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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:
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] 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) operating as a wholly-owned subsidiary of Liberty Financial
Companies, Inc. (LFC) and under its new name, Liberty Wanger Asset
Management, L.P., on substantially similar terms as the current
investment advisory agreement.
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: As of June 9, 2000, WAM entered into an agreement with LFC pursuant to which
WAM will become a wholly owned subsidiary of LFC. Completion of this transaction
(which is conditioned upon the satisfaction of certain provisions set forth in
the definitive merger agreement) will cause the current Acorn Funds investment
advisory agreement to automatically terminate. 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., to become effective as
of the completion of the transaction.
Q: What prompted the sale of Wanger Asset Management, L.P., 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.
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Q: How will this new investment advisory contract 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 12-b-1 fees).
This will give current Acorn shareholders access to more than 65 Liberty funds
that 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."
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 would 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
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. 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. It costs the Funds a
significant amount of money to solicit proxies again. The deadline for
submitting proxies is September xx, 2000. Please help us keep the costs of this
proxy solicitation reasonable by voting today.
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Acorn Investment Trust
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606-5016
1-800-9-ACORN-9
[July 24], 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") 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 or 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.,
operating as a wholly-owned subsidiary of Liberty Financial Companies,
Inc. and under its new name, Liberty Wanger Asset Management, L.P., on
substantially similar terms as the current investment advisory
agreement;
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
[July 28], 2000.
By Order of the Board of Trustees,
Steven A. Radis
Secretary
[July 24], 2000
Chicago, Illinois
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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.
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
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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"), and 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 on or about [September 29], 2000. 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 Acorn Twenty and
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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 Liberty WAM
substantially in the form of the Proposed Agreement in accordance with Rule 15a-
4 under the 1940 Act.
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:
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. 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 has advised Acorn that WAM
concluded that an outright sale of its business would best address each of these
challenges. After a detailed evaluation process, discussions with Liberty
culminated in the execution of the Merger Agreement as of 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)
______% 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 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., Stein Roe &
Farnham Incorporated and Newport Pacific Management, Inc., act as investment
advisers to approximately 65 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 many 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 as described above. Ralph Wanger will serve as president of Liberty WAM,
the overall policies of which will be set by a board of
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directors that will consist of Mr. Wanger and two Liberty executives. The
officers of Liberty WAM are expected to be Ralph Wanger and 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 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.
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
certain funds for which WAM is the investment advisor, (ii) the receipt of
certain regulatory approvals and (iii) 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 property from or on behalf of the
investment company, or
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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 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,"
this recommendation results from the board's evaluation of a substantial amount
of information.
The Proposed Agreement is substantially similar to the Current Agreement. A
copy of the Proposed Agreement is attached as Exhibit A. In the discussion
below, WAM and Liberty WAM sometimes are referred to collectively as the
"Adviser."
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 what the Merger would mean to
the Funds. 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 it intends that the
integrity of WAM's investment process would be maintained; (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.
The board noted that the employment agreements into which Mr. Wanger and
each other portfolio manager have entered and which 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.
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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.
Changes in the market for distribution of mutual fund shares were important
to the board's decision. Liberty presented information to the board showing that
the share of investments in mutual funds 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, also without a sales charge. 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.
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 Current Agreement with respect to Acorn Twenty and
Acorn Foreign Forty was approved by the board of trustees on May 27, 1998. The
Current Agreement with respect to all Funds was renewed on May 23, 2000 by
unanimous vote of the board of trustees. The Current Agreement expires on
June 30, 2001.
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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 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."
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
7
<PAGE>
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 either Acorn (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).
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. 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.
8
<PAGE>
For the fiscal year ended December 31, 1999, the advisory and
administration fees paid to WAM were:
Advisory Fee Administration Fee
------------ ------------------
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
*net of expense reimbursements of $23,136 for Acorn Twenty and $42,270 for Acorn
Foreign Forty.
No other fees or payments were made by either 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;
9
<PAGE>
. 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.
In addition certain provisions in the Current Agreement are not in the Proposed
Agreement:
. Unlike under the Current Agreement, under the Proposed Agreement
(for the classes of shares other than the no-load shares
available to current Acorn shareholders), Liberty WAM will not
assume all the expenses of marketing the shares of the Funds.
. 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."
10
<PAGE>
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, sale of Class Z shares will be closed to purchases
(including exchanges) by new investors except for purchases by certain eligible
investors, including:
. a shareholder of any of the Acorn Funds at the time of the
completion of the Merger or a member of the shareholder's family;
. 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) 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.
11
<PAGE>
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 and persons eligible to purchase 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.
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 Administration Agreement with Liberty WAM
that is substantially similar to the current Administration Agreement between
Acorn and WAM. The proposed Administration Agreement provides for compensation
to Liberty WAM identical to that which is currently provided to WAM under the
current Administration Agreement. Some or all of the administrative services now
provided by WAM pursuant to the Administration 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 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
12
<PAGE>
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
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.
13
<PAGE>
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.
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>
Rate of Compensation Paid to WAM
Name of Fund Assets as of 6/30/00 (000s) (as a percentage 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.
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:
14
<PAGE>
<TABLE>
<CAPTION>
Position(s)
Name and Held with
Date of Birth Acorn Principal Occupation(s) During Past Five Years
------------- ----------- ----------------------------------------------
<S> <C> <C>
Irving B. Harris Trustee and Chairman, William Harris Investors, Inc. (investment adviser); Chairman,
8/4/1910 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 manager, WAM; President, WAM Ltd. since July 1992;
6/21/1934 president* Trustee and president, Wanger Advisors Trust; Director, Wanger Investment
Company plc.
James H. Lorie Trustee and vice Retired; Eli B. and Harriet B. Williams Professor of Business
2/23/1922 chairman 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, Honeywell International (home and building
9/26/1937 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.
Jerome Kahn, Jr. Trustee President, William Harris Investors, Inc. (investment adviser); Director,
4/13/1934 Pittway Corporation (multi-product manufacturer and publisher) until
February 2000.
Steven N. Kaplan Trustee Neubauer Family Professor of Entrepreneurship and Finance, Graduate School
12/21/1959 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 management, University of Chicago Graduate
10/12/1935 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 and director of research, WAM since July
8/27/1953 senior vice 1992; Trustee and senior vice president, Wanger Advisors Trust.
president*
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Position(s)
Name and Held with
Date of Birth Acorn Principal Occupation(s) During Past Five Years
------------- ----------- ----------------------------------------------
<S> <C> <C>
Roger S. Meier Trustee CEO and chairman of the board, AMCO, Inc. (investment and real estate
1/18/1926 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 and member of Committee of
Legacy Systems (hospital); Executive director and chairman of investment
committee and trustee, Portland Art Museum.
Allan B. Muchin Trustee Partner, Katten, Muchin & Zavis (law firm); Director, Alberto-Culver
1/10/1936 Company (toiletries).
Robert E. Nason Trustee Consultant and private investor since 1998; From 1990-1998, executive
7/29/1936 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; 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 at Fuqua School of Business, Duke University beginning
10/04/1949 September 2000; Prior thereto, visiting professor at Fuqua School of Business,
Duke University, since September 1999; Prior thereto, Professor of accounting,
University of Chicago Graduate School of Business.
Margaret M. Forster vice president Principal, WAM since 1999; Analyst and portfolio manager, WAM since 1994.
1/28/1960
Marcel P. Houtzager vice president Principal, WAM since 1995; Analyst and portfolio manager, WAM since 1992.
10/26/1960
Kenneth A. Kalina assistant Assistant treasurer, Wanger Advisors Trust; Chief financial officer, WAM
8/4/1959 treasurer 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 1, 2000; Chief operating officer, WAM since
7/22/1957 assistant April 1995; Vice president, treasurer and assistant secretary, Wanger
secretary and Advisors Trust; Director, Wanger Investment Company plc and New Americas
treasurer Small Cap Fund.
Steven A. Radis secretary Chief marketing officer and managing director, WAM since April 1999; Prior
8/24/1962 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; Analyst and portfolio manager, WAM since August
9/13/1961 1992; Vice president, Wanger Advisors Trust.
John H. Park vice president Principal, WAM since 1998; Analyst and portfolio manager, WAM since July
5/30/1967 1993; Vice president, Wanger Advisors Trust.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Position(s)
Name and Held with
Date of Birth Acorn Principal Occupation(s) During Past Five Years
------------- ----------- ----------------------------------------------
<S> <C> <C>
Roger D. Edgely vice president Principal, WAM since January 1, 2000; Analyst, WAM since 1994; Director of
4/18/1955 international research, WAM since 1998.
Leah J. Zell vice president Principal, analyst, and portfolio manager, WAM since July 1992; Vice
5/23/1949 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.
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.
Percentage of
Number of Outstanding
Name Fund Shares Shares Held
---- ---- ------ -----------
Irving B. Harris
Ralph Wanger
James H. Lorie
Leo Guthart
Jerome Kahn, Jr.
Steven N. Kaplan
David C. Kleinman
Charles P. McQuaid
Roger S. Meier
17
<PAGE>
Allan B. Muchin
Robert E. Nason
Katherine Schipper
Trustees and executive officers as a group
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.
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 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 $________, and the cost of services
provided by MIS will be approximately $______, 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 July 28, 2000.
Shares and Shareholders
At the record date, the Funds had the following numbers of shares
outstanding:
18
<PAGE>
Fund # Shares
---- --------
Acorn Fund 221,739,545.34
Acorn International 90,823,528.32
Acorn USA 22,193,410.50
Acorn Twenty 4,631,289.06
Acorn Foreign Forty 7,349,801.88
Each share is entitled to one vote; fractional shares are entitled to fractional
votes.
Of the shares outstanding at the record date, 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:
<TABLE>
<CAPTION>
Percentage of
Outstanding
Name and Address Fund Number of 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 Acorn Fund 25,064,454.10 11.3%
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.
19
<PAGE>
How You May Vote
You may vote your shares by mail (by signing and returning the enclosed
proxy card), by telephone or over the Internet. 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
__________. 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 via the Internet, 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.
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
20
<PAGE>
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 if adoption of the
Proposed Agreement is to be determined pursuant to item (a) and will not be
counted to determine the outcome of the vote if adoption of Proposed Agreement
is to be determined pursuant to item (b).
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. 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.
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
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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
22
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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
Secretary
[July 24], 2000
23
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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
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
A-1
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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 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
A-2
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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;
(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
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<PAGE>
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.
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:
A-4
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Liberty Acorn Fund
Assets Rate of Fee
------ -----------
First $700 million 0.75%
$700 million to $2 billion 0.70%
In excess of $2 billion 0.65%
Liberty Acorn International
Assets Rate of Fee
------ -----------
First $100 million 1.20%
$100 million to $500 million 0.95%
In excess of $500 million 0.75%
Liberty Acorn USA
Assets Rate of Fee
------ -----------
First $200 million 0.95%
In excess of $200 million 0.90%
Liberty Acorn Twenty
All Assets 0.90%
Liberty Acorn Foreign Forty
All Assets 0.95%
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.
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
A-5
<PAGE>
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
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
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<PAGE>
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
If to Liberty Liberty Acorn Trust
Acorn: 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).
A-7
<PAGE>
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 ___________________________________
A-8
<PAGE>
PROXY ACORN INVESTMENT TRUST
Special Meeting of Shareholders - [September 26, 2000]
This Proxy is Solicited on Behalf of the Board of Trustees
VOTE THIS PROXY CARD TODAY! YOUR PROMPT RESPONSE WILL SAVE THE EXPENSE OF
ADDITIONAL MAILINGS
Please fold and detach card at perforation before mailing.
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 Liberty Wanger Asset Management, L.P.
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.
--------------------------------------------------------------------------------
To vote by Internet:
1. Read the Proxy Statement and have your Proxy Card handy.
2. Go to www.acornfunds.com.
3. At top of Q & A, click on proxy voting link.
4. Follow the simple online instructions.
--------------------------------------------------------------------------------
To vote by telephone:
1. Read the Proxy Statement and have your Proxy Card handy.
2. Call toll-free 1-888-221-0697.
3. Enter the 14-digit control number found on your Proxy Card.
4. Follow the simple recorded instructions.
--------------------------------------------------------------------------------
To vote by facsimile (if you are a registered Acorn shareholder):
1. Read the Proxy Statement and have your Proxy Card handy.
2. Complete, sign and date your Proxy Card.
3. Fax the Proxy Card to 212-269-2796.
***CONTROL NUMBER: 999 999 999 999 99***
FUND NAME PRINTS HERE
<PAGE>
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
_____________________________________
Signature
_____________________________________
Signature if held jointly
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.
<PAGE>
ACORN INVESTMENT TRUST [logo appears here]
Internet Proxy Voting Service Proxy Voting Form
I hereby appoint 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 I
am entitled to vote at the Special Meeting of Shareholders to be held on
September 26, 2000, and at any adjournments thereof, with all powers I would
possess if personally present at such meeting.
This proxy when properly completed by you will be voted in the manner directed
by you. 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 Liberty Wanger Asset Management, L.P.
[_] 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
Please refer to the proxy statement for discussion of each of these matters.
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.
