497 1 0001.txt 497 ------------------------------------------------------------- LIBERTY ACORN TRUST Prospectus, September 29, 2000 ------------------------------------------------------------- . LIBERTY ACORN FUND . LIBERTY ACORN INTERNATIONAL . LIBERTY ACORN USA . LIBERTY ACORN TWENTY . LIBERTY ACORN FOREIGN FORTY Class Z Shares Advised by Liberty Wanger Asset Management, L.P. Only eligible investors may purchase Class Z shares. See "Your Account -Eligible Investors" for more information. Although these securities have been registered with the Securities and Exchange Commission, the Commission has not approved or disapproved any shares offered in this prospectus or determined whether this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.
----------------------------------------------------------------------- TABLE OF CONTENTS LIBERTY ACORN FUND 2 --------------------------------------------------------------------- Investment Goal.................................................. 2 Principal Investment Strategies.................................. 2 Principal Investment Risks....................................... 2 Performance History.............................................. 5 Your Expenses.................................................... 6 LIBERTY ACORN INTERNATIONAL 7 --------------------------------------------------------------------- Investment Goal.................................................. 7 Principal Investment Strategies.................................. 7 Principal Investment Risks....................................... 7 Performance History.............................................. 10 Your Expenses.................................................... 11 LIBERTY ACORN USA 12 --------------------------------------------------------------------- Investment Goal.................................................. 12 Principal Investment Strategies.................................. 12 Principal Investment Risks....................................... 12 Performance History.............................................. 14 Your Expenses.................................................... 15 LIBERTY ACORN TWENTY 16 --------------------------------------------------------------------- Investment Goal.................................................. 16 Principal Investment Strategies.................................. 16 Principal Investment Risks....................................... 16 Performance History.............................................. 18 Your Expenses.................................................... 19 LIBERTY ACORN FOREIGN FORTY 20 --------------------------------------------------------------------- Investment Goal.................................................. 20 Principal Investment Strategies.................................. 20 Principal Investment Risks....................................... 20 Performance History.............................................. 23 Your Expenses.................................................... 24 YOUR ACCOUNT 25 --------------------------------------------------------------------- How to Buy Shares................................................ 25 Eligible Investors............................................... 26 Price of Fund Shares............................................. 28 How to Exchange Shares........................................... 28 How to Sell Shares............................................... 28 Other Information About Your Account............................. 30 MANAGING THE FUNDS 33 --------------------------------------------------------------------- Investment Advisor............................................... 33 Portfolio Managers............................................... 33 OTHER INVESTMENT STRATEGIES AND RISKS 36 --------------------------------------------------------------------- The Information Edge............................................. 36 Stock Strength Comes First....................................... 36 Derivative Strategies............................................ 37 Temporary Defensive Strategies................................... 37 FINANCIAL HIGHLIGHTS 38 ---------------------------------------------------------------------
--------------------------------- Not FDIC May Lose Value ------------------ Insured No Bank Guarantee --------------------------------- -------------------------------------------------------------------------------- Liberty Acorn Fund -------------------------------------------------------------------------------- INVESTMENT GOAL -------------------------------------------------------------------------------- Liberty Acorn Fund seeks to provide long-term growth of capital. PRINCIPAL INVESTMENT STRATEGIES -------------------------------------------------------------------------------- Liberty Acorn Fund invests primarily in the stocks of small- and medium-sized companies. The Fund generally invests in the stocks of companies with capitalizations of less than $2 billion. The Fund believes that these smaller companies, which are not as well known by financial analysts, may offer higher return potential than the stocks of larger companies. Liberty Acorn Fund typically looks for companies with: . A strong business franchise that offers growth potential. . Products and services that give a company a competitive advantage. . A stock price the Fund's advisor believes is reasonable relative to the assets and earning power of the company. Liberty Acorn Fund invests the majority of its assets in U.S. companies, but also may invest up to 33% of its assets in companies outside the U.S. in developed markets (for example, Japan, Canada and United Kingdom) and emerging markets (for example, Mexico, Brazil and Korea). Additional strategies that are not principal investment strategies and the risks associated with them are described below under "Other Investment Strategies and Risks." PRINCIPAL INVESTMENT RISKS -------------------------------------------------------------------------------- The principal risks of investing in the Fund are described below. There are many circumstances (including additional risks that are not described here) that could prevent the Fund from achieving its investment goal. You may lose money by investing in the Fund. Management risk means that the advisor's stock selections and other investment decisions might produce losses or cause the Fund to underperform when compared to other funds with a similar investment goal. Market risk means that security prices in a market, sector or industry may move down. Downward movements will reduce the value of your investment. Because of management and market risk, there is no guarantee that the Fund will achieve its investment goal or perform favorably compared with competing funds. --- 2 Liberty Acorn Fund Equity risk is the risk that stock prices will fall over short or extended periods of time. Although the stock market has historically outperformed other asset classes over the long term, the equity market tends to move in cycles and individual stock prices may fluctuate drastically from day-to-day and may underperform other asset classes over an extended period of time. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Smaller companies and mid-capitalization companies are more likely than larger companies to have limited product lines, operating histories, markets or financial resources. They may depend heavily on a small management team. Stocks of smaller companies and mid-capitalization companies may trade less frequently, may trade in smaller volumes and may fluctuate more sharply in price than stocks of larger companies. In addition, they may not be widely followed by the investment community, which can lower the demand for their stock. Foreign securities are subject to special risks. Foreign stock markets can be extremely volatile. Fluctuations in currency exchange rates may impact the value of foreign securities without a change in the intrinsic value of those securities. The liquidity of foreign securities may be more limited than domestic securities, which means that the Fund may, at times, be unable to sell foreign securities at desirable prices. Brokerage commissions, custodial fees and other fees are generally higher for foreign investments. In addition, foreign governments may impose withholding taxes which would reduce the amount of income and capital gains available to distribute to shareholders. Other risks include the following: possible delays in the settlement of transactions or the notification of income; less publicly available information about companies; the impact of political, social or diplomatic events; and possible seizure, expropriation or nationalization of the company or its assets or imposition of currency exchange controls. Emerging markets are subject to additional risk. The risks of foreign investments are typically increased in less developed countries, which are sometimes referred to as emerging markets. For example, political and economic structures in these countries may be new and developing rapidly, which may cause instability. Their securities markets may be underdeveloped. These countries are also more likely than developed countries to experience high levels of inflation, deflation or currency devaluations, which could hurt their economies and securities markets, and to expropriate or nationalize a company or its assets. --- 3 Liberty Acorn Fund Sector risk may sometimes be present in the Fund's investments. Companies that are in different but closely related industries are sometimes described as being in the same broad economic sector. The values of stocks of many different companies in a market sector may be similarly affected by particular economic or market events. Although the Fund does not intend to focus on any particular sector, at times, the Fund may have a significant portion of its assets invested in a particular sector. An example of a sector in which the Fund may sometimes have a significant portion of its assets invested is technology. Technology companies may be significantly affected by falling prices and profits, and intense competition. In addition, the rate of technological change for technology companies is generally higher than for other companies, often requiring extensive and sustained investment in research and development, and exposing such companies to the risk of rapid product obsolescence. The price of many technology stocks has risen based on projections of future earnings and company growth. If a company does not perform as expected, the price of the stock could decline significantly. Many technology companies are currently operating at a loss and may never be profitable. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. --- 4 Liberty Acorn Fund UNDERSTANDING PERFORMANCE Calendar year total return shows the Fund's Class Z share performance for each of the last ten complete calendar years. They include the effects of Fund expenses. Average annual total return is a measure of the Fund's performance over the past one-year, five-year and ten-year periods. They include the effects of Fund expenses. The Fund's return is compared to the S&P 500 Index and the Russell 2000 Index. The S&P 500 Index is a broad market-weighted average of large U.S. blue-chip companies. The Russell 2000 Index is a market-weighted index of 2000 small companies formed by taking the largest 3000 companies and eliminating the largest 1000 of those companies. Unlike the Fund, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in indices. PERFORMANCE HISTORY -------------------------------------------------------------------------------- The bar chart below shows changes in the Fund's performance from year to year by illustrating the Fund's calendar year total returns for its Class Z shares. The performance table following the bar chart shows how the Fund's average annual returns for Class Z shares compare with those of broad measures of market performance for one year, five years and ten years. The chart and table are intended to illustrate some of the risks of investing in the Fund by showing the changes in the Fund's performance. All returns include the reinvestment of dividends and distributions. As with all mutual funds, past performance does not predict the Fund's future performance. -------------------------------------------------------------------------------- Calendar-Year Total Returns (Class Z) -------------------------------------------------------------------------------- [CHART] 1990 (17.52%) 1991 47.35% 1992 24.23% 1993 32.32% 1994 (7.45%) 1995 20.80% 1996 22.55% 1997 24.98% 1998 6.02% 1999 33.38% For period shown in bar chart: Best quarter: 4th quarter 1999, +21.94% Worst quarter: 3rd quarter 1990, -23.77% -------------------------------------------------------------------------------- Average Annual Total Returns -- for periods ended December 31, 1999 --------------------------------------------------------------------------------
Inception Date 1 Year 5 Years 10 Years Class Z 6/10/70 33.38% 21.21% 17.07% --------------------------------------------------------------------------------- S&P 500 n/a 21.04% 28.56% 18.21% --------------------------------------------------------------------------------- Russell 2000 n/a 21.26% 16.69% 13.34%
--- 5 Liberty Acorn Fund UNDERSTANDING EXPENSES Annual Fund Operating Expenses are deducted from the Fund. They include management and administration fees, and administrative costs including pricing and custody services. Example Expenses help you compare the cost of investing in the Fund to the cost of investing in other mutual funds. It uses the following hypothetical conditions: . $10,000 initial investment . 5% total return for each year . Fund operating expenses remain the same . Assumes reinvestment of all dividends and distributions YOUR EXPENSES -------------------------------------------------------------------------------- Expenses are one of several factors to consider before you invest in a mutual fund. The tables below describe the fees and expenses you may pay when you buy, hold and sell shares of the Fund. -------------------------------------------------------------------------------- Shareholder Fees (paid directly from your investment) -------------------------------------------------------------------------------- Maximum sales charge (load) on purchases None -------------------------------------------------------------- Maximum deferred sales charge (load) on redemptions None -------------------------------------------------------------- Redemption fee (%) (as a percentage of amount redeemed) None -------------------------------------------------------------------------------- Annual Fund Operating Expenses (deducted directly from Fund assets) -------------------------------------------------------------------------------- Management fees/(1)/ (%) .69 --------------------------------------------------------------- Distribution and service (12b-1) fees (%) None --------------------------------------------------------------- Other expenses (%) .16 --------------------------------------------------------------- Total annual fund operating expenses (%) .85 --------------------------------------------------------------- (1) In addition to the management fee, the Fund pays the Advisor an administrative fee of .05%, which is included in "Other Expenses." -------------------------------------------------------------------------------- Example Expenses (your actual costs may be higher or lower) -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years $87 $271 $471 $1,049 --- 6 -------------------------------------------------------------------------------- Liberty Acorn International -------------------------------------------------------------------------------- INVESTMENT GOAL -------------------------------------------------------------------------------- Liberty Acorn International seeks to provide long-term growth of capital. PRINCIPAL INVESTMENT STRATEGIES -------------------------------------------------------------------------------- Liberty Acorn International invests primarily in stocks of non-U.S. small- and medium-sized companies. The Fund generally invests in the stocks of companies based outside the U.S. with capitalizations of less than $5 billion. The Fund believes that smaller companies - particularly outside the U.S. - that are not as well known by financial analysts may offer higher return potential than the stocks of larger companies. Liberty Acorn International typically looks for companies with: . A strong business franchise that offers growth potential. . Products and services that give a company a competitive advantage. . A stock price the Fund's advisor believes is reasonable relative to the assets and earning power of the company. Liberty Acorn International is an international fund and invests the majority (under normal market conditions, at least 75%) of its total assets in the stocks of foreign companies based in developed markets (for example, Japan, Canada and the United Kingdom) and emerging markets (for example, Mexico, Brazil and Korea). Additional strategies that are not principal investment strategies and the risks associated with them are described below under "Other Investment Strategies and Risks." PRINCIPAL INVESTMENT RISKS -------------------------------------------------------------------------------- The principal risks of investing in the Fund are described below. There are many circumstances (including additional risks that are not described here) which could prevent the Fund from achieving its investment goal. You may lose money by investing in the Fund. Management risk means that the advisor's stock selections and other investment decisions might produce losses or cause the Fund to underperform when compared to other funds with a similar investment goal. Market risk means that security prices in a market, sector or industry may move down. Downward movements will reduce the value of your investment. Because of management and market risk, there is no guarantee that the Fund will achieve its investment goal or perform favorably compared with competing funds. Equity risk is the risk that stock prices will fall over short or extended periods of time. Although the stock market has historically outperformed other asset classes over the long term, the equity market tends to move in cycles and individual stock prices may fluctuate drastically from day-to-day and may underperform other asset classes over an extended period of time. Individual companies may report poor results or be negatively affected --- 7 by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Smaller companies and mid-capitalization companies are more likely than larger companies to have limited product lines, operating histories, markets or financial resources. They may depend heavily on a small management team. Stocks of smaller companies and mid-capitalization companies may trade less frequently, may trade in smaller volumes and may fluctuate more sharply in price than stocks of larger companies. In addition, they may not be widely followed by the investment community, which can lower the demand for their stock. Foreign securities are subject to special risks. Foreign stock markets can be extremely volatile. Fluctuations in currency exchange rates may impact the value of foreign securities without a change in the intrinsic value of those securities. The liquidity of foreign securities may be more limited than domestic securities, which means that the Fund may, at times, be unable to sell foreign securities at desirable prices. Brokerage commissions, custodial fees and other fees are generally higher for foreign investments. In addition, foreign governments may impose withholding taxes which would reduce the amount of income and capital gains available to distribute to shareholders. Other risks include the following: possible delays in the settlement of transactions or the notification of income; less publicly available information about companies; the impact of political, social or diplomatic events; and possible seizure, expropriation or nationalization of the company or its assets or imposition of currency exchange controls. Emerging markets are subject to additional risk. The risks of foreign investments are typically increased in less developed countries, which are sometimes referred to as emerging markets. For example, political and economic structures in these countries may be new and developing rapidly, which may cause instability. Their securities markets may be underdeveloped. These countries are also more likely than developed countries to experience high levels of inflation, deflation or currency devaluations, which could hurt their economies and securities markets, and to expropriate or nationalize a company or its assets. Sector risk may sometimes be present in the Fund's investments. Companies that are in different but closely related industries are sometimes described as being in the same broad economic sector. The values of stocks of many different companies in a market sector may be similarly affected by particular economic or market events. Although the Fund does not intend to focus on any particular sector, at times, the Fund may have a significant portion of its assets invested in a particular sector. An example of a sector in which the Fund may sometimes have a significant portion of its assets invested is technology. Technology companies may be significantly affected by falling prices and profits, and intense competition. In addition, the rate of technological change for technology companies is generally higher than for other companies, often requiring extensive and sustained investment in research and development, and exposing such --- 8 Liberty Acorn International companies to the risk of rapid product obsolescence. The price of many technology stocks has risen based on projections of future earnings and company growth. If a company does not perform as expected, the price of the stock could decline significantly. Many technology companies are currently operating at a loss and may never be profitable. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. --- 9 Liberty Acorn International UNDERSTANDING PERFORMANCE Calendar year total return shows the Fund's Class Z share performance for each completed calendar year since it commenced operations. They include the effects of Fund expenses. Average annual total return is a measure of the Fund's performance over the past one-year, five-year and life of the funds periods. They include the effects of Fund expenses. The Fund's return is compared to Morgan Stanley's Europe, Australasia and Far East Index (EAFE), an index of companies throughout the world in proportion to world stock market capitalizations, excluding the U.S. and Canada, and the EMI (world ex-U.S.) Salomon Smith Barney's index of the bottom 20% of institutionally investable capital of countries, selected by Salomon and excluding the U.S. Unlike the Fund, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in indices. PERFORMANCE HISTORY -------------------------------------------------------------------------------- The bar chart below shows changes in the Fund's performance from year to year by illustrating the Fund's calendar year total returns for its Class Z shares. The performance table following the bar chart shows how the Fund's average annual returns for Class Z shares compare with those of broad measures of market performance for one year, five years and the life of the Fund. The chart and table are intended to illustrate some of the risks of investing in the Fund by showing the changes in the Fund's performance. All returns include the reinvestment of dividends and distributions. As with all mutual funds, past performance does not predict the Fund's future performance. -------------------------------------------------------------------------------- Calendar Year Total Returns/(1)/ -------------------------------------------------------------------------------- [CHART] Year Return ---- ------ 1993 49.11% 1994 (3.80%) 1995 8.93% 1996 20.65% 1997 0.19% 1998 15.43% 1999 79.19% For period shown in bar chart: Best quarter: 4th quarter 1999, +41.63% Worst quarter: 3rd quarter 1998, -16.05% -------------------------------------------------------------------------------- Average Annual Total Returns -- for periods ended December 31, 1999/(1)/ --------------------------------------------------------------------------------
Inception Date 1 Year 5 Years Life of the Fund Class Z 9/23/92 79.19% 22.19% 21.71% --------------------------------------------------------------------------------------- EAFE N/A 26.96% 12.83% 13.50% --------------------------------------------------------------------------------------- EMI (world ex-U.S.) N/A 23.52% 7.21% 9.48%
(1) The Fund's performance in 1999 was achieved during a period of unusual market conditions that are unlikely to continue. --- 10 Liberty Acorn International UNDERSTANDING EXPENSES Annual Fund Operating Expenses are deducted from the Fund. They include management and administration fees, and administrative costs including pricing and custody services. Example Expenses help you compare the cost of investing in the Fund to the cost of investing in other mutual funds. It uses the following hypothetical conditions: . $10,000 initial investment . 5% total return for each year . Fund operating expenses remain the same . Assumes reinvestment of all dividends and distributions YOUR EXPENSES -------------------------------------------------------------------------------- Expenses are one of several factors to consider before you invest in a mutual fund. The tables below describe the fees and expenses you may pay when you buy, hold and sell shares of the Fund. -------------------------------------------------------------------------------- Shareholder Fees (paid directly from your investment) -------------------------------------------------------------------------------- Maximum sales charge (load) on purchases None ----------------------------------------------------------- Maximum deferred sales charge (load) on redemptions None ----------------------------------------------------------- Redemption fee (%) (as a percentage of amount redeemed) None -------------------------------------------------------------------------------- Annual Fund Operating Expenses (deducted directly from Fund assets) -------------------------------------------------------------------------------- Management fees/(2)/ (%) .81 ----------------------------------------------------------- Distribution and service (12b-1) fees (%) None ----------------------------------------------------------- Other expenses (%) .30 ----------------------------------------------------------- Total annual fund operating expenses (%) 1.11 ----------------------------------------------------------- (2) In addition to the management fee, the Fund pays the Advisor an administrative fee of .05%, which is included in "Other Expenses." -------------------------------------------------------------------------------- Example Expenses (your actual costs may be higher or lower) -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years $113 $353 $612 $1,352 ___ 11 -------------------------------------------------------------------------------- Liberty Acorn USA -------------------------------------------------------------------------------- INVESTMENT GOAL -------------------------------------------------------------------------------- Liberty Acorn USA seeks to provide long-term growth of capital. PRINCIPAL INVESTMENT STRATEGIES -------------------------------------------------------------------------------- Liberty Acorn USA invests primarily in stocks of small- and medium-sized U.S. companies. The Fund generally invests in the stocks of U.S. companies with capitalizations of less than $2 billion. The Fund believes that these smaller companies, which are not as well known by financial analysts, may offer higher return potential than the stocks of larger companies. Liberty Acorn USA typically looks for companies with: . A strong business franchise that offers growth potential. . Products and services that give a company a competitive advantage. . A stock price the Fund's advisor believes is reasonable relative to the assets and earning power of the company. The Fund generally invests substantially all of its assets in U.S. companies and, under normal market conditions, will invest at least 65% of its assets in U.S. companies. Additional strategies that are not principal investment strategies and the risks associated with them are described below under "Other Investment Strategies and Risks." PRINCIPAL INVESTMENT RISKS -------------------------------------------------------------------------------- The principal risks of investing in the Fund are described below. There are many circumstances (including additional risks that are not described here) which could prevent the Fund from achieving its investment goal. You may lose money by investing in the Fund. Management risk means that the advisor's stock selections and other investment decisions might produce losses or cause the Fund to underperform when compared to other funds with a similar investment goal. Market risk means that security prices in a market, sector or industry may move down. Downward movements will reduce the value of your investment. Because of management and market risk, there is no guarantee that the Fund will achieve its investment goal or perform favorably compared with competing funds. Equity risk is the risk that stock prices will fall over short or extended periods of time. Although the stock market has historically outperformed other asset classes over the long term, the equity market tends to move in cycles and individual stock prices may fluctuate drastically from day-to-day and may underperform other asset classes over an extended period of time. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. ___ 12 Liberty Acorn USA Smaller companies and mid-capitalization companies are more likely than larger companies to have limited product lines, operating histories, markets or financial resources. They may depend heavily on a small management team. Stocks of smaller companies and mid-capitalization companies may trade less frequently, may trade in smaller volumes and may fluctuate more sharply in price than stocks of larger companies. In addition, they may not be widely followed by the investment community, which can lower the demand for their stock. Sector risk may sometimes be present in the Fund's investments. Companies that are in different but closely related industries are sometimes described as being in the same broad economic sector. The values of stocks of many different companies in a market sector may be similarly affected by particular economic or market events. Although the Fund does not intend to focus on any particular sector, at times, the Fund may have a significant portion of its assets invested in a particular sector. An example of a sector in which the Fund may sometimes have a significant portion of its assets invested is technology. Technology companies may be significantly affected by falling prices and profits, and intense competition. In addition, the rate of technological change for technology companies is generally higher than for other companies, often requiring extensive and sustained investment in research and development, and exposing such companies to the risk of rapid product obsolescence. The price of many technology stocks has risen based on projections of future earnings and company growth. If a company does not perform as expected, the price of the stock could decline significantly. Many technology companies are currently operating at a loss and may never be profitable. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. ___ 13 Liberty Acorn USA UNDERSTANDING PERFORMANCE Calendar year total return shows the Fund's Class Z share performance for each completed calendar year since it commenced operations. They include the effects of Fund expenses. Average annual total return is a measure of the Fund's performance over the past one-year, three-year and life of the Fund periods. They include the effects of Fund expenses. The Fund's return is compared to the Russell 2000 Index. The Russell 2000 Index is a market-weighted index, with dividends reinvested, of 2000 small companies formed by taking the largest 3000 companies and eliminating the largest 1000 of those companies. Unlike the Fund, an index is not an investment, does not incur fees or expenses and is not professionally managed. It is not possible to invest directly in an index. ================================================================================ PERFORMANCE HISTORY -------------------------------------------------------------------------------- The bar chart below shows changes in the Fund's performance from year to year by illustrating the Fund's calendar year total returns for its Class Z shares. The performance table following the bar chart shows how the Fund's average annual returns for Class Z shares compare with those of a broad measure of market performance for one year, three years and the life of the Fund. The chart and table are intended to illustrate some of the risks of investing in the Fund by showing the changes in the Fund's performance. All returns include the reinvestment of dividends and distributions. As with all mutual funds, past performance does not predict the Fund's future performance. -------------------------------------------------------------------------------- Calendar Year Total Returns -------------------------------------------------------------------------------- [CHART APPEARS HERE] Year Return ---- ------ 1997 32.30% 1998 5.79% 1999 23.02% For period shown in bar chart: Best quarter: 4th quarter 1999, +18.93% Worst quarter: 3rd quarter 1998, -19.25% -------------------------------------------------------------------------------- Average Annual Total Returns - for periods ended December 31, 1999 -------------------------------------------------------------------------------- Inception Date 1 Year 3 Years Life of the Fund Class Z 9/4/96 23.02% 19.86% 23.28% -------------------------------------------------------------------------------- Russell 2000 N/A 21.26% 13.08% 14.65% ___ 14 Liberty Acorn USA UNDERSTANDING EXPENSES Annual Fund Operating Expenses are deducted from the Fund. They include management and administration fees, and administrative costs including pricing and custody services. Example Expenses help you compare the cost of investing in the Fund to the cost of investing in other mutual funds. It uses the following hypothetical conditions: . $10,000 initial investment . 5% total return for each year . Fund operating expenses remain the same . Assumes reinvestment of all dividends and distributions YOUR EXPENSES -------------------------------------------------------------------------------- Expenses are one of several factors to consider before you invest in a mutual fund. The tables below describe the fees and expenses you may pay when you buy, hold and sell shares of the Fund. -------------------------------------------------------------------------------- Shareholder Fees (paid directly from your investment) -------------------------------------------------------------------------------- Maximum sales charge (load) on purchases None -------------------------------------------------------------- Maximum deferred sales charge (load) on redemptions None -------------------------------------------------------------- Redemption fee (%) (as a percentage of amount redeemed, if applicable) None -------------------------------------------------------------------------------- Annual Fund Operating Expenses (deduced directly from Fund assets) -------------------------------------------------------------------------------- Management fees/(1)/ (%) .93 -------------------------------------------------------------- Distribution and service (12b-1) fees (%) None -------------------------------------------------------------- Other expenses (%) .22 -------------------------------------------------------------- Total annual fund operating expenses (%) 1.15 -------------------------------------------------------------- (1) In addition to the management fee, the Fund pays the Advisor an administrative fee of .05%, which is included in "Other Expenses." -------------------------------------------------------------------------------- Example Expenses (your actual costs may be higher or lower) -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years $117 $365 $633 $1,398 ___ 15 -------------------------------------------------------------------------------- Liberty Acorn Twenty -------------------------------------------------------------------------------- INVESTMENT GOAL -------------------------------------------------------------------------------- Liberty Acorn Twenty seeks long-term growth of capital. PRINCIPAL INVESTMENT STRATEGIES -------------------------------------------------------------------------------- Liberty Acorn Twenty invests primarily in the stocks of medium- to larger-sized U.S. companies. The Fund is a non-diversified fund that takes advantage of its advisor's research and stock-picking capabilities to invest in a limited number of companies (between 20-25) with market capitalizations of $2 billion to $12 billion. The Fund believes that companies within this capitalization range are not as well known by financial analysts, and may offer higher return potential than the stocks of companies with capitalizations above $12 billion. Liberty Acorn Twenty typically looks for companies with: . A strong business franchise that offers growth potential. . Products and services that give a company a competitive advantage. . A stock price the Fund's advisor believes is reasonable relative to the assets and earning power of the company. Although the Fund does not buy securities with a short-term view, there is no restriction on the length of time the Fund must hold a security. To the extent the Fund buys and sells securities frequently, its transaction costs will be higher (which may adversely affect the Fund's performance) and it may realize additional capital gains. Additional strategies that are not principal investment strategies and the risks associated with them are described below under "Other Investment Strategies and Risks." PRINCIPAL INVESTMENT RISKS -------------------------------------------------------------------------------- The principal risks of investing in the Fund are described below. There are many circumstances (including additional risks that are not described here) which could prevent the Fund from achieving its investment goal. You may lose money by investing in the Fund. Management risk means that the advisor's stock selections and other investment decisions might produce losses or cause the Fund to underperform when compared to other funds with a similar investment goal. Market risk means that security prices in a market, sector or industry may move down. Downward movements will reduce the value of your investment. Because of management and market risk, there is no guarantee that the Fund will achieve its investment goal or perform favorably compared with competing funds. Equity risk is the risk that stock prices will fall over short or extended periods of time. Although the stock market has historically outperformed other asset classes over the long term, the equity market tends to move in cycles and individual stock prices may fluctuate drastically from day-to-day and may underperform other asset classes over an extended period of time. Individual companies may report poor results or be negatively affected ___ 16 Liberty Acorn Twenty by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Smaller companies and mid-capitalization companies are more likely than larger companies to have limited product lines, operating histories, markets or financial resources. They may depend heavily on a small management team. Stocks of smaller companies and mid-capitalization companies may trade less frequently, may trade in smaller volumes and may fluctuate more sharply in price than stocks of larger companies. In addition, they may not be widely followed by the investment community, which can lower the demand for their stock. Sector risk may sometimes be present in the Fund's investments. Companies that are in different but closely related industries are sometimes described as being in the same broad economic sector. The values of stocks of many different companies in a market sector may be similarly affected by particular economic or market events. Although the Fund does not intend to focus on any particular sector, at times, the Fund may have a significant portion of its assets invested in a particular sector. An example of a sector in which the Fund may sometimes have a significant portion of its assets invested is technology. Technology companies may be significantly affected by falling prices and profits, and intense competition. In addition, the rate of technological change for technology companies is generally higher than for other companies, often requiring extensive and sustained investment in research and development, and exposing such companies to the risk of rapid product obsolescence. The price of many technology stocks has risen based on projections of future earnings and company growth. If a company does not perform as expected, the price of the stock could decline significantly. Many technology companies are currently operating at a loss and may never be profitable. As a non-diversified mutual fund, the Fund is allowed to invest a greater percentage of its total assets in the securities of a single issuer. This may concentrate issuer risk and, therefore, the Fund may have an increased risk of loss compared to a similar diversified mutual fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. ___ 17 Liberty Acorn Twenty UNDERSTANDING PERFORMANCE Calendar year total return shows the Fund's Class Z share performance for each completed calendar year since it commenced operations. They include the effects of Fund expenses. Average annual total return is a measure of the Fund's performance over the past one-year and the life of the Fund periods. They include the effects of Fund expenses. The Fund's return is compared to the S&P MidCap 400 Index. The S&P MidCap 400 is an unmanaged, market value-weighted index of 400 midcap U.S. companies. Unlike the Fund, an index is not an investment, does not incur fees or expenses and is not professionally managed. It is not possible to invest directly in an index. ================================================================================ PERFORMANCE HISTORY -------------------------------------------------------------------------------- The bar chart below shows the Fund's performance for the past year by illustrating the Fund's calendar year total return for its Class Z shares. The performance table following the bar chart shows how the Fund's average annual returns for Class Z shares compare with those of a broad measure of market performance for one year and the life of the Fund. The chart and table are intended to illustrate some of the risks of investing in the Fund by showing the changes in the Fund's performance. All returns include the reinvestment of dividends and distributions. Performance results include the effect of expense reduction arrangements. If these arrangements were not in place, then the performance results would have been lower. Any expense reduction arrangements may be discontinued at any time. As with all mutual funds, past performance does not predict the Fund's future performance. -------------------------------------------------------------------------------- Calendar Year Total Returns -------------------------------------------------------------------------------- [CHART APPEARS HERE] Year Return ---- ------ 1999 29.30% For period shown in bar chart: Best quarter: 4th quarter 1999, +14.35% Worst quarter: 3rd quarter 1999, -7.13% -------------------------------------------------------------------------------- Average Annual Total Returns - for periods ended December 31, 1999 -------------------------------------------------------------------------------- Inception Date 1 Year Life of Fund Class Z 11/23/98 29.30% 34.20% -------------------------------------------------------------------------------- S&P MidCap 400 N/A 14.72% 24.49% ___ 18 Liberty Acorn Twenty UNDERSTANDING EXPENSES Annual Fund Operating Expenses are deducted from the Fund. They include management and administration fees, and administrative costs including pricing and custody services. Example Expenses help you compare the cost of investing in the Fund to the cost of investing in other mutual funds. The table does not take into account any expense reduction arrangements discussed in the footnotes to the Annual Fund Operating Expenses table. It uses the following hypothetical conditions: . $10,000 initial investment . 5% total return for each year . Fund operating expenses remain the same . Assumes reinvestment of all dividends and distributions ================================================================================ YOUR EXPENSES -------------------------------------------------------------------------------- Expenses are one of several factors to consider before you invest in a mutual fund. The tables below describe the fees and expenses you may pay when you buy, hold and sell shares of the Fund. -------------------------------------------------------------------------------- Shareholder Fees (paid directly from your investment) -------------------------------------------------------------------------------- Maximum sales charge (load) on purchases None -------------------------------------------------------------- Maximum deferred sales charge (load) on redemptions None -------------------------------------------------------------- Redemption fee (%) (as a percentage of amount redeemed) None -------------------------------------------------------------------------------- Annual Fund Operating Expenses (deducted directly from Fund assets) -------------------------------------------------------------------------------- Management fees/(1)/ (%) 0.90 -------------------------------------------------------------- Distribution and service (12b-1) fees (%) None -------------------------------------------------------------- Other expenses (%) 0.51 -------------------------------------------------------------- Total annual fund operating expenses/(2)/ (%) 1.41 -------------------------------------------------------------- (1) In addition to the management fee, the Fund pays the Advisor an administrative fee of .05%, which is included in "Other Expenses." (2) The Fund's Advisor has voluntarily agreed to reimburse the Fund for any ordinary operating expenses (exclusive of distribution and service fees, interest, taxes and extraordinary expenses, if any) exceeding 1.35% of the average annual net assets for Class Z. This arrangement may be modified or terminated by either the Fund or its advisor on 30 days' notice. As a result, the actual total annual Fund operating expenses for Class Z would be 1.35%. -------------------------------------------------------------------------------- Example Expenses (your actual costs may be higher or lower) -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years $144 $446 $771 $1,691 ___ 19 -------------------------------------------------------------------------------- Liberty Acorn Foreign Forty -------------------------------------------------------------------------------- INVESTMENT GOAL -------------------------------------------------------------------------------- Liberty Acorn Foreign Forty seeks long-term growth of capital. PRINCIPAL INVESTMENT STRATEGIES -------------------------------------------------------------------------------- Liberty Acorn Foreign Forty invests primarily in the stocks of medium- and larger-sized companies based in developed markets (for example, Japan, Canada and United Kingdom) outside the U.S. The Fund invests in at least three countries. The Fund is a non-diversified Fund that takes advantage of its advisor's research and stock-picking capabilities to invest in a limited number of foreign companies (between 40-60) with market capitalizations of $5 billion to $15 billion. The Fund believes that companies within this capitalization range are not as well known by financial analysts, and may offer higher return potential than the stocks of companies with capitalizations above $15 billion. Liberty Acorn Foreign Forty typically looks for companies with: . A strong business franchise that offers growth potential. . Products and services that give a company a competitive advantage. . A stock price the Fund's advisor believes is reasonable relative to the assets and earning power of the company. Liberty Acorn Foreign Forty is an international fund and invests the majority of its assets in the stocks of foreign companies based in developed markets outside the U.S. Additional strategies that are not principal investment strategies and the risks associated with them are described below under "Other Investment Strategies and Risks." PRINCIPAL INVESTMENT RISKS -------------------------------------------------------------------------------- The principal risks of investing in the Fund are described below. There are many circumstances (including additional risks that are not described here) which could prevent the Fund from achieving its investment goal. You may lose money by investing in the Fund. Management risk means that the advisor's stock selections and other investment decisions might produce losses or cause the Fund to underperform when compared to other funds with a similar investment goal. Market risk means that security prices in a market, sector or industry may move down. Downward movements will reduce the value of your investment. Because of management and market risk, there is no guarantee that the Fund will achieve its investment goal or perform favorably compared with competing funds. Equity risk is the risk that stock prices will fall over short or extended periods of time. Although the stock market has historically outperformed other asset classes over the long term, the equity market tends to move in cycles and individual stock prices may fluctuate drastically from day-to-day and may underperform other asset classes over an extended period of time. Individual companies may report poor results or be negatively affected ___ 20 Liberty Acorn Foreign Forty by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Smaller companies and mid-capitalization companies are more likely than larger companies to have limited product lines, operating histories, markets or financial resources. They may depend heavily on a small management team. Stocks of smaller companies and mid-capitalization companies may trade less frequently, may trade in smaller volumes and may fluctuate more sharply in price than stocks of larger companies. In addition, they may not be widely followed by the investment community, which can lower the demand for their stock. Foreign securities are subject to special risks. Foreign stock markets can be extremely volatile. Fluctuations in currency exchange rates may impact the value of foreign securities without a change in the intrinsic value of those securities. The liquidity of foreign securities may be more limited than domestic securities, which means that the Fund may, at times, be unable to sell foreign securities at desirable prices. Brokerage commissions, custodial fees and other fees are generally higher for foreign investments. In addition, foreign governments may impose withholding taxes which would reduce the amount of income and capital gains available to distribute to shareholders. Other risks include the following: possible delays in the settlement of transactions or the notification of income; less publicly available information about companies; the impact of political, social or diplomatic events; and possible seizure, expropriation or nationalization of the company or its assets or imposition of currency exchange controls. Sector risk may sometimes be present in the Fund's investments. Companies that are in different but closely related industries are sometimes described as being in the same broad economic sector. The values of stocks of many different companies in a market sector may be similarly affected by particular economic or market events. Although the Fund does not intend to focus on any particular sector, at times, the Fund may have a significant portion of its assets invested in a particular sector. An example of a sector in which the Fund may sometimes have a significant portion of its assets invested is technology. Technology companies may be significantly affected by falling prices and profits, and intense competition. In addition, the rate of technological change for technology companies is generally higher than for other companies, often requiring extensive and sustained investment in research and development, and exposing such companies to the risk of rapid product obsolescence. The price of many technology stocks has risen based on projections of future earnings and company growth. If a company does not perform as expected, the price of the stock could decline significantly. Many technology companies are currently operating at a loss and may never be profitable. ___ 21 Liberty Acorn Foreign Forty As a non-diversified mutual fund, the Fund is allowed to invest a greater percentage of its total assets in the securities of a single issuer. This may concentrate issuer risk and, therefore, the Fund may have an increased risk of loss compared to a similar diversified mutual fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. ___ 22 Liberty Acorn Foreign Forty UNDERSTANDING PERFORMANCE Calendar year total return shows the Fund's Class Z share performance for each completed calendar year since it commenced operations. They include the effects of Fund expenses. Average annual total return is a measure of the Fund's performance over the past one-year and the life of the Fund periods. They include the effects of Fund expenses. The Fund's return is compared to the SSB Cap Range $2-10B Index. The SSB World ex-U.S. Cap Range $2-10 Billion Index is Salomon Smith Barney's two to ten billion U.S. dollar security market subset of its Broad Market Index. It represents a midcap developed market index, excluding the U.S. Unlike the Fund, an index is not an investment, does not incur fees or expenses and is not professionally managed. It is not possible to invest directly in an index. PERFORMANCE HISTORY -------------------------------------------------------------------------------- The bar chart below shows changes in the Fund's performance for the past year by illustrating the Fund's calendar year total return for its Class Z shares. The performance table following the bar chart shows how the Fund's average annual returns for Class Z shares compare with those of a broad measure of market performance for one year and the life of the Fund. The chart and table are intended to illustrate some of the risks of investing in the Fund by showing the changes in the Fund's performance. All returns include the reinvestment of dividends and distributions. Peformance results include the effect of expense reduction arrangements, if any. If these arrangements were not in place, then the performance results would have been lower. Any expense reduction arrangements may be discontinued at any time. As with all mutual funds, past performance does not predict the Fund's future performance. -------------------------------------------------------------------------------- Calendar Year Total Returns/1/ -------------------------------------------------------------------------------- [CHART] 1999 81.60% For period shown in bar chart: Best quarter: 4th quarter 1999, +46.65% Worst quarter: 3rd quarter 1999, -3.90% -------------------------------------------------------------------------------- Average Annual Total Returns - for periods ended December 31, 1999/1/ -------------------------------------------------------------------------------- Inception Date 1 Year Life of Fund Class Z 11/23/98 81.60% 86.84% -------------------------------------------------------------------------------- SSB Cap Range $2-10B N/A 23.52% 24.72% -------------------------------------------------------------------------------- (1) The Fund's performance during 1999 was achieved in a period of unusual market conditions that are unlikely to continue. ___ 23 Liberty Acorn Foreign Forty UNDERSTANDING EXPENSES Annual Fund Operating Expenses are deducted from the Fund. They include management and administration fees, and administrative costs including pricing and custody services. Example Expenses help you compare the cost of investing in the Fund to the cost of investing in other mutual funds. The table does not take into account any expense reduction arrangements discussed in the footnotes to the Annual Fund Operating Expenses table. It uses the following hypothetical conditions: . $10,000 initial investment . 5% total return for each year . Fund operating expenses remain the same . Assumes reinvestment of all dividends and distributions YOUR EXPENSES -------------------------------------------------------------------------------- Expenses are one of several factors to consider before you invest in a mutual fund. The tables below describe the fees and expenses you may pay when you buy, hold and sell shares of the Fund. -------------------------------------------------------------------------------- Shareholder Fees (paid directly from your investment) -------------------------------------------------------------------------------- Maximum sales charge (load) on purchases None -------------------------------------------------------------- Maximum deferred sales charge (load) on redemptions None -------------------------------------------------------------- Redemption fee (%) (as a percentage of amount redeemed) None -------------------------------------------------------------------------------- Annual Fund Operating Expenses (deducted directly from Fund assets) -------------------------------------------------------------------------------- Management fees/(2)/ (%) 0.95 -------------------------------------------------------------- Distribution and service (12b-1) fees (%) None -------------------------------------------------------------- Other expenses (%) 0.62 -------------------------------------------------------------- Total annual fund operating expenses/(3)/ (%) 1.57 -------------------------------------------------------------- (2) In addition to the management fee, the Fund pays the Advisor an administrative fee of .05%, which is included in "Other Expenses." (3) The Fund's advisor has voluntarily agreed to reimburse the Fund for any ordinary operating expenses (exclusive of distribution and service fees, interest, taxes and extraordinary expenses, if any) exceeding 1.45% of the average annual net assets for Class Z. This arrangement may be modified or terminated by either the Fund or its advisor on 30 days' notice. As a result, the actual total annual Fund operating expenses for Class Z would be 1.45%. -------------------------------------------------------------------------------- Example Expenses (your actual costs may be higher or lower) -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years $160 $496 $855 $1,867 ___ 24 -------------------------------------------------------------------------------- Your Account -------------------------------------------------------------------------------- HOW TO BUY SHARES -------------------------------------------------------------------------------- If you are an Eligible Investor your shares will be bought at the next calculated price (described below), after the Fund receives your purchase request in "good form." "Good form" means that your payment has been received and your application is complete, including all necessary signatures. The Funds reserve the right to refuse a purchase order for any reason, including if a Fund believes that doing so would be in the best interest of the Funds and its shareholders. -------------------------------------------------------------------------------- Outlined below are the various options for buying shares: --------------------------------------------------------------------------------
Method Instructions ----------------------------------------------------------------------------------------------------------- By check For new accounts, send a completed application and check made payable to the Fund (new account) to the transfer agent, Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. ----------------------------------------------------------------------------------------------------------- By check For existing accounts, fill out and return the additional investment stub (existing account) included in your quarterly statement, or send a letter of instruction including your Fund name and account number with a check made payable to the Fund to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. ----------------------------------------------------------------------------------------------------------- By exchange You may acquire shares by exchanging shares you own in one Fund for shares of the same class of another Liberty Acorn Fund at no additional cost. You also may exchange your Class Z shares of a Fund for Class Z or, if there are no Class Z shares, Class A shares of certain other funds distributed by Liberty Funds Distributor, Inc., at net asset value without a sales charge. See the SAI for a listing of the funds currently available. There may be an additional charge if exchanging from a money market fund. To exchange by telephone, call 1-800-962-1585. ----------------------------------------------------------------------------------------------------------- By wire You may purchase shares by wiring money from your bank account to your Fund account. To wire funds to your Fund account, call 1-800-962-1585 to obtain a control number and the wiring instructions. ----------------------------------------------------------------------------------------------------------- By electronic funds You may purchase shares by electronically transferring money from your bank transfer (existing account to your Fund account by calling 1-800-962-1585. Electronic funds account) transfers may take up to two business days to settle and be considered in "good form." You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the application. ----------------------------------------------------------------------------------------------------------- Automatic You can make monthly or quarterly investments automatically from your bank investment plan account to your Fund account. You can select a pre-authorized amount to be sent via electronic funds transfer. Be sure to complete the appropriate section of the application for this feature. ----------------------------------------------------------------------------------------------------------- By dividend You may automatically invest dividends distributed by one Liberty Acorn Fund into diversification the same class of shares of another Liberty Acorn Fund at no additional sales charge. To invest your dividends in another Fund, call 1-800-962-1585. ----------------------------------------------------------------------------------------------------------- Through an Contact your financial professional. intermediary
___ 25 Your Account ELIGIBLE INVESTORS -------------------------------------------------------------------------------- Only Eligible Investors may purchase Class Z shares of the Funds, directly or by exchange. Eligible Investors are subject to different minimum investment requirements. Eligible Investors and their applicable investment minimums are: $1,000 minimum initial investment . any shareholder (or family member of such shareholder) who owned shares of any of the Liberty Acorn funds on September 29, 2000 (when all of the Trust's then outstanding shares were re-designated Class Z shares) and who has since then continued to own shares of any funds distributed by Liberty Funds Distributor, Inc.; . any trustee of Liberty Acorn Trust, any employee of Liberty WAM, or a member of the family of the trustee or employee; and . any person or entity listed in the account registration for any account (such as joint owners, trustees, custodians, and designated beneficiaries) that held shares of any of the funds of Liberty Acorn Trust on September 29, 2000 and that has since then continued to hold shares of any funds distributed by Liberty Funds Distributor, Inc. $100,000 minimum initial investment . any client of a broker-dealer or registered investment advisor that recommends Fund shares and charges an asset-based fee; . any insurance company, trust company or bank, which is purchasing shares for its own account; . any endowment, investment company or foundation; and . any client of an investment advisory affiliate of the distributor if the client meets certain criteria established by the distributor and its affiliate. No minimum initial investment . any person investing all or part of the proceeds of a distribution, "roll over" or transfer of assets into a Liberty IRA from, any deferred compensation plan which was a shareholder of any of the Liberty Acorn funds on September 29, 2000, in which the investor was a participant and through which the investor invested in one or more of the Liberty Acorn funds immediately prior to the distribution, transfer or roll over; and . any retirement plan with aggregate assets of at least $5 million at the time it purchases Class Z shares and which is purchasing shares directly from the distributor or through a third party broker-dealer. ___ 26 Your Account If you have any questions about your eligibility to purchase Class Z shares of the Fund, please call 800-962-1585. If you hold Fund shares through a broker- dealer or other financial institution, your eligibility to purchase Class Z shares may differ depending on that institution's policies. The Fund reserves the right to change the criteria for eligible investors and these investment minimums. No minimum investment applies to accounts participating in the automatic investment plan. The Fund also reserves the right to refuse a purchase order for any reason, including if it believes that doing so would be in the best interest of the Fund and its shareholders. ___ 27 Your Account CHOOSING A SHARE CLASS The Fund offers one class of shares in this prospectus -- Class Z. The Fund also offers three additional classes of shares -- Class A, B, and C shares are available through a separate prospectus. Each share class has its own sales charge and expense structure. Determining which share class is best for you depends on the dollar amount you are investing and the number of years for which you are willing to invest. Based on your personal situation, your investment advisor can help you decide which class of shares makes the most sense for you. In general, anyone who is eligible to purchase Class Z shares, which do not incur Rule 12b-1 fees or sales charges, should do so in preference over other classes. ================================================================================ PRICE OF FUND SHARES -------------------------------------------------------------------------------- Your purchases of Class Z shares generally are at net asset value, which is the value of a Fund share without any sales charge. Class Z shares are not subject to an initial sales charge when purchased, or a contingent deferred sales charge when sold. If you purchase Class Z shares of the Funds through certain broker-dealers, banks or other intermediaries (intermediaries), they may charge a fee for their services. They may also place limits on your ability to use services the Funds offer. There are no sales charges or limitations if you purchase shares directly from the Funds, except as described in this prospectus. If an intermediary is an agent or designee of the Funds, orders are processed at the net asset value next calculated after the intermediary receives the order. The intermediary must segregate any orders it receives after the close of regular trading on the NYSE and transmit those orders separately for execution at the net asset value next determined. HOW TO EXCHANGE SHARES -------------------------------------------------------------------------------- You may exchange your Class Z shares of the Funds for shares of another Fund at no additional charge. You also may exchange your Class Z shares of any Fund for Class Z shares or, if there are no Class Z shares, Class A shares of certain other funds distributed by Liberty Funds Distributor, Inc., at net asset value without a sales charge. Unless your account is part of a tax-deferred retirement plan, an exchange is a taxable event. Therefore, you may realize a gain or a loss for tax purposes. The Funds may terminate your exchange privilege if the advisor determines that your exchange activity is likely to adversely impact its ability to manage the Funds. To exchange by telephone, call 1-800-962-1585. HOW TO SELL SHARES -------------------------------------------------------------------------------- You may sell shares of a Fund on any regular business day that the New York Stock Exchange (NYSE) is open. When a Fund receives your sales request in "good form," shares will be sold at the next calculated net asset value. In "good form" means that money used to purchase your shares is fully collected. When selling shares by letter of instruction, "good form" also means (i) your letter has complete instructions, the proper signatures and signature guarantees, and (ii) any other required documents are attached. A signature guarantee is designed to protect you and Liberty Acorn from fraud. Signature guarantees can be obtained from a commercial bank, broker-dealer, credit union (if authorized under state law), securities exchange or association. A notary public cannot provide a signature guarantee. For additional documents required for sales by corporations, agents, fiduciaries and surviving joint owners, please call 1-800-962-1585. Retirement plan accounts have special requirements; please call 1-800-962-1585 for more information. ___ 28 Your Account A Fund will generally send proceeds from the sale to you within seven days (usually on the next business day after your request is received in "good form"). However, if you purchased your shares by check, a Fund may delay sending the proceeds from the sale of your shares for up to 15 days after your purchase to protect against checks that are returned. No interest will be paid on uncashed redemption checks. Redemption proceeds may be paid in securities rather than cash, under certain circumstances. For more information, see the paragraph "Non-Cash Redemptions" under the section "How to Sell Shares" in the Statement of Additional Information. -------------------------------------------------------------------------------- Outlined below are the various options for selling shares: --------------------------------------------------------------------------------
Method Instructions ----------------------------------------------------------------------------------------------------------- By exchange You may sell shares by exchanging from a Fund into Class Z shares or Class A shares of another fund distributed by Liberty Funds Distributor, Inc. at no additional cost. To exchange by telephone, call 1-800-962-1585. ----------------------------------------------------------------------------------------------------------- By telephone You may sell shares by telephone and request that a check be sent to your address of record by calling 1-800-422-3737, unless you have notified the Fund of an address change within the previous 30 days. The dollar limit for telephone sales is $100,000 in a 30-day period. You do not need to set up this feature in advance of your call. Certain restrictions apply to retirement accounts. For details, call 1-800-962-1585. ----------------------------------------------------------------------------------------------------------- By mail You may send a signed letter of instruction or stock power form to the address below. In your letter of instruction, note the Fund's name, share class, account number, and the dollar value or number of shares you wish to sell. All account owners must sign the letter, and signatures must be guaranteed by either a bank, a member firm of a national stock exchange or another eligible guarantor institution. Additional documentation is required for sales by corporations, agents, fiduciaries, surviving joint owners and individual retirement account owners. For details, call 1-800-962-1585. Mail your letter of instruction to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. ----------------------------------------------------------------------------------------------------------- By wire You may sell shares and request that the proceeds be wired to your bank. You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the account application for this feature. ----------------------------------------------------------------------------------------------------------- By electronic You may sell shares and request that the proceeds be electronically transferred funds transfer to your bank. Proceeds may take up to two business days to be received by your bank. You must set up this feature prior to your request. Be sure to complete the appropriate section of the account application for this feature. ----------------------------------------------------------------------------------------------------------- Systematic Withdrawal You may automatically sell a specified dollar amount or percentage on a monthly, Plan quarterly or semiannual basis if your account balance is at least $5,000 and have the proceeds sent to you. This feature is not available if you hold your shares in certificate form. Be sure to complete the appropriate section of the account application for this feature. ----------------------------------------------------------------------------------------------------------- Through an Contact your financial professional. Financial professionals may charge fees for Intermediary their services.
___ 29 Your Account OTHER INFORMATION ABOUT YOUR ACCOUNT -------------------------------------------------------------------------------- How the Funds' Share Price is Determined The price of a Fund's Class Z Shares is its net asset value. The net asset value is determined at the close of regular trading on the NYSE, usually 4:00 p.m. Eastern time, on each business day that the NYSE is open (typically Monday through Friday). When you request a transaction, it will be processed at the net asset value next determined after your request is received in "good form" by Liberty Acorn (or an authorized broker-dealer, financial services company, or other agent, some of whom may charge a fee for their services). In most cases, in order to receive that day's price, Liberty Acorn must receive your order before that day's transactions are processed. If you request a transaction through an agent, that agent must receive your order by the close of trading on the NYSE to receive that day's price. A Fund determines its net asset value for its Class Z shares by dividing total net assets attributable to Class Z shares by the number of outstanding Class Z shares. In determining the net asset value, the Fund must determine the price of each security in its portfolio at the close of each trading day. Because Liberty Acorn Fund, Liberty Acorn International and Liberty Acorn Foreign Forty may hold securities that are traded on foreign exchanges, the value of these Funds' securities may change on days when shareholders will not be able to buy or sell Fund shares. This will affect the net asset value on the day it is next determined. Securities for which market quotations are available are valued each day at the current market value. However, where market quotations are unavailable, or when the advisor believes that subsequent events have made them unreliable, the Fund may use other data to determine the fair value of the securities. You can find the daily prices of some share classes for the Funds in most major daily newspapers under the caption "Liberty." You can find daily prices for all share classes by visiting the Funds' web site at www.acornfunds.com. Share Certificates Share certificates are not available for Class Z shares. ___ 30 Your Account UNDERSTANDING FUND DISTRIBUTIONS Each Fund earns income from the securities it holds. Each Fund also may realize capital gains and losses on sales of its securities. A Fund distributes substantially all of its net investment income and capital gains to shareholders. As a shareholder, you are entitled to a portion of your Fund's income and capital gains based on the number of shares you own at the time these distributions are declared. ================================================================================ Dividends, Distributions, and Taxes Each Fund has the potential to make the following distributions: -------------------------------------------------------------------------------- Types of Distributions -------------------------------------------------------------------------------- Dividend Represents interest and dividends earned from securities held by a Fund net of expenses incurred by the Fund. -------------------------------------------------------------------------------- Capital gains Represents net long-term capital gains on sales of securities held for more than 12 months and net short-term capital gains, which are gains on sales of securities held for a 12-month period or less. Distribution Options Each Fund distributes dividends in June and December and any capital gains (including short-term capital gains) at least annually. You can choose one of the options listed in the table below for these distributions when you open your account. To change your distribution option call 1-800-962- 1585. If you do not indicate on your application your preference for handling distributions, a Fund will automatically reinvest all distributions in additional shares of the Fund. -------------------------------------------------------------------------------- Distribution Options -------------------------------------------------------------------------------- Reinvest all distributions in additional shares of your current fund -------------------------------------------------------------------------------- Reinvest all distributions in shares of another Fund -------------------------------------------------------------------------------- Receive dividends in cash (see options below) and reinvest capital gains -------------------------------------------------------------------------------- Receive all distributions in cash (with one of the following options): . send the check to your address of record . send the check to a third party address . transfer the money to your bank via electronic funds transfer Distributions of $10 or less will automatically be reinvested in additional Fund shares. If you elect to receive distributions by check and the check is returned as undeliverable, or if you do not cash a distribution check within six months of the check date, the distribution will be reinvested in additional shares of the Fund. Tax Consequences Regardless of whether you receive your distributions in cash or reinvest them in additional Fund shares, all Fund distributions are subject to federal income tax. Depending on the state where you live, distributions may also be subject to state and local income taxes. In general, any distributions of dividends, interest and short-term capital gains are taxable as ordinary income. Distributions of long-term capital gains are generally taxable as such, regardless of how long you have held your Fund shares. You will be provided with information each year regarding the amount of ordinary income and capital gains distributed to you for the previous year and any portion of your distribution which is exempt from state and local taxes. Your investment in a Fund may have additional personal tax implications. Please consult your tax advisor on foreign, federal, state, local or other applicable tax laws. ___ 31 Your Account In addition to the dividends and capital gains distributions made by each Fund, you may realize a capital gain or loss when selling and exchanging shares of the Fund. Such transactions may be subject to federal, state and local income tax. Foreign Income Taxes A Fund may receive investment income from sources within foreign countries, and that income may be subject to foreign income taxes at the source. If your Fund pays non-refundable taxes to foreign governments during the year, the taxes will reduce that Fund's dividends but will still be included in your taxable income. You may be able to claim an offsetting credit or deduction on your tax return for your share of foreign taxes paid by Liberty Acorn International or Liberty Acorn Foreign Forty. ___ 32 -------------------------------------------------------------------------------- Managing the Fund -------------------------------------------------------------------------------- INVESTMENT ADVISOR -------------------------------------------------------------------------------- Liberty Wanger Asset Management (Liberty WAM) (formerly Wanger Asset Management, L.P. (WAM)), located at 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606, is the Funds' investment advisor. Liberty WAM and its predecessor have managed mutual funds, including the Funds, since 1992. In its duties as investment advisor, Liberty WAM runs the Funds' day-to-day business, including placing all orders for the purchase and sale of the Funds' portfolio securities. As of June 30, 2000, Liberty WAM managed over $9 billion in assets. WAM was renamed Liberty WAM on September 29, 2000 when it became a wholly owned subsidiary of Liberty Financial Companies, Inc. (Liberty), which in turn is a majority owned indirect subsidiary of Liberty Mutual Insurance Company. For more information about Liberty's acquisition of WAM, see the Statement of Additional Information. Liberty WAM earns the following advisory fees for managing the Funds. -------------------------------------------------------------------------------- Fund Name Fund Fee as a % of Average Net Assets During 1999 -------------------------------------------------------------------------------- Liberty Acorn Fund .69% Liberty Acorn International .81% Liberty Acorn USA .93% Liberty Acorn Twenty .90% Liberty Acorn Foreign Forty .95% Liberty WAM also receives an administrative services fee from each Fund at the annual rate of .05% of that Fund's average daily net assets. PORTFOLIO MANAGERS -------------------------------------------------------------------------------- Liberty WAM uses a team to manage the Funds. Team members share responsibility for providing ideas, information, and knowledge in managing the Funds, and each team member has one or more particular areas of expertise. The portfolio managers are responsible for making daily portfolio selection decisions, and utilize the management team's input and advice when making buy and sell determinations. Ralph Wanger Liberty Acorn Fund, Lead portfolio manager Ralph Wanger is chief strategist of the Liberty Acorn Funds and has been portfolio manager of Liberty Acorn Fund since its inception in 1970. He has been president and a member of Liberty Acorn Trust's Board of Trustees since 1970. Mr. Wanger has been president of Liberty WAM since September 29, 2000 and was a principal of WAM before that date. He is a Chartered Financial Analyst (CFA), and earned his BS and MS degrees in Industrial Management from the Massachusetts Institute of Technology. ___ 33 Managing the Fund Charles P. McQuaid Liberty Acorn Fund, Co-portfolio manager Charles McQuaid is a senior vice president and member of Liberty Acorn Trust's Board of Trustees. He has been director of Domestic Research at Liberty WAM and WAM, and was a principal of WAM until September 29, 2000. Mr. McQuaid has been a member of Liberty Acorn Fund's management team since 1978. He is a CFA, and earned his BBA from the University of Massachusetts and his MBA from the University of Chicago. Leah J. Zell Liberty Acorn International, Lead portfolio manager Leah Zell is a vice president of Liberty Acorn Trust, and was a principal of WAM before its acquisition by Liberty. She has managed Liberty Acorn International since its inception in 1992, and was named lead portfolio manager in 1997. She has worked with Liberty Acorn Fund's international securities since 1984. Ms. Zell also manages the foreign portfolio of an investment company whose shares are offered only to non-U.S. investors. She is a CFA and earned her BA and PhD from Harvard University. Margaret M. Forster Liberty Acorn International, Co-portfolio manager Margaret Forster is a vice president of Liberty Acorn Trust and became co- portfolio manager of Liberty Acorn International in May 1999. She has been a member of the international analytical team at Liberty WAM and WAM since 1994, and was a principal of WAM from January 1999 to September 29, 2000. Prior to that, Ms. Forster was a professor of finance at Northwestern and Ohio State Universities, and an economist with the International Monetary Fund. She is a CFA. Her degrees include a BS from Universidade de Sao Paulo, Escola Politecnica, Brazil, and an MBA, MS and PhD from Cornell University. Robert A. Mohn Liberty Acorn USA, Lead portfolio manager Robert Mohn is a vice president of Liberty Acorn Trust. He has been a member of the domestic analytical team at Liberty WAM and WAM since 1992, and was a principal of WAM from 1995 to September 29, 2000. He has managed Liberty Acorn USA since its inception in 1996, and also manages a mutual fund underlying variable insurance products and the U.S. portfolio of an investment company whose shares are offered only to non-U.S. investors. He is a CFA and holds a BS from Stanford University and an MBA from the University of Chicago. ___ 34 Managing the Fund John H. Park Liberty Acorn Twenty, Lead portfolio manager John Park is a vice president of Liberty Acorn Trust, and has managed Liberty Acorn Twenty since its inception in 1998. He has been a member of the domestic investment team at Liberty WAM and WAM since 1993, and was a principal of WAM from 1998 to September 29, 2000. Mr. Park is also manager of a mutual fund underlying variable insurance products. He is a CFA and earned both his BA and MBA degrees from the University of Chicago. Marcel P. Houtzager Liberty Acorn Foreign Forty, Co-portfolio manager Marcel Houtzager is a vice president of Liberty Acorn Trust, and has managed Liberty Acorn Foreign Forty since its inception in 1998. He has been a member of the international analytical team at Liberty WAM and WAM since 1992, and was a principal of WAM from 1995 to September 29, 2000. Mr. Houtzager also manages an international mutual fund underlying variable insurance products and the foreign portfolio of an investment company whose shares are offered only to non-U.S. investors. He is a CFA and a CPA, and earned his BA from Pomona College and his MBA from the University of California at Berkeley. Roger D. Edgley Liberty Acorn Foreign Forty, Co-portfolio manager Roger Edgley is a vice president of Liberty Acorn Trust and became co-portfolio manager of Liberty Acorn Foreign Forty in December 1999. He has been director of International Research at Liberty WAM and WAM, and was a principal of WAM from January 1999 to September 29, 2000. Mr. Edgley has been a member of the international analytical team at Liberty WAM and WAM since 1994. Prior to that, Mr. Edgley was a securities analyst in Hong Kong. He is a CFA and was educated in the United Kingdom, completing his MSc degree from the London School of Economics. ___ 35 -------------------------------------------------------------------------------- Other Investment Strategies and Risks -------------------------------------------------------------------------------- UNDERSTANDING THE FUNDS' OTHER INVESTMENT STRATEGIES AND RISKS The principal investment strategies and risks for each Fund are described under "The Funds - Principal Investment Strategies" and "The Funds - Principal Investment Risks." In seeking to meet its investment goal, a Fund may also invest in other securities and use certain investment techniques. These securities and investment techniques offer opportunities and carry various risks. Liberty WAM may elect not to buy any of these securities or use any of these techniques unless it believes that doing so will help a Fund achieve its investment goal. A Fund may not always achieve its investment goal. Additional information about each Fund's securities and investment techniques, as well as the its fundamental and non-fundamental investment policies, is contained in the Statement of Additional Information. -------------------------------------------------------------------------------- The first portion of this prospectus describes the Funds' principal investment strategies and their associated risks. This section provides more detail about the Funds' investment strategies, and describes other investments a Fund may make and the risks associated with them. In seeking to achieve its investment goal, a Fund may invest in various types of securities and engage in various investment techniques, which are not the principal focus of the Fund and therefore are not described in this prospectus. These types of securities and investment practices are identified and discussed in the Funds' Statement of Additional Information, which you may obtain free of charge (see back cover). Approval by the Funds' shareholders is not required to modify or change the Funds' investment goals or investment strategies. THE INFORMATION EDGE -------------------------------------------------------------------------------- The Funds invest in entrepreneurially managed smaller, mid-sized and larger companies that they believe are not as well known by financial analysts and whose domination of a niche creates the opportunity for superior earnings-growth potential. In making investments for the Funds, Liberty WAM relies primarily on independent, internally generated research to uncover companies that may be less well known than the more popular names. To find these companies, Liberty WAM looks for growth potential, financial strength and fundamental value. Liberty WAM may identify what it believes are important economic, social or technological trends (for example, the growth of out-sourcing as a business strategy, or the productivity gains from the increasing use of technology) and try to identify companies it thinks will benefit from these trends. Growth Potential Financial Strength Fundamental Value -------------------------------------------------------------------------------- . superior technology . low debt . reasonable stock . innovative marketing . adequate working price relative to . managerial skill capital growth potential . market niche . conservative . valuable assets . good earnings accounting practices prospects . adequate profit . strong demand for margin product A strong balance sheet Once Liberty WAM gives management uncovers an attractive The realization of this greater flexibility to company, it identifies growth potential would pursue strategic a price that it likely produce superior objectives and is believes would also performance that is essential to maintaining make the stock a good sustainable over time. a competitive advantage. value. -------------------------------------------------------------------------------- STOCK STRENGTH COMES FIRST -------------------------------------------------------------------------------- Liberty WAM's analysts continually screen companies and make more than 1,000 face-to-face visits around the globe each year. To accomplish this, Liberty WAM's analysts talk to top management, vendors, suppliers and competitors, whenever possible. In managing the Funds, Liberty WAM tries to maintain lower taxes and transaction costs by investing with a long-term time horizon (at least 2-5 years). However, securities purchased on a long-term basis may be sold within 12 months after purchase due to changes in the circumstances of a particular company or industry, or changes in general market or economic conditions. ___ 36 Other Investment Strategies and Risks DERIVATIVE STRATEGIES -------------------------------------------------------------------------------- A Fund may enter into a number of hedging strategies, including those that employ futures and options, to gain or reduce exposure to particular securities or markets. These strategies, commonly referred to as derivatives, involve the use of financial instruments whose values depend on, or are derived from, the value of an underlying security, index or currency. The Fund may use these strategies to adjust the Fund's sensitivity to changes in interest rates or for other hedging purposes (i.e., attempting to offset a potential loss in one position by establishing an interest in an opposite position). Derivative strategies involve the risk that they may exaggerate a loss, potentially losing more money than the actual cost of the underlying security, or limit a potential gain. Also, with some derivative strategies there is a risk that the other party to the transaction may fail to honor its contract terms, causing a loss to the Fund. TEMPORARY DEFENSIVE STRATEGIES -------------------------------------------------------------------------------- At times, Liberty WAM may determine that adverse market conditions make it desirable to temporarily suspend a Fund's normal investment activities. During such times, a Fund may, but is not required to, invest in cash or high-quality, short-term debt securities, without limit. Taking a temporary defensive position may prevent the Fund from achieving its investment goal. ___ 37 -------------------------------------------------------------------------------- Financial Highlights -------------------------------------------------------------------------------- The financial highlights tables are intended to help you understand the Funds' financial performance. Information is shown for each Fund's last five fiscal years or since the Fund's inception, and for the six months ended June 30, 2000. The Funds' fiscal year runs from January 1 to December 31. Certain information reflects financial results for a single Fund share. The total returns in each table represent the rate that you would have earned (or lost) on an investment in a Fund (assuming reinvestment of all dividends and distributions). The information with respect to the six month period ended June 30, 2000 is unaudited. The information with respect to the last five fiscal years is audited. For periods up to and including the year ended 1999, this information has been derived from the Funds' financial statements which have been audited by Ernst & Young LLP, independent auditors, whose report, along with the Funds' audited financial statements, is included in the Funds' annual report. You can request a free annual report by calling 1-800-9-ACORN-9 (800-922-6769). -------------------------------------------------------------------------------- Liberty Acorn Fund --------------------------------------------------------------------------------
Six months ended June 30, Year ended December 31, For a share outstanding throughout each period 2000 1999 1998 1997 1996 1995 (unaudited) Class Z Class Z Class Z Class Z Class Z Class Z Net asset value, beginning of period $18.53 $16.85 $16.99 $15.04 $13.60 $12.24 ------------------------------------------------------------------------------------------------------------------------------------ Income from Investment Operations: Net investment income .06 .09 .04 .15 .09 .11 ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain on investments, foreign currency and futures (.32) 5.22 .91 3.57 2.93 2.42 ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations (.26) 5.31 .95 3.72 3.02 2.53 ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: Dividends from net investment income (0.05) (.09) (.03) (.16) (.11) (.09) ------------------------------------------------------------------------------------------------------------------------------------ Distributions from net realized and unrealized gains reportable for federal income taxes (1.00) (3.54) (1.06) (1.61) (1.47) (1.08) ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (1.05) (3.63) (1.09) (1.77) (1.58) (1.17) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $17.22 $18.53 $16.85 $16.99 $15.04 $13.60 ------------------------------------------------------------------------------------------------------------------------------------ Total return (a) (1.41)% 33.4% 6.0% 25.0% 22.6% 20.8% ------------------------------------------------------------------------------------------------------------------------------------ Ratios/supplemental data: Ratio of expenses to average net assets .84%* .85% .84% .56% .57% .57% ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets .62%* .49% .30% .75% .53% .89% ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 35%* 34% 24% 32% 33% 29% ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of period (in millions) $3,818 $3,921 $3,549 $3,681 $2,842 $2,399 ------------------------------------------------------------------------------------------------------------------------------------
(a) Total return is not annualized for periods less than one year. * Annualized ___ 38 Financial Highlights -------------------------------------------------------------------------------- Liberty Acorn International --------------------------------------------------------------------------------
Six months ended June 30, Year ended December 31, For a share outstanding throughout each period 2000 1999 1998 1997 1996 1995 (unaudited) Class Z Class Z Class Z Class Z Class Z Class Z Net asset value, beginning of period $35.33 $20.82 $18.39 $19.61 $16.59 $15.24 ------------------------------------------------------------------------------------------------------------------------------------ Income from Investment Operations: Net investment income --- .83 .17 .40 .13 .16 ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments, foreign currency and futures (1.34) 15.45 2.68 (.34) 3.29 1.20 ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations (1.34) 16.28 2.85 .06 3.42 1.36 ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: Dividends from net investment income (.66) (.22) (.15) (.38) (.12) --- ------------------------------------------------------------------------------------------------------------------------------------ Distributions from net realized and unrealized gains reportable for federal income taxes (.51) (1.55) (.27) (.90) (.28) (.01) ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (1.17) (1.77) (.42) (1.28) (.40) (.01) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $32.82 $35.33 $20.82 $18.39 $19.61 $16.59 ------------------------------------------------------------------------------------------------------------------------------------ Total return (a) (3.8)% 79.2% 15.4% 0.2% 20.7% 8.9% ------------------------------------------------------------------------------------------------------------------------------------ Ratios/supplemental data: Ratio of expenses to average net assets 1.06%* 1.11% 1.12% 1.19% 1.17% 1.22% ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets .01%* .12% .86% .58% .51% .90% ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 76%* 46% 37% 39% 34% 26% ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of period (in millions) $2,984 $2,868 $1,725 $1,623 $1,773 $1,276 ------------------------------------------------------------------------------------------------------------------------------------
(a) Total return is not annualized for periods less than one year. * Annualized ___ 39 Financial Highlights -------------------------------------------------------------------------------- Liberty Acorn USA --------------------------------------------------------------------------------
Inception September 4 Six months Through December ended June 30, Year ended December 31, 31, For a share outstanding throughout each period 2000 1999 1998 1997 1996 (unaudited) Class Z Class Z Class Z Class Z Class Z Net asset value, beginning of period $16.75 $14.80 $15.12 $11.65 $10.00 ------------------------------------------------------------------------------------------------------------------------------------ Income from Investment Operations: Net investment loss (a) (.02) --- (.07) (.07) (.02) ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain on investments (2.67) 3.32 .87 3.83 1.67 ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations (2.69) 3.32 .80 3.76 1.65 ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: Dividends from net investment income --- --- --- --- --- ------------------------------------------------------------------------------------------------------------------------------------ Distributions from net realized and unrealized gains reportable for federal income taxes (.32) (1.37) (1.12) (.29) --- ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.32) (1.37) (1.12) (.29) --- ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $13.74 $16.75 $14.80 $15.12 $11.65 ------------------------------------------------------------------------------------------------------------------------------------ Total return (c) (16.1)% 23.0% 5.8% 32.3% 16.5% ------------------------------------------------------------------------------------------------------------------------------------ Ratios/supplemental data: Ratio of expenses to average net assets (b) 1.13%* 1.15% 1.20% 1.35% 1.85%* ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment loss to average net assets (.27)%* 0.00% (.42)% (.49)% (.99)%* ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 65%* 49% 42% 33% 20%* ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of period (in millions) $ 305 $ 371 $ 281 $ 185 $ 53 ------------------------------------------------------------------------------------------------------------------------------------
a) Net investment loss per share was based upon the average shares outstanding during the period. b) In accordance with a requirement by the Securities and Exchange Commission, the ratio of expenses to average net assets for Liberty Acorn USA reflects gross custodian fees. This ratio net of custodian fees paid indirectly would have been 1.79% for the period ended December 31, 1996. c) Total return is not annualized for periods less than one year. * Annualized ___ 40 Financial Highlights -------------------------------------------------------------------------------- Liberty Acorn Twenty --------------------------------------------------------------------------------
Six months ended Inception November 23 June 30, Year Ended December 31, Through December 31, For a share outstanding throughout each period 2000 1999 1998 (unaudited) Class Z Class Z Class Z Net asset value, beginning of period $13.70 $ 10.71 $10.00 ------------------------------------------------------------------------------------------------------------------------------------ Income from Investment Operations: Net investment income (loss) (a) (.04) (.08) --- ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain on investments .50 3.21 .71 ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations .46 3.13 .71 ------------------------------------------------------------------------------------------------------------------------------------ Less Distributions: Distributions from net realized and unrealized gains reportable for federal income taxes (.89) (.14) --- ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (0.89) (.14) --- ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $13.27 $ 13.70 $10.71 ------------------------------------------------------------------------------------------------------------------------------------ Total return (d) 3.4% 29.3% 7.1% ------------------------------------------------------------------------------------------------------------------------------------ Ratios/supplemental data: Ratio of expenses to average net assets (b)(c) 1.37%* 1.37% 1.41%* ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets (c) (.57)%* (.62)% .22%* ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 170%* 101% 1.73%* ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of period (in millions) $ 61 $ 68 $ 34 ------------------------------------------------------------------------------------------------------------------------------------
(a) Net investment income (loss) per share was based upon the average shares outstanding during the period. (b) In accordance with a requirement by the Securities and Exchange Commission, the Liberty Acorn Twenty ratio reflects total expenses prior to the reduction of custodian fees for cash balances it maintains with the custodian ("custodian fees paid indirectly"). This ratio net of custodian fees paid indirectly would have been 1.35% for the period ended December 31, 1998, the year ended December 31, 1999 and the six months ended June 30, 2000. (c) Liberty Acorn Twenty was reimbursed by the Advisor for certain net expenses from November 23, 1998 through December 31, 1999. Without the reimbursement, the ratio of expenses (prior to custodian fees paid indirectly) to average net assets and the ratio of net investment income to average net assets would have been 1.83% and (.21%), respectively, for the period ended 12/31/98, 1.41% and (.66%), respectively, for the year ended 12/31/99 and 1.40% and (.60%), respectively, for the six months ended June 30, 2000. (d) Total return is not annualized for periods less than one year. *Annualized ___ 41 Financial Highlights -------------------------------------------------------------------------------- Liberty Acorn Foreign Forty --------------------------------------------------------------------------------
Six months ended Inception November 23 June 30, Year Ended Through December 31 For a share outstanding throughout each period 2000 1999 1998 (unaudited) Class Z Class Z Class Z Net asset value, beginning of period $19.93 $ 11.00 $10.00 ------------------------------------------------------------------------------------------------------------------------------------ Income from Investment Operations: Net investment loss (a) --- (.02) (.01) ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments (.12) 8.98 1.01 ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations (.12) 8.96 1.00 ------------------------------------------------------------------------------------------------------------------------------------ Less Distributions: Dividends from net investment income (.03) --- --- ------------------------------------------------------------------------------------------------------------------------------------ Distributions from net realized and unrealized gains reportable for federal income taxes (.11) (.03) --- ------------------------------------------------------------------------------------------------------------------------------------ Total Distributions (.14) (.03) --- ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $19.67 $ 19.93 $11.00 ------------------------------------------------------------------------------------------------------------------------------------ Total return (d) (0.6%) 81.6% 10.0% ------------------------------------------------------------------------------------------------------------------------------------ Ratios/supplemental data: Ratio of expenses to average net assets (b)(c) 1.37%* 1.48% 1.73%* ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment loss to average net assets (c) (.03%)* (.17%) (.78%)* ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 74%* 60% 90%* ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of period (in millions) $ 144 $ 107 $ 16 ------------------------------------------------------------------------------------------------------------------------------------
(a) Net investment loss per share was based upon the average shares outstanding during the period. (b) In accordance with a requirement by the Securities and Exchange Commission, the Liberty Acorn Foreign Forty ratio reflects total expenses prior to the reduction of custodian fees for cash balances it maintains with the custodian ("custodian fees paid indirectly"). This ratio net of custodian fees paid indirectly would have been 1.45% for the period ended December 31, 1998, and the year ended December 31, 1999. (c) Liberty Acorn Foreign Forty was reimbursed by the Advisor for certain net expenses from November 23, 1998 through December 31, 1999. Without the reimbursement, the ratio of expenses (prior to custodian fees paid indirectly) to average net assets and the ratio of net investment income to average net assets would have been 2.70% and (1.75%), respectively, for the period ended 12/31/98 and 1.57% and (.26%), respectively, for the year ended 12/31/99. (d) Total return is not annualized for periods less than one year. * Annualized ___ 42 -------------------------------------------------------------------------------- Notes -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ___ 43 FOR MORE INFORMATION -------------------------------------------------------------------------------- You can get more information about the Fund's investments in the Funds' semi- annual and annual reports to shareholders. The annual report contains a discussion of the market conditions and investment strategies that significantly affected the Funds' performance over its last fiscal year. You may wish to read the Statement of Additional Information for more information on the Funds and the securities in which they invest. The Statement of Additional Information is incorporated into this prospectus by reference, which means that it is considered to be part of this prospectus. You can get free copies of reports and the Statement of Additional Information, request other information and discuss your questions about Liberty Acorn by writing or calling Liberty Acorn's distributor at: Liberty Funds Distributor, Inc. One Financial Center Boston, MA 02111-2621 1-800-9-ACORN-9 www.acornfunds.com Text-only versions of all Fund documents can be viewed online or downloaded from the Edgar database on the Securities and Exchange Commission internet site at www.sec.gov. You can review and copy information about the Funds by visiting the following location, and you can obtain copies, upon payment of a duplicating fee by electronic request at the E-mail address publicinfo@sec.gov or by writing the: Public Reference Room Securities and Exchange Commission Washington, DC 20549-0102 Information on the operation of the Public Reference Room may be obtained by calling 1-202-942-8090. Investment Company Act file number: Liberty Acorn Trust: 811-01829 (formerly Acorn Investment Trust) -------------------------------------------------------------------------------- [LOGO] L I B E R T Y ----------------- F U N D S ALL-STAR.COLONIAL.CRABBE HUSON.NEWPORT.STEIN ROE ADVISOR Liberty Funds Distributor, Inc. (C)2000 One Financial Center, Boston, MA 02111-2621, 1-800-426-3750 www.libertyfunds.com LIBERTY ACORN FUND LIBERTY ACORN INTERNATIONAL LIBERTY ACORN USA LIBERTY ACORN TWENTY LIBERTY ACORN FOREIGN FORTY Supplement dated September 29, 2000 to Prospectus dated September 29, 2000 of Liberty Acorn Trust Enhanced pricing schedule on the Liberty Acorn Funds through February 28, 2001. We're celebrating the newest additions to our growing fund family with an enhanced commission schedule on A, B and C shares of the Liberty Acorn Funds and a reduced sales load on A share purchases. Effective October 16, 2000 - February 28, 2001:
------------------------------------------------------------------------------------------------------------ Purchase Price Reduced Upfront Sales Load** Enhanced Dealer Commission ------------------------------------------------------------------------------------------------------------ Less than $250,000 A share - 2.00% A share - 4.00% B share - 5.00% C share - 2.00% ------------------------------------------------------------------------------------------------------------ $250,000 to less than $500,000 A share - 2.00% A share - 3.50% B share - 4.50% C share - 2.00% ------------------------------------------------------------------------------------------------------------ $500,000 to $1,000,000 A share - 2.00% A share - 2.50% B share - 3.75% C share - 2.00% ------------------------------------------------------------------------------------------------------------
Liberty Acorn Fund Liberty Acorn International A share - 53015P106 A share - 53015P841 B share - 53015P205 B share - 53015P833 C share - 53015P304 C share - 53015P825 Liberty Acorn USA Liberty Acorn Foreign Forty A share - 53015P502 A share - 53015P791 B share - 53015P601 B share - 53015P783 C share - 53015P700 C share - 53015P775 Liberty Acorn Twenty A share - 53015P882 B share - 53015P874 C share - 53015P866
**Reduced sales load on A share purchases only. Liberty Funds Distributor, Inc. One Financial Center, Boston, MA 02111-2621 VAL-19/892C-0900 (00/1660) LIBERTY ACORN FUND LIBERTY ACORN INTERNATIONAL LIBERTY ACORN USA LIBERTY ACORN TWENTY LIBERTY ACORN FOREIGN FORTY Supplement dated September 29, 2000 to Prospectus dated September 29, 2000 of Liberty Acorn Trust IRA Accounts. Liberty Acorn will not accept new IRA accounts (including Roth IRAs, SIMPLE-IRAs and SEP-IRAs) until October 30, 2000. LIBERTY ACORN FUND Prospectus, September 29, 2000 Class A, B and C Shares Advised by Liberty Wanger Asset Management, L.P. Liberty Acorn Trust Although these securities have been registered with the Securities and Exchange Commission, the Commission has not approved or disapproved any shares offered in this prospectus or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. ----------------------------------------------------------------------------- T A B L E O F C O N T E N T S LIBERTY ACORN FUND 2 ----------------------------------------------------------------------------- Investment Goal.......................................................... 2 Principal Investment Strategies.......................................... 2 Principal Investment Risks............................................... 2 Performance History...................................................... 4 Your Expenses............................................................ 5 YOUR ACCOUNT 6 ----------------------------------------------------------------------------- How to Buy Shares........................................................ 6 Sales Charges............................................................ 7 How to Exchange Shares................................................... 11 How to Sell Shares....................................................... 11 Fund Policy on Trading of Fund Shares.................................... 12 Distribution and Service Fees............................................ 13 Other Information About Your Account..................................... 13 MANAGING THE FUND 17 ----------------------------------------------------------------------------- Investment Advisor....................................................... 17 Portfolio Managers....................................................... 17 OTHER INVESTMENT STRATEGIES AND RISKS 19 ----------------------------------------------------------------------------- The Information Edge..................................................... 19 Stock Strength Comes First............................................... 19 Derivative Strategies.................................................... 20 Temporary Defensive Strategies........................................... 20 FINANCIAL HIGHLIGHTS 21 -----------------------------------------------------------------------------
---------------------------- Not FDIC | May Lose Value ------------------ Insured | No Bank Guarantee ---------------------------- Liberty Acorn Fund INVESTMENT GOAL -------------------------------------------------------------------------------- Liberty Acorn Fund seeks to provide long-term growth of capital. PRINCIPAL INVESTMENT STRATEGIES -------------------------------------------------------------------------------- Liberty Acorn Fund invests primarily in the stocks of small- and medium-sized companies. The Fund generally invests in the stocks of companies with capitalizations of less than $2 billion. The Fund believes that these smaller companies, which are not as well known by financial analysts, may offer higher return potential than the stocks of larger companies. Liberty Acorn Fund typically looks for companies with: . A strong business franchise that offers growth potential. . Products and services that give a company a competitive advantage. . A stock price the Fund's advisor believes is reasonable relative to the assets and earning power of the company. Liberty Acorn Fund invests the majority of its assets in U.S. companies, but also may invest up to 33% of its assets in companies outside the U.S. in developed markets (for example, Japan, Canada and United Kingdom) and emerging markets (for example, Mexico, Brazil and Korea). Additional strategies that are not principal investment strategies and the risks associated with them are described later in this prospectus under "Other Investment Strategies and Risks." PRINCIPAL INVESTMENT RISKS -------------------------------------------------------------------------------- The principal risks of investing in the Fund are described below. There are many circumstances (including additional risks that are not described here) which could prevent the Fund from achieving its investment goal. You may lose money by investing in the Fund. Management risk means that the advisor's stock selections and other investment decisions might produce losses or cause the Fund to underperform when compared to other funds with a similar investment goal. Market risk means that security prices in a market, sector or industry may move down. Downward movements will reduce the value of your investment. Because of management and market risk, there is no guarantee that the Fund will achieve its investment goal or perform favorably compared with competing funds. Equity risk is the risk that stock prices will fall over short or extended periods of time. Although the stock market has historically outperformed other asset classes over the long term, the equity market tends to move in cycles and individual stock prices may fluctuate drastically from day-to-day and may underperform other asset classes over an extended period of time. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These price movements may result _____ 2 Liberty Acorn Fund from factors affecting individual companies, industries or the securities market as a whole. Smaller companies and mid-capitalization companies are more likely than larger companies to have limited product lines, operating histories, markets or financial resources. They may depend heavily on a small management team. Stocks of smaller companies and mid-capitalization companies may trade less frequently, may trade in smaller volumes and may fluctuate more sharply in price than stocks of larger companies. In addition, they may not be widely followed by the investment community, which can lower the demand for their stock. Foreign securities are subject to special risks. Foreign stock markets can be extremely volatile. Fluctuations in currency exchange rates may impact the value of foreign securities without a change in the intrinsic value of those securities. The liquidity of foreign securities may be more limited than domestic securities, which means that the Fund may, at times, be unable to sell foreign securities at desirable prices. Brokerage commissions, custodial fees and other fees are generally higher for foreign investments. In addition, foreign governments may impose withholding taxes which would reduce the amount of income and capital gains available to distribute to shareholders. Other risks include the following: possible delays in the settlement of transactions or the notification of income; less publicly available information about companies; the impact of political, social or diplomatic events; and possible seizure, expropriation or nationalization of the company or its assets or imposition of currency exchange controls. Emerging markets are subject to additional risk. The risks of foreign investments are typically increased in less developed countries, which are sometimes referred to as emerging markets. For example, political and economic structures in these countries may be new and developing rapidly, which may cause instability. Their securities markets may be underdeveloped. These countries are also more likely than developed countries to experience high levels of inflation, deflation or currency devaluations, which could hurt their economies and securities markets, and to expropriate or nationalize a company or its assets. Sector risk may sometimes be present in the Fund's investments. Companies that are in different but closely related industries are sometimes described as being in the same broad economic sector. The values of stocks of many different companies in a market sector may be similarly affected by particular economic or market events. Although the Fund does not intend to focus on any particular sector, at times the Fund may have a significant portion of its assets invested in a particular sector. An example of a sector in which the Fund may sometimes have a significant portion of its assets invested is technology. Technology companies may be significantly affected by falling prices and profits, and intense competition. In addition, the rate of technological change for technology companies is generally higher than for other companies, often requiring extensive and sustained investment in research and development, and exposing such companies to the risk of rapid product obsolescence. The price of many technology stocks has risen based on projections of future earnings and company growth. If a company does not perform as expected, the price of the stock could decline significantly. Many technology companies are currently operating at a loss and may never be profitable. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. _____ 3 Liberty Acorn Fund UNDERSTANDING PERFORMANCE CALENDAR YEAR TOTAL RETURNS show the Fund's Class Z share performance for each of the last ten complete calendar years. They include the effects of Class Z expenses. Class A, Class B and Class C shares are subject to sales charges, 12b-1 fees and different expenses that are not reflected in the bar chart. If these amounts were reflected, returns would be less than those shown. AVERAGE ANNUAL TOTAL RETURNS are measures of the Fund's Class Z performance over the past one-year, five-year and ten-year periods. They include the effects of Class Z expenses. The table shows for each class the Class Z performance restated to reflect the effect of sales charges of each class. The Fund's return is compared to the S&P 500 Index and the Russell 2000 Index. The S&P 500 Index is a broad market-weighted average of large U.S. blue-chip companies. The Russell 2000 Index is a market-weighted index of 2000 small companies formed by taking the largest 3000 companies and eliminating the largest 1000 of those companies. Unlike the Fund, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in indices. PERFORMANCE HISTORY -------------------------------------------------------------------------------- Because Class A, Class B and Class C shares have not been offered for a full calendar year, the information provided in the bar chart below shows changes in the Fund's performance from year to year by illustrating the Fund's calendar year total returns for its Class Z shares. Class Z shares are offered to certain investors through separate prospectuses. The performance table following the bar chart shows how the Fund's average annual returns for (1) the Class Z shares and (2) the Class Z shares, restated to reflect the sales charges of the Class A, Class B and Class C shares, respectively, compared with those of broad measures of market performance for one year, five years and ten years. The chart and table are intended to illustrate some of the risks of investing in the Fund by showing the changes in the Fund's Class Z performance. All returns include the reinvestment of dividends and distributions. As with all mutual funds, past performance does not predict the Fund's future performance. Calendar Year Total Returns (Class Z)/(1)/ ________________________________________________________________________________ [BAR CHART] Year Return ---- ------ 1990 (17.52%) 1991 47.35% 1992 24.23% 1993 32.32% 1994 (7.45%) 1995 20.80% 1996 22.55% 1997 24.98% 1998 6.02% 1999 33.38% ________________________________________________________________________________ For period shown in bar chart: Best quarter: 4th quarter 1999, +21.94% Worst quarter: 3rd quarter 1990, -23.77% (1) Class Z shares are not offered through this prospectus, but Class A, Class B and Class C shares would have substantially similar annual returns because the shares are invested in the same portfolio of securities and these returns differ only to the extent that the classes do not have the same expenses. Average Annual Total Returns-- for periods ended December 31, 1999/(2)/ Inception Date 1 Year 5 Years 10 Years Class A 9/29/00 25.71% 19.78% 16.38% ---------------------------------------------------------------------------- Class B 9/29/00 28.38% 21.02% 17.07% ---------------------------------------------------------------------------- Class C 9/29/00 32.38% 21.21% 17.07% ---------------------------------------------------------------------------- Class Z 6/10/70 33.38% 21.21% 17.07% ---------------------------------------------------------------------------- S&P 500 N/A 21.04% 28.56% 18.21% ---------------------------------------------------------------------------- Russell 2000 N/A 21.26% 16.69% 13.34% ---------------------------------------------------------------------------- (2) Class A, Class B, and Class C are new classes of shares. Their performance information includes returns of the Fund's Class Z shares (the oldest existing fund class) for periods prior to the inception of the newer classes of shares. Class Z returns are not restated to reflect any differences in expenses (such as Rule 12b-1 fees) between Class Z shares and the newer classes of shares. If differences in expenses were reflected, the returns for prior to the inception of the newer classes of shares would be lower. Class Z shares were initially offered on June 10, 1970; Class A, Class B and Class C shares were initially offered on September 29, 2000. ____ 4 Liberty Acorn Fund UNDERSTANDING EXPENSES Sales Charges are paid directly by shareholders to Liberty Funds Distributor, Inc., the Fund's distributor. Annual Fund Operating Expenses are deducted from the Fund. They include management and administration fees, 12b-1 fees and administrative costs including pricing and custody services. Example Expenses help you compare the cost of investing in the Fund to the cost of investing in other mutual funds. It uses the following hypothetical conditions: . $10,000 initial investment . 5% total return for each year . fund operating expenses remain the same . assumes reinvestment of all dividends and distributions . assumes Class B shares convert to Class A shares after eight years YOUR EXPENSES -------------------------------------------------------------------------------- Expenses are one of several factors to consider before you invest in a mutual fund. The tables below describe the fees and expenses you may pay when you buy, hold and sell shares of the Fund. Shareholder Fees /(3)/ (paid directly from your investment)
Class A Class B Class C Maximum sales charge (load) on purchases (%) (as a percentage of the offering price) 5.75 None None ------------------------------------------------------------------------------------------ Maximum deferred sales charge (load) on redemptions (%) (as a percentage of the lesser of purchase price or redemption price) 1.00/(4)/ 5.00 1.00 ------------------------------------------------------------------------------------------ Redemption fee (5) (5) (5)
(3) A $10 annual fee is deducted from accounts of less than $1,000 and paid to the transfer agent. (4) This charge applies only to certain Class A shares bought without an initial sales charge that are sold within 18 months of purchase. (5) There is a $7.50 charge for wiring sale proceeds to your bank. Annual Fund Operating Expenses (deducted directly from fund assets)
Class A Class B Class C Management Fees/(6)/(%) .69 .69 .69 -------------------------------------------------------------------------------------- Distribution and service (12b-1) fees (%) .35 1.00 1.00 -------------------------------------------------------------------------------------- Other expenses (%) .33 .33 .33 -------------------------------------------------------------------------------------- Total annual fund operating expenses (%) 1.37 2.02 2.02
(6) In addition to the management fee, the Fund pays the Advisor an administrative fee of .05%, which is included in "Other Expenses." Example Expenses (your actual costs may be higher or lower)
Class 1 Year 3 Years 5 Years 10 Years Class A: $ 706 $ 984 $1,282 $2,127 ----------------------------------------------------------------------------------------------- Class B: did not sell your shares $ 205 $ 634 $1,088 $2,181 sold all your shares at the end of the period $ 705 $ 934 $1,288 $2,181 ----------------------------------------------------------------------------------------------- Class C: did not sell your shares $ 205 $ 634 $1,088 $2,348 sold all your shares at the end of the period $ 305 $ 634 $1,088 $2,348
____ 5 Your Account INVESTMENT MINIMUMS Initial Investment.................................................... $1,000 Subsequent Investments................................................ $50 Automatic Investment Plan*............................................ $50 Retirement Plans*..................................................... $25 * The initial investment minimum of $1,000 is waived on this plan. The Fund reserves the right to change these investment minimums. The Fund also reserves the right to refuse a purchase order for any reason, including if it believes that doing so would be in the best interest of the Fund and its shareholders. HOW TO BUY SHARES -------------------------------------------------------------------------------- Your financial advisor can help you establish an appropriate investment portfolio, buy shares and monitor your investments. When the Fund receives your purchase request in "good form," your shares will be bought at the next calculated public offering price. "Good form" means that you placed your order with your brokerage firm or your payment has been received and your application is complete, including all necessary signatures. Outlined below are the various options for buying shares: Method Instructions Through your Your financial advisor can help you establish your financial advisor account and buy Fund shares on your behalf. Your financial advisor may charge you fees for executing the purchase for you. -------------------------------------------------------------------------------- By check For new accounts, send a completed application and check (new account) made payable to the Fund to the transfer agent, Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105- 1722. -------------------------------------------------------------------------------- By check For existing accounts, fill out and return the (existing account) additional investment stub included in your quarterly statement, or send a letter of instruction including your Fund name and account number with a check made payable to the Fund to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. -------------------------------------------------------------------------------- By exchange You or your financial advisor may acquire shares by exchanging shares you own in one fund for shares of the same class of the Fund at no additional cost. There may be an additional charge if exchanging from a money market fund. To exchange by telephone, call 1-800-422- 3737. -------------------------------------------------------------------------------- By wire You may purchase shares by wiring money from your bank account to your Fund account. To wire funds to your Fund account, call 1-800-422-3737 to obtain a control number and the wiring instructions. -------------------------------------------------------------------------------- By electronic funds You may purchase shares by electronically transferring transfer money from your bank account to your Fund account by calling 1-800-422-3737. Electronic funds transfers may take up to two business days to settle and be considered in "good form." You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the application. -------------------------------------------------------------------------------- Automatic You can make monthly or quarterly investments investment plan automatically from your bank account to your Fund account. You can select a pre-authorized amount to be sent via electronic funds transfer. Be sure to complete the appropriate section of the application for this feature. -------------------------------------------------------------------------------- By dividend You may automatically invest dividends distributed by diversification one fund into the same class of shares of the Fund at no additional sales charge. To invest your dividends in the Fund, call 1-800-345-6611. ____ 6 Your Account CHOOSING A SHARE CLASS The Fund offers three classes of shares in this prospectus -- Class A , B and C. Each share class has its own sales charge and expense structure. Determining which share class is best for you depends on the dollar amount you are investing and the number of years for which you are willing to invest. If your financial advisor firm does not participate in the Class B discount program, purchases of $250,000 or more must be for Class A or Class C shares only. Purchases of $1 million or more can be made only in Class A shares. Based on your personal situation, your financial advisor can help you decide which class of shares makes the most sense for you. The Fund also offers an additional class of shares, Class Z shares, to certain institutional and other investors. Class Z shares are made available through separate prospectuses provided to eligible institutional and other investors. SALES CHARGES -------------------------------------------------------------------------------- You may be subject to an initial sales charge when you purchase, or a contingent deferred sales charge (CDSC) when you sell, shares of the Fund. These sales charges are described below. In certain circumstances, these sales charges are waived, as described below and in the Statement of Additional Information. Class A shares Your purchases of Class A shares generally are at the public offering price. This price includes a sales charge that is based on the amount of your initial investment when you open your account. A portion of the sales charge is the commission paid to the financial advisor firm on the sale of Class A shares. The sales charge you pay on additional investments is based on the total amount of your purchase and the current value of your account. The amount of the sales charge differs depending on the amount you invest as shown in the table below. Class A Sales Charges
% of offering As a % of price the public As a % retained by offering of your financial Amount of purchase price investment advisor firm Less than $50,000 5.75 6.10 5.00 ---------------------------------------------------------------------------------------------- $50,000 to less than $100,000 4.50 4.71 3.75 ---------------------------------------------------------------------------------------------- $100,000 to less than $250,000 3.50 3.63 2.75 ---------------------------------------------------------------------------------------------- $250,000 to less than $500,000 2.50 2.56 2.00 ---------------------------------------------------------------------------------------------- $500,000 to less than $1,000,000 2.00 2.04 1.75 ---------------------------------------------------------------------------------------------- $1,000,000 or more 0.00 0.00 0.00 ----------------------------------------------------------------------------------------------
Class A shares bought without an initial sales charge in accounts aggregating $1 million to $25 million at the time of purchase are subject to a 1.00% CDSC if the shares are sold within 18 months of the time of purchase. Subsequent Class A share purchases that bring your account value above $1 million are subject to a CDSC if redeemed within 18 months of the date of purchase. The 18-month period begins on the first day of the month following each purchase. The CDSC does not apply to retirement plans purchasing shares through a fee-based program. For Class A share purchases of $1 million or more, financial advisors receive a commission from the distributor as follows: Purchases Over $1 Million Amount purchased Commission % First $3 million 1.00 ----------------------------------------------------------------------- $3 million to less than $5 million 0.80 ----------------------------------------------------------------------- $5 million to less than $25 million 0.50 ----------------------------------------------------------------------- $25 million or more 0.25 The commission to financial advisors for Class A share purchases of $25 million or more is paid over 12 months but only to the extent the shares remain outstanding. For Class A share purchases by participants in certain group retirement plans offered through a fee-based program, financial advisors received a 1.00% commission from the distributor on all purchases of less than $3 million. ____ 7 Your Account UNDERSTANDING CONTINGENT DEFERRED SALES CHARGES (CDSC) Certain investments in Class A, B and C shares are subject to a CDSC, a sales charge applied at the time you sell your shares. You will pay the CDSC only on shares you sell within a certain amount of time after purchase. The CDSC generally declines each year until there is no charge for selling shares. The CDSC is applied to the net asset value at the time of purchase or sale, whichever is lower. For purposes of calculating the CDSC, the start of the holding period is the month-end of the month in which the purchase is made. Shares you purchase with reinvested dividends or capital gains are not subject to a CDSC. When you place an order to sell shares, your Fund will automatically sell first those shares not subject to a CDSC and then those you have held the longest. This policy helps reduce and possibly eliminate the potential impact of the CDSC. Reduced Sales Charges for Larger Investments There are two ways for you to pay a lower sales charge when purchasing Class A shares. The first is through Rights of Accumulation. If the combined value of the Fund accounts maintained by you, your spouse or your minor children reaches a discount level (according to the chart on the previous page), your next purchase will receive the lower sales charge. The second is by signing a Statement of Intent within 90 days of your purchase. By doing so, you would be able to pay the lower sales charge on all purchases by agreeing to invest a total of at least $50,000 within 13 months. If your Statement of Intent purchases are not completed within 13 months, you will be charged the applicable sales charge on the amount you had invested to that date. In addition, certain investors may purchase shares at a reduced sales charge or net asset value, which is the value of a Fund share excluding any sales charges. See the Statement of Additional Information for a description of these situations. Class B shares Your purchases of Class B shares are at Class B shares' net asset value. Class B shares have no front-end sales charge, but they do carry a CDSC that is imposed only on shares sold prior to the completion of the periods shown in the charts below. The CDSC generally declines each year and eventually disappears over time. The distributor pays the financial advisor firm an up-front commission on sales of Class B shares as depicted in the charts below. Purchases of less than $250,000: Class B Sales Charges % deducted when Holding period after purchase shares are sold Through first year 5.00 ----------------------------------------------------------------------------- Through second year 4.00 ----------------------------------------------------------------------------- Through third year 3.00 ----------------------------------------------------------------------------- Through fourth year 3.00 ----------------------------------------------------------------------------- Through fifth year 2.00 ----------------------------------------------------------------------------- Through sixth year 1.00 ----------------------------------------------------------------------------- Longer than six years None Commission to financial advisors is 5.00%. Automatic conversion to Class A shares is eight years after purchase. ____ 8 Your Account You can pay a lower CDSC and reduce the holding period when making purchases of Class B shares through a financial advisor firm which participates in the Class B share discount program for larger purchases as described in the charts below. Some financial advisor firms are not able to participate because their record keeping or transaction processing systems are not designed to accommodate these reductions. For non-participating firms, purchases of Class B shares must be less than $250,000. Consult your financial advisor to see whether it participates in the discount program for larger purchases. For participating firms, Rights of Accumulation apply, so that if the combined value of Fund accounts maintained by you, your spouse or your minor children is at or above a discount level, your next purchase will receive the lower CDSC and the applicable reduced holding period. Purchases of $250,000 to less than $500,000: Class B Sales Charges % deducted when Holding period after purchase shares are sold Through first year 3.00 ----------------------------------------------------------------------------- Through second year 2.00 ----------------------------------------------------------------------------- Through third year 1.00 ----------------------------------------------------------------------------- Longer than three years 0.00 Commission to financial advisors is 2.50%. Automatic conversion to Class A shares is four years after purchase. Purchases of $500,000 to less than $1 million: Class B Sales Charges % deducted when Holding period after purchase shares are sold ----------------------------------------------------------------------------- Through first year 3.00 ----------------------------------------------------------------------------- Through second year 2.00 ----------------------------------------------------------------------------- Through third year 1.00 Commission to financial advisors is 1.75%. Automatic conversion to Class A shares is three years after purchase. ____ 9 Your Account If you exchange into a Fund participating in the Class B share discount program or transfer your Fund account from a financial advisor which does not participate in the program to one who does, the exchanged or transferred shares will retain the pre-existing CDSC but any additional purchases of Class B shares which cause the exchanged or transferred account to exceed the applicable discount level will receive the lower CDSC and the reduced holding period for amounts in excess of the discount level. Your financial advisor will receive the lower commission for purchases in excess of the applicable discount level. If you exchange from a participating fund or transfer your account from a financial advisor that does participate in the program into a fund or financial advisor which does not, the exchanged or transferred shares will retain the pre-existing CDSC but all additional purchases of Class B shares will be in accordance with the higher CDSC and longer holding period of the non-participating fund or financial advisor. Class C shares Similar to Class B shares, your purchases of Class C shares are at Class C's net asset value. Although Class C shares have no front-end sales charge, they carry a CDSC of 1.00% that is applied to shares sold within the first year after they are purchased. After holding shares for one year, you may sell them at any time without paying a CDSC. The distributor pays the financial advisor firm an up-front commission of 1.00% on sales of Class C shares. Class C Sales Charges Years after purchase % deducted when shares are sold Through one year 1.00 -------------------------------------------------------------------------- Longer than one year 0.00 ____ 10 Your Account HOW TO EXCHANGE SHARES -------------------------------------------------------------------------------- You may exchange your shares for shares of the same share class of another fund distributed by Liberty Funds Distributor, Inc. at net asset value. If your shares are subject to a CDSC, you will not be charged a CDSC upon the exchange. However, when you sell the shares acquired through the exchange, the shares sold may be subject to a CDSC, depending upon when you originally purchased the shares you exchanged. For purposes of computing the CDSC, the length of time you have owned your shares will be computed from the date of your original purchase and the applicable CDSC will be the CDSC of the original fund. Unless your account is part of a tax-deferred retirement plan, an exchange is a taxable event. Therefore, you may realize a gain or a loss for tax purposes. The Fund may terminate your exchange privilege if the advisor determines that your exchange activity is likely to adversely impact its ability to manage the Fund. To exchange by telephone, call 1-800-422-3737. HOW TO SELL SHARES -------------------------------------------------------------------------------- Your financial advisor can help you determine if and when you should sell your shares. You may sell shares of the Fund on any regular business day that the New York Stock Exchange (NYSE) is open. When the Fund receives your sales request in "good form," shares will be sold at the next calculated price. In "good form" means that money used to purchase your shares is fully collected. When selling shares by letter of instruction, "good form" also means (i) your letter has complete instructions, the proper signatures and signature guarantees, (ii) you have included any certificates for shares to be sold, and (iii) any other required documents are attached. A signature guarantee is designed to protect you and Liberty Acorn from fraud. Signature guarantees can be obtained from a commercial bank, broker-dealer, credit union (if authorized under state law), securities exchange or association. A notary public cannot provide a signature guarantee. For additional documents required for sales by corporations, agents, fiduciaries and surviving joint owners, please call 1-800-345-6611. Retirement plan accounts have special requirements; please call 1-800-799-7526 for more information. The Fund will generally send proceeds from the sale to you within seven days (usually on the next business day after your request is received in "good form"). However, if you purchased your shares by check, the Fund may delay sending the proceeds from the sale of your shares for up to 15 days after your purchase to protect against checks that are returned. No interest will be paid on uncashed redemption checks. Redemption proceeds may be paid in securities rather than cash, under certain circumstances. For more information, see the paragraph "Non-Cash Redemptions" under the section "How to Sell Shares" in the Statement of Additional Information. ____ 11 Your Account Outlined below are the various options for selling shares: Method Instructions Through your You may call your financial advisor to place your sell financial advisor order. To receive the current trading day's price, your financial advisor firm must receive your request prior to the close of the NYSE, usually 4:00 p.m. Eastern time. -------------------------------------------------------------------------------- By exchange You or your financial advisor may sell shares by exchanging from the Fund into the same share class of another Liberty fund at no additional cost. To exchange by telephone, call 1-800-422-3737. -------------------------------------------------------------------------------- By telephone You or your financial advisor may sell shares by telephone and request that a check be sent to your address of record by calling 1-800-422-3737, unless you have notified the Fund of an address change within the previous 30 days. The dollar limit for telephone sales is $100,000 in a 30-day period. You do not need to set up this feature in advance of your call. Certain restrictions apply to retirement accounts. For details, call 1-800-345-6611. -------------------------------------------------------------------------------- By mail You may send a signed letter of instruction or stock power form along with any certificates to be sold to the address below. In your letter of instruction, note your Fund's name, share class, account number, and the dollar value or number of shares you wish to sell. All account owners must sign the letter, and signatures must be guaranteed by either a bank, a member firm of a national stock exchange or another eligible guarantor institution. Additional documentation is required for sales by corporations, agents, fiduciaries, surviving joint owners and individual retirement account owners. For details, call 1-800-345-6611. Mail your letter of instruction to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. -------------------------------------------------------------------------------- By wire You may sell shares and request that the proceeds be wired to your bank. You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the account application for this feature. -------------------------------------------------------------------------------- By systematic You may automatically sell a specified dollar amount or withdrawal plan percentage on a monthly, quarterly or semi-annual basis if your account balance is at least $5,000 and have the proceeds sent to you. This feature is not available if you hold your shares in certificate form. Be sure to complete the appropriate section of the account application for this feature. -------------------------------------------------------------------------------- By electronic You may sell shares and request that the proceeds be funds transfer electronically transferred to your bank. Proceeds may take up to two business days to be received by your bank. You must set up this feature prior to your request. Be sure to complete the appropriate section of the account application for this feature. FUND POLICY ON TRADING OF FUND SHARES -------------------------------------------------------------------------------- The Fund does not permit short-term or excessive trading. Excessive purchases, redemptions or exchanges of Fund shares disrupt portfolio management and drive Fund expenses higher. In order to promote the best interests of the Fund, the Fund reserves the right to reject any purchase order or exchange request, particularly from market timers or investors who, in the advisor's opinion, have a pattern of short-term or excessive trading or whose trading has been or may be disruptive to the Fund. The fund into which you would like to exchange also may reject your request. ____ 12 Your Account DISTRIBUTION AND SERVICE FEES -------------------------------------------------------------------------------- The Fund has adopted a plan under Rule 12b-1 that permits it to pay the Fund's distribution, marketing and other fees to support the sale and distribution of Class A, B and C shares and certain services provided to you by your financial advisor. The annual service fee may equal up to 0.25% for Class A, Class B and Class C shares. The annual distribution fee may equal up to 0.10% for Class A shares and 0.75% for Class B and Class C shares. Distribution and service fees are paid out of the assets of these classes. Over time, these fees may reduce the return on your investment and may cost you more than paying other types of sales charges. Class B shares automatically convert to Class A shares after a certain number of years, eliminating a portion of the distribution fee upon conversion. Conversion may occur three, four or eight years after purchase, depending on the program you purchased your shares under. See "Your Account; Sales Charge" for the conversion schedule applicable to Class B shares. OTHER INFORMATION ABOUT YOUR ACCOUNT -------------------------------------------------------------------------------- HOW THE FUND'S SHARE PRICE IS DETERMINED The price of each class of the Fund's shares is based on its net asset value. The net asset value is determined at the close of regular trading on the NYSE, usually 4:00 p.m. Eastern time, on each business day that the NYSE is open (typically Monday through Friday). When you request a transaction, it will be processed at the net asset value (plus any applicable sales charges) next determined after your request is received in "good form" by the distributor. In most cases, in order to receive that day's price, the distributor must receive your order before that day's transactions are processed. If you request a transaction through your financial advisor's firm, the firm must receive your order by the close of trading on the NYSE to receive that day's price. The Fund determines its net asset value for each share class by dividing each class's total net assets by the number of that class's outstanding shares. In determining the net asset value, the Fund must determine the price of each security in its portfolio at the close of each trading day. Because the Fund holds securities that are traded on foreign exchanges, the value of these securities may change on days when shareholders will not be able to buy or sell Fund shares. This will affect the Fund's net asset value on the day it is next determined. Securities for which market quotations are available are valued each day at the current market value. However, where market quotations are not available, or when the advisor believes that subsequent events have made them unreliable, the Fund may use other data to determine the fair value of the securities. You can find the daily prices of some share classes for the Fund in most major daily newspapers under the caption "Liberty." You can find daily prices for all share classes by visiting the Fund's web site at www.libertyfunds.com. ACCOUNT FEES If your account value falls below $1,000 (other than as a result of depreciation in share value) you may be subject to an annual account fee of $10. This fee is deducted from the account in June each year. Approximately 60 days prior to the fee date, the Fund's transfer agent will send you written notification of the upcoming fee. If ____ 13 Your Account you add money to your account and bring the value above $1,000 prior to the fee date, the fee will not be deducted. Share Certificates Share certificates are not available for Class B and C shares. Certificates will be issued for Class A shares only if requested. If you decide to hold share certificates, you will not be able to sell your shares until you have endorsed your certificates and returned them to the distributor. ____ 14 Your Account UNDERSTANDING FUND DISTRIBUTIONS The Fund earns income from the securities it holds. The Fund also may realize capital gains and losses on sales of its securities. The Fund distributes substantially all of its net investment income and capital gains to shareholders. As a shareholder, you are entitled to a portion of the Fund's income and capital gains based on the number of shares you own at the time these distributions are declared. Dividends, Distributions, and Taxes The Fund has the potential to make the following distributions: Types of Distributions Dividend Represents interest and dividends earned from securities held by the Fund, net of expenses incurred by the Fund. -------------------------------------------------------------------------------- Capital gains Represents net long-term capital gains on sales of securities held for more than 12 months and net short-term capital gains, which are gains on sales of securities held for a 12-month period or less. Distribution Options The Fund distributes dividends in June and December and any capital gains (including short-term capital gains) at least annually. You can choose one of the options listed in the table below for these distributions when you open your account. To change your distribution option call 1-800-345- 6611. If you do not indicate on your application your preference for handling distributions, the Fund will automatically reinvest all distributions in additional shares of the Fund. Distribution Options Reinvest all distributions in additional shares of the Fund -------------------------------------------------------------------------------- Reinvest all distributions in shares of another fund -------------------------------------------------------------------------------- Receive dividends in cash (see options below) and reinvest capital gains -------------------------------------------------------------------------------- Receive all distributions in cash (with one of the following options) . send the check to your address of record . send the check to a third party address . transfer the money to your bank via electronic funds transfer Distributions of $10 or less will automatically be reinvested in additional Fund shares. If you elect to receive distributions by check and the check is returned as undeliverable, or if you do not cash a distribution check within six months of the check date, the distribution will be reinvested in additional shares of the Fund. ___ 15 Your Account Tax Consequences Regardless of whether you receive your distributions in cash or reinvest them in additional Fund shares, all Fund distributions are subject to federal income tax. Depending on the state where you live, distributions may also be subject to state and local income taxes. In general, any distributions of dividends, interest and short-term capital gains are taxable as ordinary income. Distributions of long-term capital gains are generally taxable as such, regardless of how long you have held your Fund shares. You will be provided with information each year regarding the amount of ordinary income and capital gains distributed to you for the previous year and any portion of your distribution which is exempt from state and local taxes. Your investment in the Fund may have additional personal tax implications. Please consult your tax advisor on foreign, federal, state, local or other applicable tax laws. In addition to the dividends and capital gains distributions made by the Fund, you may realize a capital gain or loss when selling and exchanging shares of the Fund. Such transactions may be subject to federal, state and local income tax. Foreign Income Taxes The Fund may receive investment income from sources within foreign countries, and that income may be subject to foreign income taxes at the source. If the Fund pays non-refundable taxes to foreign governments during the year, the taxes will reduce the Fund's dividends but will still be included in your taxable income. ____ 16 Managing the Fund INVESTMENT ADVISOR -------------------------------------------------------------------------------- Liberty Wanger Asset Management (Liberty WAM) (formerly Wanger Asset Management, L.P. (WAM)), located at 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606, is the Fund's investment advisor. Liberty WAM and its predecessor have managed mutual funds, including the Fund, since 1992. In its duties as investment advisor, Liberty WAM runs the Fund's day-to-day business, including placing all orders for the purchase and sale of the Fund's portfolio securities. As of June 30, 2000, Liberty WAM managed over $9 billion in assets. WAM was renamed Liberty WAM on September 29, 2000 when it became a wholly owned subsidiary of Liberty Financial Companies, Inc. (Liberty), which in turn is a majority owned indirect subsidiary of Liberty Mutual Insurance Company. For more information about Liberty's acquisition of WAM, see the Statement of Additional Information. Liberty WAM's advisory fee for managing the Fund in 1999 was 0.69% of the Fund's average daily net assets. Liberty WAM also receives an administrative services fee from the Fund at the annual rate of .05% of the Fund's average daily net assets. PORTFOLIO MANAGERS -------------------------------------------------------------------------------- Liberty WAM uses a team to manage the Fund. Team members share responsibility for providing ideas, information, and knowledge in managing the Fund, and each team member has one or more particular areas of expertise. The portfolio managers are responsible for making daily investment decisions, and utilize the management team's input and advice when making buy and sell determinations. Ralph Wanger Lead portfolio manager Ralph Wanger is chief strategist of the Liberty Acorn Funds and has been portfolio manager of Liberty Acorn Fund since its inception in 1970. He has been president and a member of Liberty Acorn Trust's Board of Trustees since 1970. Mr. Wanger has been president of Liberty WAM since September 29, 2000 and was a principal of WAM before that date. He is a Chartered Financial Analyst (CFA), and earned his BS and MS degrees in Industrial Management from the Massachusetts Institute of Technology. Charles P. McQuaid Co-portfolio manager Charles McQuaid is a senior vice president and member of Liberty Acorn Trust's Board of Trustees. He has been director of Domestic Research at Liberty WAM and WAM, and was a principal of WAM until September 29, 2000. Mr. McQuaid has been a ---- 17 Managing the Fund member of Liberty Acorn Fund's management team since 1978. He is a CFA, and earned his BBA from the University of Massachusetts and his MBA from the University of Chicago. ___ 18 Other Investment Strategies and Risks UNDERSTANDING THE FUND'S OTHER INVESTMENT STRATEGIES AND RISKS The Fund's principal investment strategies and risks are described under "Liberty Acorn Fund - Principal Investment Strategies" and Liberty Acorn Fund - Principal Investment Risks." In seeking to meet its investment goal, the Fund may also invest in other securities and use certain other investment techniques. These securities and investment techniques offer opportunities and carry various risks. Liberty WAM may elect not to buy any of these securities or use any of these techniques unless it believes that doing so will help the Fund achieve its investment goal. The Fund may not always achieve its investment goal. Additional information about the Fund's securities and investment techniques, as well as the Fund's fundamental and non-fundamental investment policies, is contained in the Statement of Additional Information. The first portion of this prospectus describes the Fund's principal investment strategies and their associated risks. This section provides more detail about the Fund's investment strategies, and describes other investments the Fund may make and the risks associated with them. In seeking to achieve its investment goal, the Fund may invest in various types of securities and engage in various investment techniques, which are not the principal focus of the Fund and therefore are not described in this prospectus. These types of securities and investment practices are identified and discussed in the Fund's Statement of Additional Information, which you may obtain free of charge (see back cover). Approval by the Fund's shareholders is not required to modify or change the Fund's investment goal or investment strategies. THE INFORMATION EDGE -------------------------------------------------------------------------------- Liberty WAM invests in entrepreneurially managed smaller and mid-sized companies that it believes are not as well known by financial analysts and whose domination of a niche creates the opportunity for superior earnings-growth potential. Liberty WAM may identify what it believes are important economic, social or technological trends (for example, the growth of out-sourcing as a business strategy, or the productivity gains from the increasing use of technology) and try to identify companies it thinks will benefit from those trends. In making investments for the Fund, Liberty WAM relies primarily on independent, internally generated research to uncover companies that may be less well known than the more popular names. To find these companies, Liberty WAM compares growth potential, financial strength and fundamental value among companies.
Growth Potential Financial Strength Fundamental Value -------------------------------------------------------------------------------- . superior technology . low debt . reasonable stock . innovative marketing . adequate working price relative to . managerial skill capital growth potential . market niche . conservative . valuable assets . good earnings accounting practices prospects . adequate profit . strong demand margin for product The realization of this A strong balance sheet Once Liberty WAM growth potential would gives management uncovers an attractive likely produce superior greater flexibility to company, it identifies performance that is pursue strategic a price that it sustainable over time. objectives and is believes would also essential to maintaining make the stock a good a competitive advantage value. --------------------------------------------------------------------------------
---- 19 STOCK STRENGTH COMES FIRST -------------------------------------------------------------------------------- Liberty WAM's analysts continually screen companies and make more than 1,000 face-to-face visits around the globe each year. To accomplish this, Liberty WAM analysts talk to top management, vendors, suppliers and competitors, whenever possible. In managing the Fund, Liberty WAM tries to maintain lower taxes and transaction costs by investing with a long-term time horizon (at least two to five years). However, Other Investment Strategies and Risks securities purchased on a long-term basis may be sold within 12 months after purchase due to changes in the circumstances of a particular company or industry, or changes in general market or economic conditions. DERIVATIVE STRATEGIES -------------------------------------------------------------------------------- The Fund may enter into a number of hedging strategies, including those that employ futures and options, to gain or reduce exposure to particular securities or markets. These strategies, commonly referred to as derivatives, involve the use of financial instruments whose values depend on, or are derived from, the value of an underlying security, index or currency. The Fund may use these strategies to adjust the Fund's sensitivity to changes in interest rates or for other hedging purposes (i.e., attempting to offset a potential loss in one position by establishing an interest in an opposite position). Derivative strategies involve the risk that they may exaggerate a loss, potentially losing more money that the actual cost of the underlying security, or limit a potential gain. Also, with some derivative strategies there is a risk that the other party to the transaction may fail to honor its contract terms, causing a loss to the Fund. TEMPORARY DEFENSIVE STRATEGIES -------------------------------------------------------------------------------- At times, Liberty WAM may determine that adverse market conditions make it desirable to temporarily suspend the Fund's normal investment activities. During such times, the Fund may, but is not required to, invest in cash or high- quality, short-term debt securities, without limit. Taking a temporary defensive position may prevent the Fund from achieving its investment goal. ____ 20 Financial Highlights The financial highlights tables are intended to help you understand the Fund's financial performance. Because Class A, Class B and Class C shares are new classes of shares, information is shown for the Fund's Class Z shares for the last five fiscal years and for the six months ended June 30, 2000. The Fund's fiscal year runs from January 1 to December 31. Class Z shares are offered to certain investors through separate prospectuses. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). The information with respect to the six month period ended June 30, 2000 is unaudited. The information with respect to the last five years is audited. For periods up to and including the year ended 1999, this information has been derived from the Fund's financial statements which have been audited by Ernst & Young LLP, independent auditors, whose report, along with the Fund's audited financial statements, is included in the Fund's annual report. You can request a free annual report by calling 1-800-426-3750. Liberty Acorn Fund
Six months Ended Year Year Year Year Year For a share outstanding throughout 6/30/00 Ended Ended Ended Ended Ended each period (unaudited) 1999 1998 1997 1996 1995 --------------------------------------------------------------------------------------------------------------------------------- Class Z Class Z Class Z Class Z Class Z Class Z --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $18.53 $16.85 $16.99 $15.04 $13.60 $12.24 --------------------------------------------------------------------------------------------------------------------------------- Income from Investment Operations: Net investment income .06 .09 .04 .15 .09 .11 --------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain on investments, foreign currency and futures (.32) 5.22 .91 3.57 2.93 2.42 --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations (.26) 5.31 .95 3.72 3.02 2.53 --------------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (.05) (.09) (.03) (.16) (.11) (.09) --------------------------------------------------------------------------------------------------------------------------------- Distributions from net realized and unrealized gains reportable for federal income taxes (1.00) (3.54) (1.06) (1.61) (1.47) (1.08) --------------------------------------------------------------------------------------------------------------------------------- Total distributions (1.05) (3.63) (1.09) (1.77) (1.58) (1.17) --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $17.22 $18.53 $16.85 $16.99 $15.04 $13.60 --------------------------------------------------------------------------------------------------------------------------------- Total return (a) (1.41%) 33.4% 6.0% 25.0% 22.6% 20.8% --------------------------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Ratio of expenses to average net assets .84%* .85% .84% .56% .57% .57% --------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets .62%* .49% .30% .75% .53% .89% --------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 35%* 34% 24% 32% 33% 29% --------------------------------------------------------------------------------------------------------------------------------- Net assets at end of period (in millions) $3,818 $3,921 $3,549 $3,681 $2,842 $2,399
(a) Total return is not annualized for periods less than one year. Class A, B and C shares are subject to sales loads, account fees and rule 12b-1 fees that are not reflected in the total return. * Annualized ---- 21 Notes -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ---- 23 FOR MORE INFORMATION -------------------------------------------------------------------------------- You can get more information about the Fund's investments in the Fund's semi-annual and annual reports to shareholders. The annual report contains a discussion of the market conditions and investment strategies that significantly affected the Fund's performance over its last fiscal year. You may wish to read the Statement of Additional Information for more information on the Fund and the securities in which it invests. The Statement of Additional Information is incorporated into this prospectus by reference, which means that it is considered to be part of this prospectus. You can get free copies of reports and the Statement of Additional Information, request other information and discuss your questions about the Fund by writing or calling the Fund's distributor at: Liberty Funds Distributor, Inc. One Financial Center Boston, MA 02111-2621 1-800-426-3750 www.libertyfunds.com Text-only versions of all Fund documents can be viewed online or downloaded from the Edgar database on the Securities and Exchange Commission internet site at www.sec.gov. You can review and copy information about the Fund by visiting the following location, and you can obtain copies, upon payment of a duplicating fee by electronic request at the E-mail address publicinfo@sec.gov or by writing the: Public Reference Room Securities and Exchange Commission Washington, DC 20549-0102 Information on the operation of the Public Reference Room may be obtained by calling 1-202-942-8090. Investment Company Act file number: Liberty Acorn Trust (formerly Acorn Investment Trust): 811-01829 . Liberty Acorn Fund (formerly Acorn Fund) [LOGO OF LIBERTY FUNDS] ALL-STAR.COLONIAL.CRABBE HUSON.NEWPORT.STEIN ROE ADVISOR Liberty Funds Distributor, Inc. (c) 2000 One Financial Center, Boston, MA 02111-2621,1-800-426-3750 www.libertyfunds.com --- 24 -------------------------------------------------------------------------------- LIBERTY ACORN INTERNATIONAL Prospectus, September 29, 2000 -------------------------------------------------------------------------------- Class A, B and C Shares Advised by Liberty Wanger Asset Management, L.P. Liberty Acorn Trust Although these securities have been registered with the Securities and Exchange Commission, the Commission has not approved or disapproved any shares offered in this prospectus or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
-------------------------------------------------------------------------- T A B L E O F C O N T E N T S LIBERTY ACORN INTERNATIONAL 2 --------------------------- Investment Goal..................................................... 2 Principal Investment Strategies..................................... 2 Principal Investment Risks.......................................... 2 Performance History................................................. 4 Your Expenses....................................................... 5 YOUR ACCOUNT 6 ------------ How to Buy Shares................................................... 6 Sales Charges....................................................... 7 How to Exchange Shares.............................................. 11 How to Sell Shares.................................................. 11 Fund Policy on Trading of Fund Shares............................... 12 Distribution and Service Fees....................................... 13 Other Information About Your Account................................ 13 MANAGING THE FUND 17 ----------------- Investment Advisor.................................................. 17 Portfolio Managers.................................................. 17 OTHER INVESTMENT STRATEGIES AND RISKS 19 -------------------- The Information Edge................................................ 19 Stock Strength Comes First.......................................... 19 Derivative Strategies............................................... 20 Temporary Defensive Strategies...................................... 20 FINANCIAL HIGHLIGHTS 21 --------------------
Not FDIC May Lose Value ----------------- Insured No Bank Guarantee Liberty Acorn International INVESTMENT GOAL -------------------------------------------------------------------------------- Liberty Acorn International seeks to provide long-term growth of capital. PRINCIPAL INVESTMENT STRATEGIES -------------------------------------------------------------------------------- Liberty Acorn International invests primarily in stocks of non-U.S. small- and medium-sized companies. The Fund generally invests in the stocks of companies based outside the U.S. with capitalizations of less than $5 billion. The Fund believes that smaller companies - particularly outside the U.S. - that are not as well known by financial analysts may offer higher return potential than the stocks of larger companies. Liberty Acorn International typically looks for companies with: . A strong business franchise that offers growth potential. . Products and services that give the company a competitive advantage. . A stock price the Fund's advisor believes is reasonable relative to the assets and earning power of the company. Liberty Acorn International is an international fund and invests the majority (under normal market conditions, at least 75%) of its total assets in the stocks of foreign companies based in developed markets (for example, Japan, Canada and United Kingdom) and emerging markets (for example, Mexico, Brazil and Korea). Additional strategies that are not principal investment strategies and the risks associated with them are described later in this prospectus under "Other Investment Strategies and Risks." PRINCIPAL INVESTMENT RISKS -------------------------------------------------------------------------------- The principal risks of investing in the Fund are described below. There are many circumstances (including additional risks that are not described here) which could prevent the Fund from achieving its investment goal. You may lose money by investing in the Fund. Management risk means that the advisor's stock selections and other investment decisions might produce losses or cause the Fund to underperform when compared to other funds with a similar investment goal. Market risk means that security prices in a market, sector or industry may move down. Downward movements will reduce the value of your investment. Because of management and market risk, there is no guarantee that the Fund will achieve its investment goal or perform favorably compared with competing funds. Equity risk is the risk that stock prices will fall over short or extended periods of time. Although the stock market has historically outperformed other asset classes over the long term, the equity market tends to move in cycles and individual stock prices may fluctuate drastically from day-to-day and may underperform other asset classes over an extended period of time. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by ______ 2 Liberty Acorn International such companies may suffer a decline in response. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Smaller companies and mid-capitalization companies are more likely than larger companies to have limited product lines, operating histories, markets or financial resources. They may depend heavily on a small management team. Stocks of smaller companies and mid-capitalization companies may trade less frequently, may trade in smaller volumes and may fluctuate more sharply in price than stocks of larger companies. In addition, they may not be widely followed by the investment community, which can lower the demand for their stock. Foreign securities are subject to special risks. Foreign stock markets can be extremely volatile. Fluctuations in currency exchange rates may impact the value of foreign securities without a change in the intrinsic value of those securities. The liquidity of foreign securities may be more limited than domestic securities, which means that the Fund may, at times, be unable to sell foreign securities at desirable prices. Brokerage commissions, custodial fees and other fees are generally higher for foreign investments. In addition, foreign governments may impose withholding taxes which would reduce the amount of income and capital gains available to distribute to shareholders. Other risks include the following: possible delays in the settlement of transactions or the notification of income; less publicly available information about companies; the impact of political, social or diplomatic events; and possible seizure, expropriation or nationalization of the company or its assets or imposition of currency exchange controls. Emerging markets are subject to additional risk. The risks of foreign investments are typically increased in less developed countries, which are sometimes referred to as emerging markets. For example, political and economic structures in these countries may be new and developing rapidly, which may cause instability. Their securities markets may be underdeveloped. These countries are also more likely than developed countries to experience high levels of inflation, deflation or currency devaluations, which could hurt their economies and securities markets, and to expropriate or nationalize a company or its assets. Sector risk may sometimes be present in the Fund's investments. Companies that are in different but closely related industries are sometimes described as being in the same broad economic sector. The values of stocks of many different companies in a market sector may be similarly affected by particular economic or market events. Although the Fund does not intend to focus on any particular sector, at times the Fund may have a significant portion of its assets invested in a particular sector. An example of a sector in which the Fund may sometimes have a significant portion of its assets invested is technology. Technology companies may be significantly affected by falling prices and profits, and intense competition. In addition, the rate of technological change for technology companies is generally higher than for other companies, often requiring extensive and sustained investment in research and development, and exposing such companies to the risk of rapid product obsolescence. The price of many technology stocks has risen based on projections of future earnings and company growth. If a company does not perform as expected, the price of the stock could decline significantly. Many technology companies are currently operating at a loss and may never be profitable. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. _____ 3 Liberty Acorn International UNDERSTANDING PERFORMANCE Calendar year total returns show the Fund's Class Z share performance for each completed calendar year. They include the effects of Class Z expenses. Class A, Class B and Class C shares are subject to sales charges, 12b-1 fees and different expenses that are not reflected in the bar chart. If these amounts were reflected, returns would be less than those shown. Average annual total returns are measures of the Fund's Class Z performance over the past one-year, five-year and life of the Fund periods. They include the effects of Class Z expenses. The table shows for each class the Class Z performance restated to reflect the effect of sales charges of the class. The Fund's return are compared to Morgan Stanley's Europe, Australasia and Far East Index (EAFE), an index of companies throughout the world in proportion to stock market capitalizations, excluding the U.S. and Canada, and the EMI (world ex-U.S.), Salomon Smith Barney's index of the bottom 20% of institutionally investable capital of countries, selected by Salomon and excluding the U.S. Unlike the Fund, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in indices. PERFORMANCE HISTORY -------------------------------------------------------------------------------- Because Class A, Class B and Class C shares have not been offered for a full calendar year, the information provided in the bar chart below shows changes in the Fund's performance from year to year by illustrating the Fund's calendar year total returns for its Class Z shares. Class Z shares are offered to certain investors through a separate prospectus. The performance table following the bar chart shows how the Fund's average annual returns for (1) the Class Z shares and (2) the Class Z shares, restated to reflect the sales charges of the Class A, Class B and Class C shares, respectively, compare with those of broad measures of market performance for one year, five years and life of the Fund. The chart and table are intended to illustrate some of the risks of investing in the Fund by showing the changes in the Fund's Class Z performance. All returns include the reinvestment of dividends and distributions. As with all mutual funds, past performance does not predict the Fund's future performance. Calendar Year Total Returns (Class Z)/(1)(2)/ -------------------------------------------------------------------------------- [BAR CHART] Year Return ---- ------ 1993 49.11% 1994 (3.80%) 1995 8.93% 1996 20.65% 1997 .19% 1998 15.43% 1999 79.19% -------------------------------------------------------------------------------- For period shown in bar chart: Best quarter: 4th quarter 1999, +41.63% Worst quarter: 3rd quarter 1998,-16.05% (1) Class Z shares are not offered through this prospectus, but Class A, Class B and Class C shares would have substantially similar annual returns because the shares are invested in the same portfolio of securities and these returns differ only to the extent that the Classes do not have the same expenses. Average Annual Total Returns -- for periods ended December 31, 1999/(2)(3)/
Life of the Inception Date 1 Year 5 Years Fund Class A 9/29/00 68.89% 20.75% 20.72% ------------------------------------------------------------------------------- Class B 9/29/00 74.19% 22.01% 21.71% ------------------------------------------------------------------------------- Class C 9/29/00 78.19% 22.19% 21.71% ------------------------------------------------------------------------------- Class Z 9/23/92 79.19% 22.19% 21.71% ------------------------------------------------------------------------------- EAFE N/A 26.96% 12.83% 13.50% ------------------------------------------------------------------------------- EMI (world ex-U.S.) N/A 23.52% 7.21% 9.48%
(2) The Fund's performance in 1999 was achieved during a period of unusual market conditions that are unlikely to continue. (3) Class A, Class B, and Class C are new classes of shares. Their performance information includes returns of the Fund's Class Z shares (the oldest existing Fund class) for periods prior to the inception of the newer classes of shares. Class Z returns are not restated to reflect any differences in expenses (such as Rule 12b-1 fees) between Class Z shares and the newer classes of shares. If differences in expenses were reflected, the returns for prior to the inception of the newer classes of shares would be lower. Class Z shares were initially offered on September 23, 1992; Class A, Class B and Class C shares were initially offered on September 29, 2000. _____ 4 Liberty Acorn International UNDERSTANDING EXPENSES Sales Charges are paid directly by shareholders to Liberty Funds Distributor, Inc., the Fund's distributor. Annual Fund Operating Expenses are deducted from the Fund. They include management and administration fees, 12b-1 fees and administrative costs including pricing and custody services. Example Expenses help you compare the cost of investing in the Fund to the cost of investing in other mutual funds. It uses the following hypothetical conditions: . $10,000 initial investment . 5% total return for each year . fund operating expenses remain the same . assumes reinvestment of all dividends and distributions . assumes Class B shares convert to Class A shares after eight years YOUR EXPENSES -------------------------------------------------------------------------------- Expenses are one of several factors to consider before you invest in a mutual fund. The tables below describe the fees and expenses you may pay when you buy, hold and sell shares of the Fund. Shareholder Fees/(4)/ (paid directly from your investment)
Class A Class B Class C Maximum sales charge (load) on purchases (%) (as a percentage of the offering price) 5.75 None None ------------------------------------------------------------------------------------------------------ Maximum deferred sales charge (load) on redemptions (%) (as a percentage of the lesser of purchase price or redemption price) 1.00/(5)/ 5.00 1.00 ------------------------------------------------------------------------------------------------------ Redemption fee (6) (6) (6)
(4) A $10 annual fee is deducted from accounts of less than $1,000 and paid to the transfer agent. (5) This charge applies only to certain Class A shares bought without an initial sales charge that are sold within 18 months of purchase. (6) There is a $7.50 charge for wiring sale proceeds to your bank. Annual Fund Operating Expenses (deducted directly from fund assets)
Class A Class B Class C Management Fees/(7)/(%) .81 .81 .81 ------------------------------------------------------------------------------------------------------ Distribution and service (12b-1) fees (%) .35 1.00 1.00 ------------------------------------------------------------------------------------------------------ Other expenses (%) .43 .43 .43 ------------------------------------------------------------------------------------------------------ Total annual fund operating expenses (%) 1.59 2.24 2.24
(7) In addition to the management fee, the Fund pays the Advisor an administrative fee of .05%, which is included in "Other Expenses." Example Expenses (your actual costs may be higher or lower)
Class 1 Year 3 Years 5 Years 10 Years Class A: $ 727 $1,048 $1,391 $2,356 ----------------------------------------------------------------------------------------------- Class B: did not sell your shares $ 227 $ 700 $1,200 $2,411 sold all your shares at the end of the period $ 727 $1,000 $1,400 $2,411 ----------------------------------------------------------------------------------------------- Class C: did not sell your shares $ 227 $ 700 $1,200 $2,575 sold all your shares at $ 327 $ 700 $1,200 $2,575 the end of the period
______ 5 Your Account INVESTMENT MINIMUMS Initial Investment............................... $1,000 Subsequent Investments........................... $ 50 Automatic Investment Plan*....................... $ 50 Retirement Plans*................................ $ 25 * The initial investment minimum of $1,000 is waived on this plan. The Fund reserves the right to change these investment minimums. The Fund also reserves the right to refuse a purchase order for any reason, including if it believes that doing so would be in the best interest of the Fund and its shareholders. HOW TO BUY SHARES -------------------------------------------------------------------------------- Your financial advisor can help you establish an appropriate investment portfolio, buy shares and monitor your investments. When the Fund receives your purchase request in "good form," your shares will be bought at the next calculated public offering price. "Good form" means that you placed your order with your brokerage firm or your payment has been received and your application is complete, including all necessary signatures. Outlined below are the various options for buying shares: Method Instructions Through your Your financial advisor can help you establish financial advisor your account and buy Fund shares on your behalf. Your financial advisor may charge you fees for executing the purchase for you. -------------------------------------------------------------------------------- By check For new accounts, send a completed application (new account) and check made payable to the Fund to the transfer agent, Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. -------------------------------------------------------------------------------- By check For existing accounts, fill out and return the (existing account) additional investment stub included in your quarterly statement, or send a letter of instruction including your Fund name and account number with a check made payable to the Fund to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. -------------------------------------------------------------------------------- By exchange You or your financial advisor may acquire shares by exchanging shares you own in one fund for shares of the same class of the Fund at no additional cost. There may be an additional charge if exchanging from a money market fund. To exchange by telephone, call 1-800-422-3737. -------------------------------------------------------------------------------- By wire You may purchase shares by wiring money from your Fund account. To wire funds to your Fund account, call 1-800-422-3737 to obtain a control number and the wiring instructions. -------------------------------------------------------------------------------- By electronic funds You may purchase shares by electronically trans- transfer ferring money from your bank account to your Fund account by calling 1-800-422-3737. Electronic funds transfers may take up to two business days to settle and be considered in "good form." You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the application. -------------------------------------------------------------------------------- Automatic You can make monthly or quarterly investments investment plan automatically from your bank account to your Fund account. You can select a pre-authorized amount to be sent via electronic funds transfer. Be sure to complete the appropriate section of the application for this feature. -------------------------------------------------------------------------------- By dividend You may automatically invest dividends distributed diversification by one fund into the same class of shares of the Fund at no additional sales charge. To invest your dividends in another fund, call 1-800-345-6611. _____ 6 Your Account CHOOSING A SHARE CLASS The Fund offers three classes of shares in this prospectus -- Class A, B and C. Each share class has its own sales charge and expense structure. Determining which share class is best for you depends on the dollar amount you are investing and the number of years for which you are willing to invest. If your financial advisor firm does not participate in the Class B discount program, purchases of $250,000 or more must be for Class A or Class C shares only. Purchases of $1 million or more can be made only in Class A shares. Based on your personal situation, your financial advisor can help you decide which class of shares makes the most sense for you. The Fund also offers an additional class of shares, Class Z shares, to certain institutional and other investors. Class Z shares are made available through separate prospectuses provided to eligible institutional and other investors. SALES CHARGES -------------------------------------------------------------------------------- You may be subject to an initial sales charge when you purchase, or a contingent deferred sales charge (CDSC) when you sell, shares of the Fund. These sales charges are described below. In certain circumstances, these sales charges are waived, as described below and in the Statement of Additional Information. Class A shares Your purchases of Class A shares generally are at the public offering price. This price includes a sales charge that is based on the amount of your initial investment when you open your account. A portion of the sales charge is the commission paid to the financial advisor firm on the sale of Class A shares. The sales charge you pay on additional investments is based on the total amount of your purchase and the current value of your account. The amount of the sales charge differs depending on the amount you invest as shown in the table below. Class A Sales Charges
% of offering As a % of price the public As a % retained by offering of your financial Amount of purchase price investment advisor firm Less than $50,000 5.75 6.10 5.00 --------------------------------------------------------------------------------------------------------- $50,000 to less than $100,000 4.50 4.71 3.75 --------------------------------------------------------------------------------------------------------- $100,000 to less than $250,000 3.50 3.63 2.75 --------------------------------------------------------------------------------------------------------- $250,000 to less than $500,000 2.50 2.56 2.00 --------------------------------------------------------------------------------------------------------- $500,000 to less than $1,000,000 2.00 2.04 1.75 --------------------------------------------------------------------------------------------------------- $1,000,000 or more 0.00 0.00 0.00
Class A shares bought without an initial sales charge in accounts aggregating $1 million to $25 million at the time of purchase are subject to a 1.00% CDSC if the shares are sold within 18 months of the time of purchase. Subsequent Class A share purchases that bring your account value above $1 million are subject to a CDSC if redeemed within 18 months of the date of purchase. The 18-month period begins on the first day of the month following each purchase. The CDSC does not apply to retirement plans purchasing shares through a fee-based program. For Class A share purchases of $1 million or more, financial advisors receive a commission from the distributor as follows: Purchases Over $1 Million Amount purchased Commission % First $3 million 1.00 ------------------------------------------------------------------------------- $3 million to less than $5 million 0.80 ------------------------------------------------------------------------------- $5 million to less than $25 million 0.50 ------------------------------------------------------------------------------- $25 million or more 0.25 The commission to financial advisors for Class A share purchases of $25 million or more is paid over 12 months but only to the extent the shares remain outstanding. For Class A share purchases by participants in certain group retirement plans offered through a fee-based program, financial advisors receive a 1.00% commission from the distributor on all purchases of less than $3 million. _____ 7 Your Account UNDERSTANDING CONTINGENT DEFERRED SALES CHARGES (CDSC) Certain investments in Class A, B and C shares are subject to a CDSC, a sales charge applied at the time you sell your shares. You will pay the CDSC only on shares you sell within a certain amount of time after purchase. The CDSC generally declines each year until there is no charge for selling shares. The CDSC is applied to the net asset value at the time of purchase or sale, whichever is lower. For purposes of calculating the CDSC, the start of the holding period is the month-end of the month in which the purchase is made. Shares you purchase with reinvested dividends or capital gains are not subject to a CDSC. When you place an order to sell shares, your Fund will automatically sell first those shares not subject to a CDSC and then those you have held the longest. This policy helps reduce and possibly eliminate the potential impact of the CDSC. Reduced Sales Charges for Larger Investments There are two ways for you to pay a lower sales charge when purchasing Class A shares. The first is through Rights of Accumulation. If the combined value of the Fund accounts maintained by you, your spouse or your minor children reaches a discount level (according to the chart on the previous page), your next purchase will receive the lower sales charge. The second is by signing a Statement of Intent within 90 days of your purchase. By doing so, you would be able to pay the lower sales charge on all purchases by agreeing to invest a total of at least $50,000 within 13 months. If your Statement of Intent purchases are not completed within 13 months, you will be charged the applicable sales charge on the amount you had invested to that date. In addition, certain investors may purchase shares at a reduced sales charge or net asset value, which is the value of a Fund share excluding any sales charges. See the Statement of Additional Information for a description of these situations. Class B shares Your purchases of Class B shares are at Class B shares' net asset value. Class B shares have no front-end sales charge, but they do carry a CDSC that is imposed only on shares sold prior to the completion of the periods shown in the charts below. The CDSC generally declines each year and eventually disappears over time. The distributor pays the financial advisor firm an up- front commission on sales of Class B shares as depicted in the charts below. Purchases of less than $250,000: Class B Sales Charges % deducted when Holding period after purchase shares are sold Through first year 5.00 -------------------------------------------------------------------------------- Through second year 4.00 -------------------------------------------------------------------------------- Through third year 3.00 -------------------------------------------------------------------------------- Through fourth year 3.00 -------------------------------------------------------------------------------- Through fifth year 2.00 -------------------------------------------------------------------------------- Through sixth year 1.00 -------------------------------------------------------------------------------- Longer than six years None Commission to financial advisors is 5.00%. Automatic conversion to Class A shares is eight years after purchase. _____ 8 Your Account You can pay a lower CDSC and reduce the holding period when making purchases of Class B shares through a financial advisor firm which participates in the Class B share discount program for larger purchases as described in the charts below. Some financial advisor firms are not able to participate because their record keeping or transaction processing systems are not designed to accommodate these reductions. For non-participating firms, purchases of Class B shares must be less than $250,000. Consult your financial advisor to see whether it participates in the discount program for larger purchases. For participating firms, Rights of Accumulation apply, so that if the combined value of Fund accounts maintained by you, your spouse or your minor children is at or above a discount level, your next purchase will receive the lower CDSC and the applicable reduced holding period. Purchases of $250,000 to less than $500,000: Class B Sales Charges % deducted when Holding period after purchase shares are sold Through first year 3.00 ------------------------------------------------------------------------------- Through second year 2.00 ------------------------------------------------------------------------------- Through third year 1.00 ------------------------------------------------------------------------------- Longer than three years 0.00 Commission to financial advisors is 2.50%. Automatic conversion to Class A shares is four years after purchase. Purchases of $500,000 to less than $1 million: Class B Sales Charges % deducted when Holding period after purchase shares are sold Through first year 3.00 ------------------------------------------------------------------------------- Through second year 2.00 ------------------------------------------------------------------------------- Through third year 1.00 ------------------------------------------------------------------------------- Commission to financial advisors is 1.75%. Automatic conversion to Class A shares is three years after purchase. _____ 9 Your Account If you exchange into a Fund participating in the Class B share discount program or transfer your Fund account from a financial advisor which does not participate in the program to one who does, the exchanged or transferred shares will retain the pre-existing CDSC but any additional purchases of Class B shares which cause the exchanged or transferred account to exceed the applicable discount level will receive the lower CDSC and the reduced holding period for amounts in excess of the discount level. Your financial advisor will receive the lower commission for purchases in excess of the applicable discount level. If you exchange from a participating fund or transfer your account from a financial advisor that does participate in the program into a fund or financial advisor which does not, the exchanged or transferred shares will retain the pre-existing CDSC but all additional purchases of Class B shares will be in accordance with the higher CDSC and longer holding period of the non-participating fund or financial advisor. Class C shares Similar to Class B shares, your purchases of Class C shares are at Class C's net asset value. Although Class C shares have no front-end sales charge, they carry a CDSC of 1.00% that is applied to shares sold within the first year after they are purchased. After holding shares for one year, you may sell them at any time without paying a CDSC. The distributor pays the financial advisor firm an up-front commission of 1.00% on sales of Class C shares. Class C Sales Charges Years after purchase % deducted when shares are sold Through one year 1.00 -------------------------------------------------------------------------------- Longer than one year 0.00 _____ 10 Your Account HOW TO EXCHANGE SHARES -------------------------------------------------------------------------------- You may exchange your shares for shares of the same share class of another fund distributed by Liberty Funds Distributor, Inc. at net asset value. If your shares are subject to a CDSC, you will not be charged a CDSC upon the exchange. However, when you sell the shares acquired through the exchange, the shares sold may be subject to a CDSC, depending upon when you originally purchased the shares you exchanged. For purposes of computing the CDSC, the length of time you have owned your shares will be computed from the date of your original purchase and the applicable CDSC will be the CDSC of the original fund. Unless your account is part of a tax-deferred retirement plan, an exchange is a taxable event. Therefore, you may realize a gain or a loss for tax purposes. The Fund may terminate your exchange privilege if the advisor determines that your exchange activity is likely to adversely impact its ability to manage the Fund. To exchange by telephone, call 1-800-422-3737. HOW TO SELL SHARES -------------------------------------------------------------------------------- Your financial advisor can help you determine if and when you should sell your shares. You may sell shares of the Fund on any regular business day that the New York Stock Exchange (NYSE) is open. When the Fund receives your sales request in "good form," shares will be sold at the next calculated price. In "good form" means that money used to purchase your shares is fully collected. When selling shares by letter of instruction, "good form" also means (i) your letter has complete instructions, the proper signatures and signature guarantees, (ii) you have included any certificates for shares to be sold, and (iii) any other required documents are attached. A signature guarantee is designed to protect you and Liberty Acorn from fraud. Signature guarantees can be obtained from a commercial bank, broker-dealer, credit union (if authorized under state law), securities exchange or association. A notary public cannot provide a signature guarantee. For additional documents required for sales by corporations, agents, fiduciaries and surviving joint owners, please call 1-800-345-6611. Retirement plan accounts have special requirements; please call 1-800-799-7526 for more information. The Fund will generally send proceeds from the sale to you within seven days (usually on the next business day after your request is received in "good form"). However, if you purchased your shares by check, the Fund may delay sending the proceeds from the sale of your shares for up to 15 days after your purchase to protect against checks that are returned. No interest will be paid on uncashed redemption checks. Redemption proceeds may be paid in securities rather than cash, under certain circumstances. For more information, see the paragraph "Non-Cash Redemptions" under the section "How to Sell Shares" in the Statement of Additional Information. _____ 11 Your Account Outlined below are the various options for selling shares: Method Instructions Through your You may call your financial advisor to place your sell financial advisor order. To receive the current trading day's price, your financial advisor firm must receive your request prior to the close of the NYSE, usually 4:00 p.m. Eastern time. ------------------------------------------------------------------------------- By exchange You or your financial advisor may sell shares by exchanging from the Fund into the same share class of another Liberty fund at no additional cost. To exchange by telephone, call 1-800-422-3737. -------------------------------------------------------------------------------- By telephone You or your financial advisor may sell shares by telephone and request that a check be sent to your address of record by calling 1-800-422-3737, unless you have notified the Fund of an address change within the previous 30 days. The dollar limit for telephone sales is $100,000 in a 30-day period. You do not need to set up this feature in advance of your call. Certain restrictions apply to retirement accounts. For details, call 1-800-345-6611. -------------------------------------------------------------------------------- By mail You may send a signed letter of instruction or stock power form along with any certificates to be sold to the address below. In your letter of instruction, note your Fund's name, share class, account number, and the dollar value or number of shares you wish to sell. All account owners must sign the letter, and signatures must be guaranteed by either a bank, a member firm of a national stock exchange or another eligible guarantor institution. Additional documentation is required for sales by corporations, agents, fiduciaries, surviving joint owners and individual retirement account owners. For details, call 1-800-345-6611. Mail your letter of instruction to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. -------------------------------------------------------------------------------- By wire You may sell shares and request that the proceeds be wired to your bank. You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the account application for this feature. -------------------------------------------------------------------------------- By systematic You may automatically sell a specified dollar amount withdrawal plan or percentage on a monthly, quarterly or semi-annual basis if your account balance is at least $5,000 and have the proceeds sent to you. This feature is not available if you hold your shares in certificate form. Be sure to complete the appropriate section of the account application for this feature. ------------------------------------------------------------------------------- By electronic You may sell shares and request that the proceeds be funds transfer electronically transferred to your bank. Proceeds may take up to two business days to be received by your bank. You must set up this feature prior to your request. Be sure to complete the appropriate section of the account application for this feature. FUND POLICY ON TRADING OF FUND SHARES -------------------------------------------------------------------------------- The Fund does not permit short-term or excessive trading. Excessive purchases, redemptions or exchanges of Fund shares disrupt portfolio management and drive Fund expenses higher. In order to promote the best interests of the Fund, the Fund reserves the right to reject any purchase order or exchange request, particularly from market timers or investors who, in the advisor's opinion, have a pattern of short-term or excessive trading or whose trading has been or may be disruptive to the Fund. The fund into which you would like to exchange also may reject your request. ____ 12 Your Account DISTRIBUTION AND SERVICE FEES -------------------------------------------------------------------------------- The Fund has adopted a plan under Rule 12b-1 that permits it to pay the Fund's distribution, marketing and other fees to support the sale and distribution of Class A, B and C shares and certain services provided to you by your financial advisor. The annual service fee may equal up to 0.25% for Class A, Class B and Class C shares. The annual distribution fee may equal up to 0.10% for Class A shares and 0.75% for Class B and Class C shares. Distribution and service fees are paid out of the assets of these classes. Over time, these fees may reduce the return on your investment and may cost you more than paying other types of sales charges. Class B shares automatically convert to Class A shares after a certain number of years, eliminating a portion of the distribution fee upon conversion. Conversion may occur three, four or eight years after purchase, depending on the program you purchased your shares under. See "Your Account; Sales Charge" for the conversion schedule applicable to Class B shares. OTHER INFORMATION ABOUT YOUR ACCOUNT -------------------------------------------------------------------------------- How the Fund's Share Price is Determined The price of each class of the Fund's shares is based on its net asset value. The net asset value is determined at the close of regular trading on the NYSE, usually 4:00 p.m. Eastern time, on each business day that the NYSE is open (typically Monday through Friday). When you request a transaction, it will be processed at the net asset value (plus any applicable sales charges) next determined after your request is received in "good form" by the distributor. In most cases, in order to receive that day's price, the distributor must receive your order before that day's transactions are processed. If you request a transaction through your financial advisor's firm, the firm must receive your order by the close of trading on the NYSE to receive that day's price. The Fund determines its net asset value for each share class by dividing each class's total net assets by the number of that class's outstanding shares. In determining the net asset value, the Fund must determine the price of each security in its portfolio at the close of each trading day. Because the Fund holds securities that are traded on foreign exchanges, the value of these securities may change on days when shareholders will not be able to buy or sell Fund shares. This will affect the Fund's net asset value on the day it is next determined. Securities for which market quotations are available are valued each day at the current market value. However, where market quotations are not available, or when the advisor believes that subsequent events have made them unreliable, the Fund may use other data to determine the fair value of the securities. You can find the daily prices of some share classes for the Fund in most major daily newspapers under the caption "Liberty." You can find daily prices for all share classes by visiting the Fund's web site at www.libertyfunds.com. Account Fees If your account value falls below $1,000 (other than as a result of depreciation in share value) you may be subject to an annual account fee of $10. This fee is deducted from the account in June each year. Approximately 60 days prior to the fee date, the Fund's transfer agent will send you written notification of the upcoming fee. If _____ 13 Your Account you add money to your account and bring the value above $1,000 prior to the fee date, the fee will not be deducted. Share Certificates Share certificates are not available for Class B and C shares. Certificates will be issued for Class A shares only if requested. If you decide to hold share certificates, you will not be able to sell your shares until you have endorsed your certificates and returned them to the distributor. _____ 14 Your Account UNDERSTANDING FUND DISTRIBUTIONS The Fund earns income from the securities it holds. The Fund also may realize capital gains and losses on sales of its securities. The Fund distributes substantially all of its net investment income and capital gains to shareholders. As a shareholder, you are entitled to a portion of the Fund's income and capital gains based on the number of shares you own at the time these distributions are declared. DIVIDENDS, DISTRIBUTIONS, AND TAXES The Fund has the potential to make the following distributions: Types of Distributions Dividend Represents interest and dividends earned from securities held by the Fund, net of expenses incurred by the Fund. -------------------------------------------------------------------------------- Capital gains Represents net long-term capital gains on sales of securities held for more than 12 months and net short-term capital gains, which are gains on sales of securities held for a 12-month period or less. DISTRIBUTION OPTIONS The Fund distributes dividends in June and December and any capital gains (including short-term capital gains) at least annually. You can choose one of the options listed in the table below for these distributions when you open your account. To change your distribution option call 1-800-345-6611. If you do not indicate on your application your preference for handling distributions, the Fund will automatically reinvest all distributions in additional shares of the Fund. Distribution Options Reinvest all distributions in additional shares of the Fund ------------------------------------------------------------------------------- Reinvest all distributions in shares of another Liberty fund ------------------------------------------------------------------------------- Receive dividends in cash (see options below) and reinvest capital gains ------------------------------------------------------------------------------- Receive all distributions in cash (with one of the following options): . send the check to your address of record . send the check to a third party address . transfer the money to your bank via electronic funds transfer Distributions of $10 or less will automatically be reinvested in additional Fund shares. If you elect to receive distributions by check and the check is returned as undeliverable, or if you do not cash a distribution check within six months of the check date, the distribution will be reinvested in additional shares of the Fund. _____ 15 Your Account Tax Consequences Regardless of whether you receive your distributions in cash or reinvest them in additional Fund shares, all Fund distributions are subject to federal income tax. Depending on the state where you live, distributions may also be subject to state and local income taxes. In general, any distributions of dividends, interest and short-term capital gains are taxable as ordinary income. Distributions of long-term capital gains are generally taxable as such, regardless of how long you have held your Fund shares. You will be provided with information each year regarding the amount of ordinary income and capital gains distributed to you for the previous year and any portion of your distribution which is exempt from state and local taxes. Your investment in the Fund may have additional personal tax implications. Please consult your tax advisor on foreign, federal, state, local or other applicable tax laws. In addition to the dividends and capital gains distributions made by the Fund, you may realize a capital gain or loss when selling and exchanging shares of the Fund. Such transactions may be subject to federal, state and local income tax. Foreign Income Taxes The Fund may receive investment income from sources within foreign countries, and that income may be subject to foreign income taxes at the source. If the Fund pays non-refundable taxes to foreign governments during the year, the taxes will reduce the Fund's dividends but will still be included in your taxable income. You may be able to claim an offsetting credit or deduction on your tax return for your share of foreign taxes paid by the Fund. _____ 16 Managing the Fund INVESTMENT ADVISOR -------------------------------------------------------------------------------- Liberty Wanger Asset Management (Liberty WAM) (formerly Wanger Asset Management, L.P. (WAM)), located at 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606, is the Fund's investment advisor. Liberty WAM and its predecessor have managed mutual funds, including the Fund, since 1992. In its duties as investment advisor, Liberty WAM runs the Fund's day-to-day business, including placing all orders for the purchase and sale of the Fund's portfolio securities. As of June 30, 2000, Liberty WAM managed over $9 billion in assets. WAM was renamed Liberty WAM on September 29, 2000 when it became a wholly owned subsidiary of Liberty Financial Companies, Inc. (Liberty), which in turn is a majority owned indirect subsidiary of Liberty Mutual Insurance Company. For more information about Liberty's acquisition of WAM, see the Statement of Additional Information. Liberty WAM's advisory fee for managing the Fund in 1999 was 0.81% of the Fund's average daily net assets. Liberty WAM also receives an administrative services fee from the Fund at the annual rate of .05% of the Fund's average daily net assets. PORTFOLIO MANAGERS -------------------------------------------------------------------------------- Liberty WAM uses a team to manage the Fund. Team members share responsibility for providing ideas, information, and knowledge in managing the Fund, and each team member has one or more particular areas of expertise. The portfolio managers are responsible for making daily investment decisions, and utilize the management team's input and advice when making buy and sell determinations. Leah J. Zell Lead portfolio manager Leah Zell is a vice president of Liberty Acorn Trust, and was a principal of WAM before its acquisition by Liberty. She has managed Liberty Acorn International since its inception in 1992, and was named lead portfolio manager in 1997. She has worked with Liberty Acorn Fund's international securities since 1984. Ms. Zell also manages the foreign portfolio of an investment company whose shares are offered only to non-U.S. investors. She is a CFA and earned her BA and PhD from Harvard University. Margaret M. Forster Co-portfolio manager Margaret Forster is a vice president of Liberty Acorn Trust and became co- portfolio manager of Liberty Acorn International in May 1999. She has been a member of the international analytical team at Liberty WAM and WAM since 1994, and was a principal ____ 17 Managing the Fund of WAM from January 1999 to September 29, 2000. Prior to that, Ms. Forster was a professor of finance at Northwestern and Ohio State Universities, and an economist with the International Monetary Fund. She is a CFA. Her degrees include a BS from Universidade de Sao Paulo, Escola Politecnica, Brazil, and an MBA, MS and PhD from Cornell University. _____ 18 Other Investment Strategies and Risks UNDERSTANDING THE FUND'S OTHER INVESTMENT STRATEGIES AND RISKS The Fund's principal investment strategies and risks are described under "Liberty Acorn International - Principal Investment Strategies" and "Liberty Acorn International - Principal Investment Risks." In seeking to meet its investment goal, the Fund may also invest in other securities and use certain other investment techniques. These securities and investment techniques offer opportunities and carry various risks. Liberty WAM may elect not to buy any of these securities or use any of these techniques unless it believes that doing so will help the Fund achieve its investment goal. The Fund may not always achieve its investment goal. Additional information about the Fund's securities and investment techniques, as well as the Fund's fundamental and non-fundamental investment policies, is contained in the Statement of Additional Information. The first portion of this prospectus describes the Fund's principal investment strategies and their associated risks. This section provides more detail about the Fund's investment strategies, and describes other investments the Fund may make and the risks associated with them. In seeking to achieve its investment goal, the Fund may invest in various types of securities and engage in various investment techniques, which are not the principal focus of the Fund and therefore are not described in this prospectus. These types of securities and investment practices are identified and discussed in the Fund's Statement of Additional Information, which you may obtain free of charge (see back cover). Approval by the Fund's shareholders is not required to modify or change the Fund's investment goal or investment strategies. THE INFORMATION EDGE -------------------------------------------------------------------------------- The Fund invests in entrepreneurially managed smaller and mid-sized companies that it believes are not as well known by financial analysts and whose domination of a niche creates the opportunity for superior earnings-growth potential. Liberty WAM may identify what it believes are important economic, social or technological trends (for example, the growth of out-sourcing as a business strategy, or the productivity gains from the increasing use of technology) and try to identify companies it thinks will benefit from those trends. In making investments for the Fund, Liberty WAM relies primarily on independent, internally generated research to uncover companies that may be less well known than the more popular names. To find these companies, Liberty WAM compares growth potential, financial strength and fundamental value among companies.
Growth Potential Financial Strength Fundamental Value --------------------------------------------------------------------------------- . superior technology . low debt . innovative marketing . adequate working . reasonable stock . managerial skill capital price relative to . market niche . conservative growth potential . good earnings accounting practices . valuable assets . strong demand for . adequate profit product margin The realization of this A strong balance sheet Once Liberty WAM growth potential would gives management greater uncovers an attractive likely produce superior flexibility to pursue company, it iden- performance that is strategic objectives and tifies a price that sustainable over time. is essential to maintain- it believes would ing a competitive advant- also make the stock age. a good value. ---------------------------------------------------------------------------------
STOCK STRENGTH COMES FIRST -------------------------------------------------------------------------------- Liberty WAM's analysts continually screen companies and make more than 1,000 face-to-face visits around the globe each year. To accomplish this, Liberty WAM analysts talk to top management, vendors, suppliers and competitors, whenever possible. In managing the Fund, Liberty WAM tries to maintain lower taxes and transaction costs by investing with a long-term time horizon (at least two to five years). However, _____ 19 Other Investment Strategies and Risks securities purchased on a long-term basis may be sold within 12 months after purchase due to changes in the circumstances of a particular company or industry, or changes in general market or economic conditions. DERIVATIVE STRATEGIES -------------------------------------------------------------------------------- The Fund may enter into a number of hedging strategies, including those that employ futures and options, to gain or reduce exposure to particular securities or markets. These strategies, commonly referred to as derivatives, involve the use of financial instruments whose values depend on, or are derived from, the value of an underlying security, index or currency. The Fund may use these strategies to adjust the Fund's sensitivity to changes in interest rates or for other hedging purposes (i.e., attempting to offset a potential loss in one position by establishing an interest in an opposite position). Derivative strategies involve the risk that they may exaggerate a loss, potentially losing more money than the actual cost of the underlying security, or limit a potential gain. Also, with some derivative strategies there is a risk that the other party to the transaction may fail to honor its contract terms, causing a loss to the Fund. TEMPORARY DEFENSIVE STRATEGIES -------------------------------------------------------------------------------- At times, Liberty WAM may determine that adverse market conditions make it desirable to temporarily suspend the Fund's normal investment activities. During such times, the Fund may, but is not required to, invest in cash or high- quality, short-term debt securities, without limit. Taking a temporary defensive position may prevent the Fund from achieving its investment goal. _____ 20 Financial Highlights The financial highlights tables are intended to help you understand the Fund's financial performance. Because Class A, Class B and Class C shares are new classes of shares, information is shown for the Fund's Class Z shares for the last five fiscal years and for the six months ended June 30, 2000. The Fund's fiscal year runs from January 1 to December 31. Class Z shares are offered to certain investors through separate prospectuses. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on the Fund (assuming reinvestment of all dividends and distributions). The information with respect to the six month period ended June 30, 2000 is unaudited. The information with respect to the last five years is audited. For periods up to and including the year ended 1999, this information has been derived from the Fund's financial statements which have been audited by Ernst & Young LLP, independent auditors whose report, along with the Fund's audited financial statements, is included in the Fund's annual report. You can request a free annual report by calling 1-800-426-3750. Liberty Acorn International
Year Year Year Year Year For a share outstanding throughout Six months ended ended ended ended ended each period ended 6/30/00 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 ------------------------------------------------------------------------------------------------------------------------------- Class Z Class Z Class Z Class Z Class Z Class Z ------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 35.33 $ 20.82 $ 18.39 $ 19.61 $ 16.59 $ 15.24 ------------------------------------------------------------------------------------------------------------------------------- Income from Investment Operations: Net investment income -- .83 .17 .40 .13 .16 ------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments, foreign currency and futures (1.34) 15.45 2.68 (.34) 3.29 1.20 ------------------------------------------------------------------------------------------------------------------------------- Total from investment operations (1.34) 16.28 2.85 .06 3.42 1.36 ------------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (.66) (.22) (.15) (.38) (.12) -- ------------------------------------------------------------------------------------------------------------------------------- Distributions from net realized and unrealized gains reportable for federal income taxes (.51) (1.55) (.27) (.90) (.28) (.01) ------------------------------------------------------------------------------------------------------------------------------- Total distributions (1.17) (1.77) (.42) (1.28) (.40) (.01) ------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 32.82 $ 35.33 $ 20.82 $ 18.39 $ 19.61 $ 16.59 ------------------------------------------------------------------------------------------------------------------------------- Total return (a) (3.8%) 79.2% 15.4% 0.2% 20.7% 8.9% ------------------------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Ratio of expenses to average net assets 1.06%* 1.11% 1.12% 1.19% 1.17% 1.22% ------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets .01%* .12% .86% .58% .51% .90% ------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 76%* 46% 37% 39% 34% 26% ------------------------------------------------------------------------------------------------------------------------------- Net assets at end of period (in millions) $ 2,984 $ 2,868 $ 1,725 $ 1,623 $ 1,773 $ 1,276
(a) Total return is not annualized for periods less than one year. Class A, B and C shares are subject to sales loads, account fees and rule 12b-1 fees that are not reflected in the total return. *Annualized _____ 21 Notes ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ____ 22 FOR MORE INFORMATION -------------------------------------------------------------------------------- You can get more information about the Fund's investments in the Fund's semi-annual and annual reports to shareholders. The annual report contains a discussion of the market conditions and investment strategies that significantly affected the Fund's performance over its last fiscal year. You may wish to read the Statement of Additional Information for more information on the Fund and the securities in which it invests. The Statement of Additional Information is incorporated into this prospectus by reference, which means that it is considered to be part of this prospectus. You can get free copies of reports and the Statement of Additional Information, request other information and discuss your questions about the Fund by writing or calling the Fund's distributor at: Liberty Funds Distributor, Inc. One Financial Center Boston, MA 02111-2621 1-800-426-3750 www.libertyfunds.com Text-only versions of all Fund documents can be viewed online or downloaded from the Edgar database on the Securities and Exchange Commission internet site at www.sec.gov. You can review and copy information about the Fund by visiting the following location, and you can obtain copies, upon payment of a duplicating fee by electronic request at the E-mail address publicinfo@sec.gov or by writing the: Public Reference Room Securities and Exchange Commission Washington, DC 20549-0102 Information on the operation of the Public Reference Room may be obtained by calling 1-202-942-8090. Investment Company Act file number: Liberty Acorn Trust (formerly Acorn Investment Trust): 811-01829 . Liberty Acorn International (formerly Acorn International) [LOGO OF LIBERTY FUNDS] --- 23 ---------------------------------------------------------------------------- LIBERTY ACORN USA Prospectus, September 29, 2000 ---------------------------------------------------------------------------- Class A, B and C Shares Advised by Liberty Wanger Asset Management, L.P. Liberty Acorn Trust Although these securities have been registered with the Securities and Exchange Commission, the Commission has not approved or disapproved any shares offered in this prospectus or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
-------------------------------------------------------------------------------- T A B L E O F C O N T E N T S LIBERTY ACORN USA 2 ----------------- Investment Goal............................................................. 2 Principal Investment Strategies............................................. 2 Principal Investment Risks.................................................. 2 Performance History......................................................... 4 Your Expenses............................................................... 5 YOUR ACCOUNT 6 ------------ How to Buy Shares........................................................... 6 Sales Charges............................................................... 7 How to Exchange Shares...................................................... 11 How to Sell Shares.......................................................... 11 Fund Policy on Trading of Fund Shares....................................... 12 Distribution and Service Fees............................................... 13 Other Information About Your Account........................................ 13 MANAGING THE FUND 17 ----------------- Investment Advisor.......................................................... 17 Portfolio Manager........................................................... 17 OTHER INVESTMENT STRATEGIES AND RISKS 18 -------------------- The Information Edge........................................................ 18 Stock Strength Comes First.................................................. 18 Derivative Strategies....................................................... 19 Temporary Defensive Strategies.............................................. 19 FINANCIAL HIGHLIGHTS 20 --------------------
Not FDIC May Lose Value ------------------ Insured No Bank Guarantee ----------------------------------------------------------------------------- Liberty Acorn USA ----------------------------------------------------------------------------- INVESTMENT GOAL -------------------------------------------------------------------------------- Liberty Acorn USA seeks to provide long-term growth of capital. PRINCIPAL INVESTMENT STRATEGIES -------------------------------------------------------------------------------- Liberty Acorn USA invests primarily in stocks of small-and medium-sized U.S. companies. The Fund generally invests in the stocks of U.S. companies with capitalizations of less than $2 billion. The Fund believes that these smaller companies, which are not as well known by financial analysts, may offer higher return potential than the stocks of larger companies. Liberty, Acorn USA typically looks for companies with: . A strong business franchise that offers growth potential. . Products and services that give the company a competitive advantage. . A stock price the Fund's advisor believes is reasonable relative to the assets and earning power of the company. The Fund generally invests substantially all of its assets in U.S companies and, under normal market conditions, will invest at least 65% of its assets in U.S. companies. Additional strategies that are not principal investment strategies and the risks associated with them are described later in this prospectus under "Other Investment Strategies and Risks." PRINCIPAL INVESTMENT RISKS -------------------------------------------------------------------------------- The principal risks of investing in the Fund are described below. There are many circumstances (including additional risks that are not described here) which could prevent the Fund from achieving its investment goal. You may lose money by investing in the Fund. Management risk means that the advisor's stock selections and other investment decisions might produce losses or cause the Fund to underperform when compared to other funds with a similar investment goal. Market risk means that security prices in a market, sector or industry may move down. Downward movements will reduce the value of your investment. Because of management and market risk, there is no guarantee that the Fund will achieve its investment goal or perform favorably compared with competing funds. Equity risk is the risk that stock prices will fall over short or extended periods of time. Although the stock market has historically outperformed other asset classes over the long term, the equity market tends to move in cycles and individual stock prices may fluctuate drastically from day-to-day and may underperform other asset classes over an extended period of time. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. _____ 2 Liberty Acorn USA Smaller companies and mid-capitalization companies are more likely than larger companies to have limited product lines, operating histories, markets or financial resources. They may depend heavily on a small management team. Stocks of smaller companies and mid-capitalization companies may trade less frequently, may trade in smaller volumes and may fluctuate more sharply in price than stocks of larger companies. In addition, they may not be widely followed by the investment community, which can lower the demand for their stock. Sector risk may sometimes be present in the Fund's investments. Companies that are in different but closely related industries are sometimes described as being in the same broad economic sector. The values of stocks of many different companies in a market sector may be similarly affected by particular economic or market events. Although the Fund does not intend to focus on any particular sector, at times, the Fund may have a large portion of its assets invested in a particular sector. An example of a sector in which the Fund may sometimes have a significant portion of its assets invested is technology. Technology companies may be significantly affected by falling prices and profits, and intense competition. In addition, the rate of technological change for technology companies is generally higher than for other companies, often requiring extensive and sustained investment in research and development, and exposing such companies to the risk of rapid product obsolescence. The price of many technology stocks has risen based on projections of future earnings and company growth. If a company does not perform as expected, the price of the stock could decline significantly. Many technology companies are currently operating at a loss and may never be profitable. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. _____ 3 Liberty Acorn USA UNDERSTANDING PERFORMANCE Calendar year total returns show the Fund's Class Z share performance for each completed calendar year. They include the effects of Class Z expenses. Class A, Class B and Class C shares are subject to sales charges, 12b-1 fees and different expenses that are not reflected in the bar chart. If these amounts were reflected, returns would be less than those shown. Average annual total returns are measures of the Fund's Class Z performance over the past one-year, three-year and life of the Fund periods. They include the effects of Class Z expenses. The table shows for each class the Class Z performance restated to reflect the effect of sales charges of each class. The Fund's return is compared to the Russell 2000 Index. The Russell 2000 Index is a market-weighted index of 2000 small companies formed by taking the largest 3000 companies and eliminating the largest 1000 of those companies. Unlike the Fund, an index is not an investment, does not incur fees or expenses and is not professionally managed. It is not possible to invest directly in an index. PERFORMANCE HISTORY -------------------------------------------------------------------------------- Because Class A, Class B and Class C shares have not been offered for a full calendar year, the information provided in the bar chart below shows changes in the Fund's performance from year to year by illustrating the Fund's calendar year total returns for its Class Z shares. Class Z shares are offered to certain investors through a separate prospectus. The performance table following the bar chart shows how the Fund's average annual returns for (1) the Class Z shares and (2) the Class Z shares, restated to reflect the sales charges of the Class A, Class B and Class C shares, respectively, compare with those of broad measures of market performance for one year, three years and life of the Fund. The chart and table are intended to illustrate some of the risks of investing in the Fund by showing the changes in the Fund's Class Z performance. All returns include the reinvestment of dividends and distributions. As with all mutual funds, past performance does not predict the Fund's future performance. Calendar Year Total Returns (Class Z)/(1)/ ------------------------------------------------------------------------------- [BAR CHART] Year Returns ---- ------- 1997 32.30% 1998 5.79% 1999 23.02% ------------------------------------------------------------------------------- For period shown in bar chart: Best quarter: 4th quarter 1999, +18.93% Worst quarter: 3rd quarter 1998, -19.25% (1) Class Z shares are not offered through this prospectus, but Class A, Class B and Class C shares would have substantially similar annual returns because the shares are invested in the same portfolio of securities and these returns differ only to the extent that the classes do not have the same expenses. Average Annual Total Returns -- for periods ended December 31, 1999 /(2)/
Life of the Inception Date 1 Year 3 Years Fund Class A 9/29/00 15.95% 17.51% 21.10% -------------------------------------------------------------------------------- Class B 9/29/00 18.02% 19.16% 22.72% -------------------------------------------------------------------------------- Class C 9/29/00 22.02% 19.86% 23.28% -------------------------------------------------------------------------------- Class Z 9/4/96 23.02% 19.86% 23.28% -------------------------------------------------------------------------------- Russell 2000 N/A 21.26% 13.08% 14.65%
(2) Class A, Class B, and Class C are new classes of shares. Their performance information includes returns of the Fund's Class Z shares (the oldest existing Fund class) for periods prior to the inception of the newer classes of shares. Class Z returns are not restated to reflect any differences in expenses (such as Rule 12b-1 fees) between Class Z shares and the newer classes of shares. If differences in expenses were reflected, the returns for prior to the inception of the newer classes of shares would be lower. Class Z shares were initially offered on September 4, 1996; Class A, Class B and Class C shares were initially offered on September 29, 2000. _____ 4 Liberty Acorn USA UNDERSTANDING EXPENSES Sales Charges are paid directly by shareholders to Liberty Funds Distributor, Inc., the Fund's distributor. Annual Fund Operating Expenses are deducted from the Fund. They include management and administration fees, 12b-1 fees and administrative costs including pricing and custody services. Example Expenses help you compare the cost of investing in the Fund to the cost of investing in other mutual funds. It uses the following hypothetical conditions: . $10,000 initial investment . 5% total return for each year . fund operating expenses remain the same . assumes reinvestment of all dividends and distributions . assumes Class B shares convert to Class A shares after eight years YOUR EXPENSES -------------------------------------------------------------------------------- Expenses are one of several factors to consider before you invest in a mutual fund. The tables below describe the fees and expenses you may pay when you buy, hold and sell shares of the Fund. Shareholder Fees/(3)/ (paid directly from your investment)
CLASS A Class B Class C Maximum sales charge (load) on purchases (%) (as a percentage of the offering price) 5.75 None None --------------------------------------------------------------------------------------------------------- Maximum deferred sales charge (load) on redemptions (%) (as a percentage of the lesser of purchase price or redemption price) 1.00/(4)/ 5.00 1.00 --------------------------------------------------------------------------------------------------------- Redemption fee (5) (5) (5)
(3) A $10 annual fee is deducted from accounts of less than $1,000 and paid to the transfer agent. (4) This charge applies only to certain Class A shares bought without an initial sales charge that are sold within 18 months of purchase. (5) There is a $7.50 charge for wiring sale proceeds to your bank. Annual Fund Operating Expenses (deducted directly from fund assets)
CLASS A Class B Class C Management fees/(6)/(%) .93 .93 .93 ------------------------------------------------------------------------------------------------- Distribution and service (12b-1) fees (%) .35 1.00 1.00 ------------------------------------------------------------------------------------------------- Other expenses (%) .37 .37 .37 ------------------------------------------------------------------------------------------------- Total annual fund operating expenses (%) 1.65 2.30 2.30
(6) In addition to the management fee, the Fund pays the Advisor an administrative fee of .05%, which is included in "Other Expenses." Example Expenses (your actual costs may be higher or lower) Class 1 Year 3 Years 5 Years 10 Years Class A: $ 733 $1,065 $1,420 $2,417 -------------------------------------------------------------------------------- Class B: did not sell your shares $ 233 $ 718 $1,230 $2,473 sold all your shares at the end of the period $ 733 $1,018 $1,430 $2,473 -------------------------------------------------------------------------------- Class C: did not sell your shares $ 233 $ 718 $1,230 $2,636 sold all your shares at the end of the period $ 333 $ 718 $1,230 $2,636 _____ 5 Your Account INVESTMENT MINIMUMS Initial Investment............................ $1,000 Subsequent Investments........................ $ 50 Automatic Investment Plan*.................... $ 50 Retirement Plans*............................. $ 25 * The initial investment minimum of $ 1,000 is waived on this plan. The Fund reserves the right to change these investment minimums. The Fund also reserves the right to refuse a purchase order for any reason, including if it believes that doing so would be in the best interest of the Fund and its shareholders. HOW TO BUY SHARES -------------------------------------------------------------------------------- Your financial advisor can help you establish an appropriate investment portfolio, buy shares and monitor your investments. When the Fund receives your purchase request in "good form," your shares will be bought at the next calculated public offering price. "Good form" means that you placed your order with your brokerage firm or your payment has been received and your application is complete, including all necessary signatures. -------------------------------------------------------------------------------- Outlined below are the various options for buying shares: -------------------------------------------------------------------------------- Method Instructions Through your Your financial advisor can help you establish your financial advisor account and buy Fund shares on your behalf. Your financial advisor may charge you fees for executing the purchase for you. -------------------------------------------------------------------------------- By check For new accounts, send a completed application and (new account) check made payable to the Fund to the transfer agent, Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. -------------------------------------------------------------------------------- By check For existing accounts, fill out and return the (existing account) additional investment stub included in your quarterly statement, or send a letter of instruction including your Fund name and account number with a check made payable to the Fund to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. -------------------------------------------------------------------------------- By exchange You or your financial advisor may acquire shares by exchanging shares you own in one fund for shares of the same class of the Fund at no additional cost. There may be an additional charge if exchanging from a money market fund. To exchange by telephone, call 1-800-422- 3737. -------------------------------------------------------------------------------- By wire You may purchase shares by wiring money from your bank account to your Fund account. To wire funds to your Fund account, call 1-800-422-3737 to obtain a control number and the wiring instructions. -------------------------------------------------------------------------------- By electronic funds You may purchase shares by electronically transferring transfer money from your bank account to your Fund account by calling 1-800-422-3737. Electronic funds transfers may take up to two business days to settle and be considered in "good form." You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the application. -------------------------------------------------------------------------------- Automatic You can make monthly or quarterly investments investment plan automatically from your bank account to your Fund account. You can select a pre-authorized amount to be sent via electronic funds transfer. Be sure to complete the appropriate section of the application for this feature. -------------------------------------------------------------------------------- By dividend You may automatically invest dividends distributed by diversification one fund into the same class of shares of the Fund at no additional sales charge. To invest your dividends in another Fund, call 1-800-345-6611. _____ 6 Your Account CHOOSING A SHARE CLASS The Fund offers three classes of shares in this prospectus -- CLASS A, B and C. Each share class has its own sales charge and expense structure. Determining which share class is best for you depends on the dollar amount you are investing and the number of years for which you are willing to invest. If your financial advisor firm does not participate in the Class B discount program, purchases of $250,000 or more must be for Class A or Class C shares only. Purchases of $1 million or more can be made only in Class A shares. Based on your personal situation, your financial advisor can help you decide which class of shares makes the most sense for you. The Fund also offers an additional class of shares, Class Z shares, to certain institutional and other investors. Class Z shares are made available through separate prospectuses provided to eligible institutional and other investors. SALES CHARGES -------------------------------------------------------------------------------- You may be subject to an initial sales charge when you purchase, or a contingent deferred sales charge (CDSC) when you sell, shares of the Fund. These sales charges are described below. In certain circumstances, these sales charges are waived, as described below and in the Statement of Additional Information. Class A Shares Your purchases of Class A shares generally are at the public offering price. This price includes a sales charge that is based on the amount of your initial investment when you open your account. A portion of the sales charge is the commission paid to the financial advisor firm on the sale of Class A shares. The sales charge you pay on additional investments is based on the total amount of your purchase and the current value of your account. The amount of the sales charge differs depending on the amount you invest as shown in the table below. Class A Sales Charges
% of offering As a % of price the public As a % retained by offering of your financial Amount of purchase price investment advisor firm Less than $50,000 5.75 6.10 5.00 -------------------------------------------------------------------------------- $50,000 to less than $100,000 4.50 4.71 3.75 -------------------------------------------------------------------------------- $100,000 to less than $250,000 3.50 3.63 2.75 -------------------------------------------------------------------------------- $250,000 to less than $500,000 2.50 2.56 2.00 -------------------------------------------------------------------------------- $500,000 to less than $1,000,000 2.00 2.04 1.75 -------------------------------------------------------------------------------- $1,000,000 or more 0.00 0.00 0.00 --------------------------------------------------------------------------------
Class A shares bought without an initial sales charge in accounts aggregating $1 million to $25 million at the time of purchase are subject to a 1.00% CDSC if the shares are sold within 18 months of the time of purchase. Subsequent Class A share purchases that bring your account value above $1 million are subject to a CDSC if redeemed within 18 months of the date of purchase. The 18-month period begins on the first day of the month following each purchase. The CDSC does not apply to retirement plans purchasing shares through a fee-based program. For Class A share purchases of $1 million or more, financial advisors receive a commission from the distributor as follows: Purchases Over $1 Million Amount purchased Commission % First $3 million 1.00 -------------------------------------------------------------------------------- $3 million to less than $5 million 0.80 -------------------------------------------------------------------------------- $5 million to less than $25 million 0.50 -------------------------------------------------------------------------------- $25 million or more 0.25 The commission to financial advisors for Class A share purchases of $25 million or more is paid over 12 months but only to the extent the shares remain outstanding. For Class A share purchases by participants in certain group retirement plans offered through a fee-based program, financial advisors receive a 1.00% commission from the distributor on all purchases of less than $3 million. _____ 7 Your Account UNDERSTANDING CONTINGENT DEFERRED SALES CHARGES (CDSC) Certain investments in Class A, B and C shares are subject to a CDSC, a sales charge applied at the time you sell your shares. You will pay the CDSC only on shares you sell within a certain amount of time after purchase. The CDSC generally declines each year until there is no charge for selling shares. The CDSC is applied to the net asset value at the time of purchase or sale, whichever is lower. For purposes of calculating the CDSC, the start of the holding period is the month-end of the month in which the purchase is made. Shares you purchase with reinvested dividends or capital gains are not subject to a CDSC. When you place an order to sell shares, your Fund will automatically sell first those shares not subject to a CDSC and then those you have held the longest. This policy helps reduce and possibly eliminate the potential impact of the CDSC. Reduced Sales Charges for Larger Investments There are two ways for you to pay a lower sales charge when purchasing Class A shares. The first is through Rights of Accumulation. If the combined value of the Fund accounts maintained by you, your spouse or your minor children reaches a discount level (according to the chart on the previous page), your next purchase will receive the lower sales charge. The second is by signing a Statement of Intent within 90 days of your purchase. By doing so, you would be able to pay the lower sales charge on all purchases by agreeing to invest a total of at least $50,000 within 13 months. If your Statement of Intent purchases are not completed within 13 months, you will be charged the applicable sales charge on the amount you had invested to that date. In addition, certain investors may purchase shares at a reduced sales charge or net asset value, which is the value of a Fund share excluding any sales charges. See the Statement of Additional Information for a description of these situations. Class B Shares Your purchases of Class B shares are at Class B shares' net asset value. Class B shares have no front-end sales charge, but they do carry a CDSC that is imposed only on shares sold prior to the completion of the periods shown in the charts below. The CDSC generally declines each year and eventually disappears over time. The distributor pays the financial advisor firm an up- front commission on sales of Class B shares as depicted in the charts below. Purchases of less than $250,000: Class B Sales Charges % deducted when Holding period after purchase shares are sold Through first year 5.00 -------------------------------------------------------------------------------- Through second year 4.00 -------------------------------------------------------------------------------- Through third year 3.00 -------------------------------------------------------------------------------- Through fourth year 3.00 -------------------------------------------------------------------------------- Through fifth year 2.00 -------------------------------------------------------------------------------- Through sixth year 1.00 -------------------------------------------------------------------------------- Longer than six years None Commission to financial advisors is 5.00%. Automatic conversion to Class A shares is eight years after purchase. _____ 8 Your Account You can pay a lower CDSC and reduce the holding period when making purchases of Class B shares through a financial advisor firm which participates in the Class B share discount program for larger purchases as described in the charts below. Some financial advisor firms are not able to participate because their record keeping or transaction processing systems are not designed to accommodate these reductions. For non-participating firms, purchases of Class B shares must be less than $250,000. Consult your financial advisor to see whether it participates in the discount program for larger purchases. For participating firms, Rights of Accumulation apply, so that if the combined value of Fund accounts maintained by you, your spouse or your minor children is at or above a discount level, your next purchase will receive the lower CDSC and the applicable reduced holding period. Purchases of $250,000 to less than $500,000: Class B Sales Charges % deducted when Holding period after purchase shares are sold Through first year 3.00 -------------------------------------------------------------------------------- Through second year 2.00 -------------------------------------------------------------------------------- Through third year 1.00 -------------------------------------------------------------------------------- Longer than three years 0.00 Commission to financial advisors is 2.50%. Automatic conversion to Class A shares is four years after purchase. Purchases of $500,000 to less than $1 million: Class B Sales Charges % deducted when Holding period after purchase shares are sold Through first year 3.00 -------------------------------------------------------------------------------- Through second year 2.00 -------------------------------------------------------------------------------- Through third year 1.00 Commission to financial advisors is 1.75%. Automatic conversion to Class A shares is three years after purchase. ______ 9 Your Account If you exchange into a Fund participating in the Class B share discount program or transfer your Fund account from a financial advisor which does not participate in the program to one who does, the exchanged or transferred shares will retain the pre-existing CDSC but any additional purchases of Class B shares which cause the exchanged or transferred account to exceed the applicable discount level will receive the lower CDSC and the reduced holding period for amounts in excess of the discount level. Your financial advisor will receive the lower commission for purchases in excess of the applicable discount level. If you exchange from a participating fund or transfer your account from a financial advisor that does participate in the program into a fund or financial advisor which does not, the exchanged or transferred shares will retain the pre-existing CDSC but all additional purchases of Class B shares will be in accordance with the higher CDSC and longer holding period of the non-participating fund or financial advisor. Class C Shares Similar to Class B shares, your purchases of Class C shares are at Class C's net asset value. Although Class C shares have no front-end sales charge, they carry a CDSC of 1.00% that is applied to shares sold within the first year after they are purchased. After holding shares for one year, you may sell them at any time without paying a CDSC. The distributor pays the financial advisor firm an up-front commission of 1.00% on sales of Class C shares. Class C Sales Charges Years After Purchase % deducted when shares are sold Through one year 1.00 -------------------------------------------------------------------------------- Longer than one year 0.00 ____ 10 Your Account HOW TO EXCHANGE SHARES ------------------------------------------------------------------------------- You may exchange your shares for shares of the same share class of another fund distributed by Liberty Funds Distributor, Inc. at net asset value. If your shares are subject to a CDSC, you will not be charged a CDSC upon the exchange. However, when you sell the shares acquired through the exchange, the shares sold may be subject to a CDSC, depending upon when you originally purchased the shares you exchanged. For purposes of computing the CDSC, the length of time you have owned your shares will be computed from the date of your original purchase and the applicable CDSC will be the CDSC of the original fund. Unless your account is part of a tax-deferred retirement plan, an exchange is a taxable event. Therefore, you may realize a gain or a loss for tax purposes. The Fund may terminate your exchange privilege if the advisor determines that your exchange activity is likely to adversely impact its ability to manage the Fund. To exchange by telephone, call 1-800-422-3737. HOW TO SELL SHARES -------------------------------------------------------------------------------- Your financial advisor can help you determine if and when you should sell your shares. You may sell shares of the Fund on any regular business day that the New York Stock Exchange (NYSE) is open. When the Fund receives your sales request in "good form," shares will be sold at the next calculated price. In "good form" means that money used to purchase your shares is fully collected. When selling shares by letter of instruction, "good form" also means (i) your letter has complete instructions, the proper signatures and signature guarantees, (ii) you have included any certificates for shares to be sold, and (iii) any other required documents are attached. A signature guarantee is designed to protect you and Liberty Acorn from fraud. Signature guarantees can be obtained from a commercial bank, broker-dealer, credit union (if authorized under state law), securities exchange or association. A notary public cannot provide a signature guarantee. For additional documents required for sales by corporations, agents, fiduciaries and surviving joint owners, please call 1-800-345-6611. Retirement plan accounts have special requirements; please call 1-800-799-7526 for more information. The Fund will generally send proceeds from the sale to you within seven days (usually on the next business day after your request is received in "good form"). However, if you purchased your shares by check, the Fund may delay sending the proceeds from the sale of your shares for up to 15 days after your purchase to protect against checks that are returned. No interest will be paid on uncashed redemption checks. Redemption proceeds may be paid in securities rather than cash, under certain circumstances. For more information, see the paragraph "Non-Cash Redemptions" under the section "How to Sell Shares" in the Statement of Additional Information. _____ 11 Your Account Outlined below are the various options for selling shares: Method Instructions Through your You may call your financial advisor to place your sell financial advisor order. To receive the current trading day's price, your financial advisor firm must receive your request prior to the close of the NYSE, usually 4:00 p.m. Eastern time. -------------------------------------------------------------------------------- By exchange You or your financial advisor may sell shares by exchanging from the Fund into the same share class of another Liberty fund at no additional cost. To exchange by telephone, call 1-800-422-3737. -------------------------------------------------------------------------------- By telephone You or your financial advisor may sell shares by telephone and request that a check be sent to your address of record by calling 1-800-422-3737, unless you have notified the Fund of an address change within the previous 30 days. The dollar limit for telephone sales is $100,000 in a 30-day period. You do not need to set up this feature in advance of your call. Certain restrictions apply to retirement accounts. For details, call 1-800-345-6611. -------------------------------------------------------------------------------- By mail You may send a signed letter of instruction or stock power form along with any share certificates to be sold to the address below. In your letter of instruction, note your Fund's name, share class, account number, and the dollar value or number of shares you wish to sell. All account owners must sign the letter, and signatures must be guaranteed by either a bank, a member firm of a national stock exchange or another eligible guarantor institution. Additional documentation is required for sales by corporations, agents, fiduciaries, surviving joint owners and individual retirement account owners. For details, call 1-800-345-6611. Mail your letter of instruction to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. -------------------------------------------------------------------------------- By wire You may sell shares and request that the proceeds be wired to your bank. You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the account application for this feature. -------------------------------------------------------------------------------- By systematic You may automatically sell a specified dollar amount withdrawal plan or percentage on a monthly, quarterly or semi-annual basis if your account balance is at least $5,000 and have the proceeds sent to you. This feature is not available if you hold your shares in certificate form. Be sure to complete the appropriate section of the account application for this feature. -------------------------------------------------------------------------------- By electronic You may sell shares and request that the proceeds be funds transfer electronically transferred to your bank. Proceeds may take up to two business days to be received by your bank. You must set up this feature prior to your request. Be sure to complete the appropriate section of the account application for this feature. FUND POLICY ON TRADING OF FUND SHARES -------------------------------------------------------------------------------- The Fund does not permit short-term or excessive trading. Excessive purchases, redemptions or exchanges of Fund shares disrupt portfolio management and drive Fund expenses higher. In order to promote the best interests of the Fund, the Fund reserves the right to reject any purchase order or exchange request, particularly from market timers or investors who, in the advisor's opinion, have a pattern of short-term or excessive trading or whose trading has been or may be disruptive to the Fund. The fund into which you would like to exchange also may reject your request. ___ 12 Your Account DISTRIBUTION AND SERVICE FEES -------------------------------------------------------------------------------- The Fund has adopted a plan under Rule 12b-1 that permits it to pay the Fund's distribution, marketing and other fees to support the sale and distribution of Class A, B and C shares and certain services provided to you by your financial advisor. The annual service fee may equal up to 0.25% for Class A, Class B and Class C shares. The annual distribution fee may equal up to 0.10% for Class A shares and 0.75% for Class B and Class C shares. Distribution and service fees are paid out of the assets of these classes. Over time, these fees may reduce the return on your investment and may cost you more than paying other types of sales charges. Class B shares automatically convert to Class A shares after a certain number of years, eliminating a portion of the distribution fee upon conversion. Conversion may occur three, four or eight years after purchase, depending on the program you purchased your shares under. See "Your Account: Sales Charge" for the conversion schedule applicable to Class B shares. OTHER INFORMATION ABOUT YOUR ACCOUNT -------------------------------------------------------------------------------- HOW THE FUND'S SHARE PRICE IS DETERMINED The price of each class of the Fund's shares is based on its net asset value. The net asset value is determined at the close of regular trading on the NYSE, usually 4:00 p.m. Eastern time, on each business day that the NYSE is open (typically Monday through Friday). When you request a transaction, it will be processed at the net asset value (plus any applicable sales charges) next determined after your request is received in "good form" by the distributor. In most cases, in order to receive that day's price, the distributor must receive your order before that day's transactions are processed. If you request a transaction through your financial advisor's firm, the firm must receive your order by the close of trading on the NYSE to receive that day's price. The Fund determines its net asset value for each share class by dividing each class's total net assets by the number of that class's outstanding shares. In determining the net asset value, the Fund must determine the price of each security in its portfolio at the close of each trading day. Securities for which market quotations are available are valued each day at the current market value. However, where market quotations are not available, or when the advisor believes that subsequent events have made them unreliable, the Fund may use other data to determine the fair value of the securities. You can find the daily prices of some share classes for the Fund in most major daily newspapers under the caption "Liberty." You can find daily prices for all share classes by visiting the Fund's web site at www.libertyfunds.com. ACCOUNT FEES If your account value falls below $1,000 (other than as a result of depreciation in share value) you may be subject to an annual account fee of $10. This fee is deducted from the account in June each year. Approximately 60 days prior to the fee date, the Fund's transfer agent will send you written notification of the upcoming fee. If you add money to your account and bring the value above $1,000 prior to the fee date, the fee will not be deducted. ___ 13 Your Account Share Certificates Share certificates are not available for Class B and C shares. Certificates will be issued for Class A shares only if requested. If you decide to hold share certificates, you will not be able to sell your shares until you have endorsed your certificates and returned them to the distributor. ____ 14 Your Account UNDERSTANDING FUND DISTRIBUTIONS The Fund earns income from the securities it holds. The Fund also may realize capital gains and losses on sales of its securities. The Fund distributes substantially all of its net investment income and capital gains to shareholders. As a shareholder, you are entitled to a portion of the Fund's income and capital gains based on the number of shares you own at the time these distributions are declared. Dividends, Distributions, and Taxes The Fund has the potential to make the following distributions: Types of Distributions Dividend Represents interest and dividends earned from securities held by the Fund, net of expenses incurred by the Fund. -------------------------------------------------------------------------------- Capital gains Represents net long-term capital gains on sales of securities held for more than 12 months and net short-term capital gains, which are gains on sales of securities held for a 12-month period or less. Distribution Options The Fund distributes dividends in June and December and any capital gains (including short-term capital gains) at least annually. You can choose one of the options listed in the table below for these distributions when you open your account. To change your distribution option call 1-800-345- 6611. If you do not indicate on your application your preference for handling distributions, the Fund will automatically reinvest all distributions in additional shares of the Fund. Distribution Options Reinvest all distributions in additional shares of the Fund -------------------------------------------------------------------------------- Reinvest all distributions in shares of another Liberty fund -------------------------------------------------------------------------------- Receive dividends in cash (see options below) and reinvest capital gains -------------------------------------------------------------------------------- Receive all distributions in cash (with one of the following options): . send the check to your address of record . send the check to a third party address . transfer the money to your bank via electronic funds transfer Distribution of $10 or less will automatically be reinvested in additional Fund shares. If you elect to receive distributions by check and the check is returned as undeliverable, or if you do not cash a distribution check within six months of the check date, the distribution will be reinvested in additional shares of the Fund. ____ 15 Your Account Tax Consequences Regardless of whether you receive your distributions in cash or reinvest them in additional Fund shares, all Fund distributions are subject to federal income tax. Depending on the state where you live, distributions may also be subject to state and local income taxes. In general, any distributions of dividends, interest and short-term capital gains are taxable as ordinary income. Distributions of long-term capital gains are generally taxable as such, regardless of how long you have held your Fund shares. You will be provided with information each year regarding the amount of ordinary income and capital gains distributed to you for the previous year and any portion of your distribution which is exempt from state and local taxes. Your investment in the Fund may have additional personal tax implications. Please consult your tax advisor on federal, state, local or other applicable tax laws. In addition to the dividends and capital gains distributions made by the Fund, you may realize a capital gain or loss when selling and exchanging shares of the Fund. Such transactions may be subject to federal, state and local income tax. ____ 16 Managing the Fund INVESTMENT ADVISOR -------------------------------------------------------------------------------- Liberty Wanger Asset Management (Liberty WAM) (formerly Wanger Asset Management, L.P. (WAM)), located at 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606, is the Fund's investment advisor. Liberty WAM and its predecessor have managed mutual funds, including the Fund, since 1992. In its duties as investment advisor, Liberty WAM runs the Fund's day-to-day business, including placing all orders for the purchase and sale of the Fund's portfolio securities. As of June 30, 2000, Liberty WAM managed over $9 billion in assets. WAM was renamed Liberty WAM on September 29, 2000 when it became a wholly owned subsidiary of Liberty Financial Companies, Inc. (Liberty), which in turn is a majority owned indirect subsidiary of Liberty Mutual Insurance Company. For more information about Liberty's acquisition of WAM, see the Statement of Additional Information. Liberty WAM's advisory fee for managing the Fund in 1999 was 0.93% of the Fund's average daily net assets. Liberty WAM also receives an administrative services fee from the Fund at the annual rate of .05% of the Fund's average daily net assets. PORTFOLIO MANAGER -------------------------------------------------------------------------------- Liberty WAM uses a team to manage the Fund. Team members share responsibility for providing ideas, information, and knowledge in managing the Fund, and each team member has one or more particular areas of expertise. The portfolio managers are responsible for making daily investment decisions, and utilize the management team's input and advice when making buy and sell determinations. Robert A. Mohn Lead portfolio manager Robert Mohn is a vice president of Liberty Acorn Trust. He has been a member of the domestic analytical team at Liberty WAM and WAM since 1992, and was a principal of WAM from 1995 to September 29, 2000. He has managed Liberty Acorn USA since its inception in 1996, and also manages a mutual fund underlying variable insurance products and the U.S. portfolio of an investment company whose shares are offered only to non-U.S. investors. He is a CFA and holds a BS from Stanford University and an MBA from the University of Chicago. ____ 17 Other Investment Strategies and Risks UNDERSTANDING THE FUND'S OTHER INVESTMENT STRATEGIES AND RISKS The Fund's principal investment strategies and risks are described under "Liberty Acorn USA - Principal Investment Strategies" and "Liberty Acorn USA - Principal Investment Risks." In seeking to meet its investment goal, the Fund may also invest in other securities and use certain other investment techniques. These securities and investment techniques offer opportunities and carry various risks. Liberty WAM may elect not to buy any of these securities or use any of these techniques unless it believes that doing so will help the Fund achieve its investment goal. The Fund may not always achieve its investment goal. Additional information about the Fund's securities and investment techniques, as well as the Fund's fundamental and non-fundamental investment policies, is contained in the Statement of Additional Information. The first portion of this prospectus describes the Fund's principal investment strategies and their associated risks. This section provides more detail about the Fund's investment strategies, and describes other investments the Fund may make and the risks associated with them. In seeking to achieve its investment goal, the Fund may invest in various types of securities and engage in various investment techniques, which are not the principal focus of the Fund and therefore are not described in this prospectus. These types of securities and investment practices are identified and discussed in the Fund's Statement of Additional Information, which you may obtain free of charge (see back cover). Approval by the Fund's shareholders is not required to modify or change the Fund's investment goal or investment strategies. THE INFORMATION EDGE -------------------------------------------------------------------------------- The Fund invests in entrepreneurially managed smaller and mid-sized companies that it believes are not as well known by financial analysts and whose domination of a niche creates the opportunity for superior earnings-growth potential. Liberty WAM may identify what it believes are important economic, social or technological trends (for example, the growth of out-sourcing as a business strategy, or the productivity gains from the increasing use of technology) and try to identify companies it thinks will benefit from those trends. In making investments for the Fund, Liberty WAM relies primarily on independent, internally generated research to uncover companies that may be less well known than the more popular names. To find these companies, Liberty WAM compares growth potential, financial strength and fundamental value among companies. Liberty WAM may identify what it believes are important economic, social or technological trends (for example, the growth of out-sourcing as a business strategy, or the productivity gains from the increasing use of technology) and try to identify companies it thinks will benefit from these trends.
Growth Potential Financial Strength Fundamental Value -------------------------------------------------------------------------------- . superior technology . low debt . reasonable stock price . innovative marketing . adequate working relative to growth . managerial skill capital potential . market niche . conservative . valuable assets . good earnings accounting practices prospects . adequate profit margin . strong demand for product The realization of this A strong balance sheet Once Liberty WAM growth potential would gives management uncovers an attractive likely produce superior greater flexibility to company, it identifies a performance that is pursue strategic price that it believes sustainable over time. objectives and is would also make the stock essential to maintaining a good value. a competitive advantage.
Other Investment Strategies and Risks STOCK STRENGTH COMES FIRST -------------------------------------------------------------------------------- Liberty WAM's analysts continually screen companies and make more than 1,000 face-to-face visits around the globe each year. To accomplish this, Liberty WAM analysts talk to top management, vendors, suppliers and competitors, whenever possible. In managing the Fund, Liberty WAM tries to maintain lower taxes and transaction costs by investing with a long-term time horizon (at least two to five years). However, ____ 18 Other Investment Strategies and Risks securities purchased on a long-term basis may be sold within 12 months after purchase due to changes in the circumstances of a particular company or industry, or changes in general market or economic conditions. DERIVATIVE STRATEGIES -------------------------------------------------------------------------------- The Fund may enter into a number of hedging strategies, including those that employ futures and options, to gain or reduce exposure to particular securities or markets. These strategies, commonly referred to as derivatives, involve the use of financial instruments whose values depend on, or are derived from, the value of an underlying security, index or currency. The Fund may use these strategies to adjust the Fund's sensitivity to changes in interest rates or for other hedging purposes (i.e., attempting to offset a potential loss in one position by establishing an interest in an opposite position). Derivative strategies involve the risk that they may exaggerate a loss, potentially losing more money than the actual cost of the underlying security, or limit a potential gain. Also, with some derivative strategies there is a risk that the other party to the transaction may fail to honor its contract terms, causing a loss to the Fund. TEMPORARY DEFENSIVE STRATEGIES -------------------------------------------------------------------------------- At times, Liberty WAM may determine that adverse market conditions make it desirable to temporarily suspend the Fund's normal investment activities. During such times, the Fund may, but is not required to, invest in cash or high- quality, short-term debt securities, without limit. Taking a temporary defensive position may prevent the Fund from achieving its investment goal. ____ 19 Financial Highlights The financial highlights tables are intended to help you understand the Fund's financial performance. Because Class A, Class B and Class C shares are new classes of shares, information is shown for the Fund's Class Z shares since inception. The Fund's fiscal year runs from January 1 to December 31. Class Z shares are offered to certain investors through separate prospectuses. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). The information with respect to the six month period ended June 30, 2000 is unaudited. The information for the three years ended December 31, 1999 and the period ended December 31, 1996 is audited. For periods up to and including the year ended 1999, this information has been derived from the Fund's audited financial statements which have been audited by Ernst & Young LLP, independent auditors, whose report, along with the Fund's financial statements, is included in the Fund's annual report. You can request a free annual report by calling 1-800-426-3750. Liberty Acorn USA
Six months ended For a share outstanding throughout 6/30/00 Year Ended Year Ended Year Ended Inception 9/4/96 each period (unaudited) 12/31/99 12/31/98 12/31/97 Through 12/31/96 --------------------------------------------------------------------------------------------------------------------------------- Class Z Class Z Class Z Class Z Class Z --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $16.75 $ 14.80 $ 15.12 $ 11.65 $ 10.00 --------------------------------------------------------------------------------------------------------------------------------- Income from Investment Operations: Net investment loss (a) (.02) -- (.07) (.07) (.02) --------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain on investments (2.67) 3.32 .87 3.83 1.67 --------------------------------------------------------------------------------------------------------------------------------- Total from Investment Operations (2.69) 3.32 .80 3.76 1.65 --------------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income -- -- -- -- -- --------------------------------------------------------------------------------------------------------------------------------- Distributions from net realized and unrealized gains reportable for federal income taxes (.32) (1.37) (1.12) (.29) -- --------------------------------------------------------------------------------------------------------------------------------- Total distributions (.32) (1.37) (1.12) (.29) -- --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $13.74 $ 16.75 $ 14.80 $ 15.12 $ 11.65 --------------------------------------------------------------------------------------------------------------------------------- Total return (c) (16.1%) 23.0% 5.8% 32.3% 16.5% --------------------------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Ratio of expenses to average net assets (b) 1.13%* 1.15% 1.20% 1.35% 1.85%* --------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment loss to average net assets (.27%)* 0.00% (.42%) (.49%) (.99%)* --------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 65% 49% 42% 33% 20%* --------------------------------------------------------------------------------------------------------------------------------- Net assets at end of period (in millions) $ 305 $ 371 $ 281 $ 185 $ 53
(a) Net investment loss per share was based upon the average shares outstanding during the period. (b) In accordance with a requirement by the Securities and Exchange Commission, the ratio of expenses to average net assets for Liberty Acorn USA reflects gross custodian fees. This ratio net of custodian fees paid indirectly would have been 1.79% for the period ended December 31, 1996. (c) Total return is not annualized for periods less than one year. Class A, B and C shares are subject to sales loads, account fees and rule 12b-1 fees that are not reflected in the total return. *Annualized ____ 20 Notes ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ____ 21 Notes ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ____ 22 FOR MORE INFORMATION -------------------------------------------------------------------------------- You can get more information about the Fund's investments in the Fund's semi-annual and annual reports to shareholders. The annual report contains a discussion of the market conditions and investment strategies that significantly affected the Fund's performance over its last fiscal year. You may wish to read the Statement of Additional Information for more information on the Fund and the securities in which it invests. The Statement of Additional Information is incorporated into this prospectus by reference, which means that it is considered to be part of this prospectus. You can get free copies of reports and the Statement of Additional Information, request other information and discuss your questions about the Fund by writing or calling the Fund's distributor at: Liberty Funds Distributor, Inc. One Financial Center Boston, MA 02111-2621 1-800-426-3750 www.libertyfunds.com Text-only versions of all Fund documents can be viewed online or downloaded from the Edgar database on the Securities and Exchange Commission internet site at www.sec.gov. You can review and copy information about the Fund by visiting the following location, and you can obtain copies, upon payment of a duplicating fee by electronic request at the E-mail address publicinfo@sec.gov or by writing the: Public Reference Room Securities and Exchange Commission Washington, DC 20549-0102 Information on the operation of the Public Reference Room may be obtained by calling 1-202-942-8090. Investment Company Act file number: Liberty Acorn Trust (formerly Acorn Investment Trust): 811-01829 . Liberty Acorn USA (formerly Acorn USA) -------------------------------------------------------------------------------- [LOGO OF LIBERTY FUNDS] ALL-STAR.COLONIAL.CRABBE HUSON.NEWPORT.STEIN ROE ADVISOR Liberty Funds Distributor, Inc. (C) 2000 One Financial Center, Boston, MA 02111-2621, 1-800-426-3750 www.libertyfunds.com LIBERTY ACORN TWENTY Prospectus, September 29, 2000 Class A, B and C Shares Advised by Liberty Wanger Asset Management, L.P. Liberty Acorn Trust Although these securities have been registered with the Securities and Exchange Commission, the Commission has not approved or disapproved any shares offered in this prospectus or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. -------------------------------------------------------------------------------- TABLE OF CONTENTS LIBERTY ACORN TWENTY...................................................... 2 -------------------- Investment Goal........................................................... 2 Principal Investment Strategies........................................... 2 Principal Investment Risks................................................ 2 Performance History....................................................... 4 Your Expenses............................................................. 5 YOUR ACCOUNT.............................................................. 6 ------------ How to Buy Shares......................................................... 6 Sales Charges............................................................. 7 How to Exchange Shares.................................................... 11 How to Sell Shares........................................................ 11 Fund Policy on Trading of Fund Shares..................................... 12 Distribution and Service Fees............................................. 13 Other Information About Your Account...................................... 13 MANAGING THE FUND......................................................... 17 ----------------- Investment Advisor........................................................ 17 Portfolio Manager......................................................... 17 OTHER INVESTMENT STRATEGIES AND RISKS..................................... 18 ------------------------------------- The Information Edge...................................................... 18 Stock Strength Comes First................................................ 18 Derivative Strategies..................................................... 19 Temporary Defensive Strategies............................................ 19 FINANCIAL HIGHLIGHTS...................................................... 20 --------------------
------------------ Not FDIC Insured May Lose Value No Bank Guarantee ------------------ Liberty Acorn Twenty INVESTMENT GOAL -------------------------------------------------------------------------------- Liberty Acorn Twenty seeks long-term growth of capital. PRINCIPAL INVESTMENT STRATEGIES -------------------------------------------------------------------------------- Liberty Acorn Twenty invests primarily in the stocks of medium- to larger-sized U.S. companies. The Fund is a non-diversified fund that takes advantage of its advisor's research and stock-picking capabilities to invest in a limited number of companies (between 20-25) with market capitalizations of $2 billion to $12 billion, offering the potential to provide above-average growth over time. The Fund believes that companies within this capitalization range are not as well known by financial analysts, and may offer higher return potential than the stocks of companies with capitalizations above $12 billion. Liberty Acorn Twenty typically looks for companies with: . A strong business franchise that offers growth potential. . Products and services that give the company a competitive advantage. . A stock price the Fund's advisor believes is reasonable relative to the assets and earning power of the company. Although the Fund does not buy securities with a short-term view, there is no restriction on the length of time the Fund must hold a security. To the extent the Fund buys and sells securities frequently, its transaction costs will be higher (which may adversely affect the Fund's performance) and it may realize additional capital gains. Additional strategies that are not principal investment strategies and the risks associated with them are described later in this prospectus under "Other Investment Strategies and Risks." PRINCIPAL INVESTMENT RISKS -------------------------------------------------------------------------------- The principal risks of investing in the Fund are described below. There are many circumstances (including additional risks that are not described here) which could prevent the Fund from achieving its investment goal. You may lose money by investing in the Fund. Management risk means that the advisor's stock selections and other investment decisions might produce losses or cause the Fund to underperform when compared to other funds with a similar investment goal. Market risk means that security prices in a market, sector or industry may move down. Downward movements will reduce the value of your investment. Because of management and market risk, there is no guarantee that the Fund will achieve its investment goal or perform favorably compared with competing funds. Equity risk is the risk that stock prices will fall over short or extended periods of time. Although the stock market has historically outperformed other asset classes over the long term, the equity market tends to move in cycles and individual stock prices may fluctuate drastically from day-to-day and may underperform other asset classes over an extended period of time. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. ____ 2 Liberty Acorn Twenty Smaller companies and mid-capitalization companies are more likely than larger companies to have limited product lines, operating histories, markets or financial resources. They may depend heavily on a small management team. Stocks of smaller companies and mid-capitalization companies may trade less frequently, may trade in smaller volumes and may fluctuate more sharply in price than stocks of larger companies. In addition, they may not be widely followed by the investment community, which can lower the demand for their stock. Sector risk may sometimes be present in the Fund's investments. Companies that are in different but closely related industries are sometimes described as being in the same broad economic sector. The values of stocks of many different companies in a market sector may be similarly affected by particular economic or market events. Although the Fund does not intend to focus on any particular sector, at times the Fund may have a significant portion of its assets invested in a particular sector. An example of a sector in which the Fund may sometimes have a significant portion of its assets invested is technology. Technology companies may be significantly affected by falling prices and profits, and intense competition. In addition, the rate of technological change for technology companies is generally higher than for other companies, often requiring extensive and sustained investment in research and development, and exposing such companies to the risk of rapid product obsolescence. The price of many technology stocks has risen based on projections of future earnings and company growth. If a company does not perform as expected, the price of the stock could decline significantly. Many technology companies are currently operating at a loss and may never be profitable. As a non-diversified mutual fund, the Fund is allowed to invest a greater percentage of its total assets in the securities of a single issuer. This may concentrate issuer risk and, therefore, the Fund may have an increased risk of loss compared to a similar diversified mutual fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. ____ 3 Liberty Acorn Twenty UNDERSTANDING PERFORMANCE Calendar year total returns show the Fund's Class Z share performance for each completed calendar year. They include the effects of Class Z expenses. Class A, Class B and Class C shares are subject to sales charges, 12b- 1 fees and different expenses that are not reflected in the bar chart. If these amounts were reflected, returns would be less than those shown. Average annual total returns are measures of the Fund's Class Z performance over the past one-year and life of the Fund periods. They include the effects of Class Z expenses. The table shows for each class the Class Z performance restated to reflect the effect of sales charges of the class. The Fund's return is compared to the S&P Mid Cap 400 Index. The S&P Mid Cap 400 is an unmanaged, market value-weighted index of 400 midcap U.S. companies. Unlike the Fund, an index is not an investment, does not incur fees or expenses and is not professionally managed. It is not possible to invest directly in an index. PERFORMANCE HISTORY -------------------------------------------------------------------------------- Because Class A, Class B and Class C shares have not been offered for a full calendar year, the information provided in the bar chart below shows changes in the Fund's performance from year to year by illustrating the Fund's calendar year total returns for its Class Z shares. Class Z shares are offered to certain investors through a separate prospectus. The performance table following the bar chart shows how the Fund's average annual returns for (1) the Class Z shares and (2) the Class Z shares, restated to reflect the sales charges of the Class A, Class B and Class C shares, respectively, compare with those of broad measures of market performance for one year and life of the Fund. The chart and table are intended to illustrate some of the risks of investing in the Fund by showing the changes in the Fund's Class Z performance. All returns include the reinvestment of dividends and distributions. Performance results include the effect of expense reduction arrangements. If these arrangements were not in place, then performance would have been lower. Any expense reduction arrangements may be discontinued at any time. As with all mutual funds, past performance does not predict the Fund's future performance. Calendar Year Total Returns (Class Z)/(1)/ -------------------------------------------------------------------------------- [Bar Chart] Year Return ---- ------ 1999 29.30% -------------------------------------------------------------------------------- For period shown in bar chart: Best quarter: 4th quarter 1999, +14.35% Worst quarter: 3rd quarter 1999, -7.13% (1) Class Z shares are not offered through this prospectus, but Class A, Class B and Class C shares would have substantially similar annual returns because the shares are invested in the same portfolio of securities and these returns differ only to the extent that the classes do not have the same expenses. Average Annual Total Returns -- for periods ended December 31, 1999/(2)/
Life of the Inception Date 1 Year Fund Class A 9/29/00 21.87% 27.20% -------------------------------------------------------------------------------- Class B 9/29/00 24.30% 30.69% -------------------------------------------------------------------------------- Class C 9/29/00 28.30% 34.20% -------------------------------------------------------------------------------- Class Z 11/23/98 29.30% 34.20% -------------------------------------------------------------------------------- S&P Mid Cap 400 N/A 14.72% 24.49%
(2) Class A, Class B, and Class C are new classes of shares. Their performance information includes returns of the Fund's Class Z shares (the oldest existing Fund class) for periods prior to the inception of the newer classes of shares. Class Z returns are not restated to reflect any differences in expenses (such as Rule 12b-1 fees) between shares. If differences in expenses were reflected, the returns for prior to the inception of the newer classes of shares would be lower. Class Z shares were initially offered on November 28, 1998; Class A, Class B and Class C shares were initially offered on September 29, 2000. ____ 4 Liberty Acorn Twenty UNDERSTANDING EXPENSES Sales Charges are paid directly by shareholders to Liberty Funds Distributor, Inc., the Fund's distributor. Annual Fund Operating Expenses are deducted from the Fund. They include management and administration fees, 12b-1 fees and administrative costs including pricing and custody services. Example Expenses help you compare the cost of investing in the Fund to the cost of investing in other mutual funds. The table does not take into account any expense reduction arrangements discusssed in the footnotes to the Annual Fund Operating Expenses table. It uses the following hypothetical conditions: . $10,000 initial investment . 5% total return for each year . fund operating expenses remain the same . assumes reinvestment of all dividends and distributions . assumes Class B shares convert to Class A shares after eight years YOUR EXPENSES -------------------------------------------------------------------------------- Expenses are one of several factors to consider before you invest in a mutual fund. The tables below describe the fees and expenses you may pay when you buy, hold and sell shares of the Fund. Shareholder Fees/(3)/ (paid directly from your investment)
Class A Class B Class C Maximum sales charge (load) on purchases (%) (as a percentage of the offering price) 5.75 None None ------------------------------------------------------------------------------------------------- Maximum deferred sales charge (load) on redemptions (%) (as a percentage of the lesser of purchase price or redemption price) 1.00/(4)/ 5.00 1.00 ------------------------------------------------------------------------------------------------- Redemption fee (5) (5) (5)
(3) A $10 annual fee is deducted from accounts of less than $1,000 and paid to the transfer agent. (4) This charge applies only to certain Class A shares bought without an initial sales charge that are sold within 18 months of purchase. (5) There is a $7.50 charge for wiring sale proceeds to your bank. Annual Fund Operating Expenses (deducted directly from fund assets)
Class A Class B Class C Management fees/(6)/(%) .90 .90 .90 ------------------------------------------------------------------------------------------------- Distribution and service (12b-1) fees (%) .35 1.00 1.00 ------------------------------------------------------------------------------------------------- Other expenses (%) .57 .57 .57 ------------------------------------------------------------------------------------------------- Total annual fund operating expenses/(7)/ (%) 1.82 2.47 2.47
(6) In addition to the management fee, the Fund pays the Advisor an administrative fee of .05%, which is included in "Other Expenses." (7) The Fund's Advisor has voluntarily agreed to reimburse the Fund for any ordinary operating expenses (exclusive of distribution and service fees, interest, taxes and extraordinary expenses, if any) exceeding 1.70%, 2.35% and 2.35% of the average annual net assets for Class A, Class B and Class C shares, respectively. This arrangement may be modified or terminated by either the Fund or its advisor on 30 days' notice. As a result, the actual total annual fund operating expenses for Class A, B and C shares would be 1.70%, 2.35%, and 2.35% of respectively. Liberty Acorn Twenty Example Expenses (your actual costs may be higher or lower)
Class 1 Year 3 Years 5 Years 10 Years Class A: $ 749 $1,115 $1,504 $2,589 ----------------------------------------------------------------------------------------------------- Class B: did not sell your shares $ 250 $ 770 $1,316 $2,646 sold all your shares at the end of the period $ 750 $1,070 $1,516 $2,646 ----------------------------------------------------------------------------------------------------- Class C: did not sell your shares $ 250 $ 770 $1,316 $2,806 sold all your shares at the end of the period $ 350 $ 770 $1,316 $2,806
____ 5 Your Account INVESTMENT MINIMUMS Initial Investment........................................ $1,000 Subsequent Investments.................................... $ 50 Automatic Investment Plan*................................ $ 50 Retirement Plans*......................................... $ 25 * The initial investment minimum of $1,000 is waived on this plan. The Fund reserves the right to change these investment minimums. The Fund also reserves the right to refuse a purchase order for any reason, including if it believes that doing so would be in the best interest of the Fund and its shareholders. HOW TO BUY SHARES -------------------------------------------------------------------------------- Your financial advisor can help you establish an appropriate investment portfolio, buy shares and monitor your investments. When the Fund receives your purchase request in "good form," your shares will be bought at the next calculated public offering price. "Good form" means that you placed your order with your brokerage firm or your payment has been received and your application is complete, including all necessary signatures. Outlined below are the various options for buying shares: Method Instructions Through your Your financial advisor can help you establish your financial advisor account and buy Fund shares on your behalf. Your financial advisor may charge you fees for executing the purchase for you. -------------------------------------------------------------------------------- By check For new accounts, send a completed application and (new account) check made payable to the Fund to the transfer agent, Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. -------------------------------------------------------------------------------- By check For existing accounts, fill out and return the (existing account) additional investment stub included in your quarterly statement, or send a letter of instruction including your Fund name and account number with a check made payable to the Fund to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. -------------------------------------------------------------------------------- By exchange You or your financial advisor may acquire shares by exchanging shares you own in one fund for shares of the same class of the Fund at no additional cost. There may be an additional charge if exchanging from a money market fund. To exchange by telephone, call 1-800-422- 3737. -------------------------------------------------------------------------------- By wire You may purchase shares by wiring money from your bank account to your Fund account. To wire funds to your Fund account, call 1-800-422-3737 to obtain a control number and the wiring instructions. -------------------------------------------------------------------------------- By electronic funds You may purchase shares by electronically transferring transfer money from your bank account to your Fund account by calling 1-800-422-3737. Electronic funds transfers may take up to two business days to settle and be considered in "good form." You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the application. -------------------------------------------------------------------------------- Automatic You can make monthly or quarterly investments investment plan automatically from your bank account to your Fund account. You can select a pre-authorized amount to be sent via electronic funds transfer. Be sure to complete the appropriate section of the application for this feature. -------------------------------------------------------------------------------- By dividend You may automatically invest dividends distributed by diversification one fund into the same class of shares of the Fund at no additional sales charge. To invest your dividends in the Fund, call 1-800-345-6611. ____ 6 Your Account CHOOSING A SHARE CLASS The Fund offers three classes of shares in this prospectus -- Class A, B and C. Each share class has its own sales charge and expense structure. Determining which share class is best for you depends on the dollar amount you are investing and the number of years for which you are willing to invest. If your financial advisor firm does not participate in the Class B discount program, purchases of $250,000 or more must be for Class A or Class C shares only. Purchases of $1 million or more can be made only in Class A shares. Based on your personal situation, your financial advisor can help you decide which class of shares makes the most sense for you. The Fund also offers an additional class of shares, Class Z shares, to certain institutional and other investors. Class Z shares are made available through separate prospectuses provided to eligible institutional and other investors. SALES CHARGES -------------------------------------------------------------------------------- You may be subject to an initial sales charge when you purchase, or a contingent deferred sales charge (CDSC) when you sell, shares of the Fund. These sales charges are described below. In certain circumstances, these sales charges are waived, as described below and in the Statement of Additional Information. Class A shares Your purchases of Class A shares generally are at the public offering price. This price includes a sales charge that is based on the amount of your initial investment when you open your account. A portion of the sales charge is the commission paid to the financial advisor firm on the sale of Class A shares. The sales charge you pay on additional investments is based on the total amount of your purchase and the current value of your account. The amount of the sales charge differs depending on the amount you invest as shown in the table below. Class A Sales Charges
% of offering As a % of price the public As a % retained by offering of your financial Amount of purchase price investment advisor firm Less than $50,000 5.75 6.10 5.00 ------------------------------------------------------------------------------------------------- $50,000 to less than $100,000 4.50 4.71 3.75 ------------------------------------------------------------------------------------------------- $100,000 to less than $250,000 3.50 3.63 2.75 ------------------------------------------------------------------------------------------------- $250,000 to less than $500,000 2.50 2.56 2.00 ------------------------------------------------------------------------------------------------- $500,000 to less than $1,000,000 2.00 2.04 1.75 ------------------------------------------------------------------------------------------------- $1,000,000 or more 0.00 0.00 0.00 -------------------------------------------------------------------------------------------------
Class A shares bought without an initial sales charge in accounts aggregating $1 million to $25 million at the time of purchase are subject to a 1.00% CDSC if the shares are sold within 18 months of the time of purchase. Subsequent Class A share purchases that bring your account value above $1 million are subject to a CDSC if redeemed within 18 months of the date of purchase. The 18-month period begins on the first day of the month following each purchase. The CDSC does not apply to retirement plans purchasing shares through a fee-based program. For Class A share purchases of $1 million or more, financial advisors receive a commission from the distributor as follows: Purchases Over $1 Million Amount purchased Commission % First $3 million 1.00 ----------------------------------------------------------- $3 million to less than $5 million 0.80 ----------------------------------------------------------- $5 million to less than $25 million 0.50 ----------------------------------------------------------- $25 million or more 0.25 ----------------------------------------------------------- The commission to financial advisors for Class A share purchases of $25 million or more is paid over 12 months but only to the extent the shares remain outstanding. For Class A share purchases by participants in certain group retirement plans offered through a fee-based program, financial advisors receive a 1.00% commission from the distributor on all purchases of less than $3 million. ---- 7 Your Account UNDERSTANDING CONTINGENT DEFERRED SALES CHARGES (CDSC) Certain investments in Class A, B and C shares are subject to a CDSC, a sales charge applied at the time you sell your shares. You will pay the CDSC only on shares you sell within a certain amount of time after purchase. The CDSC generally declines each year until there is no charge for selling shares. The CDSC is applied to the net asset value at the time of purchase or sale, whichever is lower. For purposes of calculating the CDSC, the start of the holding period is the month-end of the month in which the purchase is made. Shares you purchase with reinvested dividends or capital gains are not subject to a CDSC. When you place an order to sell shares, your Fund will automatically sell first those shares not subject to a CDSC and then those you have held the longest. This policy helps reduce and possibly eliminate the potential impact of the CDSC. Reduced Sales Charges for Larger Investments There are two ways for you to pay a lower sales charge when purchasing Class A shares. The first is through Rights of Accumulation. If the combined value of the Fund accounts maintained by you, your spouse or your minor children reaches a discount level (according to the chart on the previous page), your next purchase will receive the lower sales charge. The second is by signing a Statement of Intent within 90 days of your purchase. By doing so, you would be able to pay the lower sales charge on all purchases by agreeing to invest a total of at least $50,000 within 13 months. If your Statement of Intent purchases are not completed within 13 months, you will be charged the applicable sales charge on the amount you had invested to that date. In addition, certain investors may purchase shares at a reduced sales charge or net asset value, which is the value of a Fund share excluding any sales charges. See the Statement of Additional Information for a description of these situations. Class B shares Your purchases of Class B shares are at Class B shares' net asset value. Class B shares have no front-end sales charge, but they do carry a CDSC that is imposed only on shares sold prior to the completion of the periods shown in the charts below. The CDSC generally declines each year and eventually disappears over time. The distributor pays the financial advisor firm an up- front commission on sales of Class B shares as depicted in the charts below. Purchases of less than $250,000: Class B Sales Charges % deducted when Holding period after purchase shares are sold Through first year 5.00 ------------------------------------------------------------------------- Through second year 4.00 ------------------------------------------------------------------------- Through third year 3.00 ------------------------------------------------------------------------- Through fourth year 3.00 ------------------------------------------------------------------------- Through fifth year 2.00 ------------------------------------------------------------------------- Through sixth year 1.00 ------------------------------------------------------------------------- Longer than six years None Commission to financial advisors is 5.00%. Automatic conversion to Class A shares is eight years after purchase. ____ 8 Your Account You can pay a lower CDSC and reduce the holding period when making purchases of Class B shares through a financial advisor firm which participates in the Class B share discount program for larger purchases as described in the charts below. Some financial advisor firms are not able to participate because their record keeping or transaction processing systems are not designed to accommodate these reductions. For non-participating firms, purchases of Class B shares must be less than $250,000. Consult your financial advisor to see whether it participates in the discount program for larger purchases. For participating firms, Rights of Accumulation apply, so that if the combined value of Fund accounts maintained by you, your spouse or your minor children is at or above a discount level, your next purchase will receive the lower CDSC and the applicable reduced holding period. Purchases of $250,000 to less than $500,000: Class B Sales Charges % deducted when Holding period after purchase shares are sold Through first year 3.00 ------------------------------------------------------------------------- Through second year 2.00 ------------------------------------------------------------------------- Through third year 1.00 ------------------------------------------------------------------------- Longer than three years 0.00 Commission to financial advisors is 2.50%. Automatic conversion to Class A shares is four years after purchase. Purchases of $500,000 to less than $1 million: Class B Sales Charges % deducted when Holding period after purchase shares are sold Through first year 3.00 ------------------------------------------------------------------------- Through second year 2.00 ------------------------------------------------------------------------- Through third year 1.00 Commission to financial advisors is 1.75%. Automatic conversion to Class A shares is three years after purchase. ____ 9 Your Account If you exchange into a Fund participating in the Class B share discount program or transfer your Fund account from a financial advisor which does not participate in the program to one who does, the exchanged or transferred shares will retain the pre-existing CDSC but any additional purchases of Class B shares which cause the exchanged or transferred account to exceed the applicable discount level will receive the lower CDSC and the reduced holding period for amounts in excess of the discount level. Your financial advisor will receive the lower commission for purchases in excess of the applicable discount level. If you exchange from a participating fund or transfer your account from a financial advisor that does participate in the program into a fund or financial advisor which does not, the exchanged or transferred shares will retain the pre-existing CDSC but all additional purchases of Class B shares will be in accordance with the higher CDSC and longer holding period of the non-participating fund or financial advisor. Class C shares Similar to Class B shares, your purchases of Class C shares are at Class C's net asset value. Although Class C shares have no front-end sales charge, they carry a CDSC of 1.00% that is applied to shares sold within the first year after they are purchased. After holding shares for one year, you may sell them at any time without paying a CDSC. The distributor pays the financial advisor firm an up-front commission of 1.00% on sales of Class C shares. Class C Sales Charges Years after purchase % deducted when shares are sold Through one year 1.00 -------------------------------------------------------------------------- Longer than one year 0.00 ---- 10 Your Account HOW TO EXCHANGE SHARES ------------------------------------------------------------------------------- You may exchange your shares for shares of the same share class of another fund distributed by Liberty Funds Distributor, Inc. at net asset value. If your shares are subject to a CDSC, you will not be charged a CDSC upon the exchange. However, when you sell the shares acquired through the exchange, the shares sold may be subject to a CDSC, depending upon when you originally purchased the shares you exchanged. For purposes of computing the CDSC, the length of time you have owned your shares will be computed from the date of your original purchase and the applicable CDSC will be the CDSC of the original fund. Unless your account is part of a tax-deferred retirement plan, an exchange is a taxable event. Therefore, you may realize a gain or a loss for tax purposes. The Fund may terminate your exchange privilege if the advisor determines that your exchange activity is likely to adversely impact its ability to manage the Fund. To exchange by telephone, call 1-800-422-3737. HOW TO SELL SHARES ------------------------------------------------------------------------------- Your financial advisor can help you determine if and when you should sell your shares. You may sell shares of the Fund on any regular business day that the New York Stock Exchange (NYSE) is open. When the Fund receives your sales request in "good form," shares will be sold at the next calculated price. In "good form" means that money used to purchase your shares is fully collected. When selling shares by letter of instruction, "good form" also means (i) your letter has complete instructions, the proper signatures and signature guarantees, (ii) you have included any certificates for shares to be sold, and (iii) any other required documents are attached. A signature guarantee is designed to protect you and Liberty Acorn from fraud. Signature guarantees can be obtained from a commercial bank, broker-dealer, credit union (if authorized under state law), securities exchange or association. A notary public cannot provide a signature guarantee. For additional documents required for sales by corporations, agents, fiduciaries and surviving joint owners, please call 1-800-345-6611. Retirement plan accounts have special requirements; please call 1-800-799-7526 for more information. The Fund will generally send proceeds from the sale to you within seven days (usually on the next business day after your request is received in "good form"). However, if you purchased your shares by check, the Fund may delay sending the proceeds from the sale of your shares for up to 15 days after your purchase to protect against checks that are returned. No interest will be paid on uncashed redemption checks. Redemption proceeds may be paid in securities rather than cash, under certain circumstances. For more information, see the paragraph "Non-Cash Redemptions" under the section "How to Sell Shares" in the Statement of Additional Information. ____ 11 Your Account Outlined below are the various options for selling shares: Method Instructions Through your You may call your financial advisor to place your sell financial advisor order. To receive the current trading day's price, your financial advisor firm must receive your request prior to the close of the NYSE, usually 4:00 p.m. Eastern time. -------------------------------------------------------------------------------- By exchange You or your financial advisor may sell shares by exchanging from the Fund into the same share class of another Liberty fund at no additional cost. To exchange by telephone, call 1-800-422-3737. -------------------------------------------------------------------------------- By telephone You or your financial advisor may sell shares by telephone and request that a check be sent to your address of record by calling 1-800-422-3737, unless you have notified the Fund of an address change within the previous 30 days. The dollar limit for telephone sales is $100,000 in a 30-day period. You do not need to set up this feature in advance of your call. Certain restrictions apply to retirement accounts. For details, call 1-800-345-6611. -------------------------------------------------------------------------------- By mail You may send a signed letter of instruction or stock power form along with any certificates to be sold to the address below. In your letter of instruction, note your Fund's name, share class, account number, and the dollar value or number of shares you wish to sell. All account owners must sign the letter, and signatures must be guaranteed by either a bank, a member firm of a national stock exchange or another eligible guarantor institution. Additional documentation is required for sales by corporations, agents, fiduciaries, surviving joint owners and individual retirement account owners. For details, call 1-800-345-6611. Mail your letter of instruction to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. -------------------------------------------------------------------------------- By wire You may sell shares and request that the proceeds be wired to your bank. You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the account application for this feature. -------------------------------------------------------------------------------- By systematic You may automatically sell a specified dollar amount or withdrawal plan percentage on a monthly, quarterly or semi-annual basis if your account balance is at least $5,000 and have the proceeds sent to you. This feature is not available if you hold your shares in certificate form. Be sure to complete the appropriate section of the account application for this feature. -------------------------------------------------------------------------------- By electronic You may sell shares and request that the proceeds be funds transfer electronically transferred to your bank. Proceeds may take up to two business days to be received by your bank. You must set up this feature prior to your request. Be sure to complete the appropriate section of the account application for this feature. FUND POLICY ON TRADING OF FUND SHARES -------------------------------------------------------------------------------- The Fund does not permit short-term or excessive trading. Excessive purchases, redemptions or exchanges of Fund shares disrupt portfolio management and drive Fund expenses higher. In order to promote the best interests of the Fund, the Fund reserves the right to reject any purchase order or exchange request, particularly from market timers or investors who, in the advisor's opinion, have a pattern of short-term or excessive trading or whose trading has been or may be disruptive to the Fund. The fund into which you would like to exchange also may reject your request. ____ 12 Your Account DISTRIBUTION AND SERVICE FEES -------------------------------------------------------------------------------- The Fund has adopted a plan under Rule 12b-1 that permits it to pay the Fund's distribution, marketing and other fees to support the sale and distribution of Class A, B and C shares and certain services provided to you by your financial advisor. The annual service fee may equal up to 0.25% for Class A, Class B and Class C shares. The annual distribution fee may equal up to 0.10% for Class A shares and 0.75% for Class B and Class C shares. Distribution and service fees are paid out of the assets of these classes. Over time, these fees may reduce the return on your investment and may cost you more than paying other types of sales charges. Class B shares automatically convert to Class A shares after a certain number of years, eliminating a portion of the distribution fee upon conversion. Conversion may occur three, four or eight years after purchase, depending on the program you purchased your shares under. See "Your Account; Sales Charge" for the conversion schedule applicable to Class B shares. OTHER INFORMATION ABOUT YOUR ACCOUNT -------------------------------------------------------------------------------- How the Fund's Share Price is Determined The price of each class of the Fund's shares is based on its net asset value. The net asset value is determined at the close of regular trading on the NYSE, usually 4:00 p.m. Eastern time, on each business day that the NYSE is open (typically Monday through Friday). When you request a transaction, it will be processed at the net asset value (plus any applicable sales charges) next determined after your request is received in "good form" by the distributor. In most cases, in order to receive that day's price, the distributor must receive your order before that day's transactions are processed. If you request a transaction through your financial advisor's firm, the firm must receive your order by the close of trading on the NYSE to receive that day's price. The Fund determines its net asset value for each share class by dividing each class's total net assets by the number of that class's outstanding shares. In determining the net asset value, the Fund must determine the price of each security in its portfolio at the close of each trading day. Securities for which market quotations are available are valued each day at the current market value. However, where market quotations are not available, or when the advisor believes that subsequent events have made them unreliable, the Fund may use other data to determine the fair value of the securities. You can find the daily prices of some share classes for the Fund in most major daily newspapers under the caption "Liberty." You can find daily prices for all share classes by visiting the Fund's web site at www.libertyfunds.com. Account Fees If your account value falls below $1,000 (other than as a result of depreciation in share value) you may be subject to an annual account fee of $10. This fee is deducted from the account in June each year. Approximately 60 days prior to the fee date, the Fund's transfer agent will send you written notification of the upcoming fee. If you add money to your account and bring the value above $1,000 prior to the fee date, the fee will not be deducted. ____ 13 Your Account Share Certificates Share certificates are not available for Class B and C shares. Certificates will be issued for Class A shares only if requested. If you decide to hold share certificates, you will not be able to sell your shares until you have endorsed your certificates and returned them to the distributor. ____ 14 Your Account UNDERSTANDING FUND DISTRIBUTIONS The Fund earns income from the securities it holds. The Fund also may realize capital gains and losses on sales of its securities. The Fund distributes substantially all of its net investment income and capital gains to shareholders. As a shareholder, you are entitled to a portion of the Fund's income and capital gains based on the number of shares you own at the time these distributions are declared. Dividends, Distributions, and Taxes The Fund has the potential to make the following distributions: Types of Distributions Dividend Represents interest and dividends earned from securities held by the Fund, net of expense incurred by the Fund. -------------------------------------------------------------------------------- Capital gains Represents net long-term capital gains on sales of securities held for more than 12 months and net short-term capital gains, which are gains on sales of securities held for a 12-month period or less. Distribution Options The Fund distributes dividends in June and December and any capital gains (including short-term capital gains) at least annually. You can choose one of the options listed in the table below for these distributions when you open your account. To change your distribution option call 1-800-345-6611. If you do not indicate on your application your preference for handling distributions, the Fund will automatically reinvest all distributions in additional shares of the Fund. Distribution Options Reinvest all distributions in additional shares of the Fund -------------------------------------------------------------------------------- Reinvest all distributions in shares of another fund -------------------------------------------------------------------------------- Receive dividends in cash (see options below) and reinvest capital gains -------------------------------------------------------------------------------- Receive all distributions in cash (with one of the following options) . send the check to your address of record . send the check to a third party address . transfer the money to your bank via electronic funds transfer Distributions of $10 or less will automatically be reinvested in additional Fund shares. If you elect to receive distributions by check and the check is returned as undeliverable, or if you do not cash a distribution check within six months of the check date, the distribution will be reinvested in additional shares of the Fund. ____ 15 Your Account Tax Consequences Regardless of whether you receive your distributions in cash or reinvest them in additional Fund shares, all Fund distributions are subject to federal income tax. Depending on the state where you live, distributions may also be subject to state and local income taxes. In general, any distributions of dividends, interest and short-term capital gains are taxable as ordinary income. Distributions of long-term capital gains are generally taxable as such, regardless of how long you have held your Fund shares. You will be provided with information each year regarding the amount of ordinary income and capital gains distributed to you for the previous year and any portion of your distribution which is exempt from state and local taxes. Your investment in the Fund may have additional personal tax implications. Please consult your tax advisor on foreign, federal, state, local or other applicable tax laws. In addition to the dividends and capital gains distributions made by the Fund, you may realize a capital gain or loss when selling and exchanging shares of the Fund. Such transactions may be subject to federal, state and local income tax. ____ 16 Managing the Fund INVESTMENT ADVISOR -------------------------------------------------------------------------------- Liberty Wanger Asset Management (Liberty WAM) (formerly Wanger Asset Management, L.P. (WAM)), located at 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606, is the Fund's investment advisor. Liberty WAM and its predecessor have managed mutual funds, including the Fund, since 1992. In its duties as investment advisor, Liberty WAM runs the Fund's day-to-day business, including placing all orders for the purchase and sale of the Fund's portfolio securities. As of June 30, 2000, Liberty WAM managed over $9 billion in assets. WAM was renamed Liberty WAM on September 29, 2000 when it became a wholly owned subsidiary of Liberty Financial Companies, Inc. (Liberty), which in turn is a majority owned indirect subsidiary of Liberty Mutual Insurance Company. For more information about Liberty's acquisition of WAM, see the Statement of Additional Information. Liberty WAM's advisory fee for managing the Fund in 1999 was 0.90% of the Fund's average daily net assets. Liberty WAM also receives an administrative services fee from the Fund at the annual rate of .05% of the Fund's average daily net assets. PORTFOLIO MANAGER -------------------------------------------------------------------------------- Liberty WAM uses a team to manage the Fund. Team members share responsibility for providing ideas, information, and knowledge in managing the Fund, and each team member has one or more particular areas of expertise. The portfolio manager is responsible for making daily investment decisions, and utilize the management team's input and advice when making buy and sell determinations. John H. Park Lead portfolio manager John Park is a vice president of the Liberty Acorn Trust, and has managed Liberty Acorn Twenty since its inception in 1998. He has been a member of the domestic investment team at Liberty WAM and WAM since 1993, and was a principal of WAM from 1998 to September 29, 2000. Mr. Park is also manager of a mutual fund underlying variable insurance products. He is a CPA and earned both his BA and MBA degrees from the University of Chicago. ---- 17 Other Investment Strategies and Risks UNDERSTANDING THE FUND'S OTHER INVESTMENT STRATEGIES AND RISKS The Fund's principal investment strategies and risks are described under "Liberty Acorn Twenty - Principal Investment Strategies" and "Liberty Acorn Twenty - Principal Investment Risks." In seeking to meet its investment goal, the Fund may also invest in other securities and use certain other investment techniques. These securities and investment techniques offer opportunities and carry various risks. Liberty WAM may elect not to buy any of these securities or use any of these techniques unless it believes that doing so will help the Fund achieve its investment goal. The Fund may not always achieve its investment goal. Additional information about the Fund's securities and investment techniques, as well as the Fund's fundamental and non-fundamental investment policies, is contained in the Statement of Additional Information. The first portion of this prospectus describes the Fund's principal investment strategies and their associated risks. This section provides more detail about the Fund's investment strategies, and describes other investments the Fund may make and the risks associated with them. In seeking to achieve its investment goal, the Fund may invest in various types of securities and engage in various investment techniques, which are not the principal focus of the Fund and therefore are not described in this prospectus. These types of securities and investment practices are identified and discussed in the Fund's Statement of Additional Information, which you may obtain free of charge (see back cover). Approval by the Fund's shareholders is not required to modify or change the Fund's investment goal or investment strategies. THE INFORMATION EDGE -------------------------------------------------------------------------------- The Fund invests in entrepreneurially managed smaller, mid-sized and larger companies that it believes are not as well known by financial analysts and whose domination of a niche creates the opportunity for superior earnings-growth potential. Liberty WAM may identify what it believes are important economic, social or technological trends (for example, the growth of out-sourcing as a business strategy, or the productivity gains from the increasing use of technology) and try to identify companies it thinks will benefit from those trends. In making investments for the Fund, Liberty WAM relies primarily on independent, internally generated research to uncover companies that may be less well known than the more popular names. To find these companies, Liberty WAM compares growth potential, financial strength and fundamental value among companies.
Growth Potential Financial Strength Fundamental Value -------------------------------------------------------------------------------- . superior technology . low debt . reasonable stock . innovative marketing . adequate working price relative to . managerial skill capital growth potential . market niche . conservative . valuable assets . good earnings accounting practices prospects . adequate profit margin . strong demand for product The realization of this A strong balance sheet Once Liberty WAM growth potential would gives management uncovers an attractive likely produce superior greater flexibility to company, it identifies performance that is pursue strategic a price that it sustainable over time. objectives and is believes would also essential to maintaining make the stock a good a competitive advantage. value.
-------------------------------------------------------------------------------- STOCK STRENGTH COMES FIRST -------------------------------------------------------------------------------- Liberty WAM's analysts continually screen companies and make more than 1,000 face-to-face visits around the globe each year. To accomplish this, Liberty WAM analysts talk to top management, vendors, suppliers and competitors, whenever possible. In managing the Fund, Liberty WAM tries to maintain lower taxes and transaction costs by investing with a long-term time horizon (at least two to five years). However, ____ 18 Other Investments Strategies and Risks securities purchased on a long-term basis may be sold within 12 months after purchase due to changes in the circumstances of a particular company or industry, or changes in general market or economic conditions. DERIVATIVE STRATEGIES -------------------------------------------------------------------------------- The Fund may enter into a number of hedging strategies, including those that employ futures and options, to gain or reduce exposure to particular securities or markets. These strategies, commonly referred to as derivatives, involve the use of financial instruments whose values depend on, or are derived from, the value of an underlying security, index or currency. The Fund may use these strategies to adjust the Fund's sensitivity to changes in interest rates or for other hedging purposes (i.e., attempting to offset a potential loss in one position by establishing an interest in an opposite position). Derivative strategies involve the risk that they may exaggerate a loss, potentially losing more money than the actual cost of the underlying security, or limit a potential gain. Also, with some derivative strategies there is a risk that the other party to the transaction may fail to honor its contract terms, causing a loss to the Fund. TEMPORARY DEFENSIVE STEATEGIES -------------------------------------------------------------------------------- At times, Liberty WAM may determine that adverse market conditions make it desirable to temporarily suspend the Fund's normal investment activities. During such times, the Fund may, but is not required to, invest in cash or high-quality, short-term debt securities, without limit. Taking a temporary defensive position may prevent the Fund from achieving its investment goal. ____ 19 Financial Highlights The financial highlights tables are intended to help you understand the Fund's financial performance. Because Class A, Class B and Class C shares are new classes of shares, information is shown for the Fund's Class Z shares since inception. The Fund's fiscal year runs from January 1 to December 31. Class Z shares are offered to certain investors through separate prospectuses. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). The information with respect to the six month period ended June 30, 2000 is unaudited. The information with respect to the year ended December 31, 1999 and the period ended December 31, 1998 is audited. For periods up to and including the year ended 1999, this information has been derived from the Fund's financial statements which have been audited by Ernst & Young LLP, independent auditors, whose report, along with the Fund's audited financial statements, is included in the Fund's annual report. You can request a free annual report by calling 1-800-426-3750. Liberty Acorn Twenty
Six months For a share outstanding ended June 30, 2000 Inception 11/23/98 throughout each period (unaudited) Year Ended 12/31/99 Through 12/31/98 ------------------------------------------------------------------------------------------------------------------------ Class Z Class Z Class Z ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 13.70 $ 10.71 $ 10.00 Income from Investment Operations: ------------------------------------------------------------------------------------------------------------------------ Net investment income (loss) (a) (.04) (.08) -- ------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain on investments .50 3.21 .71 ------------------------------------------------------------------------------------------------------------------------ Total from investment operations .46 3.13 .71 ------------------------------------------------------------------------------------------------------------------------ Less Distributions: Dividends from net investment income -- (.14) -- Distributions from net realized and unrealized gains reportable for federal income taxes (.89) -- -- Total distribution (.89) (.14) -- ------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 13.27 $ 13.70 $ 10.71 ------------------------------------------------------------------------------------------------------------------------ Total return 3.4% 29.3% 7.1% ------------------------------------------------------------------------------------------------------------------------ Ratios/supplemental data: Ratio of expenses to average net assets (b)(c) 1.37%* (b) (c) 1.37% 1.41%* ------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets (c) (.57%)* (c) (.62)% .22%* ------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 170% 101% 173%* ------------------------------------------------------------------------------------------------------------------------ Net assets at end of period (in millions) $ 61 $ 68 $ 34
(a) Net investment income (loss) per share was based upon the average shares outstanding during the period. (b) In accordance with a requirement by the Securities and Exchange Commission, the expense ratio reflects total expenses prior to the reduction of custodian fees for cash balances it maintains with the custodian ("custodian fees paid indirectly"). This ratio net of custodian fees paid indirectly would have been 1.35% for the period ended December 31, 1998, the year ended December 31, 1999 and the six months ended June 30, 2000. (c) Liberty Acorn Twenty was reimbursed by Liberty WAM for certain net expenses from November 23, 1998 through December 31, 1999. Without the reimbursement, the ratio of expenses (prior to custodian fees paid indirectly) to average net assets and the ratio of net investment income to average net assets would have been 1.83% and (.21%), respectively, for the period ended 12/31/98, 1.41% and (.66%), respectively, for the year ended 12/31/99 and 1.40% and (.60%), respectively, for the six months ended June 30, 2000. (d) Total return is not annualized for periods less than one year. Class A, B and C shares are subject to sales loads, account fees and rule 12b-1 fees that are not reflected in the total return. * Annualized ____ 20 Notes ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ 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______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ____ 22 FOR MORE INFORMATION -------------------------------------------------------------------------------- You can get more information about the Fund's investments in the Fund's semi-annual and annual reports to shareholders. The annual report contains a discussion of the market conditions and investment strategies that significantly affected the Fund's performance over its last fiscal year. You may wish to read the Statement of Additional Information for more information on the Fund and the securities in which it invests. The Statement of Additional Information is incorporated into this prospectus by reference, which means that it is considered to be part of this prospectus. You can get free copies of reports and the Statement of Additional Information, request other information and discuss your questions about the Fund by writing or calling the Fund's distributor at: Liberty Funds Distributor, Inc. One Financial Center Boston, MA 02111-2621 1-800-426-3750 www.libertyfunds.com Text-only versions of all Fund documents can be viewed online or downloaded from the Edgar database on the Securities and Exchange Commission internet site at www.sec.gov. You can review and copy information about the Fund by visiting the following location, and you can obtain copies, upon payment of a duplicating fee by electronic request at the E-mail address publicinfo@sec.gov or by writing the: Public Reference Room Securities and Exchange Commission Washington, DC 20549-0102 Information on the operation of the Public Reference Room may be obtained by calling 1-202-942-8090. Investment Company Act file number: Liberty Acorn Trust (formerly Acorn Investment Trust): 811-01829 . Liberty Acorn Twenty (formerly Acorn Twenty) -------------------------------------------------------------------------------- [LETTERHEAD OF LIBERTY FUNDS] ALL-STAR . COLONIAL . CRABBE HUSON . NEWPORT . STEIN ROE ADVISOR Liberty Funds Distributor, Inc. (c)2000 One Finacial Center, Boston, MA 02111-2621, 1-800-426-3750 www.liberty funds.com ------------------------------------------------------------------------------- LIBERTY ACORN FOREIGN FORTY Prospectus, September 29, 2000 ------------------------------------------------------------------------------- Class A, B and C Shares Advised by Liberty Wanger Asset Management, L.P. Liberty Acorn Trust Although these securities have been registered with the Securities and Exchange Commission, the Commission has not approved or disapproved any shares offered in this prospectus or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. -------------------------------------------------------------------------------- T A B L E O F C O N T E N T S LIBERTY ACORN FOREIGN FORTY 2 --------------------------- Investment Goal...................................................... 2 Principal Investment Strategies...................................... 2 Principal Investment Risks........................................... 2 Performance History.................................................. 4 Your Expenses........................................................ 5 YOUR ACCOUNT 6 ------------ How to Buy Shares.................................................... 6 Sales Charges........................................................ 7 How to Exchange Shares............................................... 11 How to Sell Shares................................................... 11 Fund Policy on Trading of Fund Shares................................ 12 Distribution and Service Fees........................................ 13 Other Information About Your Account................................. 13 MANAGING THE FUND 17 ----------------- Investment Advisor................................................... 17 Portfolio Managers................................................... 17 OTHER INVESTMENT STRATEGIES AND RISKS 19 ------------------------------------- The Information Edge................................................. 19 Stock Strength Comes First........................................... 19 Derivative Strategies................................................ 20 Temporary Defensive Strategies....................................... 20 FINANCIAL HIGHLIGHTS 21 --------------------
Not FDIC May Lose Value ----------------- Insured No Bank Guarantee Liberty Acorn Foreign Forty INVESTMENT GOAL ------------------------------------------------------------------------------- Liberty Acorn Foreign Forty seeks long-term growth of capital. PRINCIPAL INVESTMENT STRATEGIES ------------------------------------------------------------------------------- Liberty Acorn Foreign Forty invests primarily in the stocks of medium- to larger-sized companies based in developed markets (for example, Japan, Canada and United Kingdom) outside the U.S. The Fund invests in at least three countries. The Fund is a non-diversified fund that takes advantage of its advisor's research and stock-picking capabilities to invest in a limited number of foreign companies (between 40-60) with market capitalizations of $5 billion to $15 billion, offering the potential to provide above-average growth over time. The Fund believes that companies within this capitalization range are not as well known by financial analysts, and may offer higher return potential than the stocks of companies with capitalizations above $15 billion. Liberty Acorn Foreign Forty typically looks for companies with: . A strong business franchise that offers growth potential. . Products and services that give the company a competitive advantage. . A stock price the Fund's advisor believes is reasonable relative to the assets and earning power of the company. Liberty Acorn Foreign Forty is an international fund and invests the majority of its assets in the stocks of foreign companies based in developed markets outside the U.S. Additional strategies that are not principal investment strategies and the risks associated with them are described later in this prospectus under "Other Investment Strategies and Risks." PRINCIPAL INVESTMENT RISKS ------------------------------------------------------------------------------- The principal risks of investing in the Fund are described below. There are many circumstances (including additional risks that are not described here) which could prevent the Fund from achieving its investment goal. You may lose money by investing in the Fund. Management risk means that the advisor's stock selections and other investment decisions might produce losses or cause the Fund to underperform when compared to other funds with a similar investment goal. Market risk means that security prices in a market, sector or industry may move down. Downward movements will reduce the value of your investment. Because of management and market risk, there is no guarantee that the Fund will achieve its investment goal or perform favorably compared with competing funds. Equity risk is the risk that stock prices will fall over short or extended periods of time. Although the stock market has historically outperformed other asset classes over the long term, the equity --- 2 Liberty Acorn Foreign Forty market tends to move in cycles and individual stock prices may fluctuate drastically from day-to-day and may underperform other asset classes over an extended period of time. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Smaller companies and mid-capitalization companies are more likely than larger companies to have limited product lines, operating histories, markets or financial resources. They may depend heavily on a small management team. Stocks of smaller companies and mid-capitalization companies may trade less frequently, may trade in smaller volumes and may fluctuate more sharply in price than stocks of larger companies. In addition, they may not be widely followed by the investment community, which can lower the demand for their stock. Foreign securities are subject to special risks. Foreign stock markets can be extremely volatile. Fluctuations in currency exchange rates may impact the value of foreign securities without a change in the intrinsic value of those securities. The liquidity of foreign securities may be more limited than domestic securities, which means that the Fund may, at times, be unable to sell foreign securities at desirable prices. Brokerage commissions, custodial fees and other fees are generally higher for foreign investments. In addition, foreign governments may impose withholding taxes which would reduce the amount of income and capital gains available to distribute to shareholders. Other risks include the following: possible delays in the settlement of transactions or the notification of income; less publicly available information about companies; the impact of political, social or diplomatic events; and possible seizure, expropriation or nationalization of the company or its assets or imposition of currency exchange controls. Sector risk may sometimes be present in the Fund's investments. Companies that are in different but closely related industries are sometimes described as being in the same broad economic sector. The values of stocks of many different companies in a market sector may be similarly affected by particular economic or market events. Although the Fund does not intend to focus on any particular sector, at times the Fund may have a significant portion of its assets invested in a particular sector. An example of a sector in which the Fund may sometimes have a significant portion of its assets invested is technology. Technology companies may be significantly affected by falling prices and profits, and intense competition. In addition, the rate of technological change for technology companies is generally higher than for other companies, often requiring extensive and sustained investment in research and development, and exposing such companies to the risk of rapid product obsolescence. The price of many technology stocks has risen based on projections of future earnings and company growth. If a company does not perform as expected, the price of the stock could decline significantly. Many technology companies are currently operating at a loss and may never be profitable. As a non-diversified mutual fund, the Fund is allowed to invest a greater percentage of its total assets in the securities of a single issuer. This may concentrate issuer risk and, therefore, the Fund may have an increased risk of loss compared to a similar diversified mutual fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. --- 3 Liberty Acorn Foreign Forty UNDERSTANDING PERFORMANCE Calendar year total returns show the Fund's Class Z share performance for each completed calendar year. They include the effects of Class Z expenses. Class A, Class B and Class C shares are subject to sales charges, 12b-1 fees and different expenses that are not reflected in the bar chart. If these amounts were reflected, returns would be less than those shown. Average annual total returns are measures of the Fund's Class Z performance over the past one-year and life of the Fund periods. They include the effects of Class Z expenses. The table shows for each class the Class Z performance restated to reflect the effect of sales charges of the class. The Fund's return is compared to the SSB World ex-U.S. Cap Range $2-10 Billion Index. The SSB World ex-U.S. Cap Range $2-10 Billion Index is Salomon Smith Barney's two to ten billion U.S. dollar security market subset of its Broad Market Index. It represents a midcap developed market index, excluding the U.S. Unlike the Fund, an index is not an investment, does not incur fees or expenses and is not professionally managed. It is not possible to invest directly in an index. PERFORMANCE HISTORY -------------------------------------------------------------------------------- Because Class A, Class B and Class C shares have not been offered for a full calendar year, the information provided in the bar chart below shows changes in the Fund's performance from year to year by illustrating the Fund's calendar year total returns for its Class Z shares. Class Z shares are offered to certain investors through a separate prospectus. The performance table following the bar chart shows how the Fund's average annual returns for (1) the Class Z shares and (2) the Class Z shares, restated to reflect the sales charges of the Class A, Class B and Class C shares, respectively, compare with those of broad measures of market performance for one year and for the life of the Fund. The chart and table are intended to illustrate some of the risks of investing in the Fund by showing the changes in the Fund's Class Z performance. All returns include the reinvestment of dividends and distributions. Performance results include the effect of expense reduction arrangements. If these arrangements were not in place, then performance would have been lower. Any expense reduction arrangements may be discontinued at any time. As with all mutual funds, past performance does not predict the Fund's future performance. Calendar Year Total Returns (Class Z)/(1)/ ------------------------------------------------------------------------------- [Bar Chart] Year Return ---- ------ 1999 81.60% ------------------------------------------------------------------------------- For period shown in bar chart: Best quarter: 4th quarter 1999, +46.65% Worst quarter: 3rd quarter 1999, +3.90% (1) Class Z shares are not offered through this prospectus, but Class A, Class B and Class C shares would have substantially similar annual returns because the shares are invested in the same portfolio of securities and these returns differ only to the extent that the classes do not have the same expenses. Average Annual Total Returns -- for periods ended December 31, 1999/(2)(3)/
Inception Date 1 Year Life of the Fund Class A 9/29/00 71.16% 77.11% ------------------------------------------------------------------------------- Class B 9/29/00 76.60% 83.46% ------------------------------------------------------------------------------- Class C 9/29/00 80.60% 86.84% ------------------------------------------------------------------------------- Class Z 11/23/98 81.60% 86.84% ------------------------------------------------------------------------------- SSB Cap Range $2-10 B N/A 23.52% 24.72%
(2) The Fund's performance during 1999 was achieved in a period of unusual market conditions that are unlikely to continue. (3) Class A, Class B, and Class C are new classes of shares. Their performance information includes returns of the Fund's Class Z shares (the oldest existing Fund class) for periods prior to the inception of the newer classes of shares. Class Z returns are not restated to reflect any difference in expenses (such as Rule 12b-1 fees) between Class Z shares and the newer classes of shares. If differences in expenses were reflected, the returns for prior to the inception of the newer classes of shares would be lower. Class Z shares were initially offered on November 28, 1998; Class A, Class B and Class C shares were initially offered on September 29, 2000. --- 4 Liberty Acorn Foreign Forty UNDERSTANDING EXPENSES Sales Charges are paid directly by shareholders to Liberty Funds Distributor, Inc., the Fund's distributor. Annual Fund Operating Expenses are deducted from the Fund. They include management and administration fees, 12b-1 fees and administrative costs including pricing and custody services. Example Expenses help you compare the cost of investing in the Fund to the cost of investing in other mutual funds. The table does not take into account any expense reduction arrangements discussed in the footnotes to the Annual Fund Operating Expense table. It uses the following hypothetical conditions: . $10,000 initial investment . 5% total return for each year . fund operating expenses remain the same . assumes reinvestment of all dividends and distributions . assumes Class B shares convert to Class A shares after eight years YOUR EXPENSES ------------------------------------------------------------------------------- Expenses are one of several factors to consider before you invest in a mutual fund. The tables below describe the fees and expenses you may pay when you buy, hold and sell shares of the Fund. Shareholder Fees/(4)/ (paid directly from your investment)
Class A Class B Class C Maximum sales charge (load) on purchases (%) (as a percentage of the offering price) 5.75 None None ------------------------------------------------------------------------------- Maximum deferred sales charge (load) on redemptions (%) (as a percentage of the lesser of purchase price or redemption price) 1.00/(5)/ 5.00 1.00 ------------------------------------------------------------------------------- Redemption fee (6) (6) (6)
(4) A $10 annual fee is deducted from accounts of less than $1,000 and paid to the transfer agent. (5) This charge applies only to certain Class A shares bought without an initial sales charge that are sold within 18 months of purchase. (6) There is a $7.50 charge for wiring sale proceeds to your bank. Annual Fund Operating Expenses (deducted directly from fund assets)
Class A Class B Class C Management fees/(7)/ (%) .95 .95 .95 ------------------------------------------------------------------------------- Distribution and service (12b-1) fees (%) .35 1.00 1.00 ------------------------------------------------------------------------------- Other expenses (%) .73 .73 .73 ------------------------------------------------------------------------------- Total annual fund operating expenses/(8)/ (%) 2.03 2.68 2.68 ---- ---- ----
(7) In addition to the management fee, the Fund pays the Advisor an administrative fee of .05%, which is included in "Other Expenses." (8) The Fund's advisor has voluntarily agreed to reimburse the Fund for any ordinary operating expenses (exclusive of distribution and service fees, interest, taxes and extraordinary expenses, if any) exceeding 1.80%, 2.45% and 2.45% of the average annual net assets for Class A, Class B and Class C, respectively. This arrangement may be modified or terminated by either the Fund or its advisor on 30 days' notice. As a result, the actual total annual Fund operating expenses for Class A, B and C shares would be 1.80%, 2.45%, 2.45% respectively. Example Expenses (your actual costs may be higher or lower) Class 1 Year 3 Years 5 Years 10 Years Class A: $769 $1,175 $1,605 $2,798 ------------------------------------------------------------------------------- Class B: did not sell your shares $271 $ 832 $1,420 $2,856 sold all your shares at the end of the period $771 $1,132 $1,620 $2,856 ------------------------------------------------------------------------------- Class C: did not sell your shares $271 $ 832 $1,420 $3,012 sold all your shares at the end of the period $371 $ 832 $1,420 $3,012 --- 5 Your Account INVESTMENT MINIMUMS Initial Investment ............................................... $1,000 Subsequent Investments............................................ $ 50 Automatic Investment Plan*........................................ $ 50 Retirement Plans*................................................. $ 25 * The initial investment minimum of $1,000 is waived on this plan. The Fund reserves the right to change these investment minimums. The Fund also reserves the right to refuse a purchase order for any reason, including if it believes that doing so would be in the best interest of the Fund and its shareholders. HOW TO BUY SHARES ------------------------------------------------------------------------------- Your financial advisor can help you establish an appropriate investment portfolio, buy shares and monitor your investments. When the Fund receives your purchase request in "good form," your shares will be bought at the next calculated public offering price. "Good form" means that you placed your order with your brokerage firm or your payment has been received and your application is complete, including all necessary signatures. Outlined below are the various options for buying shares: Method Instructions Through your Your financial advisor can help you establish your financial advisor account and buy Fund shares on your behalf. Your financial advisor may charge you fees for executing the purchase for you. ------------------------------------------------------------------------------- By check For new accounts, send a completed application and (new account) check made payable to the Fund to the transfer agent, Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. ------------------------------------------------------------------------------- By check For existing accounts, fill out and return the (existing account) additional investment stub included in your quarterly statement, or send a letter of instruction including your Fund name and account number with a check made payable to the Fund to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. ------------------------------------------------------------------------------- By exchange You or your financial advisor may acquire shares by exchanging shares you own in one fund for shares of the same class of the Fund at no additional cost. There may be an additional charge if exchanging from a money market fund. To exchange by telephone, call 1-800-422-3737. ------------------------------------------------------------------------------- By wire You may purchase shares by wiring money from your bank account to your fund account. To wire funds to your fund account, call 1-800-422-3737 to obtain a control number and the wiring instructions. ------------------------------------------------------------------------------- By electronic funds You may purchase shares by electronically transfer transferring money from your bank account to your Fund account by calling 1-800-422-3737. Electronic funds transfers may take up to two business days to settle and be considered in "good form." You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the application. ------------------------------------------------------------------------------- Automatic You can make monthly or quarterly investments investment plan automatically from your bank account to your fund account. You can select a pre-authorized amount to be sent via electronic funds transfer. Be sure to complete the appropriate section of the application for this feature. ------------------------------------------------------------------------------- By dividend You may automatically invest dividends distributed diversification by one fund into the same class of shares of the Fund at no additional sales charge. To invest your dividends in the fund, call 1-800-345-6611. --- 6 Your Account CHOOSING A SHARE CLASS The Fund offers three classes of shares in this prospectus -- Class A, B and C. Each share class has its own sales charge and expense structure. Determining which share class is best for you depends on the dollar amount you are investing and the number of years for which you are willing to invest. If your financial advisor firm does not participate in the Class B discount program, purchases of $250,000 or more must be for Class A or Class C shares only. Purchases of $1 million or more can be made only in Class A shares. Based on your personal situation, your financial advisor can help you decide which class of shares makes the most sense for you. The Fund also offers an additional class of shares, Class Z shares, to certain institutional and other investors. Class Z shares are made available through separate prospectuses provided to eligible institutional and other investors. SALES CHARGES ------------------------------------------------------------------------------- You may be subject to an initial sales charge when you purchase, or a contingent deferred sales charge (CDSC) when you sell, shares of the Fund. These sales charges are described below. In certain circumstances, these sales charges are waived, as described below and in the Statement of Additional Information. Class A shares Your purchases of Class A shares generally are at the public offering price. This price includes a sales charge that is based on the amount of your initial investment when you open your account. A portion of the sales charge is the commission paid to the financial advisor firm on the sale of Class A shares. The sales charge you pay on additional investments is based on the total amount of your purchase and the current value of your account. The amount of the sales charge differs depending on the amount you invest as shown in the table below. Class A Sales Charges
% of offering As a % of price the public As a % retained by offering of your financial Amount of purchase price investment advisor firm Less than $50,000 5.75 6.10 5.00 ------------------------------------------------------------------------------- $50,000 to less than $100,000 4.50 4.71 3.75 ------------------------------------------------------------------------------- $100,000 to less than $250,000 3.50 3.63 2.75 ------------------------------------------------------------------------------- $250,000 to less than $500,000 2.50 2.56 2.00 ------------------------------------------------------------------------------- $500,000 to less than $1,000,000 2.00 2.04 1.75 ------------------------------------------------------------------------------- $1,000,000 or more 0.00 0.00 0.00 -------------------------------------------------------------------------------
Class A shares bought without an initial sales charge in accounts aggregating $1 million to $25 million at the time of purchase are subject to a 1.00% CDSC if the shares are sold within 18 months of the time of purchase. Subsequent Class A share purchases that bring your account value above $1 million are subject to a CDSC if redeemed within 18 months of the date of purchase. The 18-month period begins on the first day of the month following each purchase. The CDSC does not apply to retirement plans purchasing shares through a fee-based program. For Class A share purchases of $1 million or more, financial advisors receive a commission from the distributor as follows: Purchases Over $1 Million Amount purchased Commission % First $3 million 1.00 ------------------------------------------------------------------------------- $3 million to less than $5 million 0.80 ------------------------------------------------------------------------------- $5 million to less than $25 million 0.50 ------------------------------------------------------------------------------- $25 million or more 0.25 The commission to financial advisors for Class A share purchases of $25 million or more is paid over 12 months but only to the extent the shares remain outstanding. For Class A share purchases by participants in certain group retirement plans offered through a fee-based program, financial advisors receive a 1.00% commission from the distributor on all purchases of less than $3 million. --- 7 Your Account UNDERSTANDING CONTINGENT DEFERRED SALES CHARGES (CDSC) Certain investments in Class A, B and C shares are subject to a CDSC, a sales charge applied at the time you sell your shares. You will pay the CDSC only on shares you sell within a certain amount of time after purchase. The CDSC generally declines each year until there is no charge for selling shares. The CDSC is applied to the net asset value at the time of purchase or sale, whichever is lower. For purposes of calculating the CDSC, the start of the holding period is the month-end of the month in which the purchase is made. Shares you purchase with reinvested dividends or capital gains are not subject to a CDSC. When you place an order to sell shares, your Fund will automatically sell first those shares not subject to a CDSC and then those you have held the longest. This policy helps reduce and possibly eliminate the potential impact of the CDSC. Reduced Sales Charges for Larger Investments There are two ways for you to pay a lower sales charge when purchasing Class A shares. The first is through Rights of Accumulation. If the combined value of the Fund accounts maintained by you, your spouse or your minor children reaches a discount level (according to the chart on the previous page), your next purchase will receive the lower sales charge. The second is by signing a Statement of Intent within 90 days of your purchase. By doing so, you would be able to pay the lower sales charge on all purchases by agreeing to invest a total of at least $50,000 within 13 months. If your Statement of Intent purchases are not completed within 13 months, you will be charged the applicable sales charge on the amount you had invested to that date. In addition, certain investors may purchase shares at a reduced sales charge or net asset value, which is the value of a Fund share excluding any sales charges. See the Statement of Additional Information for a description of these situations. Class B shares Your purchases of Class B shares are at Class B shares' net asset value. Class B shares have no front-end sales charge, but they do carry a CDSC that is imposed only on shares sold prior to the completion of the periods shown in the charts below. The CDSC generally declines each year and eventually disappears over time. The distributor pays the financial advisor firm an up- front commission on sales of Class B shares as depicted in the charts below. Purchases of less than $250,000: Class B Sales Charges % deducted when Holding period after purchase shares are sold Through first year 5.00 ------------------------------------------------------------------------------- Through second year 4.00 ------------------------------------------------------------------------------- Through third year 3.00 ------------------------------------------------------------------------------- Through fourth year 3.00 ------------------------------------------------------------------------------- Through fifth year 2.00 ------------------------------------------------------------------------------- Through sixth year 1.00 ------------------------------------------------------------------------------- Longer than six years None Commission to financial advisors is 5.00%. Automatic conversion to Class A shares is eight years after purchase. --- 8 Your Account You can pay a lower CDSC and reduce the holding period when making purchases of Class B shares through a financial advisor firm which participates in the Class B share discount program for larger purchases as described in the charts below. Some financial advisor firms are not able to participate because their record keeping or transaction processing systems are not designed to accommodate these reductions. For non-participating firms, purchases of Class B shares must be less than $250,000. Consult your financial advisor to see whether it participates in the discount program for larger purchases. For participating firms, Rights of Accumulation apply, so that if the combined value of Fund accounts maintained by you, your spouse or your minor children is at or above a discount level, your next purchase will receive the lower CDSC and the applicable reduced holding period. Purchases of $250,000 to less than $500,000: Class B Sales Charges % deducted when Holding period after purchase shares are sold Through first year 3.00 ------------------------------------------------------------------------------- Through second year 2.00 ------------------------------------------------------------------------------- Through third year 1.00 ------------------------------------------------------------------------------- Longer than three years 0.00 Commission to financial advisors is 2.50%. Automatic conversion to Class A shares is four years after purchase. Purchases of $500,000 to less than $1 million: Class B Sales Charges % deducted when Holding period after purchase shares are sold Through first year 3.00 ------------------------------------------------------------------------------- Through second year 2.00 ------------------------------------------------------------------------------- Through third year 1.00 Commission to financial advisors is 1.75%. Automatic conversion to Class A shares is three years after purchase. --- 9 Your Account If you exchange into a Fund participating in the Class B share discount program or transfer your Fund account from a financial advisor which does not participate in the program to one who does, the exchanged or transferred shares will retain the pre-existing CDSC but any additional purchases of Class B shares which cause the exchanged or transferred account to exceed the applicable discount level will receive the lower CDSC and the reduced holding period for amounts in excess of the discount level. Your financial advisor will receive the lower commission for purchases in excess of the applicable discount level. If you exchange from a participating fund or transfer your account from a financial advisor that does participate in the program into a fund or financial advisor which does not, the exchanged or transferred shares will retain the pre-existing CDSC but all additional purchases of Class B shares will be in accordance with the higher CDSC and longer holding period of the non-participating fund or financial advisor. Class C shares Similar to Class B shares, your purchases of Class C shares are at Class C's net asset value. Although Class C shares have no front-end sales charge, they carry a CDSC of 1.00% that is applied to shares sold within the first year after they are purchased. After holding shares for one year, you may sell them at any time without paying a CDSC. The distributor pays the financial advisor firm an up-front commission of 1.00% on sales of Class C shares. Class C Sales Charges Years after purchase % deducted when shares are sold Through one year 1.00 ------------------------------------------------------------------------------- Longer than one year 0.00 --- 10 Your Account HOW TO EXCHANGE SHARES ------------------------------------------------------------------------------- You may exchange your shares for shares of the same share class of another fund distributed by Liberty Funds Distributor, Inc. at net asset value. If your shares are subject to a CDSC, you will not be charged a CDSC upon the exchange. However, when you sell the shares acquired through the exchange, the shares sold may be subject to a CDSC, depending upon when you originally purchased the shares you exchanged. For purposes of computing the CDSC, the length of time you have owned your shares will be computed from the date of your original purchase and the applicable CDSC will be the CDSC of the original fund. Unless your account is part of a tax-deferred retirement plan, an exchange is a taxable event. Therefore, you may realize a gain or a loss for tax purposes. The Fund may terminate your exchange privilege if the advisor determines that your exchange activity is likely to adversely impact its ability to manage the Fund. To exchange by telephone, call 1-800-422-3737. HOW TO SELL SHARES -------------------------------------------------------------------------------- Your financial advisor can help you determine if and when you should sell your shares. You may sell shares of the Fund on any regular business day that the New York Stock Exchange (NYSE) is open. When the Fund receives your sales request in "good form," shares will be sold at the next calculated price. In "good form" means that money used to purchase your shares is fully collected. When selling shares by letter of instruction, "good form" also means (i) your letter has complete instructions, the proper signatures and signature guarantees, (ii) you have included any certificates for shares to be sold, and (iii) any other required documents are attached. A signature guarantee is designed to protect you and Liberty Acorn from fraud. Signature guarantees can be obtained from a commercial bank, broker-dealer, credit union (if authorized under state law), securities exchange or association. A notary public cannot provide a signature guarantee. For additional documents required for sales by corporations, agents, fiduciaries and surviving joint owners, please call 1-800-345-6611. Retirement plan accounts have special requirements; please call 1-800-799-7526 for more information. The Fund will generally send proceeds from the sale to you within seven days (usually on the next business day after your request is received in "good form"). However, if you purchased your shares by check, the Fund may delay sending the proceeds from the sale of your shares for up to 15 days after your purchase to protect against checks that are returned. No interest will be paid on uncashed redemption checks. Redemption proceeds may be paid in securities rather than cash, under certain circumstances. For more information, see the paragraph "Non-Cash Redemptions" under the section "How to Sell Shares" in the statement of Additional Information. --- 11 Your Account Outlined below are the various options for selling shares: Method Instructions Through your You may call your financial advisor to place your sell financial advisor order. To receive the current trading day's price, your financial advisor firm must receive your request prior to the close of the NYSE, usually 4:00 p.m. Eastern time. ------------------------------------------------------------------------------- By exchange You or your financial advisor may sell shares by exchanging from the Fund into the same share class of another Liberty fund at no additional cost. To exchange by telephone, call 1-800-422-3737. ------------------------------------------------------------------------------- By telephone You or your financial advisor may sell shares by telephone and request that a check be sent to your address of record by calling 1-800-422-3737, unless you have notified the Fund of an address change within the previous 30 days. The dollar limit for telephone sales is $100,000 in a 30-day period. You do not need to set up this feature in advance of your call. Certain restrictions apply to retirement accounts. For details, call 1-800-345-6611. ------------------------------------------------------------------------------- By mail You may send a signed letter of instruction or stock power form along with any certificates to be sold to the address below. In your letter of instruction, note your Fund's name, share class, account number, and the dollar value or number of shares you wish to sell. All account owners must sign the letter, and signatures must be guaranteed by either a bank, a member firm of a national stock exchange or another eligible guarantor institution. Additional documentation is required for sales by corporations, agents, fiduciaries, surviving joint owners and individual retirement account owners. For details, call 1-800-345-6611. Mail your letter of instruction to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. ------------------------------------------------------------------------------- By wire You may sell shares and request that the proceeds be wired to your bank. You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the account application for this feature. ------------------------------------------------------------------------------- By systematic You may automatically sell a specified dollar amount or withdrawal plan percentage on a monthly, quarterly or semi-annual basis if your account balance is at least $5,000 and have the proceeds sent to you. This feature is not available if you hold your shares in certificate form. Be sure to complete the appropriate section of the account application for this feature. ------------------------------------------------------------------------------- By electronic You may sell shares and request that the proceeds be funds transfer electronically transferred to your bank. Proceeds may take up to two business days to be received by your bank. You must set up this feature prior to your request. Be sure to complete the appropriate section of the account application for this feature. FUND POLICY ON TRADING OF FUND SHARES ------------------------------------------------------------------------------- The Fund does not permit short-term or excessive trading. Excessive purchases, redemptions or exchanges of Fund shares disrupt portfolio management and drive Fund expenses higher. In order to promote the best interests of the Fund, the Fund reserves the right to reject any purchase order or exchange request, particularly from market timers or investors who, in the advisor's opinion, have a pattern of short-term or excessive trading or whose trading has been or may be disruptive to the Fund. The fund into which you would like to exchange also may reject your request. --- 12 Your Account DISTRIBUTION AND SERVICE FEES ------------------------------------------------------------------------------- The Fund has adopted a plan under Rule 12b-1 that permits it to pay the Fund's distribution, marketing and other fees to support the sale and distribution of Class A, B and C shares and certain services provided to you by your financial advisor. The annual service fee may equal up to 0.25% for Class A, Class B and Class C shares. The annual distribution fee may equal up to 0.10% for Class A shares and 0.75% for Class B and Class C shares. Distribution and service fees are paid out of the assets of these classes. Over time, these fees may reduce the return on your investment and may cost you more than paying other types of sales charges. Class B shares automatically convert to Class A shares after a certain number of years, eliminating a portion of the distribution fee upon conversion. Conversion may occur three, four or eight years after purchase, depending on the program you purchased your shares under. See "Your Account; Sales Charge" for the conversion schedule applicable to Class B shares. OTHER INFORMATION ABOUT YOUR ACCOUNT ------------------------------------------------------------------------------- HOW THE FUND'S SHARE PRICE IS DETERMINED The price of each class of the Fund's shares is based on its net asset value. The net asset value is determined at the close of regular trading on the NYSE, usually 4:00 p.m. Eastern time, on each business day that the NYSE is open (typically Monday through Friday). When you request a transaction, it will be processed at the net asset value (plus any applicable sales charges) next determined after your request is received in "good form" by the distributor. In most cases, in order to receive that day's price, the distributor must receive your order before that day's transactions are processed. If you request a transaction through your financial advisor's firm, the firm must receive your order by the close of trading on the NYSE to receive that day's price. The Fund determines its net asset value for each share class by dividing each class's total net assets by the number of that class's outstanding shares. In determining the net asset value, the Fund must determine the price of each security in its portfolio at the close of each trading day. Because the Fund holds securities that are traded on foreign exchanges, the value of these securities may change on days when shareholders will not be able to buy or sell Fund shares. This will affect the Fund's net asset value on the day it is next determined. Securities for which market quotations are available are valued each day at the current market value. However, where market quotations are not available, or when the advisor believes that subsequent events have made them unreliable, the Fund may use other data to determine the fair value of the securities. You can find the daily prices of some share classes for the Fund in most major daily newspapers under the caption "Liberty." You can find daily prices for all share classes by visiting the Fund's web site at www.libertyfunds.com. ACCOUNT FEES If your account value falls below $1,000 (other than as a result of depreciation in share value) you may be subject to an annual account fee of $10. This fee is deducted from the account in June each year. Approximately 60 days prior to the fee date, the Fund's transfer agent will send you written notification of the upcoming fee. If --- 13 Your Account you add money to your account and bring the value above $1,000 prior to the fee date, the fee will not be deducted. Share Certificates Share certificates are not available for Class B and C shares. Certificates will be issued for Class A shares only if requested. If you decide to hold share certificates, you will not be able to sell your shares until you have endorsed your certificates and returned them to the distributor. --- 14 Your Account UNDERSTANDING FUND DISTRIBUTIONS The Fund earns income from the securities it holds. The Fund also may realize capital gains and losses on sales of its securities. The Fund distributes substantially all of its net investment income and capital gains to shareholders. As a shareholder, you are entitled to a portion of the Fund's income and capital gains based on the number of shares you own at the time these distributions are declared. Dividends, Distributions, and Taxes The Fund has the potential to make the following distributions: Types of Distributions Dividend Represents interest and dividends earned from securities held by the Fund, net of expenses incurred by the Fund. ------------------------------------------------------------------------------- Capital gains Represents net long-term capital gains on sales of securities held for more than 12 months and net short-term capital gains, which are gains on sales of securities held for a 12-month period or less. Distribution Options The Fund distributes dividends in June and December and any capital gains (including short-term capital gains) at least annually. You can choose one of the options listed in the table below for these distributions when you open your account. To change your distribution option call 1-800-345-6611. If you do not indicate on your application your preference for handling distributions, the Fund will automatically reinvest all distributions in additional shares of the Fund. Distribution Options Reinvest all distributions in additional shares of the Fund ----------------------------------------------------------- Reinvest all distributions in shares of another fund ---------------------------------------------------- Receive dividends in cash (see options below) and reinvest capital gains ------------------------------------------------------------------------------ Receive all distributions in cash (with one of the following options): . send the check to your address of record . send the check to a third party address . transfer the money to your bank via electronic funds transfer Distributions of $10 or less will automatically be reinvested in additional Fund shares. If you elect to receive distributions by check and the check is returned as undeliverable, or if you do not cash a distribution check within six months of the check date, the distribution will be reinvested in additional shares of the Fund. --- 15 Your Account Tax Consequences Regardless of whether you receive your distributions in cash or reinvest them in additional Fund shares, all Fund distributions are subject to federal income tax. Depending on the state where you live, distributions may also be subject to state and local income taxes. In general, any distributions of dividends, interest and short-term capital gains are taxable as ordinary income. Distributions of long-term capital gains are generally taxable as such, regardless of how long you have held your Fund shares. You will be provided with information each year regarding the amount of ordinary income and capital gains distributed to you for the previous year and any portion of your distribution which is exempt from state and local taxes. Your investment in the Fund may have additional personal tax implications. Please consult your tax advisor on foreign, federal, state, local or other applicable tax laws. In addition to the dividends and capital gains distributions made by the Fund, you may realize a capital gain or loss when selling and exchanging shares of the Fund. Such transactions may be subject to federal, state and local income tax. Foreign Income Taxes The Fund may receive investment income from sources within foreign countries, and that income may be subject to foreign income taxes at the source. If the Fund pays non-refundable taxes to foreign governments during the year, the taxes will reduce the Fund's dividends but will still be included in your taxable income. You may be able to claim an offsetting credit or deduction on your tax return for your share of foreign taxes paid by the Fund. --- 16 Managing the Fund INVESTMENT ADVISOR ------------------------------------------------------------------------------- Liberty Wanger Asset Management (Liberty WAM) (formerly Wanger Asset Management, L.P. (WAM)), located at 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606, is the Fund's investment advisor. Liberty WAM and its predecessor have managed mutual funds, including the Fund, since 1992. In its duties as investment advisor, Liberty WAM runs the Fund's day-to-day business, including placing all orders for the purchase and sale of the Fund's portfolio securities. As of June 30, 2000, Liberty WAM managed over $9 billion in assets. WAM was renamed Liberty WAM on September 29, 2000 when it became a wholly owned subsidiary of Liberty Financial Companies, Inc. (Liberty), which in turn is a majority owned indirect subsidiary of Liberty Mutual Insurance Company. For more information about Liberty's acquisition of WAM, see the Statement of Additional Information. Liberty WAM's advisory fee for managing the Fund in 1999 was 0.95% of the Fund's average daily net assets. Liberty WAM also receives an administrative services fee from the Fund at the annual rate of .05% of the Fund's average daily net assets. PORTFOLIO MANAGERS ------------------------------------------------------------------------------- Liberty WAM uses a team to manage the Fund. Team members share responsibility for providing ideas, information, and knowledge in managing the Fund, and each team member has one or more particular areas of expertise. The portfolio managers are responsible for making daily investment decisions, and utilize the management team's input and advice when making buy and sell determinations. Marcel P. Houtzager Co-portfolio manager Marcel Houtzager is a vice president of Liberty Acorn Trust, and has managed Liberty Acorn Foreign Forty since its inception in 1998. He has been a member of the international analytical team at Liberty WAM and at WAM since 1992, and was a principal of WAM from 1995 to September 29, 2000. Mr. Houtzager also manages an international mutual fund underlying variable insurance products and the foreign portfolio of an investment company whose shares are offered only to non-U.S. investors. He is a CFA and a CPA, and earned his BA from Pomona College and his MBA from the University of California at Berkley. --- 17 Managing the Fund Roger D. Edgley Co-portfolio manager Roger Edgley is a vice president of Liberty Acorn Trust and became co-portfolio manager of Liberty Acorn Foreign Forty in December 1999. He has been director of International Research at Liberty WAM and WAM, and was a principal of WAM from January 1999 to September 29, 2000. Mr. Edgley has been a member of the international analytical team at Liberty WAM and at WAM since 1994. Prior to that, Mr. Edgley was a securities analyst in Hong Kong. He is a CFA and was educated in the United Kingdom, completing his MSc degree from the London School of Economics. --- 18 Other Investment Strategies and Risks UNDERSTANDING THE FUND'S OTHER INVESTMENT STRATEGIES AND RISKS The Fund's principal investment strategies and risks are described under "Liberty Acorn Foreign Forty - Principal Investment Strategies" and "Liberty Acorn Foreign Forty - Principal Investment Risks." In seeking to meet its investment goal, the Fund may also invest in other securities and use certain other investment techniques. These securities and investment techniques offer opportunities and carry various risks. Liberty WAM may elect not to buy any of these securities or use any of these techniques unless it believes that doing so will help the Fund achieve its investment goal. The Fund may not always achieve its investment goal. Additional information about the Fund's securities and investment techniques, as well as the Fund's fundamental and non-fundamental investment policies, is contained in the Statement of Additional Information. The first portion of this prospectus describes the Fund's principal investment strategies and their associated risks. This section provides more detail about the Fund's investment strategies, and describes other investments the Fund may make and the risks associated with them. In seeking to achieve its investment goal, the Fund may invest in various types of securities and engage in various investment techniques, which are not the principal focus of the Fund and therefore are not described in this prospectus. These types of securities and investment practices are identified and discussed in the Fund's Statement of Additional Information, which you may obtain free of charge (see back cover). Approval by the Fund's shareholders is not required to modify or change the Fund's investment goal or investment strategies. THE INFORMATION EDGE ------------------------------------------------------------------------------- The Fund invests in entrepreneurially managed smaller, mid-sized and larger companies that it believes are not as well known by financial analysts and whose domination of a niche creates the opportunity for superior earnings-growth potential. Liberty WAM may identify what it believes are important economic, social or technological trends (for example, the growth of out-sourcing as a business strategy, or the productivity gains from the increasing use of technology) and try to identify companies it thinks will benefit from those trends. In making investments for the Fund, Liberty WAM relies primarily on independent, internally generated research to uncover companies that may be less well known than the more popular names. To find these companies, Liberty WAM compares growth potential, financial strength and fundamental value among companies. Liberty WAM may identify what it believes are important economic, social or technological trends (for example, the growth of out-sourcing as a business strategy, or the productivity gains from the increasing use of technology) and try to identify companies it thinks will benefit from these trends. Growth Potential Financial Strength Fundamental Value ------------------------------------------------------------------------------- . superior technology . low debt . reasonable stock . innovative marketing . adequate working price relative to . managerial skill capital growth potential . market niche . conservative . valuable assets . good earnings accounting practices prospects . adequate profit . strong demand for margin product The realization of this A strong balance sheet Once Liberty WAM growth potential would gives management uncovers an attractive likely produce superior greater flexibility to company, it identifies a performance that is pursue strategic price that it believes sustainable over time. objectives and is would also make the essential to maintaining stock a good value. a competitive advantage.
------------------------------------------------------------------------------- STOCK STRENGTH COMES FIRST ------------------------------------------------------------------------------- Liberty WAM's analysts continually screen companies and make more than 1,000 face-to-face visits around the globe each year. To accomplish this, Liberty WAM analysts talk to top management, vendors, suppliers and competitors, whenever possible. In managing the Fund, Liberty WAM tries to maintain lower taxes and transaction costs by investing with a long-term time horizon (at least two to five years). --- 19 Other Investment Strategies and Risks However, securities purchased on a long-term basis may be sold within 12 months after purchase due to changes in the circumstances of a particular company or industry, or changes in general market or economic conditions. DERIVATIVE STRATEGIES ------------------------------------------------------------------------------- The Fund may enter into a number of hedging strategies, including those that employ futures and options, to gain or reduce exposure to particular securities or markets. These strategies, commonly referred to as derivatives, involve the use of financial instruments whose values depend on, or are derived from, the value of an underlying security, index or currency. The Fund may use these strategies to adjust the Fund's sensitivity to changes in interest rates or for other hedging purposes (i.e., attempting to offset a potential loss in one position by establishing an interest in an opposite position). Derivative strategies involve the risk that they may exaggerate a loss, potentially losing more money than the actual cost of the underlying security, or limit a potential gain. Also, with some derivative strategies there is a risk that the other party to the transaction may fail to honor its contract terms, causing a loss to the Fund. TEMPORARY DEFENSIVE STRATEGIES ------------------------------------------------------------------------------- At times, Liberty WAM may determine that adverse market conditions make it desirable to temporarily suspend the Fund's normal investment activities. During such times, the Fund may, but is not required to, invest in cash or high- quality, short-term debt securities, without limit. Taking a temporary defensive position may prevent the Fund from achieving its investment goal. --- 20 Financial Highlights The financial highlights table is intended to help you understand the Fund's financial performance. Because Class A, Class B and Class C shares are new classes of shares, information is shown for the Fund's Class Z shares since inception. The Fund's fiscal year runs from January 1 to December 31. Class Z shares are offered to certain investors through separate prospectuses. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). The information with respect to the six month period ended June 30, 2000 is unaudited. The information with respect to the year ended December 31, 1999 and the period ended December 31, 1998 is audited. For periods up to and including the year ended 1999, this information has been derived from the Fund's financial statements which have been audited by Ernst & Young LLP, independent auditors, whose report, along with the Fund's audited financial statements, is included in the Fund's annual report. You can request a free annual report by calling 1-800-426-3750. Liberty Acorn Foreign Forty
-------------------------------------------------------------------------------------------------------------------- Six months ended June 30, 2000 Year Ended Inception 11/23/98 For a share outstanding throughout each period (unaudited) 12/31/99 Through 12/31/98 -------------------------------------------------------------------------------------------------------------------- Class Z Class Z Class Z -------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 19.93 $ 11.00 $ 10.00 -------------------------------------------------------------------------------------------------------------------- Income from Investment Operations: Net investment loss (a) -- (.02) (.01) -------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain on investments (.12) 8.98 1.01 -------------------------------------------------------------------------------------------------------------------- Total from investment operations (.12) 8.96 1.00 -------------------------------------------------------------------------------------------------------------------- Less Distributions: Dividends from net investment income (.03) -- -- -------------------------------------------------------------------------------------------------------------------- Distributions from net realized and unrealized gains reportable for federal income taxes (.11) (.03) -- -------------------------------------------------------------------------------------------------------------------- Total Distributions (.14) (.03) -- -------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 19.67 $ 19.93 $ 11.00 -------------------------------------------------------------------------------------------------------------------- Total return (d) (0.6%) 81.6% 10.0% -------------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Ratio of expenses to average net assets (b)(c) 1.37% 1.48% 1.73%* -------------------------------------------------------------------------------------------------------------------- Ratio of net investment loss to average net assets (c) (.03%) (.17%) (.78%)* -------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 74% 60% 90%* -------------------------------------------------------------------------------------------------------------------- Net assets at end of period (in millions) $ 144 $ 107 $ 16
(a) Net investment loss per share was based upon the average shares outstanding during the period. (b) In accordance with a requirement by the Securities and Exchange Commission, the expense ratio reflects total expenses prior to the reduction of custodian fees for cash balances it maintains with the custodian ("custodian fees paid indirectly"). This ratio net of custodian fees paid indirectly would have been 1.45% for the period ended December 31, 1998, and the year ended. (c) Liberty Acorn Foreign Forty was reimbursed by Liberty WAM for certain net expenses from November 23, 1998 through December 31, 1999. Without the reimbursement, the ratio of expenses (prior to custodian fees paid indirectly) to average net assets and the ratio of net investment income to average net assets would have been 2.70% and (1.75%), respectively, for the period ended 12/31/98 and 1.57% and (.26%), respectively, for the year ended 12/31/99. (d) Total return is not annualized for periods less than one year. Class A, B and C shares are subject to sales loads, account fees and rule 12b-1 fees that are not reflected in the total return. *Annualized --- 21 Notes _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ 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_______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ --- 23 FOR MORE INFORMATION ------------------------------------------------------------------------------- You can get more information about the Fund's investments in the Fund's semi-annual and annual reports to shareholders. The annual report contains a discussion of the market conditions and investment strategies that significantly affected the Fund's performance over its last fiscal year. You may wish to read the Statement of Additional Information for more information on the Fund and the securities in which it invests. The Statement of Additional Information is incorporated into this prospectus by reference, which means that it is considered to be part of this prospectus. You can get free copies of reports and the Statement of Additional Information, request other information and discuss your questions about the Fund by writing or calling the Fund's distributor at: Liberty Funds Distributor, Inc. One Financial Center Boston, MA 02111-2621 1-800-426-3750 www.libertyfunds.com Text-only versions of all Fund documents can be viewed online or downloaded from the Edgar database on the Securities and Exchange Commission internet site at www.sec.gov. You can review and copy information about the Fund by visiting the following location, and you can obtain copies, upon payment of a duplicating fee by electronic request at the E-mail address publicinfo@sec.gov or by writing the: Public Reference Room Securities and Exchange Commission Washington, DC 20549-0102 Information on the operation of the Public Reference Room may be obtained by calling 1-202-942-8090. Investment Company Act file number: Liberty Acorn Trust (formerly Acorn Investment Trust): 811-01829 . Liberty Acorn Foreign Forty (formerly Acorn Foreign Forty) [LOGO OF LIBERTY FUNDS] ALLSTAR. COLONIAL. CRABBE HUSON. NEWPORT. STEIN RUE ADVISOR Liberty Funds Distributor, Inc. (C) 2000 One Financial Center, Boston, MA 02111-2621, 1-800-426-3750 www.libertyfunds.com ------------------------------------------------------------------------------ LIBERTY ACORN FUND Prospectus, September 29, 2000 ------------------------------------------------------------------------------- Class Z Shares Advised by Liberty Wanger Asset Management, L.P. Liberty Acorn Trust Only eligible investors may purchase Class Z shares. See "Your Account - Eligible Investors" for more information. Although these securities have been registered with the Securities and Exchange Commission, the Commission has not approved or disapproved any shares offered in this prospectus or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. -------------------------------------------------------------------------------- T A B L E O F C O N T E N T S LIBERTY ACORN FUND 2 ------------------ Investment Goal........................................................... 2 Principal Investment Strategies........................................... 2 Principal Investment Risks................................................ 2 Performance History....................................................... 4 Your Expenses............................................................. 5 YOUR ACCOUNT 6 ------------ How to Buy Shares......................................................... 6 Eligible Investors........................................................ 7 Price of Fund Shares...................................................... 8 How to Exchange Shares.................................................... 8 How to Sell Shares........................................................ 8 Fund Policy on Trading of Fund Shares..................................... 9 Other Information About Your Account...................................... 10 MANAGING THE FUND 13 ----------------- Investment Advisor........................................................ 13 Portfolio Managers........................................................ 13 OTHER INVESTMENT STRATEGIES AND RISKS 15 -------------------- The Information Edge...................................................... 15 Stock Strength Comes First................................................ 15 Derivative Strategies..................................................... 16 Temporary Defensive Strategies............................................ 16 FINANCIAL HIGHLIGHTS 17 --------------------
--------------------------- Not FDIC May Lose Value ----------------- Insured No Bank Guarantee --------------------------- ____ 1 Liberty Acorn Fund INVESTMENT GOAL -------------------------------------------------------------------------------- Liberty Acorn Fund seeks to provide long-term growth of capital. PRINCIPAL INVESTMENT STRATEGIES -------------------------------------------------------------------------------- Liberty Acorn Fund invests primarily in the stocks of small- and medium-sized companies. The Fund generally invests in the stocks of companies with capitalizations of less than $2 billion. The Fund believes that these smaller companies, which are not as well known by financial analysts, may offer higher return potential than the stocks of larger companies. Liberty Acorn Fund typically looks for companies with: . A strong business franchise that offers growth potential. . Products and services that give a company a competitive advantage. . A stock price the Fund's advisor believes is reasonable relative to the assets and earning power of the company. Liberty Acorn Fund invests the majority of its assets in U.S. companies, but also may invest up to 33% of its assets in companies outside the U.S. in developed markets (for example, Japan, Canada and United Kingdom) and emerging markets (for example, Mexico, Brazil and Korea). Additional strategies that are not principal investment strategies and the risks associated with them are described below under "Other Investment Strategies and Risks." PRINCIPAL INVESTMENT RISKS -------------------------------------------------------------------------------- The principal risks of investing in the Fund are described below. There are many circumstances (including additional risks that are not described here) that could prevent the Fund from achieving its investment goal. You may lose money by investing in the Fund. Management risk means that the advisor's stock selections and other investment decisions might produce losses or cause the Fund to underperform when compared to other funds with a similar investment goal. Market risk means that security prices in a market, sector or industry may move down. Downward movements will reduce the value of your investment. Because of management and market risk, there is no guarantee that the Fund will achieve its investment goal or perform favorably compared with competing funds. Equity risk is the risk that stock prices will fall over short or extended periods of time. Although the stock market has historically outperformed other asset classes over the long term, the equity market tends to move in cycles and individual stock prices may fluctuate drastically from day-to-day and may underperform other asset classes over an extended period of time. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These price movements may result ____ 2 Acorn Fund from factors affecting individual companies, industries or the securities market as a whole. Smaller companies and mid-capitalization companies are more likely than larger companies to have limited product lines, operating histories, markets or financial resources. They may depend heavily on a small management team. Stocks of smaller companies and mid-capitalization companies may trade less frequently, may trade in smaller volumes and may fluctuate more sharply in price than stocks of larger companies. In addition, they may not be widely followed by the investment community, which can lower the demand for their stock. Foreign securities are subject to special risks. Foreign stock markets can be extremely volatile. Fluctuations in currency exchange rates may impact the value of foreign securities without a change in the intrinsic value of those securities. The liquidity of foreign securities may be more limited than domestic securities, which means that the Fund may, at times, be unable to sell foreign securities at desirable prices. Brokerage commissions, custodial fees and other fees are generally higher for foreign investments. In addition, foreign governments may impose withholding taxes which would reduce the amount of income and capital gains available to distribute to shareholders. Other risks include the following: possible delays in the settlement of transactions or the notification of income; less publicly available information about companies; the impact of political, social or diplomatic events; and possible seizure, expropriation or nationalization of the company or its assets or imposition of currency exchange controls. Emerging markets are subject to additional risk. The risks of foreign investments are typically increased in less developed countries, which are sometimes referred to as emerging markets. For example, political and economic structures in these countries may be new and developing rapidly, which may cause instability. Their securities markets may be underdeveloped. These countries are also more likely than developed countries to experience high levels of inflation, deflation or currency devaluations, which could hurt their economies and securities markets, and to expropriate or nationalize a company or its assets. Sector risk may sometimes be present in the Fund's investments. Companies that are in different but closely related industries are sometimes described as being in the same broad economic sector. The values of stocks of many different companies in a market sector may be similarly affected by particular economic or market events. Although the Fund does not intend to focus on any particular sector, at times, the Fund may have a significant portion of its assets invested in a particular sector. An example of a sector in which the Fund may sometimes have a significant portion of it assets invested is technology. Technology companies may be significantly affected by falling prices and profits, and intense competition. In addition, the rate of technological change for technology companies is generally higher than for other companies, often requiring extensive and sustained investment in research and development, and exposing such companies to the risk of rapid product obsolescence. The price of many technology stocks has risen based on projections of future earnings and company growth. If a company does not perform as expected, the price of the stock could decline significantly. Many technology companies are currently operating at a loss and may never be profitable. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. ____ 3 Acorn Fund UNDERSTANDING PERFORMANCE CALENDAR YEAR TOTAL RETURNS show the Fund's Class Z share performance for each of the last ten complete calendar years. They include the effects of Fund expenses. AVERAGE ANNUAL TOTAL RETURNS are measures of the Fund's performance over the past one-year, five-year and ten-year periods. They include the effects of Fund expenses. The Fund's return is compared to the S&P 500 Index and the Russell 2000 Index. The S&P 500 Index is a broad market-weighted average of large U.S. blue-chip companies. The Russell 2000 Index is a market-weighted index of 2000 small companies formed by taking the largest 3000 companies and eliminating the largest 1000 of those companies. Unlike the Fund, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in indices. PERFORMANCE HISTORY -------------------------------------------------------------------------------- The bar chart below shows changes in the Fund's performance from year to year by illustrating the Fund's calendar year total returns for its Class Z shares. The performance table following the bar chart shows how the Fund's average annual returns for Class Z shares compare with those of broad measures of market performance for one year, five years and ten years. The chart and table are intended to illustrate some of the risks of investing in the Fund by showing the changes in the Fund's performance. All returns include the reinvestment of dividends and distributions. As with all mutual funds, past performance does not predict the Fund's future performance. Calendar Year Total Returns -------------------------------------------------------------------------------- [BAR CHART] Year Return ---- ------ 1990 (17.52%) 1991 47.35% 1992 24.23% 1993 32.32% 1994 (7.45%) 1995 20.80% 1996 22.55% 1997 24.98% 1998 6.02% 1999 38.38% -------------------------------------------------------------------------------- For period shown in bar chart: Best quarter: 4th quarter 1999, +21.94% Worst quarter: 3rd quarter 1990, -23.77% Average Annual Total Returns -- for periods ended December 31, 1999
1 Year 5 Years 10 Years Class Z 33.38% 21.21% 17.07% ------------------------------------------------------------------------------- S&P 500 21.04% 28.56% 18.21% ------------------------------------------------------------------------------- Russell 2000 21.26% 16.69% 13.34%
____ 4 Acorn Fund UNDERSTANDING EXPENSES Annual Fund Operating Expenses are deducted from the Fund. They include management and administration fees, and administrative costs including pricing and custody services. Example Expenses help you compare the cost of investing in the Fund to the cost of investing in other mutual funds. It uses the following hypothetical conditions: . $10,000 initial investment . 5% total return for each year . fund operating expenses remain the same . assumes reinvestment of all dividends and distributions YOUR EXPENSES -------------------------------------------------------------------------------- Expenses are one of several factors to consider before you invest in a mutual fund. The tables below describe the fees and expenses you may pay when you buy, hold and sell shares of the Fund. Shareholder Fees (paid directly from your investment) Maximum sales charge (load) on purchases None ---------------------------------------------------------------- Maximum deferred sales charge (load) on redemptions None ---------------------------------------------------------------- Redemption fee (%) (as a percentage of amount redeemed) None
Annual Fund Operating Expenses (deducted directly from Fund assets) Management fees/(1)/ (%) .69 ---------------------------------------------------------------- Distribution and service (12b-1) fees (%) None ---------------------------------------------------------------- Other expenses (%) .16 ---------------------------------------------------------------- Total annual fund operating expenses (%) .85 ----------------------------------------------------------------
(1) In addition to the management fee, the Fund pays the Advisor an administrative fee of .05%, which is included in "Other Expenses." Example Expenses (your actual costs may be higher or lower)
1 Year 3 Years 5 Years 10 Years $87 $271 $471 $1,049
____ 5 Your Account HOW TO BUY SHARES -------------------------------------------------------------------------------- If you are an Eligible Investor (described below), your shares will be bought at the next calculated price after the Fund receives your purchase request in "good form." "Good form" means that your payment has been received and your application is complete, including all necessary signatures. The Fund reserves the right to refuse a purchase order for any reason, including if the Fund believes that doing so would be in the best interest of the Fund and its shareholders. Outlined below are the various options for buying shares: Method Instructions -------------------------------------------------------------------------------- By check For new accounts, send a completed application and (new account) check made payable to the Fund to the transfer agent, Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. -------------------------------------------------------------------------------- By check For existing accounts, fill out and return the (existing account) additional investment stub included in your quarterly statement, or send a letter of instruction including the Fund name and account number with a check made payable to the Fund to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. -------------------------------------------------------------------------------- By exchange You may acquire shares by exchanging shares you own in one fund for shares of the same class of shares of the Fund at no additional cost. There may be an additional charge if exchanging from a money market fund. To exchange by telephone, call 1-800-422-3737. -------------------------------------------------------------------------------- By wire You may purchase shares by wiring money from your bank account to your Fund account. To wire funds to your Fund account, call 1-800-422-3737 to obtain a control number and the wiring instructions. -------------------------------------------------------------------------------- By electronic funds You may purchase shares by electronically transferring transfer (existing money from your bank account to your Fund account by account) calling 1-800-422-3737. Electronic funds transfers may take up to two business days to settle and be considered in "good form." You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the application. -------------------------------------------------------------------------------- Automatic You can make monthly or quarterly investments investment plan automatically from your bank account to your Fund account. You can select a pre-authorized amount to be sent via electronic funds transfer. Be sure to complete the appropriate section of the application for this feature. -------------------------------------------------------------------------------- By dividend You may automatically invest dividends distributed by diversification one fund into the same class of shares of the Fund at no additional sales charge. To invest your dividends in the Fund, call 1-800-345-6611. -------------------------------------------------------------------------------- Through an Contact your financial professional. Financial intermediary professionals may charge fees for their services. ____ 6 Your Account ELIGIBLE INVESTORS Only Eligible Investors may purchase Class Z shares of the Fund, directly or by exchange. Eligible Investors are subject to different minimum investment requirements. Eligible Investors and their applicable investment minimums are: $1,000 minimum initial investment --------------------------------- . any shareholder (or family member of such shareholder) who owned shares of any of the Liberty Acorn Funds on September 29, 2000 (when all of the Trust's then outstanding shares were re-designated Class Z shares) and who has since then continued to own shares of any funds distributed by Liberty Funds Distributor, Inc.; . any trustee of Liberty Acorn Trust, any employee of Liberty WAM, or a member of the family of the trustee or employee; and . any person or entity listed in the account registration for any account (such as joint owners, trustees, custodians, and designated beneficiaries) that held shares of any of the funds of Liberty Acorn Trust on September 29, 2000 and that has continued to hold shares of any funds distributed by. Liberty Funds Distributor, Inc. $100,000 minimum initial investment ----------------------------------- . any client of a broker-dealer or registered investment advisor that recommends Fund shares and charges an asset-based fee; . any insurance company, trust company or bank, which is purchasing shares for its own account; . any endowment, investment company or foundation; and . any client of an investment advisory affiliate of the distributor if the client meets certain criteria established by the distributor and its affiliate. No minimum initial investment ----------------------------- . any retirement plan with aggregate assets of at least $5 million at the time it purchases Class Z shares and which is purchasing shares directly from the distributor or through a third party broker-dealer; and . any person investing all or part of the proceeds of a distribution, "roll over" or transfer of assets into a Liberty IRA from any deferred compensation plan which was a shareholder of any of the Liberty Acorn funds on September 29, 2000, in which the investor was a participant and through which the investor invested in one or more of the Liberty Acorn funds immediately prior to the distribution, transfer or roll over. If you have any questions about your eligibility to purchase Class Z shares of the Fund, please call 800-345-6611. If you hold Fund shares through a broker- dealer or other financial institution, your eligibility to purchase Class Z shares may differ depending on that institution's policies. The Fund reserves the right to change the criteria for eligible investors and these investment minimums. No minimum investment applies to accounts participating in the automatic investment plan. The Fund also reserves the right to refuse a purchase order for any reason, including if it believes that doing so would be in the best interest of the Fund and its shareholders. ____ 7 Your Account CHOOSING A SHARE CLASS The Fund offers one class of shares in this prospectus -- Class Z. The Fund also offers three additional classes of shares -- Class A, B and C shares are available through a separate prospectus. Each share class has its own sales charge and expense structure. Determining which share class is best for you depends on the dollar amount you are investing and the number of years for which you are willing to invest. Based on your personal situation, your investment advisor can help you decide which class of shares makes the most sense for you. In general, anyone who is eligible to purchase Class Z shares, which do not incur Rule 12b-1 fees or sales charges, should do so in preference over other classes. PRICE OF FUND SHARES Your purchases of Class Z shares generally are at net asset value, which is the value of a Fund share without any sales charge. Class Z shares are not subject to an initial sales charge when purchased, or a contingent deferred sales charge when sold. If you purchase Class Z shares of the Fund through certain broker-dealers, banks or other intermediaries (intermediaries), they may charge a fee for their services. They may also place limits on your ability to use services the Fund offers. There are no sales charges or limitations if you purchase shares directly from the Fund, except as described in this prospectus. If an intermediary is an agent or designee of the Fund, orders are processed at the net asset value next calculated after the intermediary receives the order. The intermediary must segregate any orders it receives after the close of regular trading on the NYSE and transmit those orders separately for execution at the net asset value next determined. HOW TO EXCHANGE SHARES You may exchange your shares for shares of the same share class of another fund or Class A shares of certain other funds distributed by Liberty Funds Distributor, Inc., at net asset value without a sales charge. Unless your account is part of a tax-deferred retirement plan, an exchange is a taxable event. Therefore, you may realize a gain or a loss for tax purposes. The Fund may terminate your exchange privilege if the advisor determines that your exchange activity is likely to adversely impact its ability to manage the Fund. To exchange by telephone, call 1-800-422-3737. HOW TO SELL SHARES You may sell shares of the Fund on any regular business day that the New York Stock Exchange (NYSE) is open. When the Fund receives your sales request in "good form," shares will be sold at the next calculated net asset value. In "good form" means that money used to purchase your shares is fully collected. When selling shares by letter of instruction, "good form" also means (i) your letter has complete instructions, the proper signatures and signature guarantees, and (ii) any other required documents are attached. A signature guarantee is designed to protect you and Liberty Acorn from fraud. Signature guarantees can be obtained from a commercial bank, broker-dealer, credit union (if authorized under state law), securities exchange or association. A notary public cannot provide a signature guarantee. For additional documents required for sales by corporations, agents, fiduciaries and surviving joint owners, please call 1-800-345-6611. Retirement plan accounts have special requirements; please call 1-800-799-7526 for more information. The Fund will generally send proceeds from the sale to you within seven days (usually on the next business day after your request is received in "good form"). However, if you purchased your shares by check, the Fund may delay sending the proceeds from the sale of your shares for up to 15 days after your purchase to protect against checks that are returned. No interest will be paid on uncashed redemption checks. Redemption proceeds may be paid in securities rather than cash, under certain circumstances. For more information, see the paragraph "Non-Cash Redemptions" under the section "How to Sell Shares" in the Statement of Additional Information. ____ 8 Your Account Outlined below are the various options for selling shares: Method Instructions -------------------------------------------------------------------------------- By exchange You may sell shares by exchanging from the Fund into Class Z shares or Class A shares of another fund at no additional cost. To exchange by telephone, call 1-800-422-3737. -------------------------------------------------------------------------------- By telephone You or your financial advisor may sell shares by telephone and request that a check be sent to your address of record by calling 1-800-422-3737, unless you have notified the Fund of an address change within the previous 30 days. The dollar limit for telephone sales is $100,000 in a 30-day period. You do not need to set up this feature in advance of your call. Certain restrictions apply to retirement accounts. For details, call 1-800-345-6611. -------------------------------------------------------------------------------- By mail You may send a signed letter of instruction or stock power form to the address below. In your letter of instruction, note the Fund's name, share class, account number, and the dollar value or number of shares you wish to sell. All account owners must sign the letter, and signatures must be guaranteed by either a bank, a member firm of a national stock exchange or another eligible guarantor institution. Additional documentation is required for sales by corporations, agents, fiduciaries, surviving joint owners and individual retirement account owners. For details, call 1-800-345-6611. Mail your letter of instruction to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. -------------------------------------------------------------------------------- By wire You may sell shares and request that the proceeds be wired to your bank. You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the account application for this feature. -------------------------------------------------------------------------------- By electronic You may sell shares and request that the proceeds be funds transfer electronically transferred to your bank. Proceeds may take up to two business days to be received by your bank. You must set up this feature prior to your request. Be sure to complete the appropriate section of the account application for this feature. -------------------------------------------------------------------------------- Systematic You may automatically sell a specified dollar amount or Withdrawal Plan percentage on a monthly, quarterly or semiannual basis if your account balance is at least $5,000 and have the proceeds sent to you. This feature is not available if you hold your shares in certificate form. Be sure to complete the appropriate section of the account application for this feature. -------------------------------------------------------------------------------- Through an Contact your financial professional. Financial Intermediary professionals may charge fees for their services. FUND POLICY ON TRADING OF FUND SHARES -------------------------------------------------------------------------------- The Fund does not permit short-term or excessive trading. Excessive purchases, redemptions or exchanges of Fund shares disrupt portfolio management and drive Fund expenses higher. In order to promote the best interests of the Fund, the Fund reserves the right to reject any purchase order or exchange request, particularly from market timers or investors who, in the advisor's opinion, have a pattern of short-term or excessive trading or whose trading has been or may be disruptive to the Fund. The fund into which you would like to exchange also may reject your request. ____ 9 Your Account OTHER INFORMATION ABOUT YOUR ACCOUNT -------------------------------------------------------------------------------- How the Fund's Share Price is Determined The price of a Fund's Class Z shares is its net asset value. The net asset value is determined at the close of regular trading on the NYSE, usually 4:00 p.m. Eastern time, on each business day that the NYSE is open (typically Monday through Friday). When you request a transaction, it will be processed at the net asset value next determined after your request is received in "good form" by the Fund (or an authorized broker-dealer, financial services company, or other agent, some of whom may charge a fee for their services). In most cases, in order to receive that day's price, the Fund must receive your order before that day's transactions are processed. If you request a transaction through an agent, that agent must receive your order by the close of trading on the NYSE to receive that day's price. The Fund determines its net asset value for its Class Z shares by dividing total net assets attributable to Class Z shares by the number of outstanding Class Z shares. In determining the net asset value, the Fund must determine the price of each security in its portfolio at the close of each trading day. Because the Fund may hold securities that are traded on foreign exchanges, the value of these securities may change on days when shareholders will not be able to buy or sell Fund shares. This will affect the Fund's net asset value on the day it is next determined. Securities for which market quotations are available are valued each day at the current market value. However, where market quotations are not available, or when the advisor believes that subsequent events have made them unreliable, the Fund may use other data to determine the fair value of the securities. You can find the daily prices of some share classes for the Fund in most major daily newspapers under the caption "Liberty." You can find daily prices for all share classes by visiting the Fund's web site at www.libertyfunds.com. Share Certificates Share certificates are not available for Class Z shares. ____ 10 Your Account UNDERSTANDING FUND DISTRIBUTIONS The Fund earns income from the securities it holds. The Fund also may realize capital gains and losses on sales of its securities. The Fund distributes substantially all of its net investment income and capital gains to shareholders. As a shareholder, you are entitled to a portion of the Fund's income and capital gains based on the number of shares you own at the time these distributions are declared. Dividends, Distributions, and Taxes The Fund has the potential to make the following distributions: Types of Distributions Dividend Represents interest and dividends earned from securities held by the Fund, net of expenses incurred by the Fund. -------------------------------------------------------------------------------- Capital gains Represents net long-term capital gains on sales of securities held for more than 12 months and net short-term capital gains, which are gains on sales of securities held for a 12-month period or less. Distribution Options. The Fund distributes dividends in June and December and any capital gains (including short-term capital gains) at least annually. You can choose one of the options listed in the table below for these distributions when you open your account. To change your distribution option call 1-800-345-6611. If you do not indicate on your application your preference for handling distributions, the Fund will automatically reinvest all distributions in additional shares of the Fund. Distribution Options Reinvest all distributions in additional shares of the Fund -------------------------------------------------------------------------------- Reinvest all distributions in shares of another fund -------------------------------------------------------------------------------- Receive dividends in cash (see options below) and reinvest capital gains -------------------------------------------------------------------------------- Receive all distributions in cash (with one of the following options): . send the check to your address of record . send the check to a third party address . transfer the money to your bank via electronic funds transfer Distributions of $10 or less will automatically be reinvested in additional Fund shares. If you elect to receive distributions by check and the check is returned as undeliverable, or if you do not cash a distribution check within six months of the check date, the distribution will be reinvested in additional shares of the Fund. Tax Consequences Regardless of whether you receive your distributions in cash or reinvest them in additional Fund shares, all Fund distributions are subject to federal income tax. Depending on the state where you live, distributions may also be subject to state and local income taxes. In general, any distributions of dividends, interest and short-term capital gains are taxable as ordinary income. Distributions of long-term capital gains are generally taxable as such, regardless of how long you have held your Fund shares. You will be provided with information each year regarding the amount of ordinary income and capital gains distributed to you for the previous year and any portion of your distribution which is exempt from state and local taxes. Your investment in the Fund may have additional personal tax implications. Please consult your tax advisor on foreign, federal, state, local or other applicable tax laws. ____ 11 Your Account In addition to the dividends and capital gains distributions made by the Fund, you may realize a capital gain or loss when selling and exchanging shares of the Fund. Such transactions may be subject to federal, state and local income tax. Foreign Income Taxes The Fund may receive investment income from sources within foreign countries, and that income may be subject to foreign income taxes at the source. If the Fund pays non-refundable taxes to foreign governments during the year, the taxes will reduce the Fund's dividends but will still be included in your taxable income. ____ 12 Managing the Fund INVESTMENT ADVISOR -------------------------------------------------------------------------------- Liberty Wanger Asset Management (Liberty WAM) (formerly Wanger Asset Management, L.P. (WAM)), located at 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606, is the Fund's investment advisor. Liberty WAM and its predecessor have managed mutual funds, including the Fund, since 1992. In its duties as investment advisor, Liberty WAM runs the Fund's day-to-day business, including placing all orders for the purchase and sale of the Fund's portfolio securities. As of June 30, 2000, Liberty WAM managed over $9 billion in assets. WAM was renamed Liberty WAM on September 29, 2000 when it became a wholly owned subsidiary of Liberty Financial Companies, Inc. (Liberty), which in turn is a majority owned indirect subsidiary of Liberty Mutual Insurance Company. For more information about Liberty's acquisition of WAM, see the Statement of Additional Information. Liberty WAM's advisory fee for managing the Fund in 1999 was 0.69% of the Fund's average daily net assets. Liberty WAM also receives an administrative fee from the Fund at the annual rate of .05% of the Fund's average daily net assets. PORTFOLIO MANAGERS -------------------------------------------------------------------------------- Liberty WAM uses a team to manage the Fund. Team members share responsibility for providing ideas, information, and knowledge in managing the Fund, and each team member has one or more particular areas of expertise. The portfolio managers are responsible for making daily investment decisions, and utilize the management team's input and advice when making buy and sell determinations. Ralph Wanger Lead portfolio manager Ralph Wanger is chief strategist of the Liberty Acorn Fund and has been portfolio manager of Liberty Acorn Fund since its inception in 1970. He has been president and a member of Liberty Acorn Trust's Board of Trustees since 1970. Mr. Wanger has been president of Liberty WAM since September 29, 2000 and was a principal of WAM before that date. He is a Chartered Financial Analyst (CFA), and earned his BS and MS degrees in Industrial Management from the Massachusetts Institute of Technology. Charles P. McQuaid Co-portfolio manager Charles McQuaid is a senior vice president and member of Liberty Acorn Trust's Board of Trustees. He has been director of Domestic Research at Liberty WAM and WAM, ____ 13 Managing the Fund and was a principal of WAM until September 29, 2000. Mr. McQuaid has been a member of Liberty Acorn Fund's management team since 1978. He is a CFA, and earned his BBA from the University of Massachusetts and his MBA from the University of Chicago. ____ 14 Other Investment Strategies and Risks UNDERSTANDING THE FUND'S OTHER INVESTMENT STRATEGIES AND RISKS The Fund's principal investment strategies and risks are described under "Liberty Acorn Fund - Principal Investment Strategies" and "Liberty Acorn Fund - Principal Investment Risks." In seeking to meet its investment goal, the Fund may also invest in other securities and use certain other investment techniques. These securities and investment techniques offer opportunities and carry various risks. Liberty WAM may elect not to buy any of these securities or use any of these techniques unless it believes that doing so will help the Fund achieve its investment goal. The Fund may not always achieve its investment goal. Additional information about the Fund's securities and investment techniques, as well as the Fund's fundamental and non-fundamental investment policies, is contained in the Statement of Additional Information. The first portion of this prospectus describes the Fund's principal investment strategies and their associated risks. This section provides more detail about the Fund's investment strategies, and describes other investments the Fund may make and the risks associated with them. In seeking to achieve its investment goal, the Fund may invest in various types of securities and engage in various investment techniques, which are not the principal focus of the Fund and therefore are not described in this prospectus. These types of securities and investment practices are identified and discussed in the Fund's Statement of Additional Information, which you may obtain free of charge (see back cover). Approval by the Fund's shareholders is not required to modify or change the Fund's investment goal or investment strategies. THE INFORMATION EDGE -------------------------------------------------------------------------------- The Fund invests in entrepreneurially managed smaller and mid-sized companies that it believes are not as well known by financial analysts and whose domination of a niche creates the opportunity for superior earnings-growth potential. Liberty WAM may identify what it believes are important economic, social or technological trends (for example, the growth of out-sourcing as a business strategy, or the productivity gains from the increasing use of technology) and try to identify companies it thinks will benefit from those trends. In making investments for the Fund, Liberty WAM relies primarily on independent, internally generated research to uncover companies that may be less well known than the more popular names. To find these companies, Liberty WAM compares growth potential, financial strength and fundamental value among companies.
Growth Potential Financial Strength Fundamental Value -------------------------------------------------------------------------------- . superior technology . low debt . reasonable stock price . innovative marketing . adequate working relative to growth . managerial skill capital potential . market niche . conservative . good earnings accounting practices prospects . adequate profit margin . valuable assets . strong demand for product The realization of this A strong balance sheet Once Liberty WAM growth potential would gives management uncovers an attractive likely produce superior greater flexibility to company, it identifies a performance that is pursue strategic price that it believes sustainable over time. objectives and is would also make the stock essential to maintaining a good value. a competitive advantage. --------------------------------------------------------------------------------
STOCK STRENGTH COMES FIRST -------------------------------------------------------------------------------- Liberty WAM's analysts continually screen companies and make more than 1,000 face-to-face visits around the globe each year. To accomplish this, Liberty WAM analysts talk to top management, vendors, suppliers and competitors, whenever possible. In managing the Fund, Liberty WAM tries to maintain lower taxes and transaction costs by investing with a long-term time horizon (at least two to five years). However, ____ 15 Other Investment Strategies and Risks securities purchased on a long-term basis may be sold within 12 months after purchase due to changes in the circumstances of a particular company or industry, or changes in general market or economic conditions. DERIVATIVE STRATEGIES -------------------------------------------------------------------------------- The Fund may enter into a number of hedging strategies, including those that employ futures and options, to gain or reduce exposure to particular securities or markets. These strategies, commonly referred to as derivatives, involve the use of financial instruments whose values depend on, or are derived from, the value of an underlying security, index or currency. The Fund may use these strategies to adjust the Fund's sensitivity to changes in interest rates or for other hedging purposes (i.e., attempting to offset a potential loss in one position by establishing an interest in an opposite position). Derivative strategies involve the risk that they may exaggerate a loss, potentially losing more money than the actual cost of the underlying security, or limit a potential gain. Also, with some derivative strategies there is a risk that the other party to the transaction may fail to honor its contract terms, causing a loss to the Fund. TEMPORARY DEFENSIVE STRATEGIES -------------------------------------------------------------------------------- At times, Liberty WAM may determine that adverse market conditions make it desirable to temporarily suspend the Fund's normal investment activities. During such times, the Fund may, but is not required to, invest in cash or high- quality, short-term debt securities, without limit. Taking a temporary defensive position may prevent the Fund from achieving its investment goal. ____ 16 Financial Highlights The financial highlights tables are intended to help you understand the Fund's financial performance. Information is shown for the Fund's last five fiscal years and for the six months ended June 30, 2000. The Fund's fiscal year runs from January 1 to December 31. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). The information with respect to the six month period ended June 30, 2000 is unaudited. The information with respect to the last five years is audited. For periods up to and including the year ended 1999, this information has been derived from the Fund's financial statements which have been audited by Ernst & Young LLP, independent auditors, whose report, along with the Fund's audited financial statements, is included in the Fund's annual report. You can request a free annual report by calling 1-800- 426-3750. Liberty Acorn Fund
Six Months Ended June 30, For a share outstanding throughout 2000 Year Ended each period (unaudited) 1999 1998 1997 1996 1995 ------------------------------------------------------------------------------------------------------------ Class Z Class Z Class Z Class Z Class Z Class Z ------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $18.53 $16.85 $16.99 $15.04 $13.60 $12.24 ------------------------------------------------------------------------------------------------------------ Income from Investment Operations: Net investment income .06 .09 .04 .15 .09 .11 ------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain on investments, foreign currency and futures (.32) 5.22 .91 3.57 2.93 2.42 ------------------------------------------------------------------------------------------------------------ Total from investment operations (.26) 5.31 .95 3.72 3.02 2.53 ============================================================================================================ Less distributions: Dividends from net investment income (.05) (.09) (.03) (.16) (.11) (.09) ------------------------------------------------------------------------------------------------------------ Distributions from net realized and unrealized gains reportable for federal income taxes (1.00) (3.54) (1.06) (1.61) (1.47) (1.08) ------------------------------------------------------------------------------------------------------------ Total distributions (1.05) (3.63) (1.09) (1.77) (1.58) (1.17) ============================================================================================================ Net asset value, end of period $17.22 $18.53 $16.85 $16.99 $15.04 $13.60 ------------------------------------------------------------------------------------------------------------ Total return (a) (1.41)% 33.4% 6.0% 25.0% 22.6% 20.8% ============================================================================================================ Ratios/supplemental data: Ratio of expenses to average net assets .84%* .85% .84% .56% .57% .57% ------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets .62%* .49% .30% .75% .53% .89% ------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 35%* 34% 24% 32% 33% 29% ------------------------------------------------------------------------------------------------------------ Net assets at end of period (in millions) $3,818 $3,921 $3,549 $3,681 $2,842 $2,399
(a) Total return is not annualized for periods less than one year. *Annualized. ____ 17 Notes ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ____ 18 FOR MORE INFORMATION -------------------------------------------------------------------------------- You can get more information about the Fund's investments in the Fund's semi-annual and annual reports to shareholders. The annual report contains a discussion of the market conditions and investment strategies that significantly affected the Fund's performance over its last fiscal year. You may wish to read the Statement of Additional Information for more information on the Fund and the securities in which it invests. The Statement of Additional Information is incorporated into this prospectus by reference, which means that it is considered to be part of this prospectus. You can get free copies of reports and the Statement of Additional Information, request other information and discuss your questions about the Fund by writing or calling the Fund's distributor at: Liberty Funds Distributor, Inc. One Financial Center Boston, MA 02111-2621 1-800-426-3750 www.libertyfunds.com Text-only versions of all Fund documents can be viewed online or downloaded from the Edgar database on the Securities and Exchange Commission internet site at www.sec.gov. You can review and copy information about the Fund by visiting the following location, and you can obtain copies, upon payment of a duplicating fee, by electronic request at the E-mail address publicinfo@sec.gov or by writing the: Public Reference Room Securities and Exchange Commission Washington, DC 20549-0102 Information on the operation of the Public Reference Room may be obtained by calling 1-202-942-8090. Investment Company Act file number: Liberty Acorn Trust: 811-01829 . Liberty Acorn Fund (formerly Acorn Fund) -------------------------------------------------------------------------------- [LETTERHEAD OF LIBERTY FUNDS] ALL-STAR.COLONIAL.CRABBE HUSON.NEWPORT.STEIN ROE ADVISOR Liberty Funds Distributor, Inc. (c) 2000 One Financial Center, Boston, MA 02111-2621,1-800-426-3750 www.libertyfunds.com -------------------------------------------------------------------------------- LIBERTY ACORN TWENTY Prospectus, September 29, 2000 -------------------------------------------------------------------------------- Class Z Shares Advised by Liberty Wanger Asset Management, L.P. Liberty Acorn Trust Only eligible investors may purchase Class Z shares. See "Your Account - Eligible Investors" for more information. Although these securities have been registered with the Securities and Exchange Commission, the Commission has not approved or disapproved any shares offered in this prospectus or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. -------------------------------------------------------------------------------- T A B L E O F C O N T E N T S LIBERTY ACORN TWENTY 2 -------------------- Investment Goal.......................................................... 2 Principal Investment Strategies.......................................... 2 Principal Investment Risks............................................... 2 Performance History...................................................... 4 Your Expenses............................................................ 5 YOUR ACCOUNT 6 ------------ How to Buy Shares........................................................ 6 Eligible Investors....................................................... 7 Price of Fund Shares..................................................... 8 How to Exchange Shares................................................... 8 How to Sell Shares....................................................... 8 Fund Policy on Trading of Fund Shares.................................... 9 Other Information About Your Account..................................... 10 MANAGING THE FUND 13 ----------------- Investment Advisor....................................................... 13 Portfolio Manager........................................................ 13 OTHER INVESTMENT STRATEGIES AND RISKS 14 -------------------- The Information Edge..................................................... 14 Stock Strength Comes First............................................... 14 Derivative Strategies.................................................... 15 Temporary Defensive Strategies........................................... 15 FINANCIAL HIGHLIGHTS 16 --------------------
Not FDIC May Lose Value ----------------- Insured No Bank Guarantee Liberty Acorn Twenty INVESTMENT GOAL -------------------------------------------------------------------------------- Liberty Acorn Twenty seeks long-term growth of capital. PRINCIPAL INVESTMENT STRATEGIES -------------------------------------------------------------------------------- Liberty Acorn Twenty invests primarily in the stocks of medium- to larger-sized U.S. companies. The Fund is a non-diversified fund that takes advantage of its advisor's research and stock-picking capabilities to invest in a limited number of companies (between 20-25) with market capitalizations of $2 billion to $12 billion, offering the potential to provide above-average growth over time. The Fund believes that companies within this capitalization range are not as well known by financial analysts, and may offer higher return potential than the stocks of companies with capitalizations above $12 billion. Liberty Acorn Twenty typically looks for companies with: . A strong business franchise that offers growth potential. . Products and services that give the company a competitive advantage. . A stock price the Fund's advisor believes is reasonable relative to the assets and earning power of the company. Although the Fund does not buy securities with a short-term view, there is no restriction on the length of time the Fund must hold a security. To the extent the Fund buys and sells securities frequently, its transaction costs will be higher (which may adversely affect the Fund's performance) and it may realize additional capital gains. Additional strategies that are not principal investment strategies and the risks associated with them are described below under "Other Investment Strategies and Risks." PRINCIPAL INVESTMENT RISKS -------------------------------------------------------------------------------- The principal risks of investing in the Fund are described below. There are many circumstances (including additional risks that are not described here) that could prevent the Fund from achieving its investment goal. You may lose money by investing in the Fund. Management risk means that the advisor's stock selections and other investment decisions might produce losses or cause the Fund to underperform when compared to other funds with a similar investment goal. Market risk means that security prices in a market, sector or industry may move down. Downward movements will reduce the value of your investment. Because of management and market risk, there is no guarantee that the Fund will achieve its investment goal or perform favorably compared with competing funds. Equity risk is the risk that stock prices will fall over short or extended periods of time. Although the stock market has historically outperformed other asset classes over the long term, the equity market tends to move in cycles and individual stock prices may fluctuate drastically from day-to-day and may underperform other asset classes over an extended period of time. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. ----- 2 Liberty Acorn Twenty Smaller companies and mid-capitalization companies are more likely than larger companies to have limited product lines, operating histories, markets or financial resources. They may depend heavily on a small management team. Stocks of smaller companies and mid-capitalization companies may trade less frequently, may trade in smaller volumes and may fluctuate more sharply in price than stocks of larger companies. In addition, they may not be widely followed by the investment community, which can lower the demand for their stock. Sector risk may sometimes be present in the Fund's investments. Companies that are in different but closely related industries are sometimes described as being in the same broad economic sector. The values of stocks of many different companies in a market sector may be similarly affected by particular economic or market events. Although the Fund does not intend to focus on any particular sector, at times, the Fund may have a significant portion of its assets invested in a particular sector. An example of a sector in which the Fund may sometimes have a significant portion of its assets invested is technology. Technology companies may be significantly affected by falling prices and profits, and intense competition. In addition, the rate of technological change for technology companies is generally higher than for other companies, often requiring extensive and sustained investment in research and development, and exposing such companies to the risk of rapid product obsolescence. The price of many technology stocks has risen based on projections of future earnings and company growth. If a company does not perform as expected, the price of the stock could decline significantly. Many technology companies are currently operating at a loss and may never be profitable. As a non-diversified mutual fund, the Fund is allowed to invest a greater percentage of its total assets in the securities of a single issuer. This may concentrate issuer risk and, therefore, the Fund may have an increased risk of loss compared to a similar diversified mutual fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. ------ 3 Liberty Acorn Twenty UNDERSTANDING PERFORMANCE Calendar year total returns show the Fund's Class Z share performance for each completed calendar year. They include the effects of Fund expenses. Average annual total returns are measures of the Fund's performance over the past one-year and life of the Fund. They include the effects of Fund expenses. The Fund's return is compared to the S&P Mid Cap 400 Index. The S&P Mid Cap 400 is an unmanaged, market value-weighted index of 400 mid cap U.S. companies. Unlike the Fund, an index is not an investment, does not incur fees or expenses and is not professionally managed. It is not possible to invest directly in an index. PERFORMANCE HISTORY -------------------------------------------------------------------------------- The bar chart below shows changes in the Fund's performance from year to year by illustrating the Fund's calendar year total returns for its Class Z shares. The performance table following the bar chart shows how the Fund's average annual returns for Class Z shares compare with those of broad measures of market performance for one year and life of the Fund. The chart and table are intended to illustrate some of the risks of investing in the Fund by showing the changes in the Fund's performance. All returns include the reinvestment of dividends and distributions. Performance results include the effect of expense reduction arrangements. If these arrangements were not in place, then performance would have been lower. Any expense reduction arrangements may be discontinued at any time. As with all mutual funds, past performance does not predict the Fund's future performance. Calendar Year Total Returns -------------------------------------------------------------------------------- [BAR CHART] Year Returns ---- ------- '99 29.30% -------------------------------------------------------------------------------- For period shown in bar chart: Best quarter: 4th quarter 1999, +14.35% Worst quarter: 3rd quarter 1999, - 7.13% Average Annual Total Returns -- for periods ended December 31, 1999 Inception Date 1 Year Life of the Fund Class Z 11/23/98 29.30% 34.20% -------------------------------------------------------------------------------- S&P Mid Cap 400 N/A 14.72% 24.49% ______ 4 Liberty Acorn Twenty UNDERSTANDING EXPENSES Annual Fund Operating Expenses are deducted from the Fund. They include management and administration fees, and administrative costs including pricing and custody services. Example Expenses help you compare the cost of investing in the Fund to the cost of investing in other mutual funds. The table does not take into account any expense reduction arrangements discussed in the footnotes to the Annual Fund Operating Expenses table. It uses the following hypothetical conditions: . $10,000 initial investment . 5% total return for each year . fund operating expenses remain the same . assumes reinvestment of all dividends and distributions YOUR EXPENSES -------------------------------------------------------------------------------- Expenses are one of several factors to consider before you invest in a mutual fund. The tables below describe the fees and expenses you may pay when you buy, hold and sell shares of the Fund. Shareholder Fees (paid directly from your investment) Maximum sales charge (load) on purchases None ----------------------------------------------------------------------- Maximum deferred sales charge (load) on redemptions None Redemption fee (%) (as a percentage of amount redeemed) None Annual Fund Operating Expenses (deducted directly from Fund assets) Management fees/(1)/ (%) .90 ----------------------------------------------------------------------- Distribution and service (12b-1) fees (%) None ----------------------------------------------------------------------- Other expenses (%) .51 ----------------------------------------------------------------------- Total annual fund operating expenses(2) (%) 1.41 ----------------------------------------------------------------------- (1) In addition to the management fee, the Fund pays the Advisor an administrative fee of .05%, which is included in "Other Expenses." (2) The Fund's advisor has voluntarily agreed to reimburse the Fund for any ordinary operating expenses (exclusive of distribution and service fees, interest, taxes and extraordinary expenses, if any) exceeding 1.35% of its average annual net assets. This arrangement may be modified or terminated by either the Fund or its advisor on 30 days' notice to the other. As a result, the actual total annual Fund operating expenses for Class Z would be 1.35%. Example Expenses (your actual costs may be higher or lower) 1 Year 3 Years 5 Years 10 Years $144 $446 $ 771 $1,691 ----- 5 Your Account HOW TO BUY SHARES -------------------------------------------------------------------------------- If you are an Eligible Investor (described below), your shares will be bought at the next calculated price after the Fund receives your purchase request in "good form." "Good form" means that your payment has been received and your application is complete, including all necessary signatures. The Fund reserves the right to refuse a purchase order for any reason, including if the Fund believes that doing so would be in the best interest of the Fund and its shareholders. Outlined below are the various options for buying shares:
Method Instructions ------------------------------------------------------------------------------------------------------- By check For new accounts, send a completed application and check made payable (new account) to the Fund to the transfer agent, Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. ------------------------------------------------------------------------------------------------------- By check For existing accounts, fill out and return the additional investment stub (existing account) included in your quarterly statement, or send a letter of instruction including the Fund name and account number with a check made payable to the Fund to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. ------------------------------------------------------------------------------------------------------- By exchange You may acquire shares by exchanging shares you own in one fund for shares of the same class of shares of the Fund at no additional cost. There may be an additional charge if exchanging from a money market fund. To exchange by telephone, call 1-800-422-3737. ------------------------------------------------------------------------------------------------------- By wire You may purchase shares by wiring money from your bank account to your Fund account. To wire funds to your Fund account, call 1-800-422-3737 to obtain a control number and the wiring instructions. ------------------------------------------------------------------------------------------------------- By electronic funds You may purchase shares by electronically transferring money from your transfer (existing bank account to your Fund account by calling 1-800-422-3737. account) Electronic funds transfers may take up to two business days to settle and be considered in "good form." You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the application. ------------------------------------------------------------------------------------------------------- Automatic You can make monthly or quarterly investments automatically from your investment plan bank account to your Fund account. You can select a pre-authorized amount to be sent via electronic funds transfer. Be sure to complete the appropriate section of the application for this feature. ------------------------------------------------------------------------------------------------------- By dividend You may automatically invest dividends distributed by one diversification fund into the same class of shares of the Fund at no additional sales charge. To invest your dividends in the Fund, call 1-800-345-6611. ------------------------------------------------------------------------------------------------------- Through an Contact your financial professional. Financial professionals may charge intermediary fees for their services.
Your Account ELIGIBLE INVESTORS Only Eligible Investors may purchase Class Z shares of the Funds, directly or by exchange. Eligible Investors are subject to different minimum investment requirements. Eligible Investors and their applicable investment minimums are: $1,000 minimum initial investment --------------------------------- . any shareholder (or family member of such shareholder) who owned shares of any of the Liberty Acorn funds on September 29, 2000 (when all of the Trust's then outstanding shares were re-designated Class Z shares) and who has since then continued to own shares of any funds distributed by Liberty Funds Distributor, Inc.; . any trustee of Liberty Acorn Trust, any employee of Liberty WAM, or a member of the family of the trustee or employee; and . any person or entity listed in the account registration for any account (such as joint owners, trustees, custodians, and designated beneficiaries) that held shares of any of the funds of Liberty Acorn Trust on September 29, 2000 and that has since then continued to hold shares of any funds distributed by Liberty Funds Distributor, Inc. $100,000 minimum initial investment ----------------------------------- . any client of a broker-dealer or registered investment advisor that recommends Fund shares and charges an asset-based fee; . any insurance company, trust company or bank, which is purchasing shares for its own account; . any endowment, investment company or foundation; and . any client of an investment advisory affiliate of the distributor if the client meets certain criteria established by the distributor and its affiliate. No minimum initial investment ----------------------------- . any retirement plan with aggregate assets of at least $5 million at the time it purchases Class Z shares and which is purchasing shares directly from the distributor or through a third party broker-dealer; and . any person investing all or part of the proceeds of a distribution, "roll over" or transfer of assets into a Liberty IRA from any deferred compensation plan which was a shareholder of any of the Liberty Acorn funds on September 29, 2000, in which the investor was a participant and through which the investor invested in one or more of the Liberty Acorn funds immediately prior to the distribution, transfer or roll over. If you have any questions about your eligibility to purchase Class Z shares of the Fund, please call 800-345-6611. If you hold Fund shares through a broker- dealer or other financial institution, your eligibility to purchase Class Z shares may differ depending on that institution's policies. The Fund reserves the right to change the criteria for eligible investors and these investment minimums. No minimum investment applies to accounts participating in the automatic investment plan. The Fund also reserves the right to refuse a purchase order for any reason, including if it believes that doing so would be in the best interest of the Fund and its shareholders. ---- 7 Your Account CHOOSING A SHARE CLASS The Fund offers one class of shares in this prospectus -- Class Z. The Fund also offers three additional classes of shares -- Class A, B and C shares are available through a separate prospectus. Each share class has its own sales charge and expense structure. Determining which share class is best for you depends on the dollar amount you are investing and the number of years for which you are willing to invest. Based on your personal situation, your investment advisor can help you decide which class of shares makes the most sense for you. In general, anyone who is eligible to purchase Class Z shares, which do not incur Rule 12b-1 fees or sales charges, should do so in preference over other classes. PRICE OF FUND SHARES -------------------------------------------------------------------------------- Your purchases of Class Z shares generally are at net asset value, which is the value of a Fund share without any sales charge. Class Z shares are not subject to an initial sales charge when purchased, or a contingent deferred sales charge when sold. If you purchase Class Z shares of the Fund through certain broker-dealers, banks or other intermediaries (intermediaries), they may charge a fee for their services. They may also place limits on your ability to use services the Fund offers. There are no sales charges or limitations if you purchase shares directly from the Fund, except as described in this prospectus. If an intermediary is an agent or designee of the Fund, orders are processed at the net asset value next calculated after the intermediary receives the order. The intermediary must segregate any orders it receives after the close of regular trading on the NYSE and transmit those orders separately for execution at the net asset value next determined. HOW TO EXCHANGE SHARES -------------------------------------------------------------------------------- You may exchange your shares for shares of the same share class of another fund or Class A shares of certain other funds distributed by Liberty Funds Distributor, Inc., at net asset value without a sales charge. Unless your account is part of a tax-deferred retirement plan, an exchange is a taxable event. Therefore, you may realize a gain or a loss for tax purposes. The Fund may terminate your exchange privilege if the advisor determines that your exchange activity is likely to adversely impact its ability to manage the Fund. To exchange by telephone, call 1-800-422-3737. HOW TO SELL SHARES -------------------------------------------------------------------------------- You may sell shares of the Fund on any regular business day that the New York Stock Exchange (NYSE) is open. When the Fund receives your sales request in "good form," shares will be sold at the next calculated net asset value. In "good form" means that money used to purchase your shares is fully collected. When selling shares by letter of instruction, "good form" also means (i) your letter has complete instructions, the proper signatures and signature guarantees, and (ii) any other required documents are attached. A signature guarantee is designed to protect you and Liberty Acorn from fraud. Signature guarantees can be obtained from a commercial bank, broker-dealer, credit union (if authorized under state law), securities exchange or association. A notary public cannot provide a signature guarantee. For additional documents required for sales by corporations, agents, fiduciaries and surviving joint owners, please call 1-800-345-6611. Retirement plan accounts have special requirements; please call 1-800-799-7526 for more information. The Fund will generally send proceeds from the sale to you within seven days (usually on the next business day after your request is received in "good form"). However, if you purchased your shares by check, the Fund may delay sending the proceeds from the sale of your shares for up to 15 days after your purchase to protect against checks that are returned. No interest will be paid on uncashed redemption checks. Redemption proceeds may be paid in securities rather than cash, under certain circumstances. For more information, see the paragraph "Non-Cash Redemptions" under the section "How to Sell Shares" in the Statement of Additional Information. ---- 8 Your Account Outlined below are the various options for selling shares: Method Instructions --------------------------------------------------------------------------------------------------- By exchange You may sell shares by exchanging from the Fund into Class Z shares or Class A shares of another fund at no additional cost. To exchange by telephone, call 1-800-422-3737. --------------------------------------------------------------------------------------------------- By telephone You or your financial advisor may sell shares by telephone and request that a check be sent to your address of record by calling 1-800-422-3737, unless you have notified the Fund of an address change within the previous 30 days. The dollar limit for telephone sales is $100,000 in a 30-day period. You do not need to set up this feature in advance of your call. Certain restrictions apply to retirement accounts. For details, call 1-800-345-6611. --------------------------------------------------------------------------------------------------- By mail You may send a signed letter of instruction or stock power form to the address below. In your letter of instruction, note the Fund's name, share class, account number, and the dollar value or number of shares you wish to sell. All account owners must sign the letter, and signatures must be guaranteed by either a bank, a member firm of a national stock exchange or another eligible guarantor institution. Additional documentation is required for sales by corporations, agents, fiduciaries, surviving joint owners and individual retirement account owners. For details, call 1-800-345-6611. Mail your letter of instruction to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. --------------------------------------------------------------------------------------------------- By wire You may sell shares and request that the proceeds be wired to your bank. You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the account application for this feature. --------------------------------------------------------------------------------------------------- By electronic You may sell shares and request that the proceeds be electronically funds transfer transferred to your bank. Proceeds may take up to two business days to be received by your bank. You must set up this feature prior to your request. Be sure to complete the appropriate section of the account application for this feature. --------------------------------------------------------------------------------------------------- Systematic You may automatically sell a specified dollar amount or percentage on a Withdrawal Plan monthly, quarterly or semiannual basis if your account balance is at least $5,000 and have the proceeds sent to you. This feature is not available if you hold your shares in certificate form. Be sure to complete the appropriate section of the account application for this feature. --------------------------------------------------------------------------------------------------- Through an Contact your financial professional. Financial professionals may charge Intermediary fees for their services.
FUND POLICY ON TRADING OF FUND SHARES -------------------------------------------------------------------------------- The Fund does not permit short-term or excessive trading. Excessive purchases, redemptions or exchanges of Fund shares disrupt portfolio management and drive Fund expenses higher. In order to promote the best interests of the Fund, the Fund reserves the right to reject any purchase order or exchange request, particularly from market timers or investors who, in the advisor's opinion, have a pattern of short-term or excessive trading or whose trading has been or may be disruptive to the Fund. The fund into which you would like to exchange also may reject your request. ---- 9 Your Account OTHER INFORMATION ABOUT YOUR ACCOUNT -------------------------------------------------------------------------------- How the Fund's Share Price is Determined The price of a Fund's Class Z shares is its net asset value. The net asset value is determined at the close of regular trading on the NYSE, usually 4:00 p.m. Eastern time, on each business day that the NYSE is open (typically Monday through Friday). When you request a transaction, it will be processed at the net asset value next determined after your request is received in "good form" by the Fund (or an authorized broker-dealer, financial services company, or other agent, some of whom may charge a fee for their services). In most cases, in order to receive that day's price, the Fund must receive your order before that day's transactions are processed. If you request a transaction through an agent, that agent must receive your order by the close of trading on the NYSE to receive that day's price. The Fund determines its net asset value for its Class Z shares by dividing total net assets attributable to Class Z shares by the number of outstanding Class Z shares. In determining the net asset value, the Fund must determine the price of each security in its portfolio at the close of each trading day. Securities for which market quotations are available are valued each day at the current market value. However, where market quotations are not available, or when the advisor believes that subsequent events have made them unreliable, the Fund may use other data to determine the fair value of the securities. You can find the daily prices of some share classes for the Fund in most major daily newspapers under the caption "Liberty." You can find daily prices for all share classes by visiting the Fund's web site at www.acornfunds.com. Share Certificates Share certificates are not available for Class Z shares. ----- 10 Your Account UNDERSTANDING FUND DISTRIBUTIONS The Fund earns income from the securities it holds. The Fund also may realize capital gains and losses on sales of its securities. The Fund distributes substantially all of its net investment income and capital gains to shareholders. As a shareholder, you are entitled to a portion of the Fund's income and capital gains based on the number of shares you own at the time these distributions are declared. Dividends, Distributions, and Taxes The Fund has the potential to make the following distributions: Types of Distributions Dividend Represents interest and dividends earned from securities held by the Fund net of expenses incurred by the Fund. -------------------------------------------------------------------------------- Capital gains Represents net long-term capital gains on sales of securities held for more than 12 months and net short-term capital gains, which are gains on sales of securities held for a 12-month period or less. Distribution Options The Fund distributes dividends in June and December and any capital gains (including short-term capital gains) at least annually. You can choose one of the options listed in the table below for these distributions when you open your account. To change your distribution option call 1-800-345-6611. If you do not indicate on your application your preference for handling distributions, the Fund will automatically reinvest all distributions in additional shares of the Fund. Distribution Options Reinvest all distributions in additional shares of the Fund ------------------------------------------------------------------------------- Reinvest all distributions in shares of another fund ------------------------------------------------------------------------------- Receive dividends in cash (see options below) and reinvest capital gains ------------------------------------------------------------------------------- Receive all distributions in cash (with one of the following options): . send the check to your address of record . send the check to a third party address . transfer the money to your bank via electronic funds transfer Distributions of $10 or less will automatically be reinvested in additional Fund shares. If you elect to receive distributions by check and the check is returned as undeliverable, or if you do not cash a distribution check within six months of the check date, the distribution will be reinvested in additional shares of the Fund. Tax Consequences Regardless of whether you receive your distributions in cash or reinvest them in additional Fund shares, all Fund distributions are subject to federal income tax. Depending on the state where you live, distributions may also be subject to state and local income taxes. In general, any distributions of dividends, interest and short-term capital gains are taxable as ordinary income. Distributions of long-term capital gains are generally taxable as such, regardless of how long you have held your Fund shares. You will be provided with information each year regarding the amount of ordinary income and capital gains distributed to you for the previous year and any portion of your distribution which is exempt from state and local taxes. Your investment in the Fund may have additional personal tax implications. Please consult your tax advisor on federal, state, local or other applicable tax laws. ____ 11 Your Account In addition to the dividends and capital gains distributions made by the Fund, you may realize a capital gain or loss when selling and exchanging shares of the Fund. Such transactions may be subject to federal, state and local income tax. ____ 12 Managing the Fund INVESTMENT ADVISOR -------------------------------------------------------------------------------- Liberty Wanger Asset Management (Liberty WAM) (formerly Wanger Asset Management, L.P. (WAM)), located at 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606, is the Fund's investment advisor. Liberty WAM and its predecessor have managed mutual funds, including the Fund, since 1992. In its duties as investment advisor, Liberty WAM runs the Fund's day-to-day business, including placing all orders for the purchase and sale of the Fund's portfolio securities. As of June 30, 2000, Liberty WAM managed over $9 billion in assets. WAM was renamed Liberty WAM on September 29, 2000 when it became a wholly owned subsidiary of Liberty Financial Companies, Inc. (Liberty), which in turn is a majority owned indirect subsidiary of Liberty Mutual Insurance Company. For more information about Liberty's acquisition of WAM, see the Statement of Additional Information. Liberty WAM's advisory fee for managing the Fund in 1999 was 0.90% of the Fund's average daily net assets. Liberty WAM also receives an administrative fee from the Fund at the annual rate of .05% of the Fund's average daily net assets. PORTFOLIO MANAGER -------------------------------------------------------------------------------- Liberty WAM uses a team to manage the Fund. Team members share responsibility for providing ideas, information, and knowledge in managing the Fund, and each team member has one or more particular areas of expertise. The portfolio manager is responsible for making daily investment decisions, and utilizes the management team's input and advice when making buy and sell determinations. John H. Park Lead portfolio manager John Park is a vice president of Liberty Acorn Trust, and has managed Liberty Acorn Twenty since its inception in 1998. He has been a member of the domestic investment team at Liberty WAM and WAM since 1993, and was a principal of WAM from 1998 to September 29, 2000. Mr. Park is also manager of a mutual fund underlying variable insurance products. He is a CFA and earned both his BA and MBA degrees from the University of Chicago. ____ 13 OTHER INVESTMENT STRATEGIES AND RISKS The first portion of this prospectus describes the Fund's principal investment strategies and their associated risks. This section provides more detail about the Fund's investment strategies, and describes other investments the Fund may make and the risks associated with them. In seeking to achieve its investment goal, the Fund may invest in various types of securities and engage in various investment techniques, which are not the principal focus of the Fund and therefore are not described in this prospectus. These types of securities and investment practices are identified and discussed in the Fund's Statement of Additional Information, which you may obtain free of charge (see back cover). Approval by the Fund's shareholders is not required to modify or change the Fund's investment goal or investment strategies. UNDERSTANDING THE FUND'S OTHER INVESTMENT STRATEGIES AND RISKS The Fund's principal investment strategies and risks are described under "Liberty Acorn Twenty - Principal Investment Strategies" and "Liberty Acorn Twenty - Principal Investment Risks." In seeking to meet its investment goal, the Fund may also invest in other securities and use certain other investment techniques. These securities and investment techniques offer opportunities and carry various risks. Liberty WAM may elect not to buy any of these securities or use any of these techniques unless it believes that doing so will help the Fund achieve its investment goal. The Fund may not always achieve its investment goal. Additional information about the Fund's securities and investment techniques, as well as the Fund's fundamental and non-fundamental investment policies, is contained in the Statement of Additional Information. THE INFORMATION EDGE -------------------------------------------------------------------------------- The Fund invests in entrepreneurially managed smaller, mid-sized and larger companies that it believes are not as well known by financial analysts and whose domination of a niche creates the opportunity for superior earnings-growth potential. Liberty WAM may identify what it believes are important economic, social or technological trends (for example, the growth of out-sourcing as a business strategy, or the productivity gains from the increasing use of technology) and try to identify companies it thinks will benefit from those trends. In making investments for the Fund, Liberty WAM relies primarily on independent, internally generated research to uncover companies that may be less well known than the more popular names. To find these companies, Liberty WAM compares growth potential, financial strength and fundamental value among companies.
Growth Potential Financial Strength Fundamental Value -------------------------------------------------------------------------------- . superior technology . low debt . reasonable stock price . innovative marketing . adequate working relative to growth . managerial skills capital potential . market niche . conservative . valuable assets . good earnings accounting practices prospects . adequate profit margin . strong demand for product The realization of this A strong balance sheet Once Liberty WAM growth potential would gives management uncovers an attractive likely produce superior greater flexibility to company, it identifies a performance that is pursue strategic price that it believes sustainable over time. objectives and is would also make the stock essential to maintaining a good value. a competitive advantage.
-------------------------------------------------------------------------------- STOCK STRENGTH COMES FIRST -------------------------------------------------------------------------------- Liberty WAM's analysts continually screen companies and make more than 1,000 face-to-face visits around the globe each year. To accomplish this, Liberty WAM analysts talk to top management, vendors, suppliers and competitors, whenever possible. In managing the Fund, Liberty WAM tries to maintain lower taxes and transaction costs by investing with a long-term time horizon (at least two to five years). However, ____ 14 Other Investment Strategies and Risks securities purchased on a long-term basis may be sold within 12 months after purchase due to changes in the circumstances of a particular company or industry, or changes in general market or economic conditions. DERIVATIVE STRATEGIES -------------------------------------------------------------------------------- The Fund may enter into a number of hedging strategies, including those that employ futures and options, to gain or reduce exposure to particular securities or markets. These strategies, commonly referred to as derivatives, involve the use of financial instruments whose values depend on, or are derived from, the value of an underlying security, index or currency. The Fund may use these strategies to adjust the Fund's sensitivity to changes in interest rates or for other hedging purposes (i.e., attempting to offset a potential loss in one position by establishing an interest in an opposite position). Derivative strategies involve the risk that they may exaggerate a loss, potentially losing more money than the actual cost of the underlying security, or limit a potential gain. Also, with some derivative strategies there is a risk that the other party to the transaction may fail to honor its contract terms, causing a loss to the Fund. TEMPORARY DEFENSIVE STRATEGIES -------------------------------------------------------------------------------- At times, Liberty WAM may determine that adverse market conditions make it desirable to temporarily suspend the Fund's normal investment activities. During such times, the Fund may, but is not required to, invest in cash or high- quality, short-term debt securities, without limit. Taking a temporary defensive position may prevent the Fund from achieving its investment goal. ____ 15 Financial Highlights The financial highlights table is intended to help you understand the Fund's financial performance. Information is shown for the Fund's Class Z shares since inception. The Fund's fiscal year runs from January 1 to December 31. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). The information with respect to the six-month period ended June 30, 2000 is unaudited. The information with respect to the year ended December 31, 1999 and the period ended December 31, 1998 is audited. For periods up to and including the year ended 1999, this information has been derived from the Fund's financial statements which have been audited by Ernst & Young LLP, independent auditors, whose report, along with the Fund's audited financial statements, is included in the Fund's annual report. You can request a free annual report by calling 1-800-426-3750. Liberty Acorn Twenty
Six months ended 6/30/00 Inception 11/23/98 For a share outstanding throughout each period (unaudited) Year ended 12/31/99 Through 12/31/98 ------------------------------------------------------------------------------------------------------------------- Class Z Class Z Class Z ------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $13.70 $10.71 $ 10.00 ------------------------------------------------------------------------------------------------------------------- Income from investment Operations: Net investment income (loss) (a) (.04) (.08) -- ------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain on investments .50 3.21 .71 ------------------------------------------------------------------------------------------------------------------- Total from investment operations .46 3.13 .71 ------------------------------------------------------------------------------------------------------------------- Less Distributions: Dividends from net investment income -- -- -- Distribution from net realized and unrealized gains reportable for federal income taxes (.89) (.14) -- ------------------------------------------------------------------------------------------------------------------- Total distributions (.89) (.14) -- ------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $13.27 $13.70 $ 10.71 ------------------------------------------------------------------------------------------------------------------- Total return (d) 3.4% 29.3% 7.1% ------------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: ------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (b)(c) 1.37%* 1.37% 1.41%* ------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (c) (.57%)* (.62)% .22%* ------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 170%* 101% 173%* ------------------------------------------------------------------------------------------------------------------- Net assets at end of period (in millions) $ 61 $ 68 $ 34
(a) Net investment income (loss) per (c) Liberty Acorn Twenty was reimbursed share was based upon the average by Liberty WAM for certain net shares outstanding during the period. expenses from November 23, 1998 through June 30, 2000. Without (b) In accordance with a requirement by the reimbursement, the ratio of the Securities and Exchange expenses (prior to custodian fees paid Commission, the expense ratio indirectly) to average net assets and reflects total expenses prior to the the ratio of net investment income to reduction of custodian fees for cash average net assets would have been balances it maintains with the 1.83% and (.21%), respectively, for custodian ("custodian fees paid the period ended 12/31/98, 1.41% indirectly"). This ratio net of custodian and (.66%), respectively, for the year fees paid indirectly would have been ended 12/31/99 and 1.40% and (.60%), 1.35% for the period ended December 31, respectively, for the six months 1998, the year ended December 31, 1999 ended June 30, 2000. and the six months ended June 30, 2000. (d) Total return is not annualized for periods less than one year. * Annualized
____ 16 Notes -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --- 18 FOR MORE INFORMATION -------------------------------------------------------------------------------- You can get more information about the Fund's investments in the Fund's semi- annual and annual reports to shareholders. The annual report contains a discussion of the market conditions and investment strategies that significantly affected the Fund's performance over its last fiscal year. You may wish to read the Statement of Additional Information for more information on the Fund and the securities in which it invests. The Statement of Additional Information is incorporated into this prospectus by reference, which means that it is considered to be part of this prospectus. You can get free copies of reports and the Statement of Additional Information, request other information and discuss your questions about the Fund by writing or calling the Fund's distributor at: Liberty Funds Distributor, Inc. One Financial Center Boston, MA 02111-2621 1-800-426-3750 www.libertyfunds.com Text-only versions of all Fund documents can be viewed online or downloaded from the Edgar database on the Securities and Exchange Commission internet site at www.sec.gov. You can review and copy information about the Fund by visiting the following location, and you can obtain copies, upon payment of a duplicating fee by electronic request at the E-mail address publicinfo@sec.gov or by writing the: Public Reference Room Securities and Exchange Commission Washington, DC 20549-0102 Information on the operation of the Public Reference Room may be obtained by calling 1-202-942-8090. Investment Company Act file number: Liberty Acorn Trust (formerly Acorn Investment Trust): 811-01829 . Liberty Acorn Twenty (formerly Acorn Twenty) -------------------------------------------------------------------------------- [LOGO OF LIBERTY FUNDS] ALL-STAR.COLONIAL.CRABBE HUSON.NEWPORT.STEIN ROE ADVISOR Liberty Funds Distributor, Inc. (c) 2000 One Financial Center, Boston, MA 02111-2621, 1-800-426-3750 www.libertyfunds.com -------------------------------------------------------------------------------- LIBERTY ACORN INTERNATIONAL Prospectus, September 29, 2000 -------------------------------------------------------------------------------- Class Z Shares Advised by Liberty Wanger Asset Management, L.P. Liberty Acorn Trust Only eligible investors may purchase Class Z shares. See "Your Account - Eligible Investors" for more information. Although these securities have been registered with the Securities and Exchange Commission, the Commission has not approved or disapproved any shares offered in this prospectus or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. -------------------------------------------------------------------------------- T A B L E OF C O N T E N T S LIBERTY ACORN INTERNATIONAL 2 --------------------------- Investment Goal......................................................... 2 Principal Investment Strategies......................................... 2 Principal Investment Risks.............................................. 2 Performance History..................................................... 4 Your Expenses........................................................... 5 YOUR ACCOUNT 6 ------------ How to Buy Shares....................................................... 6 Eligible Investors...................................................... 7 Price of Fund Shares.................................................... 8 How to Exchange Shares.................................................. 8 How to Sell Shares...................................................... 8 Fund Policy on Trading of Fund Shares................................... 9 Other Information About Your Account.................................... 10 MANAGING THE FUND 13 ----------------- Investment Advisor...................................................... 13 Portfolio Managers...................................................... 13 OTHER INVESTMENT STRATEGIES AND RISKS 15 -------------------- The Information Edge.................................................... 15 Stock Strength Comes First.............................................. 15 Derivative Strategies................................................... 16 Temporary Defensive Strategies.......................................... 16 FINANCIAL HIGHLIGHTS 17 --------------------
Not FDIC May Lose Value ----------------- Insured No Bank Guarantee ____ 1 Liberty Acorn International INVESTMENT GOAL -------------------------------------------------------------------------------- Liberty Acorn International seeks to provide long-term growth of capital. PRINCIPAL INVESTMENT STRATEGIES -------------------------------------------------------------------------------- Liberty Acorn International invests primarily in stocks of non-U.S. small- and medium-sized companies. The Fund generally invests in the stocks of companies based outside the U.S. with capitalizations of less than $5 billion. The Fund believes that smaller companies - particularly outside the U.S. -that are not as well known by financial analysts may offer higher return potential than the stocks of larger companies. Liberty Acorn International typically looks for companies with: . A strong business franchise that offers growth potential. . Products and services that give the company a competitive advantage. . A stock price the Fund's advisor believes is reasonable relative to the assets and earning power of the company. Liberty Acorn International is an international fund and invests the majority (under normal market conditions, at least 75%) of its total assets in the stocks of foreign companies based in developed markets (for example, Japan, Canada and United Kingdom) and emerging markets (for example, Mexico, Brazil and Korea). Additional strategies that are not principal investment strategies and the risks associated with them are described below under "Other Investment Strategies and Risks." PRINCIPAL INVESTMENT RISKS -------------------------------------------------------------------------------- The principal risks of investing in the Fund are described below. There are many circumstances (including additional risks that are not described here) that could prevent the Fund from achieving its investment goal. You may lose money by investing in the Fund. Management risk means that the advisor's stock selections and other investment decisions might produce losses or cause the Fund to underperform when compared to other funds with a similar investment goal. Market risk means that security prices in a market, sector or industry may move down. Downward movements will reduce the value of your investment. Because of management and market risk, there is no guarantee that the Fund will achieve its investment goal or perform favorably compared with competing funds. Equity risk is the risk that stock prices will fall over short or extended periods of time. Although the stock market has historically outperformed other asset classes over the long term, the equity market tends to move in cycles and individual stock prices may fluctuate drastically from day-to-day and may underperform other asset classes over an extended period of time. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These price movements may result ____ 2 Liberty Acorn International from factors affecting individual companies, industries or the securities market as a whole. Smaller companies and mid-capitalization companies are more likely than larger companies to have limited product lines, operating histories, markets or financial resources. They may depend heavily on a small management team. Stocks of smaller companies and mid-capitalization companies may trade less frequently, may trade in smaller volumes and may fluctuate more sharply in price than stocks of larger companies. In addition, they may not be widely followed by the investment community, which can lower the demand for their stock. Foreign securities are subject to special risks. Foreign stock markets can be extremely volatile. Fluctuations in currency exchange rates may impact the value of foreign securities without a change in the intrinsic value of those securities. The liquidity of foreign securities may be more limited than domestic securities, which means that the Fund may, at times, be unable to sell foreign securities at desirable prices. Brokerage commissions, custodial fees and other fees are generally higher for foreign investments. In addition, foreign governments may impose withholding taxes which would reduce the amount of income and capital gains available to distribute to shareholders. Other risks include the following: possible delays in the settlement of transactions or the notification of income; less publicly available information about companies; the impact of political, social or diplomatic events; and possible seizure, expropriation or nationalization of the company or its assets or imposition of currency exchange controls. Emerging markets are subject to additional risk. The risks of foreign investments are typically increased in less developed countries, which are sometimes referred to as emerging markets. For example, political and economic structures in these countries may be new and developing rapidly, which may cause instability. Their securities markets may be underdeveloped. These countries are also more likely than developed countries to experience high levels of inflation, deflation or currency devaluations, which could hurt their economies and securities markets, and to expropriate or nationalize a company or its assets. Sector risk may sometimes be present in the Fund's investments. Companies that are in different but closely related industries are sometimes described as being in the same broad economic sector. The values of stocks of many different companies in a market sector may be similarly affected by particular economic or market events. Although the Fund does not intend to focus on any particular sector, at times, the Fund may have a significant portion of its assets invested in a particular sector. An example of a sector in which the Fund may sometimes have a significant portion of its assets invested is technology. Technology companies may be significantly affected by falling prices and profits, and intense competition. In addition, the rate of technological change for technology companies is generally higher than for other companies, often requiring extensive and sustained investment in research and development, and exposing such companies to the risk of rapid product obsolescence. The price of many technology stocks has risen based on projections of future earnings and company growth. If a company does not perform as expected, the price of the stock could decline significantly. Many technology companies are currently operating at a loss and may never be profitable. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. ____ 3 Liberty Acorn International UNDERSTANDING PERFORMANCE Calendar year total returns show the Fund's Class Z share performance for each completed calendar year. They include the effects of Fund expenses. Average annual total returns are measures of the Fund's performance over the past one-year, five-year and life of the Fund periods. They include the effects of Fund expenses. The Fund's return is compared to Morgan Stanley's Europe, Australasia and Far East Index (EAFE), an index of companies throughout the world in proportion to stock market capitalizations, excluding the U.S. and Canada, and the EMI (world ex-U.S.), Salomon Smith Barney's index of the bottom 20% of institutionally investable capital of countries, selected by Salomon and excluding the U.S. Unlike the Fund, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in indices. PERFORMANCE HISTORY -------------------------------------------------------------------------------- The bar chart below shows changes in the Fund's performance from year to year by illustrating the Fund's calendar year total returns for its Class Z shares. The performance table following the bar chart shows how the Fund's average annual returns for Class Z shares compare with those of broad measures of market performance for one year, five years and life of the Fund. The chart and table are intended to illustrate some of the risks of investing in the Fund by showing the changes in the Fund's performance. All returns include the reinvestment of dividends and distributions. As with all mutual funds, past performance does not predict the Fund's future performance. Calendar Year Total Returns/(1)/ -------------------------------------------------------------------------------- [BAR CHART] Year Return ---- ------ 1993 49.11% 1994 (3.80%) 1995 8.93% 1996 20.65% 1997 19.00% 1998 15.43% 1999 79.19% -------------------------------------------------------------------------------- For period shown in bar chart: Best quarter: 4th quarter 1999, +41.63% Worst quarter: 3rd quarter 1998, -16.05% Average Annual Total Returns -- For Periods Ended December 31, 1999/(1)/ Inception Life Of The Date 1 Year 5 Years Fund Class Z 9/23/92 79.19% 22.19% 21.71% -------------------------------------------------------------------------------- EAFE N/A 26.96% 12.83% 13.50% -------------------------------------------------------------------------------- EMI (world ex-U.S.) N/A 23.52% 7.21% 9.48% (1) The Fund's performance in 1999 was achieved during a period of unusual market conditions that are unlikely to continue. ____ 4 Liberty Acorn International UNDERSTANDING EXPENSES Annual Fund Operating Expenses are deducted from the Fund. They include management and administration fees, and administrative costs including pricing and custody services. Example Expenses help you compare the cost of investing in the Fund to the cost of investing in other mutual funds. It uses the following hypothetical conditions: . $10,000 initial investment . 5% total return for each year . fund operating expenses remain the same . assumes reinvestment of all dividends and distributions YOUR EXPENSES -------------------------------------------------------------------------------- Expenses are one of several factors to consider before you invest in a mutual fund. The tables below describe the fees and expenses you may pay when you buy, hold and sell shares of the Fund. Shareholder Fees (paid directly from your investment) Maximum sales charge (load) on purchases None ------------------------------------------------------------------ Maximum deferred sales charge (load) on redemptions None ------------------------------------------------------------------ Redemption fee (%) (as a percentage of amount redeemed) None Annual Fund Operating Expenses (deducted directly from Fund assets) Management fees /(2)/(%) .81 ------------------------------------------------------------------ Distribution and service (12b-1) fees (%) None ------------------------------------------------------------------ Other expenses (%) .30 ------------------------------------------------------------------ Total annual fund operating expenses (%) 1.11 ------------------------------------------------------------------ (2) In addition to the management fee, the Fund pays the Advisor an administrative fee of .05%, which is included in "Other Expenses." Example Expenses (your actual costs may be higher or lower) 1 Year 3 Years 5 Years 10 Years $113 $353 $612 $1,352 ____ 5 Your Account HOW TO BUY SHARES -------------------------------------------------------------------------------- If you are an Eligible Investor (described below), your shares will be bought at the next calculated price after the Fund receives your purchase request in "good form." "Good form" means that your payment has been received and your application is complete, including all necessary signatures. The Fund reserves the right to refuse a purchase order for any reason, including if the Fund believes that doing so would be in the best interest of the Fund and its shareholders. Outlined below are the various options for buying shares: Method Instructions -------------------------------------------------------------------------------- By check For new accounts, send a completed application and check (new account) made payable to the Fund to the transfer agent, Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105- 1722. -------------------------------------------------------------------------------- By check For existing accounts, fill out and return the (existing account) additional investment stub included in your quarterly statement, or send a letter of instruction including the Fund name and account number with a check made payable to the Fund to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. -------------------------------------------------------------------------------- By exchange You may acquire shares by exchanging shares you own in one fund for shares of the same class of shares of the Fund at no additional cost. There may be an additional charge if exchanging from a money market fund. To exchange by telephone, call 1-800-422-3737. -------------------------------------------------------------------------------- By wire You may purchase shares by wiring money from your bank account to your Fund account. To wire funds to your Fund account, call 1-800-422-3737 to obtain a control number and the wiring instructions. -------------------------------------------------------------------------------- By electronic funds You may purchase shares by electronically transferring transfer (existing money from your bank account to your Fund account by account) calling 1-800-422-3737. Electronic funds transfers may take up to two business days to settle and be considered in "good form." You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the application. -------------------------------------------------------------------------------- Automatic You can make monthly or quarterly investments investment plan automatically from your bank account to your Fund account. You can select a pre-authorized amount to be sent via electronic funds transfer. Be sure to complete the appropriate section of the application for this feature. -------------------------------------------------------------------------------- By dividend You may automatically invest dividends distributed by diversification one fund into the same class of shares of the Fund at no additional sales charge. To invest your dividends in the Fund, call 1-800-345-6611. -------------------------------------------------------------------------------- Through an Contact your financial professional. Financial intermediary professionals may charge fees for their services. -------------------------------------------------------------------------------- ____ 6 Your Account ELIGIBLE INVESTORS -------------------------------------------------------------------------------- Only Eligible Investors may purchase Class Z shares of the Funds, directly or by exchange. Eligible Investors are subject to different minimum investment requirements. Eligible Investors and their applicable investment minimums are: $1,000 minimum initial investment --------------------------------- . any shareholder (or family member of such shareholder) who owned shares of any of the Liberty Acorn funds on September 29, 2000 (when all of the Trust's then outstanding shares were re-designated Class Z shares) and who has since then continued to own shares of any funds distributed by Liberty Funds Distributor, Inc.; . any trustee of Liberty Acorn Trust, any employee of Liberty WAM, or a member of the family of the trustee or employee; and . any person or entity listed in the account registration for any account (such as joint owners, trustees, custodians, and designated beneficiaries) that held shares of any of the funds of Liberty Acorn Trust on September 29, 2000 and that has continued to hold shares of any funds distributed by Liberty Funds Distributor, Inc. $100,000 minimum initial investment ----------------------------------- . any client of a broker-dealer or registered investment advisor that recommends Fund shares and charges an asset-based fee; . any insurance company, trust company or bank, which is purchasing shares for its own account; . any endowment, investment company or foundation; and . any client of an investment advisory affiliate of the distributor if the client meets certain criteria established by the distributor and its affiliate. No minimum initial investment ----------------------------- . any retirement plan with aggregate assets of at least $5 million at the time it purchases Class Z shares and which is purchasing shares directly from the distributor or through a third party broker-dealer; and . any person investing all or part of the proceeds of a distribution, "roll over" or transfer of assets into a Liberty IRA from any deferred compensation plan which was a shareholder of any of the Liberty Acorn funds on September 29, 2000, in which the investor was a participant and through which the investor invested in one or more of the Liberty Acorn funds immediately prior to the distribution, transfer or roll over. If you have any questions about your eligibility to purchase Class Z shares of the Fund, please call 1-800-345-6611. If you hold Fund shares through a broker- dealer or other financial institution, your eligibility to purchase Class Z shares may differ depending on that institution's policies. The Fund reserves the right to change the criteria for eligible investors and these investment minimums. No minimum investment applies to accounts participating in the automatic investment plan. The Fund also reserves the right to refuse a purchase order for any reason, including if it believes that doing so would be in the best interest of the Fund and its shareholders. ____ 7 Your Account CHOOSING A SHARE CLASS The Fund offers one class of shares in this prospectus -- Class Z. The Fund also offers three additional classes of shares -- Class A, B and C shares are available through a separate prospectus. Each share class has its own sales charge and expense structure. Determining which share class is best for you depends on the dollar amount you are investing and the number of years for which you are willing to invest. Based on your personal situation, your investment advisor can help you decide which class of shares makes the most sense for you. In general, anyone who is eligible to purchase Class Z shares, which do not incur Rule 12b-1 fees or sales charges, should do so in preference over other classes. PRICE OF FUND SHARES -------------------------------------------------------------------------------- Your purchases of Class Z shares generally are at net asset value, which is the value of a Fund share without any sales charge. Class Z shares are not subject to an initial sales charge when purchased, or a contingent deferred sales charge when sold. If you purchase Class Z shares of the Fund through certain broker-dealers, banks or other intermediaries (intermediaries), they may charge a fee for their services. They may also place limits on your ability to use services the Fund offers. There are no sales charges or limitations if you purchase shares directly from the Fund, except as described in this prospectus. If an intermediary is an agent or designee of the Fund, orders are processed at the net asset value next calculated after the intermediary receives the order. The intermediary must segregate any orders it receives after the close of regular trading on the NYSE and transmit those orders separately for execution at the net asset value next determined. HOW TO EXCHANGE SHARES -------------------------------------------------------------------------------- You may exchange your shares for shares of the same class of another fund or Class A shares of certain other funds distributed by Liberty Funds Distributor, Inc., at net asset value without a sales charge. Unless your account is part of a tax-deferred retirement plan, an exchange is a taxable event. Therefore, you may realize a gain or a loss for tax purposes. The Fund may terminate your exchange privilege if the advisor determines that your exchange activity is likely to adversely impact its ability to manage the Fund. To exchange by telephone, call 1-800-422-3737. HOW TO SELL SHARES -------------------------------------------------------------------------------- You may sell shares of the Fund on any regular business day that the New York Stock Exchange (NYSE) is open. When the Fund receives your sales request in "good form," shares will be sold at the next calculated net asset value. In "good form" means that money used to purchase your shares is fully collected. When selling shares by letter of instruction, "good form" also means (i) your letter has complete instructions, the proper signatures and signature guarantees, and (ii) any other required documents are attached. A signature guarantee is designed to protect you and Liberty Acorn from fraud. Signature guarantees can be obtained from a commercial bank, broker-dealer, credit union (if authorized under state law), securities exchange or association. A notary public cannot provide a signature guarantee. For additional documents required for sales by corporations, agents, fiduciaries and surviving joint owners, please call 1-800-345-6611. Retirement plan accounts have special requirements; please call 1-800-799-7526 for more information. The Fund will generally send proceeds from the sale to you within seven days (usually on the next business day after your request is received in "good form"). However, if you purchased your shares by check, the Fund may delay sending the proceeds from the sale of your shares for up to 15 days after your purchase to protect against checks that are returned. No interest will be paid on uncashed redemption checks. Redemption proceeds may be paid in securities rather than cash, under certain circumstances. For more information, see the paragraph "Non-Cash Redemptions" under the section "How to Sell Shares" in the Statement of Additional Information. ____ 8 Your Account Outlined below are the various options for selling shares:
Method Instructions ---------------------------------------------------------------------------------------------------- By exchange You may sell shares by exchanging from the Fund into Class Z shares or Class A shares of another fund at no additional cost. To exchange by telephone, call 1-800-422-3737. ---------------------------------------------------------------------------------------------------- By telephone You or your financial advisor may sell shares by telephone and request that a check be sent to your address of record by calling 1-800-422-3737, unless you have notified the Fund of an address change within the previous 30 days. The dollar limit for telephone sales is $100,000 in a 30-day period. You do not need to set up this feature in advance of your call. Certain restrictions apply to retirement accounts. For details, call 1-800-345-6611. ---------------------------------------------------------------------------------------------------- By mail You may send a signed letter of instruction or stock power form to the address below. In your letter of instruction, note the Fund's name, share class, account number, and the dollar value or number of shares you wish to sell. All account owners must sign the letter, and signatures must be guaranteed by either a bank, a member firm of a national stock exchange or another eligible guarantor institution. Additional documentation is required for sales by corporations, agents, fiduciaries, surviving joint owners and individual retirement account owners. For details, call 1-800-345-6611. Mail your letter of instruction to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. ---------------------------------------------------------------------------------------------------- By wire You may sell shares and request that the proceeds be wired to your bank. You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the account application for this feature. ---------------------------------------------------------------------------------------------------- By electronic You may sell shares and request that the proceeds be electronically funds transfer transferred to your bank. Proceeds may take up to two business days to be received by your bank. You must set up this feature prior to your request. Be sure to complete the appropriate section of the account application for this feature. ---------------------------------------------------------------------------------------------------- Systematic You may automatically sell a specified dollar amount or percentage on a Withdrawal Plan monthly, quarterly or semiannual basis if your account balance is at least $5,000 and have the proceeds sent to you. This feature is not available if you hold your shares in certificate form. Be sure to complete the appropriate section of the account application for this feature. ---------------------------------------------------------------------------------------------------- Through an Contact your financial professional. Financial professionals may charge Intermediary fees for their services. ----------------------------------------------------------------------------------------------------
FUND POLICY ON TRADING OF FUND SHARES -------------------------------------------------------------------------------- The Fund does not permit short-term or excessive trading. Excessive purchases, redemptions or exchanges of Fund shares disrupt portfolio management and drive Fund expenses higher. In order to promote the best interests of the Fund, the Fund reserves the right to reject any purchase order or exchange request, particularly from market timers or investors who, in the advisor's opinion, have a pattern of short-term or excessive trading or whose trading has been or may be disruptive to the Fund. The fund into which you would like to exchange also may reject your request. ____ 9 Your Account OTHER INFORMATION ABOUT YOUR ACCOUNT -------------------------------------------------------------------------------- How the Fund's Share Price is Determined The price of a Fund's Class Z shares is its net asset value. The net asset value is determined at the close of regular trading on the NYSE, usually 4:00 p.m. Eastern time, on each business day that the NYSE is open (typically Monday through Friday). When you request a transaction, it will be processed at the net asset value next determined after your request is received in "good form" by the Fund (or an authorized broker-dealer, financial services company, or other agent, some of whom may charge a fee for their services). In most cases, in order to receive that day's price, the Fund must receive your order before that day's transactions are processed. If you request a transaction through an agent, that agent must receive your order by the close of trading on the NYSE to receive that day's price. The Fund determines its net asset value for its Class Z shares by dividing total net assets attributable to Class Z shares by the number of outstanding Class Z shares. In determining the net asset value, the Fund must determine the price of each security in its portfolio at the close of each trading day. Because the Fund may hold securities that are traded on foreign exchanges, the value of these securities may change on days when shareholders will not be able to buy or sell Fund shares. This will affect the Fund's net asset value on the day it is next determined. Securities for which market quotations are available are valued each day at the current market value. However, where market quotations are not available, or when the advisor believes that subsequent events have made them unreliable, the Fund may use other data to determine the fair value of the securities. You can find the daily prices of some share classes for the Fund in most major daily newspapers under the caption "Liberty." You can find daily prices for all share classes by visiting the Fund's web site at www.libertyfunds.com. Share Certificates Share certificates are not available for Class Z shares. ____ 10 Your Account UNDERSTANDING FUND DISTRIBUTIONS The Fund earns income from the securities it holds. The Fund also may realize capital gains and losses on sales of its securities. The Fund distributes substantially all of its net investment income and capital gains to shareholders. As a shareholder, you are entitled to a portion of the Fund's income and capital gains based on the number of shares you own at the time these distributions are declared. Dividends, Distributions, and Taxes The Fund has the potential to make the following distributions: Types of Distributions Dividend Represents interest and dividends earned from securities held by the Fund net of expenses incurred by the Fund. -------------------------------------------------------------------------------- Capital gains Represents net long-term capital gains on sales of securities held for more than 12 months and net short-term capital gains, which are gains on sales of securities held for a 12-month period or less. Distribution Options. The Fund distributes dividends in June and December and any capital gains (including short-term capital gains) at least annually. You can choose one of the options listed in the table below for these distributions when you open your account. To change your distribution option call 1-800-345- 6611. If you do not indicate on your application your preference for handling distributions, the Fund will automatically reinvest all distributions in additional shares of the Fund. Distribution Options Reinvest all distributions in additional shares of the Fund -------------------------------------------------------------------------------- Reinvest all distributions in shares of another fund -------------------------------------------------------------------------------- Receive dividends in cash (see options below) and reinvest capital gains -------------------------------------------------------------------------------- Receive all distributions in cash (with one of the following options): . send the check to your address of record . send the check to a third party address . transfer the money to your bank via electronic funds transfer Distributions of $10 or less will automatically be reinvested in additional Fund shares. If you elect to receive distributions by check and the check is returned as undeliverable, or if you do not cash a distribution check within six months of the check date, the distribution will be reinvested in additional shares of the Fund. Tax Consequences Regardless of whether you receive your distributions in cash or reinvest them in additional Fund shares, all Fund distributions are subject to federal income tax. Depending on the state where you live, distributions may also be subject to state and local income taxes. In general, any distributions of dividends, interest and short-term capital gains are taxable as ordinary income. Distributions of long-term capital gains are generally taxable as such, regardless of how long you have held your Fund shares. You will be provided with information each year regarding the amount of ordinary income and capital gains distributed to you for the previous year and any portion of your distribution which is exempt from state and local taxes. Your investment in the Fund may have additional personal tax implications. Please consult your tax advisor on foreign, federal, state, local or other applicable tax laws. ____ 11 Your Account In addition to the dividends and capital gains distributions made by the Fund, you may realize a capital gain or loss when selling and exchanging shares of the Fund. Such transactions may be subject to federal, state and local income tax. Foreign Income Taxes The Fund may receive investment income from sources within foreign countries, and that income may be subject to foreign income taxes at the source. If the Fund pays non-refundable taxes to foreign governments during the year, the taxes will reduce the Fund's dividends but will still be included in your taxable income. You may be able to claim an offsetting credit or deduction on your tax return for your share of foreign taxes paid by the Fund. ____ 12 Managing the Fund INVESTMENT ADVISOR -------------------------------------------------------------------------------- Liberty Wanger Asset Management (Liberty WAM) (formerly Wanger Asset Management, L.P. (WAM)), located at 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606, is the Fund's investment advisor. Liberty WAM and its predecessor have managed mutual funds, including the Fund, since 1992. In its duties as investment advisor, Liberty WAM runs the Fund's day-to-day business, including placing all orders for the purchase and sale of the Fund's portfolio securities. As of June 30, 2000, Liberty WAM managed over $9 billion in assets. WAM was renamed Liberty WAM on September 29, 2000 when it became a wholly owned subsidiary of Liberty Financial Companies, Inc. (Liberty), which in turn is a majority owned indirect subsidiary of Liberty Mutual Insurance Company. For more information about Liberty's acquisition of WAM, see the Statement of Additional Information. Liberty WAM's advisory fee for managing the Fund in 1999 was 0.81% of the Fund's average daily net assets. Liberty WAM also receives an administrative fee from the Fund at the annual rate of .05% of the Fund's average daily net assets. PORTFOLIO MANAGERS -------------------------------------------------------------------------------- Liberty WAM uses a team to manage the Fund. Team members share responsibility for providing ideas, information, and knowledge in managing the Fund, and each team member has one or more particular areas of expertise. The portfolio managers are responsible for making daily investment decisions, and utilize the management team's input and advice when making buy and sell determinations. Leah J. Zell Lead portfolio manager Leah Zell is a vice president of Liberty Acorn Trust, and was a principal of WAM before its acquisition by Liberty. She has managed Liberty Acorn International since its inception in 1992, and was named lead portfolio manager in 1997. She has worked with Liberty Acorn Fund's international securities since 1984. Ms. Zell also manages the foreign portfolio of an investment company whose shares are offered only to non-U.S. investors. She is a CFA and earned her BA and PhD from Harvard University. Margaret M. Forster Co-portfolio manager Margaret Forster is a vice president of Liberty Acorn Trust and became co- portfolio manager of Liberty Acorn International in May 1999. She has been a member of the ____ 13 Managing the Fund international analytical team at Liberty WAM and WAM since 1994, and was a principal of WAM from January 1999 to September 29, 2000. Prior to that, Ms. Forster was a professor of finance at Northwestern and Ohio State Universities, and an economist with the International Monetary Fund. She is a CFA. Her degrees include a BS from Universidade de Sao Paulo, Escola Politecnica, Brazil, and an MBA, MS and PhD from Cornell University. ____ 14 Other Investment Strategies and Risks UNDERSTANDING THE FUND'S OTHER INVESTMENT STRATEGIES AND RISKS The Fund's principal investment strategies and risks are described under "Liberty Acorn International - Principal Investment Strategies" and "Liberty Acorn International - Principal Investment Risks." In seeking to meet its investment goal, the Fund may also invest in other securities and use certain other investment techniques. These securities and investment techniques offer opportunities and carry various risks. Liberty WAM may elect not to buy any of these securities or use any of these techniques unless it believes that doing so will help the Fund achieve its investment goal. The Fund may not always achieve its investment goal. Additional information about the Fund's securities and investment techniques, as well as the Fund's fundamental and non-fundamental investment policies, is contained in the Statement of Additional Information. The first portion of this prospectus describes the Fund's principal investment strategies and their associated risks. This section provides more detail about the Fund's investment strategies, and describes other investments the Fund may make and the risks associated with them. In seeking to achieve its investment goal, the Fund may invest in various types of securities and engage in various investment techniques, which are not the principal focus of the Fund and therefore are not described in this prospectus. These types of securities and investment practices are identified and discussed in the Fund's Statement of Additional Information, which you may obtain free of charge (see back cover). Approval by the Fund's shareholders is not required to modify or change the Fund's investment goal or investment strategies. THE INFORMATION EDGE -------------------------------------------------------------------------------- The Fund invests in entrepreneurially managed smaller, mid-sized and larger companies that it believes are not as well known by financial analysts and whose domination of a niche creates the opportunity for superior earnings-growth potential. Liberty WAM may identify what it believes are important economic, social or technological trends (for example, the growth of out-sourcing as a business strategy, or the productivity gains from the increasing use of technology) and try to identify companies it thinks will benefit from those trends. In making investments for the Fund, Liberty WAM relies primarily on independent, internally generated research to uncover companies that may be less well known than the more popular names. To find these companies, Liberty WAM compares growth potential, financial strength and fundamental value among companies.
Growth Potential Financial Strength Fundamental Value ------------------------------------------------------------------------------- . superior technology . low debt . reasonable stock . innovative marketing . adequate working price relative to . managerial skill capital growth potential . market niche . conservative . valuable assets . good earnings prospects accounting practices . strong demand for . adequate profit margin product The realization of this A strong balance sheet Once Liberty WAM growth potential would gives management uncovers an attractive likely produce superior greater flexibility to company, it identifies a performance that is pursue strategic price that it believes sustainable over time. objectives and is would also make the essential to maintaining stock a good value. a competitive advantage.
-------------------------------------------------------------------------------- STOCK STRENGTH COMES FIRST -------------------------------------------------------------------------------- Liberty WAM's analysts continually screen companies and make more than 1,000 face-to-face visits around the globe each year. To accomplish this, Liberty WAM analysts talk to top management, vendors, suppliers and competitors, whenever possible. In managing the Fund, Liberty WAM tries to maintain lower taxes and transaction costs by investing with a long-term time horizon (at least two to five years). ____ 15 Other Investment Strategies and Risks Occasionally, however, securities purchased on a long-term basis may be sold within 12 months after purchase due to changes in the circumstances of a particular company or industry, or changes in general market or economic conditions. DERIVATIVE STRATEGIES -------------------------------------------------------------------------------- The Fund may enter into a number of hedging strategies, including those that employ futures and options, to gain or reduce exposure to particular securities or markets. These strategies, commonly referred to as derivatives, involve the use of financial instruments whose values depend on, or are derived from, the value of an underlying security, index or currency. The Fund may use these strategies to adjust the Fund's sensitivity to changes in interest rates or for other hedging purposes (i.e., attempting to offset a potential loss in one position by establishing an interest in an opposite position). Derivative strategies involve the risk that they may exaggerate a loss, potentially losing more money than the actual cost of the underlying security, or limit a potential gain. Also, with some derivative strategies there is a risk that the other party to the transaction may fail to honor its contract terms, causing a loss to the Fund. TEMPORARY DEFENSIVE STRATEGIES -------------------------------------------------------------------------------- At times, Liberty WAM may determine that adverse market conditions make it desirable to temporarily suspend the Fund's normal investment activities. During such times, the Fund may, but is not required to, invest in cash or high- quality, short-term debt securities, without limit. Taking a temporary defensive position may prevent the Fund from achieving its investment goal. ____ 16 Financial Highlights The financial highlights tables are intended to help you understand the Fund's financial performance. Information is shown for the Fund's last five fiscal years and for the six months ended June 30, 2000. The Fund's fiscal year runs from January 1 to December 31. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). The information with respect to the six month period ended June 30, 2000 is unaudited. The information with respect to the last five years is audited. For periods up to and including the year ended 1999, this information has been derived from the Fund's financial statements which have been audited by Ernst & Young LLP, independent auditors, whose report, along with the Fund's audited financial statements, is included in the Fund's annual report. You can request a free annual report by calling 1-800- 426-3750.
Liberty Acorn International Six months Year Ended December 31, For a share outstanding throughout ended June 30, ------------------------------------------------------ each period 2000 (unaudited) 1999 1998 1997 1996 1995 ------------------------------------------------------------------------------------------------------------------------ Class Z Class Z Class Z Class Z Class Z Class Z ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $35.33 $20.82 $18.39 $19.61 $16.59 $15.24 ------------------------------------------------------------------------------------------------------------------------ Income from Investment Operations: Net investment income -- .83 .17 .40 .13 .16 ------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments, foreign currency and futures (1.34) 15.45 2.68 (.34) 3.29 1.20 ------------------------------------------------------------------------------------------------------------------------ Total from investment Operations (1.34) 16.28 2.85 .06 3.42 1.36 ------------------------------------------------------------------------------------------------------------------------ Less distributions: Dividends from net investment income (.66) (.22) (.15) (.38) (.12) -- ------------------------------------------------------------------------------------------------------------------------ Distributions from net realized and unrealized gains reportable for federal income taxes (.51) (1.55) (.27) (.90) (.28) (.01) ------------------------------------------------------------------------------------------------------------------------ Total distributions (1.17) (1.77) (.42) (1.28) (.40) (.01) ------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $32.82 $35.33 $20.82 $18.39 $19.61 $16.59 ------------------------------------------------------------------------------------------------------------------------ Total return (a) (3.8)% 79.2% 15.4% 0.2% 20.7% 8.9% ------------------------------------------------------------------------------------------------------------------------ Ratios/supplemental data: Ratio of expenses to average net assets 1.06%* 1.11% 1.12% 1.19% 1.17% 1.22% ------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets .01%* .12% .86% .58% .51% .90% ------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 76%* 46% 37% 39% 34% 26% ------------------------------------------------------------------------------------------------------------------------ Net assets at end of period (in millions) $2,984 $2,868 $1,725 $1,623 $1,773 $1,276
(a) Total return is not annualized for periods less than one year. *Annualized ____ 17 Notes ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ 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________________________________________________________________________________ ____ 19 FOR MORE INFORMATION -------------------------------------------------------------------------------- You can get more information about the Fund's investments in the Fund's semi-annual and annual reports to shareholders. The annual report contains a discussion of the market conditions and investment strategies that significantly affected the Fund's performance over its last fiscal year. You may wish to read the Statement of Additional Information for more information on the Fund and the securities in which it invests. The Statement of Additional Information is incorporated into this prospectus by reference, which means that it is considered to be part of this prospectus. You can get free copies of reports and the Statement of Additional Information, request other information and discuss your questions about the Fund by writing or calling the Fund's distributor at: Liberty Funds Distributor, Inc. One Financial Center Boston, MA 02111-2621 1-800-426-3750 www.libertyfunds.com Text-only versions of all Fund documents can be viewed online or downloaded from the Edgar database on the Securities and Exchange Commission internet site at www.sec.gov. You can review and copy information about the Fund by visiting the following location, and you can obtain copies, upon payment of a duplicating fee by electronic request at the E-mail address publicinfo@sec.gov or by writing the: Public Reference Room Securities and Exchange Commission Washington, DC 20549-0102 Information on the operation of the Public Reference Room may be obtained by calling 1-202-942-8090. Investment Company Act file number: Liberty Acorn Trust (formerly Acorn Investment Trust): 811-01829 . Liberty Acorn International (formerly Acorn International) [LOGO OF LIBERTY FUNDS] ALL-STAR.COLONIAL.CRABBE HUSON.NEWPORT.STEIN ROE ADVISOR Liberty Funds Distributor, Inc. (C) 2000 One Financial Center, Boston 02111-2621, 1-800-426-3750 www.libertyfunds.com ------------------------------------------------------------------------------- LIBERTY ACORN USA Prospectus, September 29, 2000 ------------------------------------------------------------------------------- Class Z Shares Advised by Liberty Wanger Asset Management, L.P. Liberty Acorn Trust Only eligible investors may purchase Class Z shares. See "Your Account - Eligible Investors" for more information. Although these securities have been registered with the Securities and Exchange Commission, the Commission has not approved or disapproved any shares offered in this prospectus or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
-------------------------------------------------------------------------------- T A B L E O F C O N T E N T S LIBERTY ACORN USA 2 ----------------- Investment Goal......................................................... 2 Principal Investment Strategies......................................... 2 Principal Investment Risks.............................................. 2 Performance History..................................................... 4 Your Expenses........................................................... 5 YOUR ACCOUNT 6 ------------ How to Buy Shares....................................................... 6 Eligible Investors...................................................... 7 Price of Fund Shares.................................................... 8 How to Exchange Shares.................................................. 8 How to Sell Shares...................................................... 8 Fund Policy on Trading of Fund Shares................................... 9 Other Information About Your Account.................................... 10 MANAGING THE FUND 13 ----------------- Investment Advisor...................................................... 13 Portfolio Manager....................................................... 13 OTHER INVESTMENT STRATEGIES AND RISKS 14 -------------------- The Information Edge.................................................... 14 Stock Strength Comes First................................................................... 14 Derivative Strategies................................................... 15 Temporary Defensive Strategies.............................................................. 15 FINANCIAL HIGHLIGHTS.................................................... 16 --------------------
Not FDIC May Lose Value ------------------ Insured No Bank Guarantee ___ 1 Liberty Acorn USA INVESTMENT GOAL ------------------------------------------------------------------------------- Liberty Acorn USA seeks to provide long-term growth of capital. PRINCIPAL INVESTMENT STRATEGIES ------------------------------------------------------------------------------- Liberty Acorn USA invests primarily in stocks of small-and medium-sized U.S. companies. The Fund generally invests in the stocks of U.S. companies with capitalizations of less than $2 billion. The Fund believes that these smaller companies, which are not as well known by financial analysts, may offer higher return potential than the stocks of larger companies. Liberty Acorn USA typically looks for companies with: . A strong business franchise that offers growth potential. . Products and services that give the company a competitive advantage. . A stock price the Fund's advisor believes is reasonable relative to the assets and earning power of the company. The Fund generally invests substantially all of its assets in U.S. companies, and, under normal market conditions, will invest at least 65% of its assets in U.S. companies. Additional strategies that are not principal investment strategies and the risks associated with them are described below under "Other Investment Strategies and Risks." PRINCIPAL INVESTMENT RISKS ------------------------------------------------------------------------------- The principal risks of investing in the Fund are described below. There are many circumstances (including additional risks that are not described here) that could prevent the Fund from achieving its investment goal. You may lose money by investing in the Fund. Management risk means that the advisor's stock selections and other investment decisions might produce losses or cause the Fund to underperform when compared to other funds with a similar investment goal. Market risk means that security prices in a market, sector or industry may move down. Downward movements will reduce the value of your investment. Because of management and market risk, there is no guarantee that the Fund will achieve its investment goal or perform favorably compared with competing funds. Equity risk is the risk that stock prices will fall over short or extended periods of time. Although the stock market has historically outperformed other asset classes over the long term, the equity market tends to move in cycles and individual stock prices may fluctuate drastically from day-to-day and may underperform other asset classes over an extended period of time. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. __ 2 Liberty Acorn USA Smaller companies and mid-capitalization companies are more likely than larger companies to have limited product lines, operating histories, markets or financial resources. They may depend heavily on a small management team. Stocks of smaller companies and mid-capitalization companies may trade less frequently, may trade in smaller volumes and may fluctuate more sharply in price than stocks of larger companies. In addition, they may not be widely followed by the investment community, which can lower the demand for their stock. Sector risk may sometimes be present in the Fund's investments. Companies that are in different but closely related industries are sometimes described as being in the same broad economic sector. The values of stocks of many different companies in a market sector may be similarly affected by particular economic or market events. Although the Fund does not intend to focus on any particular sector, at times, the Fund may have a significant portion of its assets invested in a particular sector. An example of a sector in which the Fund may sometimes have a significant portion of its assets invested is technology. Technology companies may be significantly affected by falling prices and profits, and intense competition. In addition, the rate of technological change for technology companies is generally higher than for other companies, often requiring extensive and sustained investment in research and development, and exposing such companies to the risk of rapid product obsolescence. The price of many technology stocks has risen based on projections of future earnings and company growth. If a company does not perform as expected, the price of the stock could decline significantly. Many technology companies are currently operating at a loss and may never be profitable. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. __ 3 Liberty Acorn USA UNDERSTANDING PERFORMANCE CALENDAR YEAR TOTAL RETURNS show the Fund's Class Z share performance for each completed calendar year since inception. They include the effects of Fund expenses. AVERAGE ANNUAL TOTAL RETURNS are measures of the performance over the past one- year, three-year and life of the Fund periods. They include the effects of Fund expenses. The Fund's return is compared to the Russell 2000 Index. The Russell 2000 Index is a market-weighted index of 2000 small companies formed by taking the largest 3000 companies and eliminating the largest 1000 of those companies. Unlike the Fund, an index is not an investment, does not incur fees or expenses and is not professionally managed. It is not possible to invest directly in an index. PERFORMANCE HISTORY -------------------------------------------------------------------------------- The bar chart below shows changes in the Fund's performance from year to year by illustrating the Fund's calendar year total returns for its Class Z shares. The performance table following the bar chart shows how the Fund's average annual returns for Class Z shares compare with those of broad measures of market performance for one year, three years and life of the Fund. The chart and table are intended to illustrate some of the risks of investing in the Fund by showing the changes in the Fund's performance. All returns include the reinvestment of dividends and distributions. As with all mutual funds, past performance does not predict the Fund's future performance. CALENDAR YEAR TOTAL RETURNS _______________________________________________________________________________ [BAR CHART] Year Return ---- ------ 1997 32.30% 1998 5.79% 1999 23.02% _______________________________________________________________________________ For period shown in bar chart: Best quarter: 4th quarter 1999, +18.93% Worst quarter: 3rd quarter 1998, -19.25% Average Annual Total Returns -- for periods ended December 31, 1999 Inception Date Life of The 1 Year 3 Years Fund Class Z 9/4/96 23.02% 19.86% 23.28% ------------------------------------------------------------------------------- Russell 2000 N/A 21.26% 13.08% 14.65% __ 4 Liberty Acorn USA UNDERSTANDING EXPENSES Annual Fund Operating Expenses are deducted from the Fund. They include management and administration fees, and administrative costs including pricing and custody services. Example Expenses help you compare the cost of investing in the Fund to the cost of investing in other mutual funds. It uses the following hypothetical conditions: . $10,000 initial investment . 5% total return for each year . fund operating expenses remain the same . assumes reinvestment of all dividends and distributions YOUR EXPENSES ------------------------------------------------------------------------------- Expenses are one of several factors to consider before you invest in a mutual fund. The tables below describe the fees and expenses you may pay when you buy, hold and sell shares of the Fund. Shareholder Fees (paid directly from your investment) Maximum sales charge (load) on purchases None _________________________________________________________________ Maximum deferred sales charge (load) on redemptions None _________________________________________________________________ Redemption fee (%) (as a percentage of amount redeemed) None Annual Fund Operating Expenses (deducted directly from Fund assets) Management fees/(1)/ (%) .93 _________________________________________________________________ Distribution and service (12b-1) fees (%) None _________________________________________________________________ Other expenses (%) .22 _________________________________________________________________ Total annual fund operating expenses (%) 1.15 _________________________________________________________________ (1) In addition to the management fee, the Fund pays the Advisor an administrative fee of .05%, which is included in "Other Expenses." Example Expenses (your actual costs may be higher or lower) 1 Year 3 Years 5 Years 10 Years $117 $365 $ 633 $1,398 __ 5 Your Account HOW TO BUY SHARES ------------------------------------------------------------------------------- If you are an Eligible Investor (described below), your shares will be bought at the next calculated price after the Fund receives your purchase request in "good form." "Good form" means that your payment has been received and your application is complete, including all necessary signatures. The Fund reserves the right to refuse a purchase order for any reason, including if the Fund believes that doing so would be in the best interest of the Fund and its shareholders. Outlined below are the various options for buying shares: Method Instructions ------------------------------------------------------------------------------- By check For new accounts, send a completed application and (new account) check made payable to the Fund to the transfer agent, Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. ------------------------------------------------------------------------------- By check For existing accounts, fill out and return the (existing account) additional investment stub included in your quarterly statement, or send a letter of instruction including the Fund name and account number with a check made payable to the Fund to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. ------------------------------------------------------------------------------- By exchange You may acquire shares by exchanging shares you own in one fund for shares of the same class of shares of the Fund at no additional cost. There may be an additional charge if exchanging from a money market fund. To exchange by telephone, call 1-800-422-3737. ------------------------------------------------------------------------------- By wire You may purchase shares by wiring money from your bank account to your Fund account. To wire funds to your Fund account, call 1-800-422-3737 to obtain a control number and the wiring instructions. ------------------------------------------------------------------------------- By electronic funds You may purchase shares by electronically transfer (existing transferring money from your bank account to your account) Fund account by calling 1-800-422-3737. Electronic funds transfers may take up to two business days to settle and be considered in "good form." You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the application. ------------------------------------------------------------------------------- Automatic You can make monthly or quarterly investments investment plan automatically from your bank account to your Fund account. You can select a pre-authorized amount to be sent via electronic funds transfer. Be sure to complete the appropriate section of the application for this feature. ------------------------------------------------------------------------------- By dividend You may automatically invest dividends distributed by diversification one fund into the same class of shares of the Fund at no additional sales charge. To invest your dividends in the Fund, call 1-800-345-6611. ------------------------------------------------------------------------------- Through an Contact your financial professional. Financial intermediary professionals may charge fees for their services. __ 6 Your Account ELIGIBLE INVESTORS ------------------------------------------------------------------------------- Only Eligible Investors may purchase Class Z shares of the Fund, directly or by exchange. Eligible Investors are subject to different minimum investment requirements. Eligible Investors and their applicable investment minimums are: $1,000 minimum initial investment --------------------------------- . any shareholder (or family member of such shareholder) who owned shares of any of the Liberty Acorn Trust funds on September 29, 2000 (when all of the Trust's then outstanding shares were re-designated Class Z shares) and who has since then continued to own shares of any funds distributed by Liberty Funds Distributor, Inc.; . any trustee of Liberty Acorn Trust, any employee of Liberty WAM, or a member of the family of the Employee; and . any person or entity listed in the account registration for any account (such as joint owners, trustees, custodians, and designated beneficiaries) that held shares of any of the funds of Liberty Acorn Trust on September 29, 2000 and that has continued to held shares of any funds distributed by Liberty Funds Distributor, Inc. $100,000 minimum initial investment ---------------------------------- . any client of a broker-dealer or registered investment advisor that recommends Fund shares and charges an asset-based fee; . any insurance company, trust company or bank, which is purchasing shares for its own account; . any endowment, investment company or foundation; and . any client of an investment advisory affiliate of the distributor if the client meets certain criteria established by the distributor and its affiliate. No minimum initial investment ----------------------------- . any retirement plan with aggregate assets of at least $5 million at the time it purchases Class Z shares and which is purchasing shares directly from the distributor or through a third party broker-dealer; and . any person investing all or part of the proceeds of a distribution, "roll over" or transfer of assets into a Liberty IRA from any deferred compensation plan which was a shareholder of any of the Liberty Acorn funds on September 29, 2000, in which the investor was a participant and through which the investor invested in one or more of the Liberty Acorn funds immediately prior to the distribution, transfer or roll over. If you have any questions about your eligibility to purchase Class Z shares of the Fund, please call 800-345-6611. If you hold Fund shares through a broker- dealer or other financial institution, you eligibility to purchase Class Z shares may differ depending on that institution's policies. The Fund reserves the right to change the criteria for eligible investors and these investment minimums. No minimum investment applies to accounts participating in the automatic investment plan. The Fund also reserves the right to refuse a purchase order for any reason, including if it believes that doing so would be in the best interest of the Fund and its shareholders. ____ 7 Your Account CHOOSING A SHARE CLASS The Fund offers one class of shares in this prospectus -- Class Z. The Fund also offers three additional classes of shares -- Class A, B and C shares are available through a separate prospectus. Each share class has its own sales charge and expense structure. Determining which share class is best for you depends on the dollar amount you are investing and the number of years for which you are willing to invest. Based on your personal situation, your investment advisor can help you decide which class of shares makes the most sense for you. In general, anyone who is eligible to purchase Class Z shares, which do not incur Rule 12b-1 fees or sales charges, should do so in preference over other classes. PRICE OF FUND SHARES ------------------------------------------------------------------------------- Your purchases of Class Z shares generally are at net asset value, which is the value of a Fund share without any sales charge. Class Z shares are not subject to an initial sales charge when purchased, or a contingent deferred sales charge when sold. If you purchase Class Z shares of the Fund through certain broker-dealers, banks or other intermediaries (intermediaries), they may charge a fee for their services. They may also place limits on your ability to use services the Fund offers. There are no sales charges or limitations if you purchase shares directly from the Fund, except as described in this prospectus. If an intermediary is an agent or designee of the Fund, orders are processed at the net asset value next calculated after the intermediary receives the order. The intermediary must segregate any orders it receives after the close of regular trading on the NYSE and transmit those orders separately for execution at the net asset value next determined. HOW TO EXCHANGE SHARES ------------------------------------------------------------------------------- You may exchange your shares for shares of the same share class of another fund or Class A shares of certain other funds distributed by Liberty Funds Distributor, Inc., at net asset value without a sales charge. Unless your account is part of a tax-deferred retirement plan, an exchange is a taxable event. Therefore, you may realize a gain or a loss for tax purposes. The Fund may terminate your exchange privilege if the advisor determines that your exchange activity is likely to adversely impact its ability to manage the Fund. To exchange by telephone, call 1-800-422-3737. HOW TO SELL SHARES ------------------------------------------------------------------------------- You may sell shares of the Fund on any regular business day that the New York Stock Exchange (NYSE) is open. When the Fund receives your sales request in "good form," shares will be sold at the next calculated net asset value. In "good form" means that money used to purchase your shares is fully collected. When selling shares by letter of instruction, "good form" also means (i) your letter has complete instructions, the proper signatures and signature guarantees, and (ii) any other required documents are attached. A signature guarantee is designed to protect you and Liberty Acorn from fraud. Signature guarantees can be obtained from a commercial bank, broker-dealer, credit union (if authorized under state law), securities exchange or association. A notary public cannot provide a signature guarantee. For additional documents required for sales by corporations, agents, fiduciaries and surviving joint owners, please call 1-800-345-6611. Retirement plan accounts have special requirements; please call 1-800-799-7526 for more information. The Fund will generally send proceeds from the sale to you within seven days (usually on the next business day after your request is received in "good form"). However, if you purchased your shares by check, the Fund may delay sending the proceeds from the sale of your shares for up to 15 days after your purchase to protect against checks that are returned. No interest will be paid on uncashed redemption checks. Redemption proceeds may be paid in securities rather than cash, under certain circumstances. For more information, see the paragraph "Non-Cash Redemptions" under the section "How to Sell Shares" in the Statement of Additional Information. __ 8 Your Account Outlined below are the various options for selling shares: Method Instructions ------------------------------------------------------------------------------- By exchange You may sell shares by exchanging from the Fund into Class Z shares or Class A shares of another fund at no additional cost. To exchange by telephone, call 1-800-422-3737. ------------------------------------------------------------------------------- By telephone You or your financial advisor may sell shares by telephone and request that a check be sent to your address of record by calling 1-800-422-3737, unless you have notified the Fund of an address change within the previous 30 days. The dollar limit for telephone sales is $100,000 in a 30-day period. You do not need to set up this feature in advance of your call. Certain restrictions apply to retirement accounts. For details, call 1-800-345-6611. ------------------------------------------------------------------------------- By mail You may send a signed letter of instruction or stock power form to the address below. In your letter of instruction, note the Fund's name, share class, account number, and the dollar value or number of shares you wish to sell. All account owners must sign the letter, and signatures must be guaranteed by either a bank, a member firm of a national stock exchange or another eligible guarantor institution. Additional documentation is required for sales by corporations, agents, fiduciaries, surviving joint owners and individual retirement account owners. For details, call 1-800-345-6611. Mail your letter of instruction to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. ------------------------------------------------------------------------------- By wire You may sell shares and request that the proceeds be wired to your bank. You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the account application for this feature. ------------------------------------------------------------------------------- By electronic You may sell shares and request that the proceeds be funds transfer electronically transferred to your bank. Proceeds may take up to two business days to be received by your bank. You must set up this feature prior to your request. Be sure to complete the appropriate section of the account application for this feature. -------------------------------------------------------------------------------- Systematic You may automatically sell a specified dollar amount or Withdrawal Plan percentage on a monthly, quarterly or semiannual basis if your account balance is at least $5,000 and have the proceeds sent to you. This feature is not available if you hold your shares in certificate form. Be sure to complete the appropriate section of the account application for this feature. ------------------------------------------------------------------------------- Through an Contact your financial professional. Financial professionals Intermediary may charge fees for their services. FUND POLICY ON TRADING OF FUND SHARES ------------------------------------------------------------------------------- The Fund does not permit short-term or excessive trading. Excessive purchases, redemptions or exchanges of Fund shares disrupt portfolio management and drive Fund expenses higher. In order to promote the best interests of the Fund, the Fund reserves the right to reject any purchase or order exchange request, particularly from market timers or investors who, in the advisor's opinion, have a pattern of short-term or excessive trading or whose trading has been or may be disruptive to the Fund. The fund into which you would like to exchange also may reject your request. ____ 9 Your Account OTHER INFORMATION ABOUT YOUR ACCOUNT -------------------------------------------------------------------------------- How the Fund's Share Price is Determined The price of a Fund's Class Z shares is its net asset value. The net asset value is determined at the close of regular trading on the NYSE, usually 4:00 p.m. Eastern time, on each business day that the NYSE is open (typically Monday through Friday). When you request a transaction, it will be processed at the net asset value next determined after your request is received in "good form" by the Fund (or an authorized broker-dealer, financial services company, or other agent, some of whom may charge a fee for their services). In most cases, in order to receive that day's price, the Fund must receive your order before that day's transactions are processed. If you request a transaction through an agent, that agent must receive your order by the close of trading on the NYSE to receive that day's price. The Fund determines its net asset value for its Class Z shares by dividing total net assets attributable to Class Z shares by the number of outstanding Class Z shares. In determining the net asset value, the Fund must determine the price of each security in its portfolio at the close of each trading day. Securities for which market quotations are available are valued each day at the current market value. However, where market quotations are not available, or when the advisor believes that subsequent events have made them unreliable, the Fund may use other data to determine the fair value of the securities. You can find the daily prices of some share classes for the Fund in most major daily newspapers under the caption "Liberty." You can find daily prices for all share classes by visiting the Fund's web site at www.libertyfunds.com. Share Certificates Share certificates are not available for Class Z shares. ____ 10 Your Account UNDERSTANDING FUND DISTRIBUTIONS The Fund earns income from the securities it holds. The Fund also may realize capital gains and losses on sales of its securities. The Fund distributes substantially all of its net investment income and capital gains to shareholders. As a shareholder, you are entitled to a portion of the Fund's income and capital gains based on the number of shares you own at the time these distributions are declared. Dividends, Distributions, and Taxes The Fund has the potential to make the following distributions: Types of Distributions Dividend Represents interest and dividends earned from securities held by the Fund, net of expenses incurred by the Fund. -------------------------------------------------------------------------------- Capital gains Represents net long-term capital gains on sales of securities held for more than 12 months and net short-term capital gains, which are gains on sales of securities held for a 12- month period or less. Distribution Options. The Fund distributes dividends in June and December and any capital gains (including short-term capital gains) at least annually. You can choose one of the options listed in the table below for these distributions when you open your account. To change your distribution option call 1-800-345-6611. If you do not indicate on your application your preference for handling distributions, the Fund will automatically reinvest all distributions in additional shares of the Fund. Distribution Options Reinvest all distributions in additional shares of the Fund -------------------------------------------------------------------------------- Reinvest all distributions in shares of another fund -------------------------------------------------------------------------------- Receive dividends in cash (see options below) and reinvest capital gains -------------------------------------------------------------------------------- Receive all distributions in cash (with one of the following options) -------------------------------------------------------------------------------- . send the check to your address of record . send the check to a third party address . transfer the money to your bank via electronic funds transfer Distributions of $10 or less will automatically be reinvested in additional Fund shares. If you elect to receive distributions by check and the check is returned as undeliverable, or if you do not cash a distribution check within six months of the check date, the distribution will be reinvested in additional shares of the Fund. Tax Consequences Regardless of whether you receive your distributions in cash or reinvest them in additional Fund shares, all Fund distributions are subject to federal income tax. Depending on the state where you live, distributions may also be subject to state and local income taxes. In general, any distributions of dividends, interest and short-term capital gains are taxable as ordinary income. Distributions of long-term capital gains are generally taxable as such, regardless of how long you have held your Fund shares. You will be provided with information each year regarding the amount of ordinary income and capital gains distributed to you for the previous year and any portion of your distribution which is exempt from state and local taxes. Your investment in the Fund may have additional personal tax implications. Please consult your tax advisor on federal, state, local or other applicable tax laws. ____ 11 Your Account In addition to the dividends and capital gains distributions made by the Fund, you may realize a capital gain or loss when selling and exchanging shares of the Fund. Such transactions may be subject to federal, state and local income tax. ____ 12 Managing the Fund INVESTMENT ADVISOR -------------------------------------------------------------------------------- Liberty Wanger Asset Management (Liberty WAM) (formerly Wanger Asset Management, L.P. (WAM)), located at 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606, is the Fund's investment advisor. Liberty WAM and its predecessor have managed mutual funds, including the Fund, since 1992. In its duties as investment advisor, Liberty WAM runs the Fund's day-to-day business, including placing all orders for the purchase and sale of the Fund's portfolio securities. As of June 30, 2000, Liberty WAM managed over $9 billion in assets. WAM was renamed Liberty WAM on September 29, 2000 when it became a wholly owned subsidiary of Liberty Financial Companies, Inc. (Liberty), which in turn is a majority owned indirect subsidiary of Liberty Mutual Insurance Company. For more information about Liberty's acquisition of WAM, see the Statement of Additional Information. Liberty WAM's advisory fee for managing the Fund in 1999 was 0.93% of the Fund's average daily net assets. Liberty WAM also receives an administrative fee from the Fund at the annual rate of .05% of the Fund's average daily net assets. PORTFOLIO MANAGER -------------------------------------------------------------------------------- Liberty WAM uses a team to manage the Fund. Team members share responsibility for providing ideas, information, and knowledge in managing the Fund, and each team member has one or more particular areas of expertise. The portfolio managers are responsible for making daily investment decisions, and utilize the management team's input and advice when making buy and sell determinations. Robert A. Mohn Lead portfolio manager Robert Mohn is a vice president of Liberty Acorn Trust He has been a member of the domestic analytical team at Liberty WAM and WAM since 1992, and was a principal of WAM from 1995 to September 29, 2000. He has managed Liberty Acorn USA since its inception in 1996, and also manages a mutual fund underlying variable insurance products and the U.S. portfolio of an investment company whose shares are offered only to non-U.S. investors. He is a CFA and holds a BS from Stanford University and an MBA from the University of Chicago. ____ 13 Other Investment Strategies and Risks UNDERSTANDING THE FUND'S OTHER INVESTMENT STRATEGIES AND RISKS The Fund's principal investment strategies and risks are described under "Liberty Acorn USA - Principal Investment Strategies" and "Liberty Acorn USA - Principal Investment Risks." In seeking to meet its investment goal, the Fund may also invest in other securities and use certain other investment techniques. These securities and investment techniques offer opportunities and carry various risks. Liberty WAM may elect not to buy any of these securities or use any of these techniques unless it believes that doing so will help the Fund achieve its investment goal. The Fund may not always achieve its investment goal. Additional information about the Fund's securities and investment techniques, as well as the Fund's fundamental and non-fundamental investment policies, is contained in the Statement of Additional Information. The first portion of this prospectus describes the Fund's principal investment strategies and their associated risks. This section provides more detail about the Fund's investment strategies, and describes other investments the Fund may make and the risks associated with them. In seeking to achieve its investment goal, the Fund may invest in various types of securities and engage in various investment techniques, which are not the principal focus of the Fund and therefore are not described in this prospectus. These types of securities and investment practices are identified and discussed in the Fund's Statement of Additional Information, which you may obtain free of charge (see back cover). Approval by the Fund's shareholders is not required to modify or change the Fund's investment goal or investment strategies. THE INFORMATION EDGE -------------------------------------------------------------------------------- The Fund invests in entrepreneurially managed smaller and mid-sized companies that it believes are not as well known by financial analysts and whose domination of a niche creates the opportunity for superior earnings-growth potential. Liberty WAM may identify what it believes are important economic, social or technological trends (for example, the growth of out-sourcing as a business strategy, or the productivity gains from the increasing use of technology) and try to identify companies it thinks will benefit from those trends. In making investments for the Fund, Liberty WAM relies primarily on independent, internally generated research to uncover companies that may be less well known than the more popular names. To find these companies, Liberty WAM compares growth potential, financial strength and fundamental value among companies.
Growth Potential Financial Strength Fundamental Value -------------------------------------------------------------------------------- . superior technology . low debt . reasonable stock price . innovative marketing . adequate working relative to growth . managerial skill capital potential . market niche . conservative . valuable assets . good earnings accounting practices prospects . adequate profit . strong demand margin for product The realization of this A strong balance sheet Once Liberty WAM uncovers growth potential would gives management greater an attractive company, it likely produce superior flexibility to pursue identifies a price that performance that is strategic objectives and it believes would also sustainable over time. is essential to make the stock a good maintaining a competitive value. advantage. --------------------------------------------------------------------------------
STOCK STRENGTH COMES FIRST -------------------------------------------------------------------------------- Liberty WAM's analysts continually screen companies and make more than 1,000 face-to-face visits around the globe each year. To accomplish this, Liberty WAM analysts talk to top management, vendors, suppliers and competitors, whenever possible. In managing the Fund, Liberty WAM tries to maintain lower taxes and transaction costs by investing with a long-term time horizon (at least two to five years). However, ____ 14 Other Investment Strategies and Risks securities purchased on a long-term basis may be sold within 12 months after purchase due to changes in the circumstances of a particular company or industry, or changes in general market or economic conditions. DERIVATIVE STRATEGIES -------------------------------------------------------------------------------- The Fund may enter into a number of hedging strategies, including those that employ futures and options, to gain or reduce exposure to particular securities or markets. These strategies, commonly referred to as derivatives, involve the use of financial instruments whose values depend on, or are derived from, the value of an underlying security, index or currency. The Fund may use these strategies to adjust the Fund's sensitivity to changes in interest rates or for other hedging purposes (i.e., attempting to offset a potential loss in one position by establishing an interest in an opposite position). Derivative strategies involve the risk that they may exaggerate a loss, potentially losing more money than the actual cost of the underlying security, or limit a potential gain. Also, with some derivative strategies there is a risk that the other party to the transaction may fail to honor its contract terms, causing a loss to the Fund. TEMPORARY DEFENSIVE STRATEGIES ------------------------------------------------------------------------------- At times, Liberty WAM may determine that adverse market conditions make it desirable to temporarily suspend the Fund's normal investment activities. During such times, the Fund may, but is not required to, invest in cash or high- quality, short-term debt securities, without limit. Taking a temporary defensive position may prevent the Fund from achieving its investment goal. ____ 15 Financial Highlights The financial highlights table is intended to help you understand the Fund's financial performance. Information is shown for the Fund's Class Z shares since inception. The Fund's fiscal year runs from January 1 to December 31. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). The information with respect to the six month period ended June 30, 2000 is unaudited. The information for the three years ended December 31, 1999 and the period ended December 31, 1996 is audited. For periods up to and including the year ended 1999, this information has been derived from the Fund's financial statements which have been audited by Ernst & Young LLP, independent auditors, whose report, along with the Fund's audited financial statements, is included in the Fund's annual report. You can request a free annual report by calling 1-800-426-3750. Liberty Acorn USA
Six months For a share outstanding ended June 30, 2000 Year Ended December 31, Inception 9/4/96 throughout each period (unaudited) 1999 1998 1997 Through 12/31/96 ------------------------------------------------------------------------------------------------------------------------------------ Class Z Class Z Class Z Class Z Class Z ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 16.75 $ 14.80 $ 15.12 $ 11.65 $ 10.00 ------------------------------------------------------------------------------------------------------------------------------------ Income from Investment Operations: Net investment loss (a) (.02) -- (.07) (.07) (.02) ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain on investments (2.67) 3.32 .87 3.83 1.67 ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations (2.69) 3.32 .80 3.76 1.65 ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: Dividends from net investment income -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Distributions from net realized and unrealized gains reportable for federal income taxes (.32) (1.37) (1.12) (.29) -- ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.32) (1.37) (1.12) (.29) -- ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 13.74 $ 16.75 $ 14.80 $ 15.12 $ 11.65 ------------------------------------------------------------------------------------------------------------------------------------ Total return (c) (16.1)% 23.0% 5.8% 32.3% 16.5% ------------------------------------------------------------------------------------------------------------------------------------ Ratios/supplemental data: Ratio of expenses to average net assets (b) 1.13%* 1.15% 1.20% 1.35% 1.85%* ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment loss to average net assets (.27%)* 0.00% (.42%) (.49%) (.99%)* ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 65%* 49% 42% 33% 20%* ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of period (in millions) $ 305 $ 371 $ 281 $ 185 $ 53
(a) Net investment loss per share was based upon the average shares outstanding during the period. (b) In accordance with a requirement by the Securities and Exchange Commission, the ratio of expenses to average net assets for Liberty Acorn USA reflects gross custodian fees. This ratio net of custodian fees paid indirectly would have been 1.79% for the period ended December 31, 1996. (c) Total return is not annualized for periods less than one year. *Annualized ____ 16 Notes -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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-------------------------------------------------------------------------------- ____ 18 FOR MORE INFORMATION -------------------------------------------------------------------------------- You can get more information about the Fund's investments in the Fund's semi-annual and annual reports to shareholders. The annual report contains a discussion of the market conditions and investment strategies that significantly affected the Fund's performance over its last fiscal year. You may wish to read the Statement of Additional Information for more information on the Fund and the securities in which it invests. The Statement of Additional Information is incorporated into this prospectus by reference, which means that it is considered to be part of this prospectus. You can get free copies of reports and the Statement of Additional Information, request other information and discuss your questions about the Fund by writing or calling the Fund's distributor at: Liberty Funds Distributor, Inc. One Financial Center Boston, MA 02111-2621 1-800-426-3750 www.libertyfunds.com Text-only versions of all Fund documents can be viewed online or downloaded from the Edgar database on the Securities and Exchange Commission internet site at www.sec.gov. You can review and copy information about the Fund by visiting the following location, and you can obtain copies, upon payment of a duplicating fee by electronic request at the E-mail address publicinfo@sec.gov or by writing the: Public Reference Room Securities and Exchange Commission Washington, DC 20549-0102 Information on the operation of the Public Reference Room may be obtained by calling 1-202-942-8090. Investment Company Act file number: Liberty Acorn Trust: (formerly Acorn Investment Trust) 811-01829 . Liberty Acorn USA (formerly Acorn USA) [LOGO OF LIBERTY FUNDS] ALL - STAR . COLONIAL . CRABBE HUSON, NEWPORT . STEIN ROE ADVISOR Liberty Funds Distributor, Inc.(C) 2000 One Financial Center, Boston, MA 02111-2621, 1-800-426-3750 www.libertyfunds.com LIBERTY ACORN FOREIGN FORTY Prospectus, September 29, 2000 Class Z Shares Advised by Liberty Wanger Asset Management, L.P. Liberty Acorn Trust Only eligible investors may purchase Class Z shares. See "Your Account - Eligible Investors" for more information. Although these securities have been registered with the Securities and Exchange Commission, the Commission has not approved or disapproved any shares offered in this prospectus or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. ------------------------------------------------------------------------------- T A B L E O F C O N T E N T S
Liberty Acorn Foreign Forty 2 --------------------------- Investment Goal............................................................ 2 Principal Investment Strategies............................................ 2 Principal Investment Risks................................................. 2 Performance History........................................................ 4 Your Expenses.............................................................. 5 YOUR ACCOUNT 6 ------------ How to Buy Shares.......................................................... 6 Eligible Investors......................................................... 7 Price of Fund Shares....................................................... 8 How to Exchange Shares..................................................... 8 How to Sell Shares......................................................... 8 Fund Policy on Trading of Fund Shares...................................... 9 Other Information About Your Account....................................... 10 MANAGING THE FUND 13 ----------------- Investment Advisor......................................................... 13 Portfolio Managers......................................................... 13 OTHER INVESTMENT STRATEGIES AND RISKS 15 -------------------- The Information Edge....................................................... 15 Stock Strength Comes First................................................. 15 Derivative Strategies...................................................... 16 Temporary Defensive Strategies............................................. 16 FINANCIAL HIGHLIGHTS 17 --------------------
Not FDIC May Lose Value ----------------- Insured No Bank Guarantee ____ 1 Liberty Acorn Foreign Forty INVESTMENT GOAL ------------------------------------------------------------------------------- Liberty Acorn Foreign Forty seeks long-term growth of capital. PRINCIPAL INVESTMENT STRATEGIES ------------------------------------------------------------------------------- Liberty Acorn Foreign Forty invests primarily in the stocks of medium- to larger-sized companies based in developed markets (for example, Japan, Canada and United Kingdom) outside the U.S. The Fund invests in at least three countries. The Fund is a non-diversified fund that takes advantage of its advisor's research and stock-picking capabilities to invest in a limited number of foreign companies (between 40-60) with market capitalizations of $5 billion to $15 billion, offering the potential to provide above-average growth over time. The Fund believes that companies within this capitalization range are not as well known by financial analysts, and may offer higher return potential than the stocks of companies with capitalizations above $15 billion. Liberty Acorn Foreign Forty typically looks for companies with: . A strong business franchise that offers growth potential. . Products and services that give the company a competitive advantage. . A stock price the Fund's advisor believes is reasonable relative to the assets and earning power of the company. Liberty Acorn Foreign Forty is an international fund and invests the majority of its assets in the stocks of foreign companies based in developed markets outside the U.S. Additional strategies that are not principal investment strategies and the risks associated with them are described below under "Other Investment Strategies and Risks." PRINCIPAL INVESTMENT RISKS ------------------------------------------------------------------------------- The principal risks of investing in the Fund are described below. There are many circumstances (including additional risks that are not described here) that could prevent the Fund from achieving its investment goal. You may lose money by investing in the Fund. Management risk means that the advisor's stock selections and other investment decisions might produce losses or cause the Fund to underperform when compared to other funds with a similar investment goal. Market risk means that security prices in a market, sector or industry may move down. Downward movements will reduce the value of your investment. Because of management and market risk, there is no guarantee that the Fund will achieve its investment goal or perform favorably compared with competing funds. Equity risk is the risk that stock prices will fall over short or extended periods of time. Although the stock market has historically outperformed other asset classes over the long term, the equity market tends to move in cycles and individual stock prices may fluctuate drastically from ____ 2 Liberty Acorn Foreign Forty day-to-day and may underperform other asset classes over an extended period of time. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Smaller companies and mid-capitalization companies are more likely than larger companies to have limited product lines, operating histories, markets or financial resources. They may depend heavily on a small management team. Stocks of smaller companies and mid-capitalization companies may trade less frequently, may trade in smaller volumes and may fluctuate more sharply in price than stocks of larger companies. In addition, they may not be widely followed by the investment community, which can lower the demand for their stock. Foreign securities are subject to special risks. Foreign stock markets can be extremely volatile. Fluctuations in currency exchange rates may impact the value of foreign securities without a change in the intrinsic value of those securities. The liquidity of foreign securities may be more limited than domestic securities, which means that the Fund may, at times, be unable to sell foreign securities at desirable prices. Brokerage commissions, custodial fees and other fees are generally higher for foreign investments. In addition, foreign governments may impose withholding taxes which would reduce the amount of income and capital gains available to distribute to shareholders. Other risks include the following: possible delays in the settlement of transactions or the notification of income; less publicly available information about companies; the impact of political, social or diplomatic events; and possible seizure, expropriation or nationalization of the company or its assets or imposition of currency exchange controls. Sector risk may sometimes be present in the Fund's investments. Companies that are in different but closely related industries are sometimes described as being in the same broad economic sector. The values of stock of many different companies in a market sector may be similarly affected by particular economic or market events. Although the Fund does not intend to focus on any particular sector, at times, the Fund may have a significant portion of its assets invested in a particular sector. An example of a sector in which the Fund may sometimes have a significant portion of its assets invested is technology. Technology companies may be significantly affected by falling prices and profits, and intense competition. In addition, the rate of technological change for technology companies is generally higher than for other companies, often requiring extensive and sustained investment in research and development, and exposing such companies to the risk of rapid product obsolescence. The price of many technology stocks has risen based on projections of future earnings and company growth. If a company does not perform as expected, the price of the stock could decline significantly. Many technology companies are currently operating at a loss and may never be profitable. As a non-diversified mutual fund, the Fund is allowed to invest a greater percentage of its total assets in the securities of a single issuer. This may concentrate issuer risk and, therefore, the Fund may have an increased risk of loss compared to a similar diversified mutual fund. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. ____ 3 Liberty Acorn Foreign Forty UNDERSTANDING PERFORMANCE Calendar year total returns show the Fund's Class Z share performance for each completed calendar year since inception. They include the effects of Fund expenses. Average annual total returns are measures of the Fund's performance over the past one-year and life of the Fund periods. They include the effects of Fund expenses. The Fund's returns are compared to the SSB World ex-U.S. Cap Range $2-10 Billion Index. The SSB World ex-U.S. Cap Range $2-10 Billion Index is Salomon Smith Barney's two to ten billion U.S. dollar security market subset of its Broad Market Index. It represents a midcap developed market index, excluding the U.S. Unlike the Fund, an index is not an investment, does not incur fees or expenses and is not professionally managed. It is not possible to invest directly in an index. PERFORMANCE HISTORY -------------------------------------------------------------------------------- The bar chart below shows changes in the Fund's performance from year to year by illustrating the Fund's calendar year total returns for its Class Z shares. The performance table following the bar chart shows how the Fund's average annual returns for Class Z shares compare with those of broad measures of market performance for one year and life of the Fund. The chart and table are intended to illustrate some of the risks of investing in the Fund by showing the changes in the Fund's performance. All returns include the reinvestment of dividends and distributions. Performance results include the effect of expense reduction arrangements. If these arrangements were not in place, then performance would have been lower. Any expense reduction arrangements may be discounted at any time. As with all mutual funds, past performance does not predict the Fund's future performance. Calendar Year Total Returns/(1)/ -------------------------------------------------------------------------------- [Bar Chart] Year Return ---- ------ 1999 81.60% -------------------------------------------------------------------------------- For period shown in bar chart: Best quarter: 4th quarter 1999, +46.65% Worst quarter: 3rd quarter 1999, +3.90% Average Annual Total Returns -- for periods ended December 31, 1999/(1)/ Inception Date 1 Year Life of the Fund Class Z 11/23/98 81.60% 86.84% ------------------------------------------------------------------------------- SSB Cap Range $2-10B N/A 23.52% 24.72% (1) The Fund's performance during 1999 was achieved in a period of unusual market conditions that are unlikely to continue. ____ 4 Liberty Acorn Foreign Forty UNDERSTANDING EXPENSES Annual Fund Operating Expenses are deducted from the Fund. They include management and administration fees, and administrative costs including pricing and custody services. Example Expenses help you compare the cost of investing in the Fund to the cost of investing in other mutual funds. The table does not take into account any expense reduction arrangements discussed in the footnotes to the Annual Fund Operating Expenses table. It uses the following hypothetical conditions: . $10,000 initial investment . 5% total return for each year . fund operating expenses remain the same . assumes reinvestment of all dividends and distributions YOUR EXPENSES -------------------------------------------------------------------------------- Expenses are one of several factors to consider before you invest in a mutual fund. The tables below describe the fees and expenses you may pay when you buy, hold and sell shares of the Fund. Shareholder Fees (paid directly from your investment) Maximum sales charge (load) on purchases None ----------------------------------------------------------------- Maximum deferred sales charge (load) on redemptions None ----------------------------------------------------------------- Redemption fee (%) (as a percentage of amount redeemed) None Annual Fund Operating Expenses (deducted directly from Fund assets) Management fees/(2)/ (%) .95 ----------------------------------------------------------------- Distribution and service (12b-1) fees (%) None ----------------------------------------------------------------- Other expenses (%) .62 ----------------------------------------------------------------- Total annual fund operating expenses/(3)/ (%) 1.57 ----------------------------------------------------------------- (2) In addition to the management fee, the Fund pays the Advisor an administrative fee of .05%, which is included in "Other Expenses." (3) The Fund's advisor has voluntarily agreed to reimburse the Fund for any ordinary operating expenses (exclusive of distribution and service fees, interest, taxes and extraordinary expenses, if any) exceeding 1.45% of the average annual net assets for Class Z. This arrangement may be modified or terminated by either the Fund or its advisor on 30 days' notice to the other. As a result, the actual total annual fund operating expenses for Class Z would be 1.45%. Example Expenses (your actual costs may be higher or lower) 1 Year 3 Years 5 Years 10 Years $160 $496 $ 855 $1,867 ____ 5 Your Account HOW TO BUY SHARES -------------------------------------------------------------------------------- If you are an Eligible Investor (described below), your shares will be bought at the next calculated price after the Fund receives your purchase request in "good form." "Good form" means that your payment has been received and your application is complete, including all necessary signatures. The Fund reserves the right to refuse a purchase order for any reason, including if the Fund believes that doing so would be in the best interest of the Fund and its shareholders. Outlined below are the various options for buying shares: Method Instructions ------------------------------------------------------------------------------- By check For new accounts, send a completed application and (new account) check made payable to the Fund to the transfer agent, Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. ------------------------------------------------------------------------------- By check For existing accounts, fill out and return the (existing account) additional investment stub included in your quarterly statement, or send a letter of instruction including the Fund name and account number with a check made payable to the Fund to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. ------------------------------------------------------------------------------- By exchange You may acquire shares by exchanging shares you own in one fund for shares of the same class of the Fund at no additional cost. There may be an additional charge if exchanging from a money market fund. To exchange by telephone, call 1-800-422- 3737. ------------------------------------------------------------------------------- By wire You may purchase shares by wiring money from your bank account to your Fund account. To wire funds to your Fund account, call 1-800-422-3737 to obtain a control number and the wiring instructions. ------------------------------------------------------------------------------- By electronic funds You may purchase shares by electronically transfer (existing transferring money from your bank account to your account) Fund account by calling 1-800-422-3737. Electronic funds transfers may take up to two business days to settle and be considered in "good form." You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the application. ------------------------------------------------------------------------------- Automatic You can make monthly or quarterly investments investment plan automatically from your bank account to your fund account. You can select a pre-authorized amount to be sent via electronic funds transfer. Be sure to complete the appropriate section of the application for this feature. ------------------------------------------------------------------------------- By dividend You may automatically invest dividends distributed diversification by one fund into the same class of shares of the Fund at no additional sales charge. To invest your dividends in the Fund, call 1-800-345-6611. ------------------------------------------------------------------------------- Through an Contact your financial professional. Financial intermediary professionals may charge fees for their services. ____ 6 ELIGIBLE INVESTORS Only Eligible investors may purchase Class Z shares of the Fund, directly or by exchange. Eligible Investors are subject to different minimum investment requirements. Eligible Investors and their applicable investment minimums are: $1,000 minimum initial investment --------------------------------- . any shareholder (or family member of such shareholder) who owned shares of any of the Liberty Acorn funds on September 29, 2000 (when all of the Trust's then outstanding shares were re-designated Class Z shares) and who has since then continued to own shares of any funds distributed by Liberty Funds Distributor, Inc.; . any trustee of Liberty Acorn Trust, any employee of Liberty WAM, or a member of the family of the trustee or employee; and . any person or entity listed in the account registration for any account (such as joint owners, trustees, custodians, and designated beneficiaries) that held shares of any of the funds of Liberty Acorn Trust on September 29, 2000 and that has since then continued to hold shares of any funds distributed by Liberty Funds Distributor, Inc. $100,000 minimum initial investment ----------------------------------- . any client of a broker-dealer or registered investment advisor that recommends Fund shares and charges an asset-based fee; . any insurance company, trust company or bank, which is purchasing shares for its own account; . any endowment, investment company or foundation; and . any client of an investment advisory affiliate of the distributor if the client meets certain criteria established by the distributor and its affiliate. No minimum initial investment ----------------------------- . any person investing all or part of the proceeds of a distribution, "roll over" or transfer assets into a Liberty IRA from any deferred compensation plan which was a shareholder of any of the Liberty Acorn Funds on September 29, 2000, in which the investor was a participant and through which the investor invested in one or more of the Liberty Acorn Funds immediately prior to the distribution, transfer or roll over; and . any retirement plan with aggregate assets of at least $5 million at the time it purchases Class Z shares and which is purchasing shares directly from the distributor or through a third party broker-dealer. If you have any questions about your eligibility to purchase Class Z shares of the Fund, please call 800-345-6611. If you hold Fund shares through a broker- dealer or other financial institution, your eligibility to purchase Class Z shares may differ depending on that institution's policies. The Fund reserves the right to change the criteria for eligible investors and these investment minimums. No minimum investment applies to accounts participating in the automatic investment plan. The Fund also reserves the right to refuse a purchase order for any reason, including if it believes that doing so would be in the best interest of the Fund and its shareholders. ---- 7 CHOOSING A SHARE CLASS The Fund offers one class of shares in this prospectus -- Class Z. The Fund also offers three additional classes of shares -- Class A, B and C shares are available through a separate prospectus. Each share class has its own sales charge and expense structure. Determining which share class is best for you depends on the dollar amount you are investing and the number of years for which you are willing to invest. Based on your personal situation, your investment advisor can help you decide which class of shares makes the most sense for you. In general, anyone who is eligible to purchase Class Z shares, which do not incur Rule 12b-1 fees or sales charges, should do so in preference over other classes. PRICE OF FUND SHARES -------------------------------------------------------------------------------- Your purchases of Class Z shares generally are at net asset value, which is the value of a Fund share without any sales charge. Class Z shares are not subject to an initial sales charge when purchased, or a contingent deferred sales charge when sold. If you purchase Class Z shares of the Fund through certain broker-dealers, banks or other intermediaries (intermediaries), they may charge a fee for their services. They may also place limits on your ability to use services the Fund offers. There are no sales charges or limitations if you purchase shares directly from the Fund, except as described in this prospectus. If an intermediary is an agent or designee of the Fund, orders are processed at the net asset value next calculated after the intermediary receives the order. The intermediary must segregate any orders it receives after the close of regular trading on the NYSE and transmit those orders separately for execution at the net asset value next determined. HOW TO EXCHANGE SHARES -------------------------------------------------------------------------------- You may exchange your shares for shares of the same share class of another fund or Class A shares of certain other funds distributed by Liberty Funds Distributor, Inc., at net asset value without a sales charge. Unless your account is part of a tax-deferred retirement plan, an exchange is a taxable event. Therefore, you may realize a gain or a loss for tax purposes. The Fund may terminate your exchange privilege if the advisor determines that your exchange activity is likely to adversely impact its ability to manage the Fund. To exchange by telephone, call 1-800-422-3737. HOW TO SELL SHARES -------------------------------------------------------------------------------- You may sell shares of the Fund on any regular business day that the New York Stock Exchange (NYSE) is open. When the Fund receives your sales request in "good form," shares will be sold at the next calculated net asset value. In "good form" means that money used to purchase your shares is fully collected. When selling shares by letter of instruction, "good form" also means (i) your letter has complete instructions, the proper signatures and signature guarantees, and (ii) any other required documents are attached. A signature guarantee is designed to protect you and Liberty Acorn from fraud. Signature guarantees can be obtained from a commercial bank, broker-dealer, credit union (if authorized under state law), securities exchange or association. A notary public cannot provide a signature guarantee. For additional documents required for sales by corporations, agents, fiduciaries and surviving joint owners, please call 1-800-345-6611. Retirement plan accounts have special requirements; please call 1-800-799-7526 for more information. The Fund will generally send proceeds from the sale to you within seven days (usually on the next business day after your request is received in "good form"). However, if you purchased your shares by check, the Fund may delay sending the proceeds from the sale of your shares for up to 15 days after your purchase to protect against checks that are returned. No interest will be paid on uncashed redemption checks. Redemption proceeds may be paid in securities rather than cash, under certain circumstances. For more information, see the paragraph "Non-Cash Redemptions" under the section "How to Sell Shares" in the Statement of Additional Information. ____ 8 Outlined below are the various options for selling shares: Method Instructions ------------------------------------------------------------------------------- By exchange You may sell shares by exchanging from the Fund into Class Z shares or Class A shares of another fund at no additional cost. To exchange by telephone, call 1-800-422-3737. ------------------------------------------------------------------------------- By telephone You or your financial advisor may sell shares by telephone and request that a check be sent to your address of record by calling 1-800-422-3737, unless you have notified the Fund of an address change within the previous 30 days. The dollar limit for telephone sales is $100,000 in a 30-day period. You do not need to set up this feature in advance of your call. Certain restrictions apply to retirement accounts. For details, call 1-800-345-6611. ------------------------------------------------------------------------------- By mail You may send a signed letter of instruction or stock power form to the address below. In your letter of instruction, note the Fund's name, share class, account number, and the dollar value or number of shares you wish to sell. All account owners must sign the letter, and signatures must be guaranteed by either a bank, a member firm of a national stock exchange or another eligible guarantor institution. Additional documentation is required for sales by corporations, agents, fiduciaries, surviving joint owners and individual retirement account owners. For details, call 1-800-345-6611. Mail your letter of instruction to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA 02105-1722. -------------------------------------------------------------------------------- By wire You may sell shares and request that the proceeds be wired to your bank. You must set up this feature prior to your telephone request. Be sure to complete the appropriate section of the account application for this feature. -------------------------------------------------------------------------------- By electronic You may sell shares and request that the proceeds be funds transfer electronically transferred to your bank. Proceeds may take up to two business days to be received by your bank. You must set up this feature prior to your request. Be sure to complete the appropriate section of the account application for this feature. -------------------------------------------------------------------------------- Systematic You may automatically sell a specified dollar amount or Withdrawal Plan percentage on a monthly, quarterly or semiannual basis if your account balance is at least $5,000 and have the proceeds sent to you. This feature is not available if you hold your shares in certificate form. Be sure to complete the appropriate section of the account application for this feature. ------------------------------------------------------------------------------- Through an Contact your financial professional. Financial professionals Intermediary may charge fees for their services. FUND POLICY ON TRADING OF FUND SHARES ------------------------------------------------------------------------------- The Fund does not permit short-term or excessive trading. Excessive purchases, redemptions or exchanges of Fund shares disrupt portfolio management and drive Fund expenses higher. In order to promote the best interests of the Fund, the Fund reserves the right to reject any purchase order or exchange request, particularly from market timers or investors who, in the advisor's opinion, have a pattern of short-term or excessive trading or whose trading has been or may be disruptive to the Fund. The fund into which you would like to exchange also may reject your request. ____ 9 OTHER INFORMATION ABOUT YOUR ACCOUNT -------------------------------------------------------------------------------- How the Fund's Share Price is Determined The price of a Fund's Class Z shares is its net asset value. The net asset value is determined at the close of regular trading on the NYSE, usually 4:00 p.m. Eastern time, on each business day that the NYSE is open (typically Monday through Friday). When you request a transaction, it will be processed at the net asset value next determined after your request is received in "good form" by the Fund (or an authorized broker-dealer, financial services company, or other agent, some of whom may charge a fee for their services). In most cases, in order to receive that day's price, the Fund must receive your order before that day's transactions are processed. If you request a transaction through an agent, that agent must receive your order by the close of trading on the NYSE to receive that day's price. The Fund determines its net asset value for its Class Z shares by dividing total net assets attributable to Class Z shares by the number of outstanding Class Z shares. In determining the net asset value, the Fund must determine the price of each security in its portfolio at the close of each trading day. Because the Fund holds securities that are traded on foreign exchanges, the value of these securities may change on days when shareholders will not be able to buy or sell Fund shares. This will affect the Fund's net asset value on the day it is next determined. Securities for which market quotations are available are valued each day at the current market value. However, where market quotations are not available, or when the advisor believes that subsequent events have made them unreliable, the Fund may use other data to determine the fair value of the securities. You can find the daily prices of some share classes for the Fund in most major daily newspapers under the caption "Liberty." You can find daily prices for all share classes by visiting the Fund's web site at www.libertyfunds.com. Share Certificates Share certificates are not available for Class Z shares. ____ 10 UNDERSTANDING FUND DISTRIBUTIONS The Fund earns income from the securities it holds. The Fund also may realize capital gains and losses on sales of its securities. The Fund distributes substantially all of its net investment income and capital gains to shareholders. As a shareholder, you are entitled to a portion of the Fund's income and capital gains based on the number of shares you own at the time these distributions are declared. Dividends, Distributions, and Taxes The Fund has the potential to make the following distributions: Types of Distributions Dividend Represents interest and dividends earned from securities held by the Fund. -------------------------------------------------------------------------------- Capital gains Represents net long-term capital gains on sales of securities held for more than 12 months and net short-term capital gains, which are gains on sales of securities held for a 12-month period or less. Distribution Options. Normally, the Fund distributes dividends in June and December and any capital gains (including short-term capital gains) at least annually. You can choose one of the options listed in the table below for these distributions when you open your account. To change your distribution option call 1-800-345-6611. If you do not indicate on your application your preference for handling distributions, the Fund will automatically reinvest all distributions in additional shares of the Fund. Distribution Options Reinvest all distributions in additional shares of the Fund -------------------------------------------------------------------------------- Reinvest all distributions in shares of another fund -------------------------------------------------------------------------------- Receive dividends in cash (see options below) and reinvest capital gains -------------------------------------------------------------------------------- Receive all distributions in cash (with one of the following options): . send the check to your address of record . send the check to a third party address . transfer the money to your bank via electronic funds transfer Distributions of $10 or less will automatically be reinvested in additional Fund shares. If you elect to receive distributions by check and the check is returned as undeliverable, or if you do not cash a distribution check within six months of the check date, the distribution will be reinvested in additional shares of the Fund. Tax Consequences Regardless of whether you receive your distributions in cash or reinvest them in additional Fund shares, all Fund distributions are subject to federal income tax. Depending on the state where you live, distributions may also be subject to state and local income taxes. In general, any distributions of dividends, interest and short-term capital gains are taxable as ordinary income. Distributions of long-term capital gains are generally taxable as such, regardless of how long you have held your Fund shares. You will be provided with information each year regarding the amount of ordinary income and capital gains distributed to you for the previous year and any portion of your distribution which is exempt from state and local taxes. Your investment in the Fund may have additional personal tax implications. Please consult your tax advisor on foreign, federal, state, local or other applicable tax laws. ____ 11 In addition to the dividends and capital gains distributions made by the Fund, you may realize a capital gain or loss when selling and exchanging shares of the Fund. Such transactions may be subject to federal, state and local income tax. Foreign Income Taxes The Fund may receive investment income from sources within foreign countries, and that income may be subject to foreign income taxes at the source. If the Fund pays non-refundable taxes to foreign governments during the year, the taxes will reduce the Fund's dividends but will still be included in your taxable income. You may be able to claim an offsetting credit or deduction on your tax return for your share of foreign taxes paid by the Fund. ____ 12 Managing the Fund INVESTMENT ADVISOR -------------------------------------------------------------------------------- Liberty Wanger Asset Management (Liberty WAM) (formerly Wanger Asset Management, L.P. (WAM)), located at 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606, is the Fund's investment advisor. Liberty WAM and its predecessor have managed mutual funds, including the Fund, since 1992. In its duties as investment advisor, Liberty WAM runs the Fund's day-to-day business, including placing all orders for the purchase and sale of the Fund's portfolio securities. As of June 30, 2000, Liberty WAM managed over $9 billion in assets. WAM was renamed Liberty WAM on September 29, 2000 when it became a wholly owned subsidiary of Liberty Financial Companies, Inc. (Liberty), which in turn is a majority owned indirect subsidiary of Liberty Mutual Insurance Company. For more information about Liberty's acquisition of WAM, see the Statement of Additional Information. Liberty WAM's advisory fee for managing the Fund in 1999 was 0.95% of the Fund's average daily net assets. Liberty WAM also receives an administrative fee from the Fund at the annual rate of .05% of the Fund's average daily net assets. PORTFOLIO MANAGERS -------------------------------------------------------------------------------- Liberty WAM uses a team to manage the Fund. Team members share responsibility for providing ideas, information, and knowledge in managing the Fund, and each team member has one or more particular areas of expertise. The portfolio managers are responsible for making daily investment decisions, and utilize the management team's input and advice when making buy and sell determinations. Marcel P. Houtzager Co-portfolio manager Marcel Houtzager is a vice president of Liberty Acorn Trust, and has managed Liberty Acorn Foreign Forty since its inception in 1998. He has been a member of the international analytical team at Liberty WAM and WAM since 1992, and was a principal of WAM from 1995 to September 29, 2000. Mr. Houtzager also manages an international mutual fund underlying variable insurance products and the foreign portfolio of an investment company whose shares are offered only to non- U.S. investors. He is a CFA and a CPA, and earned his BA from Pomona College and his MBA from the University of California at Berkeley. ____ 13 Managing the Fund Roger D. Edgley Co-portfolio manager Roger Edgley is a vice president of Liberty Acorn Trust and became co-portfolio manager of Liberty Acorn Foreign Forty in December 1999. He has been director of International Research at Liberty WAM and WAM, and was a principal of WAM from January 1999 to September 29, 2000. Mr. Edgley has been a member of the international analytical team at Liberty WAM and WAM since 1994. Prior to that, Mr. Edgley was a securities analyst in Hong Kong. He is a CFA and was educated in the United Kingdom, completing his MSc degree from the London School of Economics. ____ 14 Other Investment Strategies and Risks UNDERSTANDING THE FUND'S OTHER INVESTMENT STRATEGIES AND RISKS The Fund's principal investment strategies and risks are described under "Liberty Acorn Foreign Forty - Principal Investment Strategies" and "Liberty Acorn Foreign Forty - Principal Investment Risks." In seeking to meet its investment goal, the Fund may also invest in other securities and use certain other investment techniques. These securities and investment techniques offer opportunities and carry various risks. Liberty WAM may elect not to buy any of these securities or use any of these techniques unless it believes that doing so will help the Fund achieve its investment goal. The Fund may not always achieve its investment goal. Additional information about the Fund's securities and investment techniques, as well as the Fund's fundamental and non-fundamental investment policies, is contained in the Statement of Additional Information. The first portion of this prospectus describes the Fund's principal investment strategies and their associated risks. This section provides more detail about the Fund's investment strategies, and describes other investments the Fund may make and the risks associated with them. In seeking to achieve its investment goal, the Fund may invest in various types of securities and engage in various investment techniques, which are not the principal focus of the Fund and therefore are not described in this prospectus. These types of securities and investment practices are identified and discussed in the Fund's Statement of Additional Information, which you may obtain free of charge (see back cover). Approval by the Fund's shareholders is not required to modify or change the Fund's investment goal or investment strategies. THE INFORMATION EDGE -------------------------------------------------------------------------------- The Fund invests in entrepreneurially managed smaller, mid-sized and larger companies that it believes are not as well known by financial analysts and whose domination of a niche creates the opportunity for superior earnings-growth potential. Liberty WAM may identify what it believes are important economic, social or technological trends (for example, the growth of out-sourcing as a business strategy, or the productivity gains from the increasing use of technology) and try to identify companies it thinks will benefit from those trends. In making investments for the Fund, Liberty WAM relies primarily on independent, internally generated research to uncover companies that may be less well known than the more popular names. To find these companies, Liberty WAM compares growth potential, financial strength and fundamental value among companies.
Growth Potential Financial Strength Fundamental Value -------------------------------------------------------------------------------- . superior technology . low debt . reasonable stock price . innovative . adequate working relative to growth marketing capital potential . managerial skill . conservative . valuable assets . market niche accounting practices . good earnings . adequate profit margin prospects . strong demand for product The realization of this A strong balance sheet Once Liberty WAM growth potential would gives management uncovers an attractive likely produce superior greater flexibility to company, it performance that is pursue strategic identifies a sustainable over time. objectives and is price that it essential to believes would maintaining also make the a competitive stock a good advantage. value.
-------------------------------------------------------------------------------- STOCK STRENGTH COMES FIRST -------------------------------------------------------------------------------- Liberty WAM's analysts continually screen companies and make more than 1,000 face-to-face visits around the globe each year. To accomplish this, Liberty WAM analysts talk to top management, vendors, suppliers and competitors, whenever possible. In managing the Fund, Liberty WAM tries to maintain lower taxes and transaction costs by investing with a long-term time horizon (at least two to five years). However, ____ 15 Other Investment Strategies and Risks securities purchased on a long-term basis may be sold within 12 months after purchase due to changes in the circumstances of a particular company or industry, or changes in general market or economic conditions. DERIVATIVE STRATEGIES -------------------------------------------------------------------------------- The Fund may enter into a number of hedging strategies, including those that employ futures and options, to gain or reduce exposure to particular securities or markets. These strategies, commonly referred to as derivatives, involve the use of financial instruments whose values depend on, or are derived from, the value of an underlying security, index or currency. The Fund may use these strategies to adjust the Fund's sensitivity to changes in interest rates or for other hedging purposes (i.e., attempting to offset a potential loss in one position by establishing an interest in an opposite position). Derivative strategies involve the risk that they may exaggerate a loss, potentially losing more money than the actual cost of the underlying security, or limit a potential gain. Also, with some derivative strategies there is a risk that the other party to the transaction may fail to honor its contract terms, causing a loss to the Fund. TEMPORARY DEFENSIVE STRATEGIES -------------------------------------------------------------------------------- At times, Liberty WAM may determine that adverse market conditions make it desirable to temporarily suspend the Fund's normal investment activities. During such times, the Fund may, but is not required to, invest in cash or high- quality, short-term debt securities, without limit. Taking a temporary defensive position may prevent the Fund from achieving its investment goal. ____ 16 Financial Highlights The financial highlights tables are intended to help you understand the Fund's financial performance. Information is shown for the Fund's Class Z shares since inception. The Fund's fiscal year runs from January 1 to December 31. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). The information with respect to the six month period ended June 30, 2000 is unaudited. The information with respect to the year ended December 31, 1999 and the period ended December 31, 1998 is audited. For periods up to and including the year ended 1999, this information has been derived from the Fund's financial statements which have been audited by Ernst & Young LLP, independent auditors, whose report, along with the Fund's audited financial statements, is included in the Fund's annual report. You can request a free annual report by calling 1-800-426-3750.
Liberty Acorn Foreign Forty -------------------------------------------------------------------------------------------------------------- Six months ended 6/30/00 Year Ended Inception 11/23/98 (unaudited) 12/31/99 Through 12/31/98 -------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period -------------------------------------------------------------------------------------------------------------- Class Z Class Z Class Z -------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 19.93 $ 11.00 $ 10.00 -------------------------------------------------------------------------------------------------------------- Income from Investment Operations: Net investment loss (a) -- (.02) (.01) -------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments (.12) 8.98 1.01 -------------------------------------------------------------------------------------------------------------- Total from investment operations (.12) 8.96 1.00 -------------------------------------------------------------------------------------------------------------- Less Distributions: Dividends from net investment income (.03) -- -- Distributions from net realized and unrealized gains reportable for federal income taxes (.11) (.03) -- Total Distributions (.14) (.03) -- -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 19.67 $ 19.93 $ 11.00 -------------------------------------------------------------------------------------------------------------- Total return (d) (0.6%) 81.6% 10.0% -------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Ratio of expenses to average net assets (b)(c) 1.37%* 1.48% 1.73%* -------------------------------------------------------------------------------------------------------------- Ratio of net investment loss to average net assets (c) (.03%)* (.17%) (.78%)* -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 74%* 60% 90%* -------------------------------------------------------------------------------------------------------------- Net assets at end of period (in millions) $ 144 $ 107 $ 16
(a) Net investment loss per share was based upon the average shares outstanding during the period. (b) In accordance with a requirement by the Securities and Exchange Commission, the expense ratio reflects total expenses prior to the reduction of custodian fees for cash balances it maintains with the custodian ("custodian fees paid indirectly"). This ratio net of custodian fees paid indirectly would have been 1.45% for the period ended December 31, 1998, and the year ended December 31, 1999. (c) Liberty Acorn Foreign Forty was reimbursed by Liberty WAM for certain net expenses from November 23, 1998 through December 31, 1999. Without the reimbursement, the ratio of expenses (prior to custodian fees paid indirectly) to average net assets and the ratio of net investment income to average net assets would have been 2.70% and (1.75%), respectively, for the period ended 12/31/98 and 1.57% and (.26%), respectively, for the year ended 12/31/99. (d) Total return is not annualized for periods less than one year. *Annualized ____ 17 Notes _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ ____ 18 FOR MORE INFORMATION -------------------------------------------------------------------------------- You can get more information about the Fund's investments in the Fund's semi- annual and annual reports to shareholders. The annual report contains a discussion of the market conditions and investment strategies that significantly affected the Fund's performance over its last fiscal year. You may wish to read the Statement of Additional Information for more information on the Fund and the securities in which it invests. The Statement of Additional Information is incorporated into this prospectus by reference, which means that it is considered to be part of this prospectus. You can get free copies of reports and the Statement of Additional Information, request other information and discuss your questions about the Fund by writing or calling the Fund's distributor at: Liberty Funds Distributor, Inc. One Financial Center Boston, MA 02111-2621 1-800-426-3750 www.libertyfunds.com Text-only versions of all Fund documents can be viewed online or downloaded from the Edgar database on the Securities and Exchange Commission internet site at www.sec.gov. You can review and copy information about the Fund by visiting the following location, and you can obtain copies, upon payment of a duplicating fee by electronic request at the E-mail address publicinfo@sec.gov or by writing the: Public Reference Room Securities and Exchange Commission Washington, DC 20549-0102 Information on the operation of the Public Reference Room may be obtained by calling 1-202-942-8090. Investment Company Act file number: Liberty Acorn Trust (formerly Acorn Investment Trust): 811-01829 . Liberty Acorn Foreign Forty (formerly Acorn Foreign Forty) -------------------------------------------------------------------------------- [LOGO] [LIBERTY FUNDS] ALL STAR . COLONIAL . CRABBE HUSON . NEWPORT . STEIN ROE ADVISOR Liberty Funds Distributor, Inc. (C) 2000 One Financial Center, Boston, MA 02111-2621, 1-800-426-3750 www.libertyfunds.com