be submitted in writing to the Secretary of the Trust at its
principal offices at 227 West Monroe Street, Suite 3000, Chicago, Illinois
60606-5016. Upon submitting a proposal, the shareholder shall provide the
Trust with a written notice which includes the shareholder's name and address,
the number of shares of each fund that such shareholder holds of record or
beneficially, the dates upon which such shares were acquired, and documentary
support for a claim of beneficial ownership.
By order of the Board of Trustees,
[STEVEN A. RADIS SIGNATURE]
Steven A. Radis
Secretary
July 28, 2000
28
<PAGE>
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
LIBERTY ACORN TRUST, a Massachusetts business trust registered under the
Investment Company Act of 1940 (the "1940 Act") as an open-end diversified
management investment company ("Liberty Acorn"), and LIBERTY WANGER ASSET
MANAGEMENT, L.P., a Delaware limited partnership registered under the
Investment Advisers Act of 1940 as an investment adviser ("Liberty WAM"),
agree that:
1. ENGAGEMENT OF LIBERTY WAM. Liberty Acorn appoints Liberty WAM to
furnish investment advisory and other services to Liberty Acorn for its series
designated Liberty Acorn Fund, Liberty Acorn International, Liberty Acorn USA,
Liberty Acorn Twenty and Liberty Acorn Foreign Forty (each, a "Fund," and
collectively, the "Funds")), and Liberty WAM accepts that appointment, for the
period and on the terms set forth in this agreement.
If Liberty Acorn establishes one or more series in addition to the Funds
named above with respect to which it desires to retain Liberty WAM as
investment adviser hereunder, and if Liberty WAM is willing to provide such
services under this agreement, Liberty Acorn and Liberty 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 Liberty WAM
by Liberty Acorn with respect to such series and such other modifications of
the terms of this agreement with respect to such series as Liberty Acorn and
Liberty WAM may agree. Upon execution of such a supplement by Liberty Acorn
and Liberty 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.
2. SERVICES OF LIBERTY WAM.
(a) INVESTMENT MANAGEMENT. Subject to the overall supervision and control
of Liberty Acorn's board of trustees (the "Board"), Liberty WAM shall have
supervisory responsibility for the general management and investment of the
Funds' assets. Liberty WAM shall comply with the 1940 Act and with all
applicable rules and regulations of the Securities and Exchange Commission,
the provisions of the Internal Revenue Code applicable to the Funds as
regulated investment companies, the investment policies and restrictions,
portfolio transaction policies and the other statements concerning the Funds
in Liberty Acorn's agreement and declaration of trust, bylaws, and
registration statements under the 1940 Act and the Securities Act of 1933 (the
"1933 Act"), and policy decisions and procedures adopted by the Board from
time to time.
Liberty WAM is authorized to make the decisions to buy and sell securities
and other assets for the Funds, to place the Funds' portfolio transactions
with broker-dealers, and to negotiate the terms of such transactions including
A-1
<PAGE>
brokerage commissions on brokerage transactions, on behalf of the Funds.
Liberty WAM is authorized to exercise discretion within the Funds' policy
concerning allocation of its portfolio brokerage, as permitted by law,
including but not limited to section 28(e) of the Securities Exchange Act of
1934, and in so doing shall not be required to make any reduction in its
investment advisory fees. Liberty Acorn hereby authorizes any entity or person
associated with Liberty WAM that is a member of a national securities exchange
to effect any transaction on the exchange for the account of a Fund to the
extent permitted by and in accordance with Section 11(a) of the Securities
Exchange Act of 1934 and Rule 11a2-2(T) thereunder. Liberty Acorn hereby
consents to the retention by such entity or person of compensation for such
transactions in accordance with Rule 11a-2(T)(a)(iv).
Liberty WAM may, where it deems it to be advisable, aggregate orders with
other securities of the same type to be sold or purchased by one or more Funds
with like orders on behalf of other clients of Liberty WAM (as well as clients
of other investment advisers affiliated with Liberty WAM, in the event that
Liberty WAM and such affiliated investment advisers share common trading
facilities). In such event, Liberty WAM (or Liberty WAM and its affiliated
advisers, as the case may be) will allocate the shares so sold or purchased,
as well as the expenses incurred in the transaction, in a manner it (or it and
they) consider to be equitable and fair and consistent with its (or its or
their) fiduciary obligations to clients.
(b) REPORTS AND INFORMATION. Liberty WAM shall furnish to the Board
periodic reports on the investment strategy and performance of the Funds and
such additional reports and information as the Board or the officers of
Liberty Acorn may reasonably request. Liberty Acorn shall furnish or otherwise
make available to Liberty WAM such copies of financial statements, proxy
statements, reports, and other information relating to the business and
affairs of each Fund as Liberty WAM may, at any time or from time to time,
reasonably require in order to discharge its obligations under this agreement.
(c) CUSTOMERS OF FINANCIAL INSTITUTIONS. It is understood that Liberty WAM
may, but shall not be obligated to, make payments from its own resources to
financial institutions (which may include banks, broker-dealers,
recordkeepers, administrators and others) that provide, either directly or
through agents, administrative and other services with respect to shareholders
who are customers of such institutions, including establishing shareholder
accounts, assisting Liberty Acorn's transfer agent with respect to recording
purchase and redemption transactions, advising shareholders about the status
of their accounts, current yield and dividends declared and such related
services as the shareholders or the Funds may request.
(d) BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the 1940 Act, Liberty WAM agrees to maintain records relating
A-2
<PAGE>
to its services under this agreement, and further agrees that all records that
it maintains for Liberty Acorn are the property of Liberty Acorn and to
surrender promptly to Liberty Acorn any of such records upon Liberty Acorn's
request; provided that Liberty WAM may at its own expense make and retain
copies of any such records. Liberty WAM further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
(e) STATUS OF LIBERTY WAM. Liberty WAM shall for all purposes herein be
deemed to be an independent contractor and not an agent of Liberty Acorn and
shall, unless otherwise expressly provided or authorized, have no authority to
act for or represent Liberty Acorn in any way. Liberty WAM agrees to notify
the Trust promptly of any change in the identity of Liberty WAM's general
partner.
3. ADMINISTRATIVE SERVICES. Liberty WAM shall supervise the business and
affairs of Liberty Acorn and each Fund and shall provide such services and
facilities as may be required for effective administration of Liberty Acorn
and Funds as are not provided by employees or other agents engaged by Liberty
Acorn; provided that Liberty WAM shall not have any obligation to provide
under this agreement any such services which are the subject of a separate
agreement or arrangement between Liberty Acorn and Liberty WAM, any affiliate
of Liberty WAM, or any third party administrator.
4. USE OF AFFILIATED COMPANIES AND SUBCONTRACTORS. In connection with the
services to be provided by Liberty WAM under this agreement, Liberty WAM may,
to the extent it deems appropriate, and subject to compliance with the
requirements of applicable laws and regulations and upon receipt of approval
of the Trustees, make use of (i) its affiliated companies and their directors,
trustees, officers, and employees and (ii) subcontractors selected by Liberty
WAM, provided that Liberty WAM shall supervise and remain fully responsible
for the services of all such third parties in accordance with and to the
extent provided by this agreement. All costs and expenses associated with
services provided by any such third parties shall be borne by Liberty WAM or
such parties.
5. EXPENSES TO BE PAID BY TRUST. Except as otherwise provided in this
agreement or any other contract to which Liberty Acorn is a party, Liberty
Acorn shall pay all expenses incidental to its organization, operations and
business, including, without limitation:
(a) all charges of depositories, custodians, sub-custodians and other
agencies for the safekeeping and servicing of its cash, securities and
other property and of its transfer agents and registrars and its
dividend disbursing and redemption agents, if any;
(b) all charges of its administrator, if any;
A-3
<PAGE>
(c) all charges of legal counsel and of independent auditors;
(d) all compensation of trustees other than those affiliated with Liberty
WAM or Liberty Acorn's administrator, if any, and all expenses
incurred in connection with their services to Liberty Acorn;
(e) all expenses of preparing, printing and distributing notices, proxy
solicitation materials and reports to shareholders of the Funds;
(f) all expenses of meetings of shareholders of the Funds;
(g) all expenses of registering and maintaining the registration of
Liberty Acorn under the 1940 Act and of shares of the Funds under the
1933 Act, including all expenses of preparation, filing and printing
of annual or more frequent revisions of the Funds' registration
statements under the 1940 Act and 1933 Act, and of supplying each then
existing shareholder or beneficial owner of shares of the Funds of a
copy of each revised prospectus or supplement thereto, and of
supplying a copy of the statement of additional information upon
request to any then existing shareholder;
(h) all costs of borrowing money;
(i) all expenses of publication of notices and reports to shareholders and
to governmental bodies or regulatory agencies;
(j) all taxes and fees payable to federal, state or other governmental
agencies, domestic or foreign, and all stamp or other taxes;
(k) all expenses of printing and mailing certificates for shares of a
Fund;
(l) all expenses of bond and insurance coverage required by law or deemed
advisable by the Board;
(m) all expenses of qualifying and maintaining qualification of, or
providing appropriate notification of intention to sell relating to,
shares of the Funds under the securities laws of the various states
and other jurisdictions, and of registration and qualification of
Liberty Acorn under any other laws applicable to Liberty Acorn or its
business activities;
(n) all fees, dues and other expenses related to membership of Liberty
Acorn in any trade association or other investment company
organization; and
(o) any extraordinary expenses.
In addition to the payment of expenses, Liberty Acorn shall also pay all
brokers' commissions and other charges relating to the purchase and sale of
portfolio securities for each Fund.
A-4
<PAGE>
6. ALLOCATION OF EXPENSES PAID BY LIBERTY ACORN. Any expenses paid by
Liberty Acorn that are attributable solely to the organization, operation or
business of a Fund or Funds shall be paid solely out of the assets of that
Fund or Funds. Any expense paid by Liberty Acorn that is not solely
attributable to a Fund or Funds, nor solely to any other series of Liberty
Acorn, shall be apportioned in such manner as Liberty Acorn or Liberty Acorn's
administrator determines is fair and appropriate, or as otherwise specified by
the Board.
7. EXPENSES TO BE PAID BY LIBERTY WAM. Liberty WAM shall furnish to
Liberty Acorn, at Liberty WAM's own expense, office space and all necessary
office facilities, equipment and personnel required to provide its services
pursuant to this agreement. Liberty WAM shall also assume and pay all expenses
of placement of securities orders and related bookkeeping.
8. COMPENSATION OF LIBERTY WAM. For the services to be rendered and the
expenses to be assumed and to be paid by Liberty WAM under this agreement,
Liberty Acorn shall pay to Liberty WAM fees accrued daily and paid monthly at
the annual rates shown below:
<TABLE>
<S> <C>
LIBERTY ACORN FUND
<CAPTION>
ASSETS RATE OF FEE
------ -----------
<S> <C>
First $700 million 0.75%
$700 million to $2 billion 0.70%
In excess of $2 billion 0.65%
LIBERTY ACORN INTERNATIONAL
<CAPTION>
ASSETS RATE OF FEE
------ -----------
<S> <C>
First $100 million 1.20%
$100 million to $500 million 0.95%
In excess of $500 million 0.75%
LIBERTY ACORN USA
<CAPTION>
ASSETS RATE OF FEE
------ -----------
<S> <C>
First $200 million 0.95%
In excess of $200 million 0.90%
LIBERTY ACORN TWENTY
<CAPTION>
RATE OF FEE
-----------
<S> <C>
ALL ASSETS 0.90%
LIBERTY ACORN FOREIGN FORTY
<CAPTION>
RATE OF FEE
-----------
<S> <C>
ALL ASSETS 0.95%
</TABLE>
The fees attributable to each Fund shall be a separate charge to such Fund and
shall be the several (and not joint or joint and several) obligation of each
such Fund.
9. SERVICES OF LIBERTY WAM NOT EXCLUSIVE. The services of Liberty WAM to
Liberty Acorn under this agreement are not exclusive, and Liberty WAM shall be
free to render similar services to others so long as its services under this
agreement are not impaired by such other activities.
A-5
<PAGE>
10. SERVICES OTHER THAN AS ADVISER. Within the limits permitted by law,
Liberty WAM or an affiliate of Liberty WAM may receive compensation from
Liberty Acorn for other services performed by it for Liberty Acorn which are
not within the scope of the duties of Liberty WAM under this agreement,
including the provision of brokerage services.
11. STANDARD OF CARE. To the extent permitted by applicable law, neither
Liberty WAM nor any of its partners, officers, agents, employees or affiliates
shall be liable to Liberty Acorn or its shareholders for any loss suffered by
Liberty Acorn or its shareholders as a result of any error of judgment, or any
loss arising out of any investment, or as a consequence of any other act or
omission of Liberty WAM or any of its affiliates in the performance of Liberty
WAM's duties under this agreement, except for liability resulting from willful
misfeasance, bad faith or gross negligence on the part of Liberty WAM or such
affiliate, or by reason of reckless disregard by Liberty WAM or such affiliate
of the obligations and duties of Liberty WAM under this agreement.
12. EFFECTIVE DATE, DURATION AND RENEWAL. This agreement shall become
effective at the Effective Time as defined in the Agreement and Plan of Merger
among Wanger Asset Management, Ltd., Wanger Asset Management, L.P. and Liberty
Financial Companies, Inc. and WAM Acquisition L.P. dated as of June 9, 2000
(the "Merger Agreement"). Unless terminated as provided in Section 13, this
agreement shall continue in effect as to a Fund until the second anniversary
of the Effective Date (as defined in the Merger Agreement), and thereafter
from year to year only so long as such continuance is specifically approved at
least annually (a) by a majority of those trustees who are not interested
persons of Liberty Acorn or of Liberty WAM, voting in person at a meeting
called for the purpose of voting on such approval, and (b) by either the Board
or vote of the holders of a "majority of the outstanding shares" of that Fund
(which term as used throughout this agreement shall be construed in accordance
with the definition of "vote of a majority of the outstanding voting
securities of a company" in section 2(a)(42) of the 1940 Act).
13. TERMINATION. This agreement may be terminated as to a Fund at any
time, without payment of any penalty, by the Board, or by a vote of the
holders of a majority of the outstanding shares of that Fund, upon 60 days'
written notice to Liberty WAM. This agreement may be terminated by Liberty WAM
at any time upon 60 days' written notice to Liberty Acorn. This agreement
shall terminate automatically in the event of its assignment (as defined in
Section 2(a)(4) of the 1940 Act).
14. AMENDMENT. This agreement may be amended in accordance with the 1940
Act.
15. NON-LIABILITY OF TRUSTEES AND SHAREHOLDERS. A copy of the Declaration
of Trust of Liberty Acorn Trust is on file with the Secretary of The
A-6
<PAGE>
Commonwealth of Massachusetts, and notice is hereby given that this instrument
is executed on behalf of Liberty Acorn Trust by officers of Acorn Investment
Trust as officers and not individually. All obligations of Liberty Acorn
hereunder shall be binding only upon the assets of Liberty Acorn (or the
appropriate Fund) and shall not be binding upon any trustee, officer,
employee, agent or shareholder of Liberty Acorn. Neither the authorization of
any action by the Trustees or shareholders of Liberty Acorn nor the execution
of this agreement on behalf of Liberty Acorn shall impose any liability upon
any trustee, officer or shareholder of Liberty Acorn.
16. USE OF MANAGER'S NAME. Liberty Acorn may use the name "Liberty" or any
other name derived from the name "Liberty" only for so long as this agreement
or any extension, renewal or amendment hereof remains in effect, including any
similar agreement with any organization that shall remain affiliated with
Liberty Financial Companies, Inc. and shall have succeeded to the business of
Liberty WAM as investment adviser. At such time as this agreement or any
extension, renewal or amendment hereof, or such other similar agreement shall
no longer be in effect, Liberty Acorn will (by amendment of its agreement and
Declaration of Trust if necessary) cease to use any name derived from the name
"Liberty" or otherwise connected with Liberty WAM, or with any organization
that shall have succeeded to Liberty WAM's business as investment adviser.
17. NOTICES. Any notice, demand, change of address or other communication
to be given in connection with this agreement shall be given in writing and
shall be given by personal delivery, by registered or certified mail or by
transmittal by facsimile or other electronic medium addressed to the recipient
as follows (or at such other address or addresses as a party may provide to
the other from time to time, by notice):
If to Liberty WAM:
Liberty Wanger Asset Management, L.P.
Attention: Bruce H. Lauer
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606
Telephone: 312-634-9200
Facsimile: 312-634-0016
with a copy to:
Liberty Funds Group LLC
One Financial Center
Boston, Massachusetts 02114
Attention: General Counsel
Telephone: 617-426-3750
Facsimile: 617-772-3650
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<PAGE>
If to Liberty Acorn:
Liberty Acorn Trust
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606
Telephone: 312-634-9200
Facsimile: 312-634-1919
with a copy to:
Bell, Boyd & Lloyd LLC
Attention: Janet D. Olsen
Three First National Plaza, Suite 3300
Chicago, Illinois 60602
Telephone: 312-372-1121
Facsimile: 312-372-2098
All notices shall be conclusively deemed to have been given on the day of
actual delivery thereof and, if given by registered or certified mail, on the
fifth business day following the deposit thereof in the mail and, if given by
facsimile or other electronic medium, on the day of transmittal thereof (upon
electronic confirmation of receipt thereof).
18. GOVERNING LAW. This agreement shall be construed and interpreted in
accordance with the laws of the State of Illinois and the laws of the United
States of America applicable to contracts executed and to be performed
therein.
Dated as of the effective date of this agreement.
Liberty Acorn Trust
By____________________________________________
Liberty Wanger Asset Management, L.P.
By____________________________________________
Its General Partner
By____________________________________________
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THANK
YOU
For Voting Your Proxy Promptly!
We appreciate your continuing support
and look forward to serving
your future investment needs.
<PAGE>
The Acorn
Family of Funds
WAM Brokerage Services, L.L.C.
P.O. Box 8502
Boston, MA 02266-8502
Member NASD
<PAGE>
TO VOTE BY INTERNET:
1. Go to www.acornfunds.com.
2. At top of Q & A, click on proxy voting link.
3. Follow the simple online instructions.
--------------------------------------------------------------------------------
TO VOTE BY TELEPHONE:
1. Call toll-free 1-888-221-0697.
2. Enter the 14-digit control number found on your Proxy Card.
3. Follow the simple recorded instructions.
--------------------------------------------------------------------------------
TO VOTE BY FACSIMILE:
1. Fax both sides of your proxy card to 212-269-2796.
---- -----
FUND NAME PRINTS HERE
***CONTROL NUMBER: 999 999 999 999 99***
Please fold and detach card at perforation before mailing.
SPECIAL MEETING OF SHAREHOLDERS--SEPTEMBER 26, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES.
The undersigned hereby appoints RALPH WANGER, CHARLES P. McQUAID, BRUCE H. LAUER
and STEVEN A. RADIS and each or any of them, as proxies, with full power of
substitution, to vote all shares of the above referenced fund represented by
this proxy which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on September 26, 2000, and at any adjournments thereof,
with all powers the undersigned would possess if personally present at such
meeting.
Dated , 2000
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IMPORTANT: Please date and sign exactly as your name appears hereon. When
signing as executor, administrator, trustee, agent, attorney, guardian, or
corporate officer, please set forth your full title. Joint owners must each
sign.
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Signature(s), (if held jointly)
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PROXY ACORN INVESTMENT TRUST
VOTE THIS PROXY CARD TODAY! YOUR PROMPT RESPONSE WILL SAVE THE
EXPENSE OF ADDITIONAL MAILINGS
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This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSAL 1 AND FOR PROPOSAL 2, AND IN THE SOLE DISCRETION OF THE PROXIES
UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT OR ADJOURNMENTS THEREOF.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
PLEASE VOTE BY FILLING IN THE APPROPRIATE BOXES BELOW
1. Approval of an investment advisory agreement between Acorn Investment Trust
and Wanger Asset Management, L.P. (WAM), on substantially similar terms as
the current investment advisory agreement, but with WAM operating as a
wholly owned subsidiary of Liberty Financial Companies, Inc.
FOR _______ AGAINST _______ ABSTAIN _______
2. Ratification of selection of Ernst & Young LLP as the Trust's independent
public accountants for the fiscal year ending December 31, 2000.
FOR _______ AGAINST _______ ABSTAIN _______
3. In their sole discretion on any other matters properly coming before the
meeting or any adjournment or adjournments thereof.
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Internet Proxy Voting Service Proxy Voting Form
ACORN INVESTMENT TRUST
[fund name appears here]
The undersigned hereby appoints RALPH WANGER, CHARLES P. MCQUAID, BRUCE H. LAUER
and STEVEN A. RADIS and each or any of them, as proxies, with full power of
substitution, to vote all shares of the above referenced fund represented by
this proxy which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on September 26, 2000, and at any adjournments thereof,
with all powers the undersigned would possess if personally present at such
meeting.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. If no direction is made, this proxy will be voted
FOR Proposal 1 and FOR Proposal 2, and in the sole discretion of the Proxies
upon such other business as may properly come before the meeting or any
adjournment or adjournments thereof. THE BOARD OF TRUSTEES RECOMMENDS A VOTE
"FOR" PROPOSALS 1 and 2.
Proposal 1. Approval of an investment advisory agreement between Acorn
Investment Trust and Wanger Asset Management, L.P. (WAM), on substantially
similar terms as the current investment advisory agreement, but with WAM
operating as a wholly owned subsidiary of Liberty Financial Companies, Inc.
[_] FOR [_] AGAINST [_] ABSTAIN
Proposal 2. Ratification of selection of Ernst & Young LLP as the Funds'
independent public accountants for the fiscal year ending December 31, 2000.
[_] FOR [_] AGAINST [_] ABSTAIN
If no specification is made on a proposal, the proposal will be voted "For."
To receive email confirmation of your vote, enter your email address here:
_____________
Please review your selections carefully before voting. If you vote more than
once on the same Proxy, only your last (most recent) vote will be considered
valid.
