-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ta9p9PPfrEJyYm+Om8Mo5dMN5hN8ueeKclwQGIHPyXkzfjfLFhGZpb6DsrFxFZQp SsYX88XtSs2BSuotdlEYJw== 0000950135-02-001682.txt : 20020610 0000950135-02-001682.hdr.sgml : 20020610 20020327154205 ACCESSION NUMBER: 0000950135-02-001682 CONFORMED SUBMISSION TYPE: N-14AE PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20020327 DATE AS OF CHANGE: 20020607 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LIBERTY ACORN TRUST CENTRAL INDEX KEY: 0000002110 IRS NUMBER: 362692100 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-14AE SEC ACT: 1933 Act SEC FILE NUMBER: 333-85014 FILM NUMBER: 02588687 BUSINESS ADDRESS: STREET 1: 227 W MONROE STE 3000 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3126349200 MAIL ADDRESS: STREET 1: 227 W MONROE STE 3000 CITY: CHICAGO STATE: IL ZIP: 60606 FORMER COMPANY: FORMER CONFORMED NAME: ACORN FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: ACORN INVESTMENT TRUST DATE OF NAME CHANGE: 19940204 N-14 1 b42376lfn-14.txt LIBERTY ACORN TRUST As filed with the Securities and Exchange Commission on March 27, 2002 Registration No. _______________ U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-14 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ] Pre-Effective Amendment No. ____ [ ] Post-Effective Amendment No. ___ (Check Appropriate Box or Boxes) Liberty Acorn Trust * (Exact Name of Registrant as Specified in Charter) One Financial Center, Boston, Massachusetts 02111 (Address of Principal Executive Offices) 617-426-3750 (Area Code and Telephone Number) Bruce H. Lauer Liberty Acorn Trust 227 West Monroe Street, Suite 3000 Chicago, Illinois 60606 (Name and address of Agent for Service) Copies to: John M. Loder, Esq. Ropes & Gray One International Place Boston, Massachusetts 02110 Title of Securities Being Registered: Shares of Beneficial Interest, no par value Approximate Date of Proposed Offering: As soon as practicable after this Registration Statement becomes effective. It is proposed that this filing will become effective on April 26, 2002 pursuant to Rule 488. An indefinite amount of the Registrant's securities has been registered under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940. In reliance upon such Rule, no filing fee is being paid at this time. * On behalf of Liberty Acorn USA. LIBERTY FUNDS STEIN ROE FUNDS ONE FINANCIAL CENTER, BOSTON, MASSACHUSETTS 02111-2621 Dear Shareholder: Your fund will hold a special meeting of shareholders on June 28, 2002, at 2:00 p.m. (Eastern Time). At this meeting, you will be asked to vote on the proposed acquisition of your fund, which is one of a number of fund acquisitions recommended by Columbia Management Group, Inc. ("Columbia"), the new parent company of the investment advisors to Liberty Funds and Stein Roe Funds. Columbia's overall goal in proposing these fund mergers is two-fold. First, by merging funds with similar investment strategies, Columbia can create larger, more efficient funds. Second, by streamlining its investment product line, Columbia can concentrate its portfolio management resources on a more focused group of portfolios. The specific details and reasons for your fund's acquisition are contained in the enclosed Prospectus/Proxy Statement. Please read it carefully. If you have any questions, feel free to speak to one of our representatives at 800-426-3750. This special meeting will be held at Columbia's offices located at One Financial Center, Boston, Massachusetts. While we hope you can attend this meeting, it is very important that you vote your shares at your earliest convenience. Your fund has retained the services of Georgeson Shareholder Communications, Inc. to assist shareholders with the voting process. As we get closer to June 28th, shareholders who have not yet voted may receive a call from Georgeson reminding them to exercise their right to vote. YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. YOU CAN VOTE EASILY AND QUICKLY BY MAIL, BY PHONE, BY INTERNET OR IN PERSON. A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE HAS BEEN ENCLOSED FOR YOUR CONVENIENCE. PLEASE HELP YOUR FUND AVOID THE EXPENSE OF A FOLLOW-UP MAILING BY VOTING TODAY! Again, if you have any questions regarding the combined Prospectus/Proxy Statement, please call us at 800-426-3750. We appreciate your participation and prompt response in these matters and thank you for your continued support. Sincerely, Keith T. Banks President Liberty Funds Stein Roe Mutual Funds [May ___], 2002 [Job Code] NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 28, 2002 LIBERTY-STEIN ROE FUNDS INVESTMENT TRUST STEIN ROE SMALL COMPANY GROWTH FUND NOTICE IS HEREBY GIVEN that a Special Meeting of the shareholders of the Stein Roe Small Company Growth Fund will be held at 2:00 p.m. Eastern Time on Friday, June 28, 2002, at the offices of Columbia Management Group, Inc., the indirect parent of the Stein Roe Small Company Growth Fund's advisor, One Financial Center, Boston, Massachusetts 02111-2621, for these purposes: 1. To approve an Agreement and Plan of Reorganization providing for the sale of all of the assets of the Stein Roe Small Company Growth Fund to, and the assumption of all of the liabilities of the Stein Roe Small Company Growth Fund by, Liberty Acorn USA in exchange for shares of Liberty Acorn USA and the distribution of such shares to the shareholders of the Stein Roe Small Company Growth Fund in complete liquidation of the Stein Roe Small Company Growth Fund. 2. To consider and act upon any other matters that properly come before the meeting and any adjourned session of the meeting. Shareholders of record at the close of business on April 17, 2002, are entitled to notice of and to vote at the meeting and any adjourned session. By order of the Board of Trustees, Jean S. Loewenberg, Secretary [May ___], 2002 NOTICE: YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. YOU CAN VOTE EASILY AND QUICKLY BY PHONE, BY MAIL, BY INTERNET OR IN PERSON. SEE ENCLOSED PROXY INSERT FOR INSTRUCTIONS. PLEASE HELP THE STEIN ROE SMALL COMPANY GROWTH FUND AVOID THE EXPENSE OF A FOLLOW-UP MAILING BY VOTING TODAY! COMBINED PROSPECTUS AND PROXY STATEMENT MAY [___], 2002 ACQUISITION OF THE ASSETS AND LIABILITIES OF STEIN ROE SMALL COMPANY GROWTH FUND (INCLUDING CLASS S AND LIBERTY SMALL COMPANY GROWTH FUND CLASS A) c/o Liberty-Stein Roe Funds Investment Trust One Financial Center Boston, Massachusetts 02111 1-800-338-2550 BY AND IN EXCHANGE FOR SHARES OF LIBERTY ACORN USA c/o Liberty Acorn Trust One Financial Center Boston, Massachusetts 02111 1-800-426-3750 TABLE OF CONTENTS QUESTIONS AND ANSWERS ................................................................ 3 PROPOSAL - Acquisition of the Stein Roe Small Company Growth Fund by Liberty Acorn USA 9 Principal Investment Risks ...................................................... 9 Information about the Acquisition ............................................... 9 GENERAL .............................................................................. 16 Voting Information .............................................................. 16 Appendix A - Form of Agreement and Plan of Reorganization ............................ A-1 Appendix B - Fund Information ........................................................ B-1 Appendix C - Capitalization .......................................................... C-1 Appendix D - Management's Discussion of Fund Performance for Liberty Acorn USA ....... D-1
This combined Prospectus/Proxy Statement contains information you should know before voting on the Agreement and Plan of Reorganization relating to the proposed acquisition of the Stein Roe Small Company Growth Fund (including Class S and Liberty Small Company Growth Fund Class A) (the "Growth Fund") by Liberty Acorn USA ("Acorn USA," and together with the Growth Fund, the "Funds") (the "Acquisition") at a Special Meeting of Shareholders of the Growth Fund (the "Meeting"), which will be held at 2:00 p.m. Eastern Time on June 28, 2002, at the offices of Columbia Management Group, Inc. ("Columbia"), One Financial Center, Boston, Massachusetts 02111. Please read this Prospectus/Proxy Statement and keep it for future reference. The Proposal in this Prospectus/Proxy Statement relates to the proposed acquisition of the Growth Fund by Acorn USA. If the Acquisition occurs, you will become a shareholder of Acorn USA. Acorn USA seeks long-term growth of capital. If the Agreement and Plan of Reorganization is approved by the shareholders of the Growth Fund and the Acquisition occurs, the Growth Fund will transfer all of the assets and liabilities attributable to each class of its shares to Acorn USA in exchange for shares of the same class of Acorn USA with the same aggregate net asset value as the net value of the assets and liabilities transferred (in the case of Class S shares of the Growth Fund, Class Z shares of the Acorn Fund). After that exchange, shares of each class received by the Growth Fund will be distributed pro rata to its shareholders of the corresponding class. In the distribution, holders of Class S shares of the Growth Fund will receive Class Z shares of Acorn USA, and holders of Class A shares of the Growth Fund will receive Class A shares of Acorn USA. Please review the enclosed Prospectus of Acorn USA for your class of shares. This document is incorporated in this Prospectus/Proxy Statement by reference. The following documents have been filed with the 1 Securities and Exchange Commission (the "SEC") and are also incorporated in this Prospectus/Proxy Statement by reference: - The Prospectuses of the Growth Fund dated February 1, 2002. - The Statement of Additional Information of the Growth Fund dated February 1, 2002. - The Report of Independent Accountants and financial statements included in the Annual Report to Shareholders of the Growth Fund dated September 30, 2001. - The Statement of Additional Information of Acorn USA dated May [___], 2002, relating to the Acquisition. The Growth Fund has previously sent its Annual Report to its shareholders. For a free copy of this Report or any of the documents listed above, you may call 1-800-426-3750, or you may write to your Fund at the address listed on the cover of this Prospectus/Proxy Statement. You may also obtain many of these documents by accessing the Internet site for your Fund at www.libertyfunds.com or www.steinroe.com. Our hearing impaired shareholders may call Liberty Funds Services, Inc. at 1-800-528-6979 with special TTD equipment. Text-only versions of all the Growth Fund and Acorn USA documents can be viewed online or downloaded from the EDGAR database on the SEC's Internet site at www.sec.gov. You can review and copy information about the Funds by visiting the Public Reference Room, U.S. Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, DC 20549-0102. You can obtain copies, upon payment of a duplicating fee, by sending an e-mail request to publicinfo@sec.gov or by writing the Public Reference Room at the address above. Information on the operation of the Public Reference Room may be obtained by calling 202-942-8090. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS/PROXY STATEMENT IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. 2 QUESTIONS AND ANSWERS THE FOLLOWING QUESTIONS AND ANSWERS PROVIDE AN OVERVIEW OF KEY FEATURES OF THE ACQUISITION AND OF THE INFORMATION CONTAINED IN THIS COMBINED PROSPECTUS/PROXY STATEMENT. PLEASE REVIEW THE FULL PROSPECTUS/ PROXY STATEMENT PRIOR TO CASTING YOUR VOTE. 1. WHAT IS BEING PROPOSED? The Trustees of Liberty-Stein Roe Funds Investment Trust (the "Investment Trust") and the Trustees of Liberty Acorn Trust (the "Acorn Trust") (each a "Trust" and together, the "Trusts") are recommending that Acorn USA acquire the Growth Fund. This means that Acorn USA would acquire all of the assets and liabilities of the Growth Fund in exchange for shares of Acorn USA. If the Acquisition is approved, you will receive shares of Acorn USA with an aggregate net asset value equal to the aggregate net asset value of your Growth Fund shares as of the day before the closing of the Acquisition. The Acquisition is currently scheduled to take place on or around [July ___], 2002. Please note that the Trustees of the Investment Trust have approved the liquidation of the Growth Fund in the event that its shareholders do not approve the Acquisition. 2. WHY IS THE ACQUISITION BEING PROPOSED? The Trustees of the Investment Trust recommend approval of the Acquisition because it offers shareholders of the Growth Fund an investment in a larger fund with an investment goal and strategies generally similar to those of the Growth Fund. In reviewing the Acquisition, the Trustees also considered: - that, because the Growth Fund is too small to be economically viable without fee waivers and expense reimbursements, and has been unable to achieve meaningful sales growth that over time could reduce Fund expenses, the Trustees of the Investment Trust have approved the liquidation of the Growth Fund if its Acquisition is not approved; - that, although Class A shareholders of the Growth Fund are expected to experience an increase, based on expense ratios as of December 31, 2001, in net expenses (expenses reduced by the voluntary expense reimbursement described in footnotes 7 and 8 to the Annual Fund Operating Expenses table below), they are expected to experience a decrease in gross expenses (expenses before reduction by such reimbursement) and will move into a fund with greater scale and better long-term performance; and - that the Acquisition is expected to be tax-free for shareholders of the Growth Fund who choose to remain shareholders of Acorn USA, while liquidation would be a realization event for tax purposes. Please review "Reasons for the Acquisition" in the Proposal section of this Prospectus/Proxy Statement for more information regarding the factors considered by the Trustees. SHAREHOLDERS OF THE GROWTH FUND SHOULD NOTE THAT, ALTHOUGH THE INVESTMENT GOAL AND STRATEGIES OF ACORN USA ARE GENERALLY SIMILAR TO THOSE OF THE GROWTH FUND, THERE WILL BE SOME DIFFERENCE IN THE INVESTMENT STYLE OF THE COMBINED FUND. COMPARED TO THE GROWTH FUND, ACORN USA, ON AVERAGE, HAS INVESTED IN COMPANIES WITH SMALLER MARKET CAPITALIZATIONS AND INVESTS A SMALLER PERCENTAGE OF ITS TOTAL ASSETS IN SECURITIES OF FOREIGN COMPANIES. PLEASE SEE THE ANSWER TO QUESTION 4 BELOW FOR MORE INFORMATION COMPARING THE INVESTMENT GOALS, STRATEGIES AND POLICIES OF THE FUNDS. 3. HOW DO THE MANAGEMENT FEES AND EXPENSES OF THE FUNDS COMPARE AND WHAT ARE THEY ESTIMATED TO BE FOLLOWING THE ACQUISITION? The following tables allow you to compare the sales charges and management fees and expenses of the Growth Fund and Acorn USA and to analyze the estimated expenses that Columbia expects the combined fund to bear in the first year following the Acquisition. The shareholder fees presented below for Acorn USA apply both before and after giving effect to the Acquisition. Sales charges, if applicable, are paid directly by shareholders to Liberty Funds Distributor, Inc., each Fund's distributor. Annual Fund Operating Expenses are paid by the Fund. They include management fees, 12b-1 fees (if applicable) and administrative costs, including pricing and custody services. The 3 Annual Fund Operating Expenses shown in the table below represent expenses incurred by the Growth Fund for its last fiscal year (ended September 30, 2001) and by Acorn USA for its last fiscal year (ended December 31, 2001) and those expected to be incurred by the combined fund on a pro forma basis (giving effect to the Acquisition and based on pro forma combined net assets as of December 31, 2001). Shareholders of the Growth Fund will not pay additional sales charges as a result of the Acquisition, although contingent deferred sales charges will continue to apply. SHAREHOLDER FEES (paid directly from your investment)
GROWTH FUND ----------- CLASS A(1) CLASS S(4) Maximum sales charge (load) on purchases (%) 5.75 0.00 (as a percentage of the offering price) - ----------------------------------------------------------------------------------- Maximum deferred sales charge (load) on redemptions (%) 1.00(2) 0.00 (as a percentage of the lesser of purchase price or redemption price) - ----------------------------------------------------------------------------------- Redemption fee (%) (3) (4) (as a percentage of amount redeemed, if applicable)
ACORN USA (1) --------- CLASS A CLASS Z Maximum sales charge (load) on purchases (%) 5.75 0.00 (as a percentage of the offering price) - ----------------------------------------------------------------------------------- Maximum deferred sales charge (load) on redemptions (%) 1.00(2) 0.00 (as a percentage of the lesser of purchase price or redemption price) - ----------------------------------------------------------------------------------- Redemption fee (%) (3) (5) (as a percentage of amount redeemed, if applicable)
- -------- (1) A $10 annual fee is deducted from accounts of less than $1,000 and paid to the transfer agent. (2) This charge applies only to certain Class A shares bought without an initial sales charge that are sold within 18 months of purchase. (3) There is a $7.50 charge for wiring sale proceeds to your bank. (4) A fee of $5.00 per quarter may be charged to accounts that fall below the required minimum balance. There is a $7.00 charge for wiring redemption proceeds to your bank. (5) There is a $7.50 charge for wiring sale proceeds to the transfer agent. 4 ANNUAL FUND OPERATING EXPENSES (deducted directly from Fund assets)
GROWTH FUND ----------- CLASS A CLASS S Management fee (6) (7) (%) 1.00 1.00 - -------------------------------------------------------------------------------- Distribution and service (12b-1) fees (8) (%) 0.35 0.00 - -------------------------------------------------------------------------------- Other expenses (%) 0.81 0.81 - -------------------------------------------------------------------------------- Total annual fund operating expenses (7) (%) 2.16 1.81
ACORN USA --------- CLASS A CLASS Z Management fee (9) (%) 0.99 0.99 - -------------------------------------------------------------------------------- Distribution and service (12b-1) fees (10) (%) 0.35 0.00 - -------------------------------------------------------------------------------- Other expenses (%) 0.50 0.18 - -------------------------------------------------------------------------------- Total annual fund operating expenses (%) 1.84 1.17
ACORN USA (PRO FORMA COMBINED) -------------------- CLASS A CLASS Z Management fee (%) 0.98 0.98 - -------------------------------------------------------------------------------- Distribution and service (12b-1) fees (10) (%) 0.35 0.00 - -------------------------------------------------------------------------------- Other expenses (%) 0.49 0.17 - -------------------------------------------------------------------------------- Total annual fund operating expenses (%) 1.82 1.15
- -------- (6) The Growth Fund paid a management fee of 0.85% and an administration fee of 0.15%. (7) The Growth Fund's advisor has voluntarily agreed to reimburse the Fund for certain expenses so that total annual fund operating expenses (exclusive of distribution and service fees, brokerage commissions, interest, taxes and extraordinary expenses, if any) will not exceed 1.50%. If this reimbursement were reflected in the table, the actual advisory fee for Class A and Class S shares would be 0.69%, and total annual fund operating expense for Class A and Class S shares would be 1.75% (which also reflects the distributor's agreement to waive a portion of 12b-1 fees, as discussed in footnote 8) and 1.50%, respectively. This arrangement may be modified or terminated by the advisor at any time. (8) The Growth Fund has adopted a plan under Rule 12b-1 that permits it to pay the Fund's distributor marketing and other fees to support the sale and distribution of Class A shares and certain services provided to you by your financial advisor. The annual service fee may equal up to 0.25%, and the annual distribution fee may equal up to 0.10%. Distribution and service fees are paid out of the assets attributable to Class A. The Growth Fund's distributor has voluntarily agreed to waive a portion of the 12b-1 fees for Class A shares. If this waiver were reflected in the table, the 12b-1 fee for Class A shares would be 0.25% and the total annual fund operating expenses for Class A shares would be 1.75% (which figure also reflects the advisor's agreement to limit fund expenses, as discussed in footnote 7.) This arrangement may be modified or terminated by the distributor at any time. (9) Acorn USA paid a management fee of 0.94% and an administration fee of 0.05%. (10) Acorn USA has adopted a plan under Rule 12b-1 that permits it to pay the Fund's distributor marketing and other fees to support the sale and distribution of Class A shares and certain services provided to you by your financial advisor. The annual service fee may equal up to 0.25% and the annual distribution fee may equal up to 0.10% for Class A shares. Distribution and service fees are paid out of the assets attributable to Class A shares. 5 EXAMPLE EXPENSES Example Expenses help you compare the cost of investing in the Growth Fund or Acorn USA currently with the cost of investing in the combined fund on a pro forma basis and also allow you to compare these costs with the cost of investing in other mutual funds. Your actual costs may be higher or lower. The following hypothetical conditions were used in performing the calculations: - $10,000 initial investment - 5% total return for each year - Each Fund's operating expenses remain the same - Reinvestment of all dividends and distributions
1 YEAR 3 YEARS 5 YEARS 10 YEARS GROWTH FUND Class A $781 $1,212 $1,668 $2,925 Class S 184 569 980 2,127 ACORN USA Class A $751 $1,120 $1,513 $2,609 Class Z 119 372 644 1,420 ACORN USA (pro forma combined) Class A $749 $1,115 $1,504 $2,589 Class Z 117 365 633 1,398
The projected post-Acquisition pro forma Annual Fund Operating Expenses and Example Expenses presented above are based upon numerous material assumptions, including that (1) the current contractual agreements will remain in place and (2) certain fixed costs involved in operating the Growth Fund are eliminated. Although these projections represent good faith estimates, there can be no assurance that any particular level of expenses or expense savings will be achieved, because expenses depend on a variety of factors, including the future level of fund assets, many of which are beyond the control of Acorn USA or Columbia. 6 4. HOW DO THE INVESTMENT GOALS, STRATEGIES AND POLICIES OF THE GROWTH FUND AND ACORN USA COMPARE? This table shows the investment goal and principal investment strategies of each Fund: - -------------------------------------------------------------------------------- GROWTH FUND - -------------------------------------------------------------------------------- INVESTMENT GOAL: The Growth Fund seeks long-term growth. - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGIES: The Growth Fund seeks to achieve its goal as follows: - The Fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in common stocks of small-cap companies (defined as stocks with market capitalizations equal to or less than the largest stock in the Standard & Poor's Small Cap 600 Index (approximately $3.8 billion as of December 31, 2001)). - The portfolio manager seeks to manage the Fund in accordance with Morningstar, Inc.'s guidelines for a "Small Growth" fund. - -------------------------------------------------------------------------------- ACORN USA - -------------------------------------------------------------------------------- INVESTMENT GOAL: Acorn USA seeks to provide long-term growth of capital. - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGIES: Acorn USA seeks to achieve its goal as follows: - The Fund generally invests in the stocks of U.S. companies with market capitalizations of less than $2 billion at the time of purchase. - The Fund generally invests substantially all of its assets in U.S. companies, and, under normal circumstances, will invest at least 80% of its net assets (plus any borrowing for investment purposes) in U.S. companies. - -------------------------------------------------------------------------------- The following compares the principal investment strategies that each Fund uses to achieve its investment goal and the investment policies to which each Fund is subject: - Each Fund invests primarily in equity securities of smaller companies, with Acorn USA tending to invest in companies with market capitalizations less than $2 billion and the Growth Fund tending to invest in companies with market capitalizations equal to or less than the company of the largest stock in the Standard & Poor's Small Cap 600 Index. Both Funds seek to invest in growth companies, although their approaches to selecting growth companies may differ slightly, as noted in the table above. - Unlike the Growth Fund, which may invest up to 25% of its total assets in foreign securities, Acorn USA generally invests substantially all of its assets in U.S. companies and may not invest more than 10% of its total assets in securities of foreign companies. - Acorn USA may not acquire securities of a single issuer if such acquisition would cause the Fund to own more than 10% of the equity value of such issuer, whereas the Growth Fund is not subject to such a restriction. - Acorn USA may invest no more than 15% of its total assets in privately placed debt securities, whereas the Growth Fund is not subject to such a restriction. - The Growth Fund may not write options or purchase options if the aggregate premiums paid for all options exceed 20% of its net assets (less the amount by which any such positions are "in-the-money"), whereas Acorn USA is not subject to such a restriction, although it may not invest in options on futures contracts in certain circumstances. Other than as noted above, the investment policies of the Growth Fund and Acorn USA are generally similar. For a complete list of the Funds' investment policies, see the Statement of Additional Information of each Fund. 5. WHAT CLASS OF ACORN USA SHARES WILL YOU RECEIVE IF THE ACQUISITION OCCURS? If you own Class A shares of the Growth Fund, you will receive Class A shares of Acorn USA. The shares will have the same exchange rights and will bear the same contingent deferred sales charges ("CDSCs"), if applicable, as 7 your current shares. The shares will also have the same distribution, purchase and redemption procedures as your current shares. If you own Class S shares of the Growth Fund, you will receive Class Z shares of Acorn USA. Like your Growth Fund Class S shares, your new Class Z shares will not bear sales charges or be subject to 12b-1 fees, and they will have distribution, purchase and redemption procedures that are substantially similar to those of your current shares. Your Class Z shares will have a similar "telephone exchange privilege," but unlike your Class S shares, they will not have an "automatic exchange privilege." Also, your exchange rights will be different. Whereas your Class S shares of the Growth Fund could be exchanged only for certain other shares of Stein Roe no-load funds offered for sale in your state of residence, your new Class Z shares may be exchanged for Class Z or Class A shares of other funds distributed by Liberty Funds Distributor, Inc. at net asset value. 6. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION? The Acquisition is expected to be tax-free to you for federal income tax purposes. This means that neither you nor the Growth Fund is expected to recognize a gain or loss as a result of the Acquisition. Immediately prior to the Acquisition, the Growth Fund will declare and pay a distribution of all net investment company taxable income, if any, and net realized capital gains (after reduction by any available capital loss carryforwards), if any, to its shareholders. The cost basis and holding period of your Growth Fund shares are expected to carry over to your new shares in Acorn USA. Acorn USA has significant unrealized gains ([14.5]% of net asset value as of [December 31, 2001]), some or all of which could be realized and distributed to its shareholders, including you. In addition, Acorn USA's ability to carry forward the pre-Acquisition losses of the Growth Fund and use them to offset future gains of Acorn USA will be limited. In certain circumstances, you may pay more taxes, or pay taxes sooner, than if the Acquisition did not occur. 8 PROPOSAL ACQUISITION OF THE LIBERTY GROWTH FUND BY LIBERTY ACORN USA THE PROPOSAL You are being asked to approve the Agreement and Plan of Reorganization dated [April ___], 2002. A form of the Agreement and Plan of Reorganization is attached as Appendix A to this Prospectus/Proxy Statement. By approving the Agreement and Plan of Reorganization, you are also approving the Acquisition of the Growth Fund by Acorn USA under the Agreement and Plan of Reorganization. PRINCIPAL INVESTMENT RISKS What are the principal investment risks of Acorn USA, and how do they compare with those of the Growth Fund? Acorn USA is subject to market risk, management risk, the risks associated with investing in small-capitalization and middle-capitalization companies and the risks associated with investing in growth stocks, which are the risks to which the Growth Fund is subject. Unlike the Growth Fund, however, Acorn USA is subject to sector risk (i.e., the risk associated with having a significant portion of fund assets invested in a particular sector). Aside from the risks associated with sector risk, the principal risks associated with each Fund are generally similar because the Funds have generally similar investment goals and strategies. For more information about the principal investment risks of Acorn USA, please see the enclosed Prospectus of Acorn USA. The actual risks of investing in each Fund depend on the securities held in each Fund's portfolio and on market conditions, both of which change over time. SHAREHOLDERS OF THE GROWTH FUND SHOULD NOTE THAT, ALTHOUGH THE INVESTMENT GOAL AND STRATEGIES OF ACORN USA ARE GENERALLY SIMILAR TO THOSE OF THE GROWTH FUND, THERE WILL BE SOME DIFFERENCE IN THE INVESTMENT STYLE OF THE COMBINED FUND. COMPARED TO THE GROWTH FUND, ACORN USA, ON AVERAGE, HAS INVESTED IN COMPANIES WITH SMALLER MARKET CAPITALIZATIONS AND INVESTS A SMALLER PERCENTAGE OF ITS TOTAL ASSETS IN SECURITIES OF FOREIGN COMPANIES. PLEASE SEE THE ANSWER TO QUESTION 4 ABOVE UNDER "QUESTIONS AND ANSWERS" FOR MORE INFORMATION COMPARING THE INVESTMENT GOALS, STRATEGIES AND POLICIES OF THE FUNDS. INFORMATION ABOUT THE ACQUISITION Terms of the Agreement and Plan of Reorganization If approved by the shareholders of the Growth Fund, the Acquisition is expected to occur on or around [July ___], 2002, under the Agreement and Plan of Reorganization, a form of which is attached as Appendix A to this combined Prospectus/Proxy Statement. Please review Appendix A. The following is a brief summary of the principal terms of the Agreement and Plan of Reorganization: - The Growth Fund will transfer all of the assets and liabilities attributable to each class of its shares to Acorn USA in exchange for shares of the same class of Acorn USA (in the case of Class S shares of the Growth Fund, Class Z shares of Acorn USA) with an aggregate net asset value equal to the net value of the transferred assets and liabilities. - The Acquisition will occur on the next business day after the time (currently scheduled to be 4:00 p.m. Eastern Time on [July ___], 2002, or such other date and time as the parties may determine) when the assets of each Fund are valued for purposes of the Acquisition. - The shares of each class of Acorn USA received by the Growth Fund will be distributed to the shareholders of the same class of the Growth Fund (in the case of Class S shares of the Growth Fund, Class Z shares of Acorn USA) pro rata in accordance with their percentage ownership of such class of the Growth Fund in full liquidation of the Growth Fund. 9 - After the Acquisition, the Growth Fund will be terminated, and its affairs will be wound up in an orderly fashion. - The Acquisition requires approval by the Growth Fund's shareholders and satisfaction of a number of other conditions; the Acquisition may be terminated at any time with the approval of the Trustees of both the Investment Trust and the Acorn Trust. Shareholders who object to the Acquisition will not be entitled under Massachusetts law or the Declaration of Trust of the Investment Trust to demand payment for, or an appraisal of, their shares. However, shareholders should be aware that the Acquisition as proposed is not expected to result in recognition of gain or loss to shareholders for federal income tax purposes and that, if the Acquisition is consummated, shareholders will be free to redeem the shares which they receive in the transaction at their current net asset value, less any applicable CDSC. In addition, shares may be redeemed at any time prior to the consummation of the Acquisition. Shares You Will Receive If the Acquisition occurs, you will receive shares in Acorn USA of the same class (in the case of Class S shares of the Growth Fund, Class Z Shares of Acorn USA) as the shares that you currently own in the Growth Fund. In comparison to the shares you currently own, the shares you receive will have the following characteristics: - They will have an aggregate net asset value equal to the aggregate net asset value of your current shares as of the business day before the closing of the Acquisition. - They will bear the same sales charges, redemption fees and CDSCs as your current shares to the extent such charges and fees apply, and for purposes of determining the CDSC applicable to any redemption, if applicable, the new shares will continue to age from the date you purchased your Growth Fund shares. - The procedures for purchasing and redeeming your shares will be substantially similar as a result of the Acquisition. However, Class Z shares do not offer an "automatic exchange privilege," whereas Class S shares do offer such exchange privilege. - Shareholders of new Class Z shares will have different exchange rights. Whereas Class S shares of the Growth Fund could be exchanged only for shares of certain other Stein Roe no-load funds offered for sale in your state of residence, your new Class Z shares may be exchanged for Class Z or Class A shares of other funds distributed by Liberty Funds Distributor, Inc. at net asset value. - In general, Class Z shares of Acorn USA may be purchased only by "Eligible Investors" whose purchases satisfy certain minimum initial investment requirements. You do not need to be an Eligible Investor or satisfy those requirements in order to receive Class Z shares of Acorn USA. - You will have the same voting rights as you currently have, but as a shareholder of Acorn USA of the Acorn Trust. Information concerning the capitalization of each of the Funds is contained in Appendix C. Reasons for the Acquisition The Trustees of the Investment Trust and the Trustees of the Acorn Trust, including all Trustees who are not "interested persons" of those Trusts, have determined on behalf of each Trust that the Acquisition would be in the best interests of each Fund's shareholders and that the interests of existing shareholders in each Fund would not be diluted as a result of the Acquisition. The Trustees have unanimously approved the Acquisition and recommend that you vote in favor of the Acquisition by approving the Agreement and Plan of Reorganization a form of which is attached as Appendix A to this Prospectus/Proxy Statement. The Acquisition is one of several proposed acquisitions and liquidations of funds in the Liberty and Stein Roe Fund groups proposed by Columbia, the indirect parent of the investment advisors to the Liberty and Stein Roe 10 Funds. The overall purposes of these acquisitions and liquidations include streamlining and rationalizing the product offerings of the Liberty and Stein Roe Funds, creating larger, more efficient funds and permitting the Columbia organization to concentrate its portfolio management resources on a more focused group of portfolios. In proposing the Acquisition, Columbia presented to the Trustees, at meetings held on February 12-13, 2002, March 8, 2002 and March 13, 2002, the following reasons for the Growth Fund to enter into the Acquisition: - The Acquisition is expected to create a larger fund with an investment goal and strategies generally similar to those of the Growth Fund. - That, because the Growth Fund is too small to be economically viable without fee waivers and expense reimbursements, has had relatively poor long-term performance and has been unable to achieve meaningful sales growth that over time could reduce Fund expenses, the Trustees should approve (and they have subsequently approved) the liquidation of the Growth Fund in the event that its shareholders do not approve the Acquisition; - The Acquisition is intended to permit the Growth Fund's shareholders to exchange their investment for an investment in Acorn USA without recognizing gain or loss for federal income tax purposes. By contrast, if a Growth Fund shareholder were to redeem his or her shares to invest in another fund, like Acorn USA, the transaction would likely be a taxable event for such shareholder. Similarly, if the Growth Fund were liquidated or reorganized in a taxable transaction, the transaction would likely be a taxable event for the Growth Fund's shareholders. After the Acquisition, shareholders may redeem any or all of their Acorn USA shares at net asset value (subject to any applicable CDSC) at any time, at which point they would recognize a taxable gain or loss. The Trustees considered that shareholders of the Growth Fund who do not want to become shareholders of Acorn USA, whether because the expenses they expect to bear would increase, they wish to realize an unrealized loss on their shares or otherwise, could redeem their shares in the Growth Fund prior to the Acquisition. In addition, the Trustees considered the relative Fund performance results set forth below under "Performance Information." No assurance can be given that Acorn USA will achieve any particular level of performance after the Acquisition. Performance Information The charts below show the percentage gain or loss in each calendar year for the five-year period ending December 31, 2001, for Class S shares of the Growth Fund and Class Z shares of Acorn USA. They should give you a general idea of how each Fund's return has varied from year to year. The charts include the effects of Fund expenses, but not sales charges (if applicable to the Fund's shares). Returns would be lower if any applicable sales charges were included. The calculations of total return assume the reinvestment of all dividends and capital gain distributions on the reinvestment date. Past performance is not an indication of future results. Performance results include the effect of expense reduction arrangements, if any. If these arrangements had not been in place, the performance results would have been lower. Additional discussion of the manner of calculation of total return is contained in each Fund's respective Prospectus and Statement of Additional Information. 11 GROWTH FUND (11)
--------------------------------------------------------- 1997 1998 1999 2000 2001 --------------------------------------------------------- 60.00% --------------------------------------------------------- 50.91% --------------------------------------------------------- 40.00% --------------------------------------------------------- --------------------------------------------------------- 20.00% 19.93% --------------------------------------------------------- 7.85% --------------------------------------------------------- 0.00% --------------------------------------------------------- -0.73% --------------------------------------------------------- -20.00% -10.16% --------------------------------------------------------- --------------------------------------------------------- -40.00% --------------------------------------------------------- --------------------------------------------------------- -60.00% --------------------------------------------------------- --------------------------------------------------------- ---------------------------------------------------------
The Fund's year-to-date total return through March 31, 2002, was [____]%. For period shown in bar chart: Best quarter: 4th quarter, 1999 +36.33% Worst quarter: 3rd quarter, 2001 -24.89% - -------- (11) On February 2, 1999, the Colonial Aggressive Growth Fund (the "Predecessor Fund") was reorganized into the Growth Fund. The Predecessor Fund had Class A, Class B and Class C shares. The performance information contained in the bar chart prior to February 2, 1999, is based on historical returns of the Predecessor Fund's Class A shares. The Predecessor Fund's Class A share returns are not restated to reflect any differences in expenses (such as 12b-1 fees) between Class A shares and Class S shares. If differences in expenses were reflected, the returns for the period between March 25, 1996, and February 2, 1999, would be higher, since Class S shares are not subject to 12b-1 fees. The chart does not reflect the sales load of the Predecessor Fund's Class A shares. The Predecessor Fund's Class A shares were initially offered on March 25, 1996. ACORN USA
--------------------------------------------------------- 1997 1998 1999 2000 2001 --------------------------------------------------------- --------------------------------------------------------- 40.00% --------------------------------------------------------- 32.30% --------------------------------------------------------- 20.00% 23.02% 19.25% --------------------------------------------------------- 5.79% --------------------------------------------------------- 0.00% --------------------------------------------------------- -8.99% --------------------------------------------------------- -20.00% --------------------------------------------------------- --------------------------------------------------------- -40.00% --------------------------------------------------------- --------------------------------------------------------- -60.00% --------------------------------------------------------- --------------------------------------------------------- ---------------------------------------------------------
The Fund's year-to-date total return through March 31, 2002, was [____]%. For period shown in bar chart: Best quarter: 2nd quarter, 2001 +21.71 Worst quarter: 3rd quarter, 1998 -19.25 12 The following tables list each Fund's average annual total return for the one-year, five-year and life-of-the-fund periods ending December 31, 2001 (including applicable sales charges), for Class A and Class S shares of the Growth Fund and Class A and Class Z shares of Acorn USA. These tables are intended to provide you with some indication of the risks of investing in the Funds. At the bottom of each table, you can compare the Funds' performance with one or more indices. After-tax returns are calculated using the historical highest individual federal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and may not be relevant to investors who hold shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. GROWTH FUND (12) (13) (14)
INCEPTION 1 YEAR 5 YEARS LIFE OF THE DATE FUND Class A (%) Return Before Taxes 7/31/00 -15.49 10.33 11.64 Return After Taxes on Distributions -15.49 7.39 9.04 Return After Taxes on Distributions and -9.43 7.45 8.75 Sale of Fund Shares - --------------------------------------------------------------------------------------------------------- Class S (%) Return Before Taxes 3/25/96 -10.16 11.73 12.87 Return After Taxes on Distributions -10.16 8.74 10.24 Return After Taxes on Distributions and -6.19 8.62 9.79 Sale of Fund Shares - --------------------------------------------------------------------------------------------------------- Russell 2000 Growth Index (%) N/A -9.23 2.87 3.40(15) - ---------------------------------------------------------------------------------------------------------
- -------- (12) The Growth Fund's returns are compared to the Russell 2000 Growth Index. The Russell 2000 Growth Index is an unmanaged index that tracks the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. 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. (13) The performance information contained in the annual returns for Class A shares prior to February 2, 1999, are based on historical returns of the Predecessor Fund's Class A shares. Performance information from February 2, 1999, to July 31, 2000, is based on the historical returns of the Fund's Class S shares. Class S share returns are not restated to reflect any differences in expenses (such as 12b-1 fees) or sales chargers between Class S shares and Class A shares of the Growth Fund. If differences in expenses and sales chargers were reflected, the returns for the period between February 2, 1999, and July 31, 2000, would be lower. Class A shares were initially offered on July 31, 2000. (14) The performance information contained in the annual returns for Class S shares prior to February 2, 1999, are based on historical returns of the Predecessor Fund's Class A shares. The Predecessor Fund's Class A share returns are not restated to reflect any differences in expenses (such as 12b-1 fees) or sales charges between Class A shares and Class S shares. If differences in expenses and sales chargers were reflected, the returns for periods prior to February 2, 1999, would be higher, since Class S shares are not subject to 12b-1 fees or sales charges. (15) Index performance information is from March 31, 1996, to December 31, 2001. 13 ACORN USA (16)(17)
INCEPTION 1 YEAR 5 YEARS LIFE OF THE DATE FUND Class A (%) Return Before Taxes 10/16/00 18.65 13.18 15.59 Return After Taxes on Distributions 11.61 10.75 13.26 Return After Taxes on Distributions and 7.36 9.51 11.69 Sale of Fund Shares - ------------------------------------------------------------------------------------------------------------- Class Z (%) Return Before Taxes 9/4/96 19.25 13.32 15.73 Return After Taxes on Distributions 18.77 12.16 14.62 Return After Taxes on Distributions and 11.88 10.75 12.90 Sale of Fund Shares - ------------------------------------------------------------------------------------------------------------- Russell 2000 Index (%) N/A 2.49 7.52 8.84(18)
- -------- (16) Acorn USA's returns are compared to the Russell 2000 Index, an unmanaged index that tracks the performance of small-capitalization stocks traded on the New York Stock Exchange, the American Stock Exchange and the NASDAQ. 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. (17) Performance information for Class A shares of Acorn USA includes returns of the Fund's Class Z shares (the oldest existing Fund class) for periods prior to its inception. Class Z returns are not restated to reflect any differences in expenses (such as 12b-1 fees or sales charges) between Class Z shares and the newer class of shares. If differences in expenses were reflected, the returns for periods prior to inception of the newer class of shares would be lower. (18) Index performance information is from August 31, 1996, to December 31, 2001. 14 Federal Income Tax Consequences The Acquisition is intended to be a tax-free reorganization. Ropes & Gray has delivered to the Growth Fund and Acorn USA an opinion, and the closing of the Acquisition will be conditioned on receipt of a letter from Ropes & Gray confirming such opinion, to the effect that, on the basis of existing law under specified sections of the Internal Revenue Code of 1986, as amended (the "Code"), for federal income tax purposes: - under Section 361 or Section 354 of the Code, respectively, no gain or loss will be recognized by the Growth Fund or the shareholders of the Growth Fund as a result of the Acquisition; - under Section 358 of the Code, the tax basis of Acorn USA shares you receive will be the same, in the aggregate, as the aggregate tax basis of your Growth Fund shares; - under Section 1223(1) of the Code, your holding period for Acorn USA shares you receive will include the holding period for your Growth Fund shares if you hold your shares as a capital asset; - under Section 1032 of the Code, no gain or loss will be recognized by Acorn USA as a result of the Acquisition; - under Section 362(b) of the Code, Acorn USA's tax basis in the assets that Acorn USA receives from the Growth Fund will be the same as the Growth Fund's basis in such assets; and - under Section 1223(2) of the Code, Acorn USA's holding period in such assets will include the Growth Fund's holding period in such assets. The opinion is, and the confirmation letter will be, based on certain factual certifications made by officers of each Fund's Trust. The opinion is not a guarantee that the tax consequences of the Acquisition will be as described above. Prior to the closing of the Acquisition, the Growth Fund will, and Acorn USA may, distribute to their shareholders all of their respective net investment company taxable income, if any, and net realized capital gains (after reduction by any available capital loss carryforwards), if any, that have not previously been distributed to shareholders. Such distributions will be taxable to shareholders. Shareholders of the Growth Fund will be subject to tax on any distributions of realized gains in the combined fund, although Acorn USA had no realized gains as of [February 28, 2002]. Some or all of those gains could be distributed to all shareholders of the combined fund, including former Growth Fund shareholders. The distributions described in this paragraph, to the extent any are made, will be taxable to the shareholders of the respective Funds. Acorn USA's ability to carry forward the pre-Acquisition losses of the Growth Fund (currently equal to approximately $[7.8 million] as of [February 28, 2002]) and use them to offset future gains of Acorn USA will be limited. As a result of the Acquisition, the capital loss carryforwards remaining available to Acorn USA will offset capital gains accruing after the Acquisition and thus reduce distributions to a broader group of shareholders than would have been the case absent such Acquisition. Therefore, in certain circumstances, former shareholders of the Growth Fund may pay more taxes, or pay taxes sooner, than they would if such Acquisition did not occur. This description of the federal income tax consequences of the Acquisition does not take into account your particular facts and circumstances. Consult your own tax advisor about the effect of state, local, foreign, and other tax laws. THE TRUSTEES OF THE INVESTMENT TRUST UNANIMOUSLY RECOMMEND APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION. 15 Required Vote for the Proposal Approval of the Agreement and Plan of Reorganization dated [April ___], 2002, among the Investment Trust on behalf of the Growth Fund, the Acorn Trust on behalf of Acorn USA, and Columbia will require the affirmative vote of a majority of the shares of the Growth Fund voted. A vote of the shareholders of Acorn USA is not needed to approve the Acquisition. GENERAL VOTING INFORMATION The Trustees of the Investment Trust are soliciting proxies from the shareholders of the Growth Fund in connection with the Meeting, which has been called to be held at 2:00 p.m. Eastern Time on June 28, 2002, at Columbia's offices, One Financial Center, Boston, Massachusetts 02111. The meeting notice, this combined Prospectus/Proxy Statement and proxy inserts are being mailed to shareholders beginning on or about [May ___], 2002. Information About Proxies and the Conduct of the Meeting Solicitation of Proxies. Proxies will be solicited primarily by mailing this combined Prospectus/Proxy Statement and its enclosures, but proxies may also be solicited through further mailings, telephone calls, personal interviews or e-mail by officers of the Growth Fund or by employees or agents of Columbia and its affiliated companies. In addition, Georgeson Shareholder Communications, Inc. ("Georgeson") has been engaged to assist in the solicitation of proxies, at an estimated cost of $[_______]. Voting Process You can vote in any one of the following ways: a. By mail, by filling out and returning the enclosed proxy card; b. By phone or Internet (see enclosed proxy insert for instructions); or c. In person at the Meeting. Shareholders who owned shares on the record date, April 17, 2002, are entitled to vote at the Meeting. For each share that you hold, you are entitled to cast a number of votes equal to the net asset value of a share (or fractional share) determined at the close of business on the record date. For example, a share having a net asset value of $10.50 determined at the close of business on the record date would be entitled to 10.5 votes. If you choose to vote by mail and you are an individual account owner, please sign exactly as your name appears on the proxy insert. Either owner of a joint account may sign the proxy insert, but the signer's name must exactly match the name that appears on the card. Costs. The estimated costs of the Meeting, including the costs of soliciting proxies, and the costs of the Acquisition to be borne by the Growth Fund and Acorn USA are approximately $31,424 and $0, respectively. Columbia is also bearing a portion of such costs. This portion to be borne by Columbia is in addition to the amounts to be borne by the Funds. In the event that the shareholders of the Growth Fund do not approve the Agreement and Plan of Reorganization or the Acquisition does not close for any reason, Columbia will bear the costs of the failed Acquisition which would otherwise have been borne by the Growth Fund and Acorn USA. Voting and Tabulation of Proxies. Shares represented by duly executed proxies will be voted as instructed on the proxy. If no instructions are given, the proxy will be voted in favor of the Proposal. You can revoke your proxy by sending a signed, written letter of revocation to the Secretary of the Growth Fund, by properly executing and submitting a later-dated proxy or by attending the Meeting and voting in person. Votes cast in person or by proxy at the Meeting will be counted by persons appointed by the Growth Fund as tellers for the Meeting (the "Tellers"). Thirty percent (30%) of the shares of the Growth Fund outstanding on the record date, present in person or represented by proxy, constitute a quorum for the transaction of business by the shareholders of the Growth Fund at the Meeting. In determining whether a quorum is present, the Tellers will count 16 shares represented by proxies that reflect abstentions and "broker non-votes" as shares that are present and entitled to vote. Since these shares will be counted as present, but not as voting in favor of the Proposal, these shares will have the same effect as if they cast votes against the Proposal. "Broker non-votes" are shares held by brokers or nominees as to which (i) the broker or nominee does not have discretionary voting power and (ii) the broker or nominee has not received instructions from the beneficial owner or other person who is entitled to instruct how the shares will be voted. Advisors' and Underwriter's Addresses. The address of the Growth Fund's investment advisor, Stein Roe & Farnham Incorporated, is One South Wacker Drive, Suite 3500, Chicago, Illinois 60606. The address of Acorn USA's investment advisor, Liberty Wanger Asset Management, L.P., is 227 Monroe Street, Suite 3000, Chicago, Illinois 60606. The address of each Fund's principal underwriter, Liberty Funds Distributor, Inc., is One Financial Center, Boston, Massachusetts 02111. Outstanding Shares and Significant Shareholders. Appendix B to this Prospectus/Proxy Statement lists the total number of shares outstanding as of April 17, 2002, for each class of the Growth Fund entitled to vote at the Meeting. It also identifies holders of more than 5% or 25% of any class of shares of each Fund, and contains information about the executive officers and Trustees of the Trusts and their shareholdings in the Funds and the Trusts. Adjournments; Other Business. If the Growth Fund has not received enough votes by the time of the Meeting to approve the Proposal, the persons named as proxies may propose that such Meeting be adjourned one or more times to permit further solicitation of proxies. Any adjournment requires the affirmative vote of a majority of the total number of shares of the Growth Fund that are present in person or by proxy on the question when the adjournment is being voted on. The persons named as proxies will vote in favor of any such adjournment all proxies that they are entitled to vote in favor of the Proposal. They will vote against any such adjournment any proxy that directs them to vote against the Proposal. They will not vote any proxy that directs them to abstain from voting on the Proposal. The Meeting has been called to transact any business that properly comes before it. The only business that management of the Growth Fund intends to present or knows that others will present is the Proposal. If any other matters properly come before the Meeting, and on all matters incidental to the conduct of the Meeting, the persons named as proxies intend to vote the proxies in accordance with their judgment, unless the Secretary of the Growth Fund has previously received written contrary instructions from the shareholder entitled to vote the shares. Shareholder Proposals at Future Meetings. Neither the Investment Trust nor the Acorn Trust holds annual or other regular meetings of shareholders. Shareholder proposals to be presented at any future meeting of shareholders of either Fund or either Trust must be received by the relevant Fund in writing a reasonable time before the relevant Trust solicits proxies for that meeting in order to be considered for inclusion in the proxy materials for that meeting. Shareholder proposals should be sent to the relevant Fund, care of the Investment Trust or the Acorn Trust, as applicable, Attention: Secretary, One Financial Center, Boston, Massachusetts 02111. 17 APPENDIX A FORM OF AGREEMENT AND PLAN OF REORGANIZATION APPENDIX A AGREEMENT AND PLAN OF REORGANIZATION THIS AGREEMENT AND PLAN OF REORGANIZATION dated as of [April ], 2002, is by and among Liberty-Stein Roe Funds Investment Trust (the "Trust"), a Massachusetts business trust established under a Declaration of Trust dated January 8, 1987, as amended, on behalf of the Liberty Small Company Growth Fund, Class A and the Stein Roe Small Company Growth Fund, Class S (collectively the "Acquired Fund"), a series of the Trust, Liberty Acorn Trust (the "Acquiring Trust"), a Massachusetts business trust established under a Declaration of Trust dated April 21, 1992, as amended, on behalf of Liberty Acorn USA (the "Acquiring Fund"), a series of the Acquiring Trust, and Columbia Management Group, Inc. ("Columbia"). This Agreement is intended to be and is adopted as a plan of reorganization and liquidation within the meaning of Section 368(a) of the United States Internal Revenue Code of 1986, as amended (the "Code"), and any successor provision. The reorganization will consist of the transfer of all of the assets of the Acquired Fund in exchange for Class A shares and Class Z shares of beneficial interest of the Acquiring Fund ("Acquisition Shares") and the assumption by the Acquiring Fund of the liabilities of the Acquired Fund (other than certain expenses of the reorganization contemplated hereby) and the distribution of such Acquisition Shares to the shareholders of the Acquired Fund in liquidation of the Acquired Fund, all upon the terms and conditions set forth in this Agreement. In consideration of the premises and of the covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows: 1. TRANSFER OF ASSETS OF ACQUIRED FUND IN EXCHANGE FOR ASSUMPTION OF LIABILITIES AND ACQUISITION SHARES AND LIQUIDATION OF ACQUIRED FUND. 1.1. Subject to the terms and conditions herein set forth and on the basis of the representations and warranties contained herein, (a) The Trust, on behalf of the Acquired Fund, will transfer and deliver to the Acquiring Fund, and the Acquiring Fund will acquire, all the assets of the Acquired Fund as set forth in paragraph 1.2; (b) The Acquiring Fund will assume all of the Acquired Fund's liabilities and obligations of any kind whatsoever, whether absolute, accrued, contingent or otherwise, in existence on the Closing Date (as defined in paragraph 1.2 hereof) (the "Obligations"), except that expenses of reorganization contemplated hereby to be paid by the Acquired Fund pursuant to paragraph 9.2 shall not be assumed or paid by the Acquiring Fund; and (c) The Acquiring Fund will issue and deliver to the Acquired Fund in exchange for such assets the number of Acquisition Shares (including fractional shares, if any) determined by dividing the net asset value of the Acquired Fund, computed in the manner and as of the time and date set forth in paragraph 2.1, by the net asset value of one Acquisition Share, computed in the manner and as of the time and date set forth in paragraph 2.2. Such transactions shall take place at the closing provided for in paragraph 3.1 (the "Closing"). 1.2. The assets of the Acquired Fund to be acquired by the Acquiring Fund shall consist of all cash, securities, dividends and interest receivable, receivables for shares sold and all other assets which are owned by the Acquired Fund on the closing date provided in paragraph 3.1 (the "Closing Date") and any deferred expenses, other than unamortized organizational expenses, shown as an asset on the books of the Acquired Fund on the Closing Date. 1.3. As provided in paragraph 3.4, as soon after the Closing Date as is conveniently practicable (the "Liquidation Date"), the Acquired Fund will liquidate and distribute pro rata to its shareholders of record ("Acquired Fund Shareholders"), determined as of the close of business on the Valuation A-1 Date (as defined in paragraph 2.1), the Acquisition Shares received by the Acquired Fund pursuant to paragraph 1.1. Such liquidation and distribution will be accomplished by the transfer of the Acquisition Shares then credited to the account of the Acquired Fund on the books of the Acquiring Fund to open accounts on the share records of the Acquiring Fund in the names of the Acquired Fund Shareholders and representing the respective pro rata number of Acquisition Shares due such shareholders. The Acquiring Fund shall not be obligated to issue certificates representing Acquisition Shares in connection with such exchange. 1.4. With respect to Acquisition Shares distributable pursuant to paragraph 1.3 to an Acquired Fund Shareholder holding a certificate or certificates for shares of the Acquired Fund, if any, on the Valuation Date, the Acquiring Trust will not permit such shareholder to receive Acquisition Share certificates therefor, exchange such Acquisition Shares for shares of other investment companies, effect an account transfer of such Acquisition Shares, or pledge or redeem such Acquisition Shares until the Acquiring Trust has been notified by the Acquired Fund or its agent that such Shareholder has surrendered all his or her outstanding certificates for Acquired Fund shares or, in the event of lost certificates, posted adequate bond. 1.5. As promptly as possible after the Closing Date, the Acquired Fund shall be terminated pursuant to the provisions of the laws of the Commonwealth of Massachusetts, and, after the Closing Date, the Acquired Fund shall not conduct any business except in connection with its liquidation. 2. VALUATION. 2.1. For the purpose of paragraph 1, the value of the Acquired Fund's assets to be acquired by the Acquiring Fund hereunder shall be the net asset value computed as of the close of regular trading on the New York Stock Exchange on the business day next preceding the Closing (such time and date being herein called the "Valuation Date") using the valuation procedures set forth in the Declaration of Trust of the Acquiring Trust and the then current prospectus or prospectuses or statement or statements of additional information of the Acquiring Fund (collectively, as amended or supplemented from time to time, the "Acquiring Fund Prospectus"), after deduction for the expenses of the reorganization contemplated hereby to be paid by the Acquired Fund pursuant to paragraph 9.2, and shall be certified by the Acquired Fund. 2.2. For the purpose of paragraph 2.1, the net asset value of an Acquisition Share shall be the net asset value per share computed as of the close of regular trading on the New York Stock Exchange on the Valuation Date, using the valuation procedures set forth in the Declaration of Trust of the Acquiring Trust and the Acquiring Fund Prospectus. 3. CLOSING AND CLOSING DATE. 3.1. The Closing Date shall be on , 2002, or on such other date as the parties may agree in writing. The Closing shall be held at 9:00 a.m. at Columbia's offices, One Financial Center, Boston, Massachusetts 02111, or at such other time and/or place as the parties may agree. 3.2. The portfolio securities of the Acquired Fund shall be made available by the Acquired Fund to State Street Bank & Trust Company, as custodian for the Acquiring Fund (the "Custodian"), for examination no later than five business days preceding the Valuation Date. On the Closing Date, such portfolio securities and all the Acquired Fund's cash shall be delivered by the Acquired Fund to the Custodian for the account of the Acquiring Fund, such portfolio securities to be duly endorsed in proper form for transfer in such manner and condition as to constitute good delivery thereof in accordance with the custom of brokers or, in the case of portfolio securities held in the U.S. Treasury Department's book-entry system or by the Depository Trust Company, Participants Trust Company or other third party depositories, by transfer to the account of the Custodian in accordance with Rule 17f-4, Rule 17f-5 or Rule 17f-7, as the case may be, under the Investment Company Act of 1940 (the "1940 Act") and accompanied by all necessary federal and state stock transfer stamps or a check for the appropriate purchase price thereof. The cash delivered shall be in the form of A-2 currency or certified or official bank checks, payable to the order of "State Street Bank & Trust Company, custodian for Liberty Acorn USA." 3.3. In the event that on the Valuation Date (a) the New York Stock Exchange shall be closed to trading or trading thereon shall be restricted, or (b) trading or the reporting of trading on said Exchange or elsewhere shall be disrupted so that accurate appraisal of the value of the net assets of the Acquired Fund or the Acquiring Fund is impracticable, the Closing Date shall be postponed until the first business day after the day when trading shall have been fully resumed and reporting shall have been restored; provided that if trading shall not be fully resumed and reporting restored within three business days of the Valuation Date, this Agreement may be terminated by either of the Trust or the Acquiring Trust upon the giving of written notice to the other party. 3.4. At the Closing, the Acquired Fund or its transfer agent shall deliver to the Acquiring Fund or its designated agent a list of the names and addresses of the Acquired Fund Shareholders and the number of outstanding shares of beneficial interest of the Acquired Fund owned by each Acquired Fund Shareholder, all as of the close of business on the Valuation Date, certified by the Secretary or Assistant Secretary of the Trust. The Acquiring Trust will provide to the Acquired Fund evidence satisfactory to the Acquired Fund that the Acquisition Shares issuable pursuant to paragraph 1.1 have been credited to the Acquired Fund's account on the books of the Acquiring Fund. On the Liquidation Date, the Acquiring Trust will provide to the Acquired Fund evidence satisfactory to the Acquired Fund that such Acquisition Shares have been credited pro rata to open accounts in the names of the Acquired Fund Shareholders as provided in paragraph 1.3. 3.5. At the Closing each party shall deliver to the other such bills of sale, instruments of assumption of liabilities, checks, assignments, stock certificates, receipts or other documents as such other party or its counsel may reasonably request in connection with the transfer of assets, assumption of liabilities and liquidation contemplated by paragraph 1. 4. REPRESENTATIONS AND WARRANTIES. 4.1. The Trust, on behalf of the Acquired Fund, represents and warrants the following to the Acquiring Trust and to the Acquiring Fund as of the date hereof and agrees to confirm the continuing accuracy and completeness in all material respects of the following on the Closing Date: (a) The Trust is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts; (b) The Trust is a duly registered investment company classified as a management company of the open-end type and its registration with the Securities and Exchange Commission as an investment company under the 1940 Act is in full force and effect, and the Acquired Fund is a separate series thereof duly designated in accordance with the applicable provisions of the Declaration of Trust of the Trust and the 1940 Act; (c) The Trust is not in violation in any material respect of any provision of its Declaration of Trust or By-laws or of any agreement, indenture, instrument, contract, lease or other undertaking to which the Trust is a party or by which the Acquired Fund is bound, and the execution, delivery and performance of this Agreement will not result in any such violation; (d) The Trust has no material contracts or other commitments (other than this Agreement and such other contracts as may be entered into in the ordinary course of its business) which if terminated may result in material liability to the Acquired Fund or under which (whether or not terminated) any material payments for periods subsequent to the Closing Date will be due from the Acquired Fund; (e) No litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or threatened against the Acquired Fund, any of its properties or assets, or any person whom the Acquired Fund may be obligated to indemnify in A-3 connection with such litigation, proceeding or investigation. The Acquired Fund knows of no facts which might form the basis for the institution of such proceedings, and is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects its business or its ability to consummate the transactions contemplated hereby; (f) The statement of assets and liabilities, the statement of operations, the statement of changes in net assets, and the schedule of investments at, as of and for the two years ended September 30, 2001, of the Acquired Fund, audited by PricewaterhouseCoopers LLP, and the statement of assets, the statement of changes in net assets and the schedule of investments for the six months ended March 31, 2002, copies of which have been furnished to the Acquiring Fund, fairly reflect the financial condition and results of operations of the Acquired Fund as of such dates and for the periods then ended in accordance with generally accepted accounting principles consistently applied, and the Acquired Fund has no known liabilities of a material amount, contingent or otherwise, other than those shown on the statements of assets referred to above or those incurred in the ordinary course of its business since March 31, 2002; (g) Since March 31, 2002, there has not been any material adverse change in the Acquired Fund's financial condition, assets, liabilities or business (other than changes occurring in the ordinary course of business), or any incurrence by the Acquired Fund of indebtedness, except as disclosed in writing to the Acquiring Fund. For the purposes of this subparagraph (g), distributions of net investment income and net realized capital gains, changes in portfolio securities, changes in the market value of portfolio securities or net redemptions shall be deemed to be in the ordinary course of business; (h) By the Closing Date, all federal and other tax returns and reports of the Acquired Fund required by law to have been filed by such date (giving effect to extensions) shall have been filed, and all federal and other taxes shown to be due on said returns and reports shall have been paid so far as due, or provision shall have been made for the payment thereof, and to the best of the Acquired Fund's knowledge no such return is currently under audit and no assessment has been asserted with respect to such returns; (i) For all taxable years and all applicable quarters of such years from the date of its inception, the Acquired Fund has met the requirements of subchapter M of the Code, for treatment as a "regulated investment company" within the meaning of Section 851 of the Code. Neither the Trust nor the Acquired Fund has at any time since its inception been liable for nor is now liable for any material income or excise tax pursuant to Section 852 or 4982 of the Code. The Acquired Fund has duly filed all federal, state, local and foreign tax returns which are required to have been filed, and all taxes of the Acquired Fund which are due and payable have been paid except for amounts that alone or in the aggregate would not reasonably be expected to have a material adverse effect. The Acquired Fund is in compliance in all material respects with applicable regulations of the Internal Revenue Service pertaining to the reporting of dividends and other distributions on and redemptions of its capital stock and to withholding in respect of dividends and other distributions to shareholders, and is not liable for any material penalties which could be imposed thereunder; (j) The authorized capital of the Trust consists of an unlimited number of shares of beneficial interest with no par value, of multiple series and classes. All issued and outstanding shares of the Acquired Fund are, and at the Closing Date will be, duly and validly issued and outstanding, fully paid and non-assessable (except as set forth in the Acquired Fund's then current prospectus or prospectuses or statement or statements of additional information (collectively, as amended or supplemented from time to time, the "Acquired Fund Prospectus")) by the Acquired Fund and will have been issued in compliance with all applicable registration or qualification requirements of federal and state securities laws. No options, warrants or other rights to subscribe for or purchase, or securities convertible into any shares of A-4 beneficial interest of the Acquired Fund are outstanding and none will be outstanding on the Closing Date; (k) The Acquired Fund's investment operations from inception to the date hereof have been in compliance in all material respects with the investment policies and investment restrictions set forth in its prospectus or prospectuses and statement or statements of additional information as in effect from time to time, except as previously disclosed in writing to the Acquiring Fund; (l) The execution, delivery and performance of this Agreement has been duly authorized by the Trustees of the Trust, and, upon approval thereof by the required majority of the shareholders of the Acquired Fund, this Agreement will constitute the valid and binding obligation of the Acquired Fund enforceable in accordance with its terms except as the same may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and other equitable principles; (m) The Acquisition Shares to be issued to the Acquired Fund pursuant to paragraph 1 will not be acquired for the purpose of making any distribution thereof other than to the Acquired Fund Shareholders as provided in paragraph 1.3; (n) The information provided by the Acquired Fund for use in the Registration Statement and Proxy Statement referred to in paragraph 5.3 shall be accurate and complete in all material respects and shall comply with federal securities and other laws and regulations as applicable thereto; (o) No consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Acquired Fund of the transactions contemplated by this Agreement, except such as may be required under the Securities Act of 1933, as amended (the "1933 Act"), the Securities Exchange Act of 1934, as amended (the "1934 Act"), the 1940 Act and state insurance, securities or "Blue Sky" laws (which terms used herein shall include the laws of the District of Columbia and of Puerto Rico); (p) At the Closing Date, the Trust, on behalf of the Acquired Fund, will have good and marketable title to its assets to be transferred to the Acquiring Fund pursuant to paragraph 1.1 and will have full right, power and authority to sell, assign, transfer and deliver the Investments (as defined below) and any other assets and liabilities of the Acquired Fund to be transferred to the Acquiring Fund pursuant to this Agreement. At the Closing Date, subject only to the delivery of the Investments and any such other assets and liabilities and payment therefor as contemplated by this Agreement, the Acquiring Fund will acquire good and marketable title thereto and will acquire the Investments and any such other assets and liabilities subject to no encumbrances, liens or security interests whatsoever and without any restrictions upon the transfer thereof, except as previously disclosed to the Acquiring Fund. As used in this Agreement, the term "Investments" shall mean the Acquired Fund's investments shown on the schedule of its investments as of March 31, 2002, referred to in Section 4.1(f) hereof, as supplemented with such changes in the portfolio as the Acquired Fund shall make, and changes resulting from stock dividends, stock split-ups, mergers and similar corporate actions through the Closing Date; (q) At the Closing Date, the Acquired Fund will have sold such of its assets, if any, as are necessary to assure that, after giving effect to the acquisition of the assets of the Acquired Fund pursuant to this Agreement, the Acquiring Fund will remain a "diversified company" within the meaning of Section 5(b)(1) of the 1940 Act and in compliance with such other mandatory investment restrictions as are set forth in the Acquiring Fund Prospectus, as amended through the Closing Date; and (r) No registration of any of the Investments would be required if they were, as of the time of such transfer, the subject of a public distribution by either of the Acquiring Fund or the Acquired Fund, except as previously disclosed by the Acquired Fund to the Acquiring Fund. A-5 4.2. The Acquiring Trust, on behalf of the Acquiring Fund, represents and warrants the following to the Trust and to the Acquired Fund as of the date hereof and agrees to confirm the continuing accuracy and completeness in all material respects of the following on the Closing Date: (a) The Acquiring Trust is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts; (b) The Acquiring Trust is a duly registered investment company classified as a management company of the open-end type and its registration with the Securities and Exchange Commission as an investment company under the 1940 Act is in full force and effect, and the Acquiring Fund is a separate series thereof duly designated in accordance with the applicable provisions of the Declaration of Trust of the Acquiring Trust and the 1940 Act; (c) The Acquiring Fund Prospectus conforms in all material respects to the applicable requirements of the 1933 Act and the rules and regulations of the Securities and Exchange Commission thereunder and does not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and there are no material contracts to which the Acquiring Fund is a party that are not referred to in such Prospectus or in the registration statement of which it is a part; (d) At the Closing Date, the Acquiring Fund will have good and marketable title to its assets; (e) The Acquiring Trust is not in violation in any material respect of any provisions of its Declaration of Trust or By-laws or of any agreement, indenture, instrument, contract, lease or other undertaking to which the Acquiring Trust is a party or by which the Acquiring Fund is bound, and the execution, delivery and performance of this Agreement will not result in any such violation; (f) No litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or threatened against the Acquiring Fund or any of its properties or assets. The Acquiring Fund knows of no facts which might form the basis for the institution of such proceedings, and is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects its business or its ability to consummate the transactions contemplated hereby; (g) The statement of assets, the statement of operations, the statement of changes in assets and the schedule of investments at, as of and for the two years ended December 31, 2001, of the Acquiring Fund, audited by Ernst & Young LLP, copies of which have been furnished to the Acquired Fund, fairly reflect the financial condition and results of operations of the Acquiring Fund as of such dates and the results of its operations for the periods then ended in accordance with generally accepted accounting principles consistently applied, and the Acquiring Fund has no known liabilities of a material amount, contingent or otherwise, other than those shown on the statements of assets referred to above or those incurred in the ordinary course of its business since December 31, 2001; (h) Since December 31, 2001, there has not been any material adverse change in the Acquiring Fund's financial condition, assets, liabilities or business (other than changes occurring in the ordinary course of business), or any incurrence by the Acquiring Fund of indebtedness. For the purposes of this subparagraph (h), changes in portfolio securities, changes in the market value of portfolio securities or net redemptions shall be deemed to be in the ordinary course of business; (i) By the Closing Date, all federal and other tax returns and reports of the Acquiring Fund required by law to have been filed by such date (giving effect to extensions) shall have been filed, and all federal and other taxes shown to be due on said returns and reports shall have been paid so far as due, or provision shall have been made for the payment thereof, and to the A-6 best of the Acquiring Fund's knowledge no such return is currently under audit and no assessment has been asserted with respect to such returns; (j) For each fiscal year of its operation, the Acquiring Fund has met the requirements of Subchapter M of the Code for qualification as a regulated investment company; (k) The authorized capital of the Acquiring Trust consists of an unlimited number of shares of beneficial interest, no par value, of such number of different series as the Board of Trustees may authorize from time to time. The outstanding shares of beneficial interest in the Acquiring Fund are, and at the Closing Date will be, divided into Class A shares, Class B shares, Class C shares and Class Z shares, each having the characteristics described in the Acquiring Fund Prospectus. All issued and outstanding shares of the Acquiring Fund are, and at the Closing Date will be, duly and validly issued and outstanding, fully paid and non-assessable (except as set forth in the Acquiring Fund Prospectus) by the Acquiring Trust, and will have been issued in compliance with all applicable registration or qualification requirements of federal and state securities laws. Except for Class B shares which convert to Class A shares after the expiration of a period of time, no options, warrants or other rights to subscribe for or purchase, or securities convertible into, any shares of beneficial interest in the Acquiring Fund of any class are outstanding and none will be outstanding on the Closing Date; (l) The Acquiring Fund's investment operations from inception to the date hereof have been in compliance in all material respects with the investment policies and investment restrictions set forth in its prospectus or prospectuses and statement or statements of additional information as in effect from time to time; (m) The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Acquiring Trust, and this Agreement constitutes the valid and binding obligation of the Acquiring Trust and the Acquiring Fund enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and other equitable principles; (n) The Acquisition Shares to be issued and delivered to the Acquired Fund pursuant to the terms of this Agreement will at the Closing Date have been duly authorized and, when so issued and delivered, will be duly and validly issued Class A shares and Class Z shares of beneficial interest in the Acquiring Fund, and will be fully paid and non-assessable (except as set forth in the Acquiring Fund Prospectus) by the Acquiring Trust, and no shareholder of the Acquiring Trust will have any preemptive right of subscription or purchase in respect thereof; (o) The information to be furnished by the Acquiring Fund for use in the Registration Statement and Proxy Statement referred to in paragraph 5.3 shall be accurate and complete in all material respects and shall comply with federal securities and other laws and regulations applicable thereto; and (p) No consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Acquiring Fund of the transactions contemplated by this Agreement, except such as may be required under the 1933 Act, the 1934 Act, the 1940 Act and state insurance, securities or "Blue Sky" laws (which term as used herein shall include the laws of the District of Columbia and of Puerto Rico). A-7 5. COVENANTS OF THE ACQUIRED FUND AND THE ACQUIRING FUND. The Acquiring Trust, on behalf of the Acquiring Fund, and the Trust, on behalf of the Acquired Fund, each hereby covenants and agrees with the other as follows: 5.1. The Acquiring Fund and the Acquired Fund each will operate its business in the ordinary course between the date hereof and the Closing Date, it being understood that such ordinary course of business will include regular and customary periodic dividends and distributions. 5.2. The Acquired Fund will call a meeting of its shareholders to be held prior to the Closing Date to consider and act upon this Agreement and take all other reasonable action necessary to obtain the required shareholder approval of the transactions contemplated hereby. 5.3. In connection with the Acquired Fund shareholders' meeting referred to in paragraph 5.2, the Acquired Fund will prepare a Proxy Statement for such meeting, to be included in a Registration Statement on Form N-14 (the "Registration Statement") which the Acquiring Trust will prepare and file for the registration under the 1933 Act of the Acquisition Shares to be distributed to the Acquired Fund shareholders pursuant hereto, all in compliance with the applicable requirements of the 1933 Act, the 1934 Act, and the 1940 Act. 5.4. The information to be furnished by the Acquired Fund for use in the Registration Statement and the information to be furnished by the Acquiring Fund for use in the Proxy Statement, each as referred to in paragraph 5.3, shall be accurate and complete in all material respects and shall comply with federal securities and other laws and regulations thereunder applicable thereto. 5.5. The Acquiring Fund will advise the Acquired Fund promptly if at any time prior to the Closing Date the assets of the Acquired Fund include any securities which the Acquiring Fund is not permitted to acquire. 5.6. Subject to the provisions of this Agreement, the Acquired Fund and the Acquiring Fund will each take, or cause to be taken, all action, and do or cause to be done, all things reasonably necessary, proper or advisable to cause the conditions to the other party's obligations to consummate the transactions contemplated hereby to be met or fulfilled and otherwise to consummate and make effective such transactions. 5.7. The Acquiring Fund will use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act and such of the state securities or "Blue Sky" laws as it may deem appropriate in order to continue its operations after the Closing Date. 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND. The obligations of the Acquired Fund to consummate the transactions provided for herein shall be subject, at its election, to the performance by the Acquiring Trust and the Acquiring Fund of all the obligations to be performed by them hereunder on or before the Closing Date and, in addition thereto, to the following further conditions: 6.1. The Acquiring Trust, on behalf of the Acquiring Fund, shall have delivered to the Trust a certificate executed in its name by its President or Vice President and its Treasurer or Assistant Treasurer, in form satisfactory to the Trust and dated as of the Closing Date, to the effect that the representations and warranties of the Acquiring Trust on behalf of the Acquiring Fund made in this Agreement are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, and that the Acquiring Trust and the Acquiring Fund have complied with all the covenants and agreements and satisfied all of the conditions on their parts to be performed or satisfied under this Agreement at or prior to the Closing Date. A-8 6.2. The Trust shall have received a favorable opinion of Ropes & Gray, counsel to the Acquiring Trust for the transactions contemplated hereby, dated the Closing Date and, in a form satisfactory to the Trust, to the following effect: (a) The Acquiring Trust is a business trust duly organized and validly existing under the laws of the Commonwealth of Massachusetts and has power to own all of its properties and assets and to carry on its business as presently conducted, and the Acquiring Fund is a separate series thereof duly constituted in accordance with the applicable provisions of the 1940 Act and the Declaration of Trust and By-laws of the Acquiring Trust; (b) This Agreement has been duly authorized, executed and delivered on behalf of the Acquiring Fund and, assuming the Proxy Statement and Registration Statement referred to in paragraph 5.3 complies with applicable federal securities laws and assuming the due authorization, execution and delivery of this Agreement by the Trust on behalf of the Acquired Fund, is the valid and binding obligation of the Acquiring Fund enforceable against the Acquiring Fund in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and other equitable principles; (c) The Acquiring Fund has the power to assume the liabilities to be assumed by it hereunder and upon consummation of the transactions contemplated hereby the Acquiring Fund will have duly assumed such liabilities; (d) The Acquisition Shares to be issued for transfer to the shareholders of the Acquired Fund as provided by this Agreement are duly authorized and upon such transfer and delivery will be validly issued and outstanding and fully paid and nonassessable Class A shares and Class Z shares of beneficial interest in the Acquiring Fund, and no shareholder of the Acquiring Fund has any preemptive right of subscription or purchase in respect thereof; (e) The execution and delivery of this Agreement did not, and the performance by the Acquiring Trust and the Acquiring Fund of their respective obligations hereunder will not, violate the Acquiring Trust's Declaration of Trust or By-laws, or any provision of any agreement known to such counsel to which the Acquiring Trust or the Acquiring Fund is a party or by which it is bound or, to the knowledge of such counsel, result in the acceleration of any obligation or the imposition of any penalty under any agreement, judgment, or decree to which the Acquiring Trust or the Acquiring Fund is a party or by which either of them is bound; (f) To the knowledge of such counsel, no consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Acquiring Trust or the Acquiring Fund of the transactions contemplated by this Agreement except such as may be required under state securities or "Blue Sky" laws or such as have been obtained; (g) Except as previously disclosed, pursuant to subparagraph 4.2(f) above, such counsel does not know of any legal or governmental proceedings relating to the Acquiring Trust or the Acquiring Fund existing on or before the date of mailing of the Proxy Statement referred to in paragraph 5.3 or the Closing Date required to be described in the Registration Statement referred to in paragraph 5.3 which are not described as required; (h) The Acquiring Trust is registered with the Securities and Exchange Commission as an investment company under the 1940 Act; and (i) To the best knowledge of such counsel, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or threatened as to the Acquiring Trust or the Acquiring Fund or any of their properties or assets and neither the Acquiring Trust nor the Acquiring Fund is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body, which materially and adversely affects its business. A-9 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND. The obligations of the Acquiring Fund to complete the transactions provided for herein shall be subject, at its election, to the performance by the Acquired Fund of all the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, to the following further conditions: 7.1. The Trust, on behalf of the Acquired Fund, shall have delivered to the Acquiring Trust a certificate executed in its name by its President or Vice President and its Treasurer or Assistant Treasurer, in form and substance satisfactory to the Acquiring Trust and dated the Closing Date, to the effect that the representations and warranties of the Acquired Fund made in this Agreement are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, and that the Trust and the Acquired Fund have complied with all the covenants and agreements and satisfied all of the conditions on its part to be performed or satisfied under this Agreement at or prior to the Closing Date; 7.2. The Acquiring Trust shall have received a favorable opinion of Ropes & Gray, counsel to the Trust, dated the Closing Date and in a form satisfactory to the Acquiring Trust, to the following effect: (a) The Trust is a business trust duly organized and validly existing under the laws of the Commonwealth of Massachusetts and has power to own all of its properties and assets and to carry on its business as presently conducted, and the Acquired Fund is a separate series thereof duly constituted in accordance with the applicable provisions of the 1940 Act and the Declaration of Trust and By-laws of the Trust; (b) This Agreement has been duly authorized, executed and delivered on behalf of the Acquired Fund and, assuming the Proxy Statement referred to in paragraph 5.3 complies with applicable federal securities laws and assuming the due authorization, execution and delivery of this Agreement by the Acquiring Trust on behalf of the Acquiring Fund, is the valid and binding obligation of the Acquired Fund enforceable against the Acquired Fund in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and other equitable principles; (c) The Acquired Fund has the power to sell, assign, transfer and deliver the assets to be transferred by it hereunder, and, upon consummation of the transactions contemplated hereby, the Acquired Fund will have duly transferred such assets to the Acquiring Fund; (d) The execution and delivery of this Agreement did not, and the performance by the Trust and the Acquired Fund of their respective obligations hereunder will not, violate the Trust's Declaration of Trust or By-laws, or any provision of any agreement known to such counsel to which the Trust or the Acquired Fund is a party or by which it is bound or, to the knowledge of such counsel, result in the acceleration of any obligation or the imposition of any penalty under any agreement, judgment, or decree to which the Trust or the Acquired Fund is a party or by which it is bound; (e) To the knowledge of such counsel, no consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Trust or the Acquired Fund of the transactions contemplated by this Agreement, except such as have been obtained; (f) Such counsel does not know of any legal or governmental proceedings relating to the Trust or the Acquired Fund existing on or before the date of mailing of the Proxy Statement referred to in paragraph 5.3 or the Closing Date required to be described in the Registration Statement referred to in paragraph 5.3 which are not described as required; (g) The Trust is registered with the Securities and Exchange Commission as an investment company under the 1940 Act; and A-10 (h) To the best knowledge of such counsel, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or threatened as to the Trust or the Acquired Fund or any of its properties or assets and neither the Trust nor the Acquired Fund is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body, which materially and adversely affects its business. 7.3. Prior to the Closing Date, the Acquired Fund shall have declared a dividend or dividends which, together with all previous dividends, shall have the effect of distributing all of the Acquired Fund's investment company taxable income for its taxable years ending on or after September 30, 2001, and on or prior to the Closing Date (computed without regard to any deduction for dividends paid), and all of its net capital gains realized in each of its taxable years ending on or after September 30, 2001, and on or prior to the Closing Date. 7.4. The Acquired Fund shall have furnished to the Acquiring Fund a certificate, signed by the President (or any Vice President) and the Treasurer of the Trust, as to the adjusted tax basis in the hands of the Acquired Fund of the securities delivered to the Acquiring Fund pursuant to this Agreement. 7.5. The custodian of the Acquired Fund shall have delivered to the Acquiring Fund a certificate identifying all of the assets of the Acquired Fund held by such custodian as of the Valuation Date. 8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH OF THE ACQUIRING FUND AND THE ACQUIRED FUND. The respective obligations of the Trust and the Acquiring Trust hereunder are each subject to the further conditions that on or before the Closing Date: 8.1. This Agreement and the transactions contemplated herein shall have been approved by the affirmative vote of holders of a majority of the shares entitled to vote that are voted at the meeting of shareholders of the Acquired Fund referred to in paragraph 5.2. 8.2. On the Closing Date no action, suit or other preceding shall be pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement or the transactions contemplated hereby. 8.3. All consents of other parties and all other consents, orders and permits of federal, state and local regulatory authorities (including those of the Securities and Exchange Commission and of state "Blue Sky" and securities authorities) deemed necessary by the Trust or the Acquiring Trust to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain any such consent, order or permit would not involve a risk of a material adverse effect on the assets or properties of the Acquiring Fund or the Acquired Fund. 8.4. The Registration Statement referred to in paragraph 5.3 shall have become effective under the 1933 Act and no stop order suspending the effectiveness thereof shall have been issued and, to the best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the 1933 Act. 8.5. The Trust shall have received a favorable opinion of Ropes & Gray satisfactory to the Trust, and the Acquiring Trust shall have received a favorable opinion of Ropes & Gray satisfactory to the Acquiring Trust, each substantially to the effect that, for federal income tax purposes: (a) The acquisition by the Acquiring Fund of the assets of the Acquired Fund in exchange for the Acquiring Fund's assumption of the liabilities and Obligations of the Acquired Fund and issuance of the Acquisition Shares, followed by the distribution by the Acquired Fund of such Acquisition Shares to the shareholders of the Acquired Fund in exchange for their shares of the Acquired Fund, all as provided in paragraph 1 hereof, will constitute a reorganization within the meaning of Section 368(a) of the Code, and the Acquired Fund and the Acquiring Fund will each be "a party to a reorganization" within the meaning of Section 368(b) of the Code; A-11 (b) No gain or loss will be recognized by the Acquired Fund (i) upon the transfer of its assets to the Acquiring Fund in exchange for the Acquisition Shares or (ii) upon the distribution of the Acquisition Shares to the shareholders of the Acquired Fund as contemplated in paragraph 1 hereof; (c) No gain or loss will be recognized by the Acquiring Fund upon the receipt of the assets of the Acquired Fund in exchange for the assumption of liabilities and Obligations and issuance of the Acquisition Shares as contemplated in paragraph 1 hereof; (d) The tax basis in the hands of the Acquiring Fund of the assets of the Acquired Fund transferred to the Acquiring Fund in the transaction will be the same as the basis of those assets in the hands of the Acquired Fund immediately prior to the transfer; (e) The holding period of the assets of the Acquired Fund in the hands of the Acquiring Fund will include the period during which those assets were held by the Acquired Fund; (f) The shareholders of the Acquired Fund will recognize no gain or loss upon the exchange of all of their shares of the Acquired Fund for the Acquisition Shares; (g) The tax basis of the Acquisition Shares to be received by each shareholder of the Acquired Fund will be the same in the aggregate as the aggregate tax basis of the shares of the Acquired Fund surrendered in exchange therefor; (h) The holding period of the Acquisition Shares to be received by the shareholders of the Acquired Fund will include the period during which the shares of the Acquired Fund surrendered in exchange therefor were held, provided such shares of the Acquired Fund were held as a capital asset on the date of the exchange; and (i) The Acquiring Fund will succeed to and take into account the items of the Acquired Fund described in Section 381(c) of the Code, subject to the conditions and limitations specified in Sections 381, 382, 383 and 384 of the Code and the regulations thereunder. 8.6. At any time prior to the Closing, any of the foregoing conditions of this Agreement may be waived jointly by the Board of Trustees of the Trust and the Board of Trustees of the Acquiring Trust if, in their judgment, such waiver will not have a material adverse effect on the interests of the shareholders of the Acquired Fund and the Acquiring Fund. 9. BROKERAGE FEES AND EXPENSES. 9.1. The Trust, on behalf of the Acquired Fund, and the Acquiring Trust, on behalf of the Acquiring Fund, each represents and warrants to the other that there are no brokers or finders entitled to receive any payments in connection with the transactions provided for herein. 9.2. The Acquiring Trust, on behalf of the Acquiring Fund, shall pay all fees paid to governmental authorities for the registration or qualification of the Acquisition Shares. All of the other out-of- pocket expenses of the transactions contemplated by this Agreement shall be borne as follows: (a) as to expenses allocable to the Trust, on behalf of the Acquired Fund, fifty percent (50%) of such expenses shall be borne by the Trust, on behalf of the Acquired Fund, and fifty percent (50%) of such expenses shall be borne by Columbia; and (b) as to expenses allocable to the Acquiring Trust, on behalf of the Acquiring Fund, one hundred percent (100%) of such expenses shall be borne by Columbia. The foregoing sentence shall be subject, however, to any undertaking by Columbia to Liberty Funds Trust I, II, III, IV, V, VI, VII and IX (or any of their series) (collectively, the "Liberty Trusts") to limit the aggregate expenses (other than fees paid to governmental authorities for the registration or qualification of shares of the Liberty Trusts) of the transactions contemplated by this Agreement and other transactions involving the Liberty Trusts. A-12 10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES. 10.1. The Trust, on behalf of the Acquired Fund, and the Acquiring Trust, on behalf of the Acquiring Fund, agree that neither party has made any representation, warranty or covenant not set forth herein and that this Agreement constitutes the entire agreement between the parties. 10.2. The representations, warranties and covenants contained in this Agreement or in any document delivered pursuant hereto or in connection herewith shall not survive the consummation of the transactions contemplated hereunder except paragraphs 1.1, 1.3, 1.5, 5.4, 9, 10, 13 and 14. 11. TERMINATION. 11.1. This Agreement may be terminated by the mutual agreement of the Acquiring Trust and the Trust. In addition, either the Acquiring Trust or the Trust may at its option terminate this Agreement at or prior to the Closing Date because: (a) Of a material breach by the other of any representation, warranty, covenant or agreement contained herein to be performed by the other party at or prior to the Closing Date; or (b) A condition herein expressed to be precedent to the obligations of the terminating party has not been met and it reasonably appears that it will not or cannot be met. If the transactions contemplated by this Agreement have not been substantially completed by , 2002, this Agreement shall automatically terminate on that date unless a later date is agreed to by both the Trust and the Acquiring Trust. 11.2. If for any reason the transactions contemplated by this Agreement are not consummated, no party shall be liable to any other party for any damages resulting therefrom, including without limitation consequential damages. 12. AMENDMENTS. This Agreement may be amended, modified or supplemented in such manner as may be mutually agreed upon in writing by the authorized officers of the Trust on behalf of the Acquired Fund and the Acquiring Trust on behalf of the Acquiring Fund; provided, however, that following the shareholders' meeting called by the Acquired Fund pursuant to paragraph 5.2 no such amendment may have the effect of changing the provisions for determining the number of the Acquisition Shares to be issued to shareholders of the Acquired Fund under this Agreement to the detriment of such shareholders without their further approval. 13. NOTICES. Any notice, report, statement or demand required or permitted by any provisions of this Agreement shall be in writing and shall be given by prepaid telegraph, telecopy or certified mail addressed to: Liberty-Stein Roe Funds Investment Trust, One Financial Center, Boston, Massachusetts 02111, Attention: Secretary, or to Liberty Acorn Trust, One Financial Center, Boston, Massachusetts 02111, Attention: Secretary. 14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; NON-RECOURSE. 14.1. The article and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 14.2. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. 14.3. This Agreement shall be governed by and construed in accordance with the domestic substantive laws of the Commonwealth of Massachusetts, without giving effect to any choice or conflicts of law rule or provision that would result in the application of the domestic substantive laws of any other jurisdiction. A-13 14.4. This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other party. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement. 14.5. A copy of the Declaration of Trust of the Trust and the Declaration of Trust of the Acquiring Trust are each on file with the Secretary of the Commonwealth of Massachusetts, and notice is hereby given that no trustee, officer, agent or employee of either the Trust or the Acquiring Trust shall have any personal liability under this Agreement, and that this Agreement is binding only upon the assets and properties of the Acquired Fund and the Acquiring Fund. A-14 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as a sealed instrument by its President or Vice President and its corporate seal to be affixed thereto and attested by its Secretary or Assistant Secretary. LIBERTY-STEIN ROE FUNDS INVESTMENT TRUST on behalf of Stein Roe Small Company Growth Fund By: ------------------------------------ Name: -------------------------------------- Title: -------------------------------------- ATTEST: - -------------------------------------- Name: - -------------------------------------- Title: - -------------------------------------- LIBERTY ACORN TRUST on behalf of Liberty Acorn USA By: ------------------------------------ Name: -------------------------------------- Title: -------------------------------------- ATTEST: - -------------------------------------- Name: - -------------------------------------- Title: - -------------------------------------- A-15 Solely for purposes of Section 9.2 of the Agreement: COLUMBIA MANAGEMENT GROUP, INC. By: ------------------------------------ Name: -------------------------------------- Title: -------------------------------------- ATTEST: - -------------------------------------- Name: - -------------------------------------- Title: - -------------------------------------- A-16 APPENDIX B FUND INFORMATION SHARES OUTSTANDING AND ENTITLED TO VOTE OF THE GROWTH FUND For each class of the Growth Fund's shares entitled to vote at the Meeting, the number of shares outstanding as of April 17, 2002, was as follows:
NUMBER OF SHARES OUTSTANDING AND FUND CLASS ENTITLED TO VOTE - ---- ----- ---------------- GROWTH FUND................................ A S
OWNERSHIP OF SHARES As of April 17, 2002, the Investment Trust believes that its Trustees and officers, as a group, owned less than one percent of each class of shares of the Growth Fund and the Trust as a whole. As of April 17, 2002, the Acorn Trust believes that its Trustees and officers, as a group, owned less than one percent of Class A shares of Acorn USA and the Trust as a whole, [but owned 1.12% of the outstanding Class Z shares of the Fund]. As of April 17, 2002, the following shareholders of record owned 5% or more of the outstanding shares of the noted class of shares of the noted Fund:
NUMBER OF PERCENTAGE OF OUTSTANDING OUTSTANDING SHARES OF SHARES OF CLASS FUND AND CLASS NAME AND ADDRESS OF SHAREHOLDER CLASS OWNED OWNED - -------------- ------------------------------- ----------- ----- GROWTH FUND Class A.................. Class S.................. ACORN USA Class A.................. Class Z..................
B-1 OWNERSHIP OF SHARES UPON CONSUMMATION OF ACQUISITION As of April 17, 2002, the shareholders of record that owned 5% or more of the outstanding shares of the noted class of shares of the noted Fund would own the following percentage of Acorn USA upon consummation of the Acquisition:
PERCENTAGE OF OUTSTANDING SHARES OF CLASS OWNED UPON CONSUMMATION OF FUND AND CLASS NAME AND ADDRESS OF SHAREHOLDER ACQUISITION - -------------- ------------------------------- ----------- GROWTH FUND Class A..................... Class S..................... ACORN USA Class A..................... Class Z.....................
B-2 APPENDIX C CAPITALIZATION The following table shows on an unaudited basis the capitalization of each of the Growth Fund and Acorn USA as of February 28, 2002, and on a pro forma combined basis, giving effect to the acquisition of the assets and liabilities of the Growth Fund by Acorn USA at net asset value as of that date.
ACORN USA PRO FORMA PRO FORMA GROWTH FUND ACORN USA ADJUSTMENTS COMBINED(1) ----------- --------- ----------- ----------- Class A Net asset value................ $ 2,722 $ 27,974,601 $ (4) (2) $ 27,977,319 Shares outstanding............. 244 1,636,564 (85) 1,636,723 Net asset value per share...... $ 11.16 $ 17.09 $ 17.09 Class S Net asset value................ $ 19,554,068 $ (19,554,068) (3) Shares outstanding............. 1,742,670 (1,742,670) (3) Net asset value per share...... $ 11.22 Class Z Net asset value................ $ 231,291,990 $ 19,522,648 (2)(4) $ 250,814,638(4) Shares outstanding............. 13,498,526 1,139,676 (4) 14,638,202(4) Net asset value per share...... $ 17.13 $ 17.13
- ---------- (1) Assumes the Acquisition was consummated on February 28, 2002, and is for information purposes only. No assurance can be given as to how many shares of Acorn USA will be received by the shareholders of the Growth Fund on the date the Acquisition takes place, and the foregoing should not be relied upon to reflect the number of shares of Acorn USA that actually will be received on or after such date. (2) Adjustments reflect estimated one-time proxy, accounting, legal and other costs of the reorganization of $31,424 and $0 to be borne by the Growth Fund and Acorn USA, respectively. (3) Class S shareholders of the Growth Fund will receive Class Z shares of Acorn USA on the date of the Acquisition. (4) Includes net asset value attributable to, and shares outstanding of, the Class S shares of the Growth Fund. C-1 APPENDIX D MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE AS OF DECEMBER 31, 2001 LIBERTY ACORN USA CLASS A, B AND C SHARES Liberty Acorn USA >In a Nutshell Liberty Acorn USA ended the year up 18.65% (Class A shares, without sales charge), strongly outperforming the Russell 2000's 2.49% gain for the year. While it was an outstanding year for the Fund, the fourth quarter was not as good as the benchmark. Several stocks that had powered gains early in the year fell back in the last quarter. The Fund was up 12.31% in the quarter while the Russell 2000 gained 21.09%. The year's outperformance can be largely attributed to a strong showing from technology stocks. Our tech stocks increased roughly 30% in 2001 vs. the Russell 2000 tech component, which fell 21%. JDA Software, a software and services provider for retailers (see box for more on this stock), was up 71% for the 12 months. Micros Systems, a provider of hotel and restaurant software and systems, increased 38%. The hospitality industry was stunned by the September 11 atrocities. The industry is now recovering and Micros Systems ended up with a good gain for the year. Health claim and credit card processors NDCHealth (formerly, National Data) and Global Payments had strong years. These stocks tend to move with the technology sector and benefit from having strong recurring revenues. September 11 caused most stocks to drop sharply. One exception was Wackenhut, a security company that more than doubled in 2001 as the nation's heightened emphasis on security fueled interest in the stock. ITT Educational Services ended the year up 68%, overcoming news of competitor DeVry's missed earnings. AmeriCredit was strong in the first half of the year but weakened in the second half, as the market grew nervous about the prospects for sub-prime lenders in a weak economy. The stock finished the year up 16%. We believe AmeriCredit remains attractively valued and the credit quality fears are overblown. On the downside for the year: Tektronix, a manufacturer of analytical instruments, fell in half as its main customer base, the semiconductor industry, had its own problems. We sold out of the stock in the third quarter. Novoste, a developer of radiated stents used in heart surgery, declined as drug-coated stents stole market share. Jason Selch, our energy analyst, was onto the problems at Enron but liked Dynegy, a competitor of Enron's in the energy trading business. Even though Dynegy did not engage in funny-money accounting, the stock suffered collateral damage when Enron collapsed. The end for Enron leaves Dynegy as the major player in the energy trading business. Liberty Acorn USA, like our other funds, invests for the long term. We don't try to jump in and out of the latest hot sector. Looking at companies one at a time, paying close attention to valuations, allowed us to do well in technology even though tech had a down year. /s/ Robert A. Mohn Robert A. Mohn Lead Portfolio Manager JDA Software Soared JDA Software provides systems used by retailers that help with such things as merchandising, purchasing and warehousing. It is the leading systems provider for the roughly 3,000 retailers in the $100 million to $5 billion annual revenue range. In recent years, JDA Software has purchased companies with expertise in merchandising, space planning and inventory optimization - great additional services to offer its existing customer base. We started building a position in the stock in early 2000 when, despite its strong business fundamentals and healthy balance sheet, the stock was ignored because it was not an Internet play. As the tech sector lurched through 2000, we took advantage of further slides in price to add to the Fund's position. By the end of 2001, we had more than doubled our average investment. - -------------------------------------------------------------------------------- Small-cap stocks are often more volatile and less liquid than the stocks of larger companies. Small companies may have a shorter history of operations than larger companies and may have a less diversified product line, making them more susceptible to market pressure. As of 12/31/01, the Fund's positions in the holdings mentioned were: JDA Software, 4.4%; Micros Systems, 4.6%; NDCHealth, 3.2%; Global Payments, 2.5%; ITT Educational Services, 4.2%; Wackenhut, 2.8%; AmeriCredit, 6.0%; Novoste, 1.0%; Dynegy, 0.7%. D-1 Liberty Acorn USA >At a Glance Ticker Symbol: LAUAX Pretax and After-tax Average Annual Total Returns (Based on Class A share returns) >Through December 31, 2001
- ----------------------------------------------------------------------- Life of 1 year 5 years Fund - ----------------------------------------------------------------------- Returns before NAV 18.65% 13.18% 15.59% Taxes POP 11.83 11.84 14.31 - ----------------------------------------------------------------------- Returns after taxes NAV 18.42 12.06 14.52 on distributions POP 11.61 10.75 13.26 - ----------------------------------------------------------------------- Returns after taxes NAV 11.52 10.66 12.81 on distributions and POP 7.36 9.51 11.69 sale of fund shares - ----------------------------------------------------------------------- Russell 2000 (pretax) 2.49 7.52 8.79 - -----------------------------------------------------------------------
Past performance, before and after taxes, cannot predict future investment results. After-tax returns are calculated using the highest historical individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Class A shares only; after-tax returns for other share classes will vary. Indexes do not reflect any deduction for fees, expenses or taxes. Investment returns and principal value may fluctuate, resulting in a gain or loss on sale. Public offering price (POP) returns include the maximum sales charge of 5.75% for Class A shares. Net asset value (NAV) returns do not include sales charges or contingent deferred sales charges (CDSC). - ---------------------------------------------------- Liberty Acorn USA Portfolio Diversification - ---------------------------------------------------- >as a % of net assets, as of December 31, 2001 [PIE CHART] D-2 33.6% Information Software & Services 21.7% Telecommunications 5.2% Media 4.8% Computer Related Hardware 1.9% 7.2% Industrial Goods/Services 7.8% Energy/Minerals 17.6% Health Care 11.4% Consumer Goods/Services 10.3% Finance 12.1% Other*
* Other includes cash and other assets less liabilities of 7.4%. - ------------------------------------------------------ The Value of a $10,000 Investment in Liberty Acorn USA - ------------------------------------------------------ >September 4, 1996 through December 31, 2001 Illustration is based on a hypothetical $10,000 investment in Class A shares of the Fund, which includes the 5.75% maximum initial sales charge. The Fund commenced operations on 9/4/96, but until 10/16/00, offered only the shares that are now designated Class Z shares. The historical performance of Class A, B and C shares for the period prior to 10/16/00 is based on the performance of Class Z shares. The Class A, B and C share returns are not restated to reflect any expense differential (e.g., Rule 12b-1 fees) between the Class A, B, and C and Class Z. Had the expense differential been reflected, the returns for the period prior to the inception of the newer class shares would have been lower. Performance may reflect any voluntary waiver or reimbursement of Fund expenses by the Advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. The Russell 2000 is a market-weighted index of 2,000 smaller U.S. companies formed by taking the largest 3,000 U.S. companies and eliminating the largest 1,000. The index is unmanaged and returns for both the index and the Fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. Index performance from 8/31/96. Past performance does not guarantee future results. Performance changes over time. Visit libertyfunds.com for daily updates. Total Net Assets: $290.7 million
- --------------------------------------------------------------------------------- Class A Class B Class C Class Z Without sales charge $21,631 $21,483 $21,483 $21,770 - --------------------------------------------------------------------------------- With sales charge $20,387 $21,383 $21,483 N/A - ---------------------------------------------------------------------------------
[The following was represented by a line graph in the printed material.] LINE CHART:
Liberty Liberty Acorn USA-A Acorn USA-A at NAV with sales charge Russell 2000 9/4/96 $10,000.00 $ 9,425.00 $10,000.00 9/30/96 $10,720.00 $10,103.60 $10,391.00 10/31/96 $10,810.05 $10,188.47 $10,230.98 11/30/96 $11,259.75 $10,612.31 $10,652.49 12/31/96 $11,649.33 $10,979.50 $10,931.59
D-3 1/31/97 $12,079.19 $11,384.64 $11,150.22 2/28/97 $11,919.75 $11,234.36 $10,880.39 3/31/97 $11,479.91 $10,819.81 $10,366.83 4/30/97 $11,420.21 $10,763.55 $10,395.86 5/31/97 $12,509.70 $11,790.39 $11,551.88 6/30/97 $13,319.08 $12,553.23 $12,047.45 7/31/97 $13,999.69 $13,194.70 $12,607.66 8/31/97 $14,349.68 $13,524.57 $12,896.38 9/30/97 $15,339.81 $14,457.77 $13,840.39 10/31/97 $15,140.39 $14,269.82 $13,232.80 11/30/97 $15,170.67 $14,298.35 $13,146.79 12/31/97 $15,413.40 $14,527.13 $13,376.85 1/31/98 $15,077.39 $14,210.44 $13,165.50 2/28/98 $16,321.27 $15,382.80 $14,138.43 3/31/98 $17,401.74 $16,401.14 $14,720.93 4/30/98 $17,993.40 $16,958.78 $14,801.90 5/31/98 $17,228.68 $16,238.03 $14,004.08 6/30/98 $17,526.74 $16,518.95 $14,033.48 7/31/98 $16,594.31 $15,640.14 $12,896.77 8/31/98 $13,937.56 $13,136.15 $10,392.22 9/30/98 $14,153.60 $13,339.76 $11,205.93 10/31/98 $14,656.05 $13,813.33 $11,663.13 11/30/98 $15,404.97 $14,519.19 $12,274.28 12/31/98 $16,307.70 $15,370.01 $13,034.06 1/31/99 $15,779.33 $14,872.02 $13,207.41 2/28/99 $14,897.27 $14,040.68 $12,137.61 3/31/99 $15,017.94 $14,154.41 $12,326.96 4/30/99 $16,097.73 $15,172.11 $13,431.45 5/31/99 $16,736.81 $15,774.44 $13,627.55 6/30/99 $17,652.31 $16,637.30 $14,243.52 7/31/99 $18,049.49 $17,011.64 $13,853.25 8/31/99 $16,823.93 $15,856.55 $13,340.68 9/30/99 $16,867.67 $15,897.78 $13,343.34 10/31/99 $17,861.17 $16,834.16 $13,398.05 11/30/99 $18,811.39 $17,729.73 $14,197.91 12/31/99 $20,060.47 $18,906.99 $15,805.12 1/31/00 $19,055.44 $17,959.75 $15,550.66 2/29/00 $19,869.10 $18,726.63 $18,118.07 3/31/00 $19,821.42 $18,681.69 $16,924.09 4/30/00 $17,569.70 $16,559.45 $15,905.26 5/31/00 $16,527.82 $15,577.47 $14,977.98 6/30/00 $16,835.24 $15,867.21 $16,284.06 7/31/00 $16,749.38 $15,786.29 $15,759.72 8/31/00 $17,766.07 $16,744.52 $16,962.18 9/30/00 $17,643.48 $16,628.98 $16,463.49 10/31/00 $17,643.48 $16,628.98 $15,729.22 11/30/00 $16,614.87 $15,659.51 $14,113.83 12/31/00 $18,231.49 $17,183.18 $15,326.21 1/31/01 $19,383.72 $18,269.16 $16,124.70 2/28/01 $19,321.69 $18,210.70 $15,066.92 3/31/01 $18,867.63 $17,782.75 $14,330.15 4/30/01 $21,146.84 $19,930.90 $15,450.77 5/31/01 $22,322.61 $21,039.06 $15,830.86 6/30/01 $22,934.25 $21,615.53 $16,377.02 7/31/01 $23,165.88 $21,833.85 $15,491.03 8/31/01 $22,517.24 $21,222.50 $14,990.67 9/30/01 $19,259.00 $18,151.60 $12,972.92 10/31/01 $19,307.14 $18,196.98 $13,731.84
D-4 11/30/01 $20,434.68 $19,259.69 $14,794.68 12/31/01 $21,631.23 $20,387.44 $15,707.51
Liberty Acorn USA - A at NAV $21,631 Liberty Acorn USA - A with sales charge $20,387 Russell 2000 $15,708
- -------------------------------------------------------------------------------- Liberty Acorn USA Top 10 Holdings - -------------------------------------------------------------------------------- 1. AmeriCredit 6.0% Auto Lending 2. Micros Systems 4.6% Information Systems for Restaurants & Hotels 3. JDA Software 4.4% Applications/Software & Services for Retailers 4. ITT Educational Services 4.2% Technology-oriented Post-secondary Degree Programs 5. Conectiv 4.2% Electric Utility in New Jersey, Delaware & Maryland 6. Telephone and Data Systems 3.2% Cellular & Telephone Services 7. NDCHealth 3.2% Health Claims Processing & Drug Marketing Services 8. Wackenhut 2.8% Prison Management 9. Salem Communications 2.6% Radio Stations for Religious Programming 10. Edwards Lifesciences 2.6% Heart Valves
The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings. D-5 CLASS Z SHARES Liberty Acorn USA >In a Nutshell [PHOTO OMITTED] Liberty Acorn USA ended the year up 19.25%, strongly outperforming the Russell 2000's 2.49% gain for the year. While it was an outstanding year for the Fund, the fourth quarter was not as good as the benchmark. Several stocks that had powered gains early in the year fell back in the last quarter. The Fund was up 12.53% in the quarter while the Russell 2000 gained 21.09%. The year's outperformance can be largely attributed to a strong showing from technology stocks. Our tech stocks increased roughly 30% in 2001 vs. the Russell 2000 tech component, which fell 21%. JDA Software, a software and services provider for retailers (see box for more on this stock), was up 71% for the 12 months. Micros Systems, a provider of hotel and restaurant software and systems, increased 38%. The hospitality industry was stunned by the September 11 atrocities. The industry is now recovering and Micros Systems ended up with a good gain for the year. Health claim and credit card processors NDCHealth (formerly, National Data) and Global Payments had strong years. These stocks tend to move with the technology sector and benefit from having strong recurring revenues. September 11 caused most stocks to drop sharply. One exception was Wackenhut, a security company that more than doubled in 2001 as the nation's heightened emphasis on security fueled interest in the stock. ITT Educational Services ended the year up 68%, overcoming news of competitor DeVry's missed earnings. AmeriCredit was strong in the first half of the year but weakened in the second half, as the market grew nervous about the prospects for sub-prime lenders in a weak economy. The stock finished the year up 16%. We believe AmeriCredit remains attractively valued and the credit quality fears are overblown. On the downside for the year: Tektronix, a manufacturer of analytical instruments, fell in half as its main customer base, the semiconductor industry, had its own problems. We sold out of the stock in the third quarter. Novoste, a developer of radiated stents used in heart surgery, declined as drug-coated stents stole market share. Jason Selch, our energy analyst, was onto the problems at Enron but liked Dynegy, a competitor of Enron's in the energy trading business. Even though Dynegy did not engage in funny-money accounting, the stock suffered collateral damage when Enron collapsed. The end for Enron leaves Dynegy as the major player in the energy trading business. Liberty Acorn USA, like our other funds, invests for the long term. We don't try to jump in and out of the latest hot sector. Looking at companies one at a time, paying close attention to valuations, allowed us to do well in technology even though tech had a down year. /s/ Robert A. Mohn Robert A. Mohn Lead Portfolio Manager - ------------------------- JDA Software Soared - ------------------------- JDA Software provides systems used by retailers that help with such things as merchandising, purchasing and warehousing. It is the leading systems provider for the roughly 3,000 retailers in the $100 million to $5 billion annual revenue range. In recent years, JDA Software has purchased companies with expertise in merchandising, space planning and inventory optimization - great additional services to offer its existing customer base. We started building a position in the stock in early 2000 when, despite its strong business fundamentals and healthy balance sheet, the stock was ignored because it was not an Internet play. As the tech sector lurched through 2000, we took D-6 advantage of further slides in price to add to the Fund's position. By the end of 2001, we had more than doubled our average investment. - ------------------------ Small-cap stocks are often more volatile and less liquid than the stocks of larger companies. Small companies may have a shorter history of operations than larger companies and may have a less diversified product line, making them more susceptible to market pressure. As of 12/31/01, the Fund's positions in the holdings mentioned were: JDA Software, 4.4%; Micros Systems, 4.6%; NDCHealth, 3.2%; Global Payments, 2.5%; ITT Educational Services, 4.2%; Wackenhut, 2.8%; AmeriCredit, 6.0%; Novoste, 1.0%; Dynegy, 0.7%. Liberty Acorn USA >At a Glance Ticker Symbol: AUSAX Pretax and After-tax Average Annual Total Returns (Class Z) - ------------------------------------------------------------------------------- >through December 31, 2001 - -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- Life of 1 year 5 years Fund - ------------------------------------------------------------------------------- Returns before taxes 19.25% 13.32% 15.73% - ------------------------------------------------------------------------------- Returns after taxes 18.77 12.16 14.62 on distributions - ------------------------------------------------------------------------------- Returns after taxes 11.88 10.75 12.90 on distributions and sale of fund shares - ------------------------------------------------------------------------------- Russell 2000 (pretax) 2.49 7.52 8.79 - -------------------------------------------------------------------------------
Past performance, before and after taxes, cannot predict future investment results. After-tax returns are calculated using the highest historical individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns are shown for class Z shares only; after-tax returns for other share classes will vary. Indexes do not reflect any deduction for fees, expenses or taxes. Investment returns and principal value may fluctuate, resulting in a gain or loss on sale. - ---------------------------------------------------- Liberty Acorn USA Portfolio Diversification - ---------------------------------------------------- >as a % of net assets, as of December 31, 2001 [PIE CHART] 33.6% Information Software & Services 21.7% Telecommunications 5.2%
D-7 Media 4.8% Computer Related Hardware 1.9% 7.2% Industrial Goods/Services 7.8% Energy/Minerals 17.6% Health Care 11.4% Consumer Goods/Services 10.3% Finance 12.1% Other*
* Other includes cash and other assets less liabilities of 7.4%. - ------------------------------------------------------ The Value of a $10,000 Investment in Liberty Acorn USA - ------------------------------------------------------ >September 4, 1996 through December 31, 2001 This graph compares the results of $10, 000 invested in Liberty Acorn USA on September 4, 1996 (the date Fund shares were first offered to the public) to the Russell 2000 Index. The Russell 2000 is a market-weighted index of 2,000 smaller U.S. companies formed by taking the largest 3,000 U.S. companies and eliminating the largest 1,000. The index is unmanaged and returns for both the index and the Fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. The line graph and the table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Performance changes over time. Visit libertyfunds.com for daily updates. Liberty Acorn USA NAV as of 12/31/01: $17.52 Total Net Assets: $290.7 million [The following was represented by a line graph in the printed material.] LINE CHART:
ACORN LIBERTY USA Russell 2000 9/4/96 10,000.00 10,000.00 9/30/96 10,720.00 10,359.91 10/31/96 10,810.00 10,200.25 11/30/96 11,260.00 10,620.51 12/31/96 11,650.00 10,898.86 1/31/97 12,210.00 11,116.70 2/28/97 11,920.00 10,847.14 3/31/97 11,480.00 10,335.31 4/30/97 11,420.00 10,364.11 5/31/97 12,510.00 11,517.11 6/30/97 13,320.00 12,010.71 7/31/97 14,000.00 12,569.59 8/31/97 14,350.00 12,857.21 9/30/97 15,340.00 13,798.27 10/31/97 15,140.00 13,192.12 11/30/97 15,170.00 13,106.76
D-8 12/31/97 15,413.10 13,336.21 1/31/98 15,076.70 13,125.72 2/28/98 16,320.35 14,096.30 3/31/98 17,400.90 14,677.68 4/30/98 17,992.15 14,758.85 5/31/98 17,227.61 13,963.98 6/30/98 17,525.05 13,993.35 7/31/98 16,591.88 12,860.52 8/31/98 13,935.95 10,363.30 9/30/98 14,151.30 11,174.30 10/31/98 14,653.77 11,630.06 11/30/98 15,402.36 12,239.36 12/31/98 16,305.06 12,996.71 1/31/99 15,776.24 13,169.44 2/28/99 14,894.89 12,102.77 3/31/99 15,016.08 12,291.72 4/30/99 16,095.73 13,393.17 5/31/99 16,734.72 13,588.82 6/30/99 17,650.22 14,203.28 7/31/99 18,047.85 13,813.60 8/31/99 16,821.83 13,302.33 9/30/99 16,866.01 13,305.23 10/31/99 17,860.08 13,359.12 11/30/99 18,809.97 14,156.81 12/31/99 20,059.03 15,759.36 1/31/00 19,053.08 15,506.27 2/29/00 19,867.42 18,066.90 3/31/00 19,819.52 16,875.75 4/30/00 17,568.12 15,860.25 5/31/00 16,526.24 14,935.89 6/30/00 16,834.02 16,237.87 7/31/00 16,748.25 15,715.45 8/31/00 17,765.16 16,914.55 9/30/00 17,642.64 16,417.42 10/31/00 17,654.89 15,684.55 11/30/00 16,625.73 14,074.51 12/31/00 18,255.23 15,283.26 1/31/01 19,406.90 16,078.96 2/28/01 19,370.15 15,023.95 3/31/01 18,904.58 14,289.04 4/30/01 21,195.67 15,406.86 5/31/01 22,384.10 15,785.56 6/30/01 23,008.94 16,330.63 7/31/01 23,253.98 15,446.66 8/31/01 22,616.88 14,947.76 9/30/01 19,345.64 12,935.60 10/31/01 19,394.65 13,692.60 11/30/01 20,546.32 14,752.63 12/31/01 21,770.22 15,663.22
D-9 Average Annual Total Return
- ---------------------------------------------- 1 Year 5 Years Life of Fund 19.25% 13.32% 15.73%
Liberty Acorn USA $21,770 Russell 2000 $15,663 - -------------------------------------------------------------------- Liberty Acorn USA Top 10 Holdings - -------------------------------------------------------------------- 1. AmeriCredit 6.0% Auto Lending 2. Micros Systems 4.6% Information Systems for Restaurants & Hotels 3. JDA Software 4.4% Applications/Software & Services for Retailers 4. ITT Educational Services 4.2% Technology-oriented Post-secondary Degree Programs 5. Conectiv 4.2% Electric Utility in New Jersey, Delaware & Maryland 6. Telephone and Data Systems 3.2% Cellular & Telephone Services 7. NDCHealth 3.2% Health Claims Processing & Drug Marketing Services 8. Wackenhut 2.8% Prison Management 9. Salem Communications 2.6% Radio Stations for Religious Programming 10. Edwards Lifesciences 2.6% Heart Valves
The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings. D-10 LIBERTY ACORN TRUST LIBERTY ACORN USA FORM N-14 PART B STATEMENT OF ADDITIONAL INFORMATION May [___], 2002 This Statement of Additional Information (the "SAI") relates to the proposed Acquisition (the "Acquisition") of the Stein Roe Small Company Growth Fund (the "Acquired Fund"), a series of Liberty-Stein Roe Funds Investment Trust, by the Liberty Acorn USA Fund (the "Acquiring Fund"), a series of Liberty Acorn Trust. This SAI contains information which may be of interest to shareholders but which is not included in the Prospectus/Proxy Statement dated May [___], 2002 (the "Prospectus/Proxy Statement") of the Acquiring Fund which relates to the Acquisition. As described in the Prospectus/Proxy Statement, the Acquisition would involve the transfer of all the assets of the Acquired Fund in exchange for shares of the Acquiring Fund and the assumption of all the liabilities of the Acquired Fund. The Acquired Fund would distribute the Acquiring Fund shares it receives to its shareholders in complete liquidation of the Acquired Fund. This SAI is not a prospectus and should be read in conjunction with the Prospectus/Proxy Statement. The Prospectus/Proxy Statement has been filed with the Securities and Exchange Commission and is available upon request and without charge by writing to your Fund at One Financial Center, Boston, Massachusetts 02111-2621, or by calling 1-800-426-3750. Table of Contents
I. Additional Information about the Acquiring Fund and the Acquired Fund ......................... 2 II. Financial Statements .......................... 2
I. Additional Information about the Acquiring Fund and the Acquired Fund. Attached hereto as Appendix A is the Statement of Additional Information for the Acquiring Fund dated May 1, 2002. II. Financial Statements. This SAI is accompanied by the Annual Report for the year ended December 31, 2001, of the Acquiring Fund, which report contains historical financial information regarding such Fund. Such report has been filed with the Securities and Exchange Commission and is incorporated herein by reference. In accordance with Instruction 2 to Item 14 of Form N-14, no pro forma financial statements are required because the net asset value of the Acquired Fund does not exceed 10% of the net asset value of the Acquiring Fund as of [March 1, 2002]. Appendix A [May 1, 2002 Statement of Additional Information to be included by Amendment.] PART C OTHER INFORMATION (LIBERTY ACORN TRUST) ITEM 15. Indemnification Article VIII of the Agreement and Declaration of Trust of the Registrant (exhibit a.1) provides in effect that Registrant shall provide certain indemnification of its trustees and officers. In accordance with Section 17(h) of the Investment Company Act, that provision shall not protect any person against any liability to the Registrant or its shareholders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Registrant, its trustees and officers, its investment adviser and persons affiliated with them are insured under a policy of insurance maintained by Registrant and its investment adviser, within the limits and subject to the limitations of the policy, against certain expenses in connection with the defense of actions, suits or proceedings, and certain liabilities that might be imposed as a result of such actions, suits or proceedings, to which they are parties by reason of being or having been such trustees or officers. The policy expressly excludes coverage for any trustee or officer whose personal dishonesty, fraudulent breach of trust, lack of good faith, or intention to deceive or defraud has been finally adjudicated or may be established or who willfully fails to act prudently. ITEM 16. Exhibits: --------
1.1 Agreement and declaration of trust. (1) 1.2 Amendment No. 1 to Agreement and Declaration of Trust. (7) 2. Bylaws, as amended effective September 29, 2000. (5) 3. Not Applicable. 4. Form of Agreement and Plan of Reorganization among Stein Roe Small Company Growth Fund, Liberty Acorn USA and Columbia Management Group, Inc. (filed as Appendix A to Part A of this Registration Statement).
5. Article III, Section 4, Article V, Section 1, Article VIII, Section 4 and Article IX, Sections 1 and 7 of the Agreement and Declaration of Trust, as amended, and Sections 2.1, 2.3 and 2.5 of the By-Laws, as amended, each define the rights of shareholders. 6.1 Investment Advisory Agreement between Liberty Acorn Trust (on behalf of Liberty Acorn Fund, Liberty Acorn International, Liberty Acorn USA, Liberty Acorn Twenty and Liberty Acorn Foreign Forty) and Liberty Wanger Asset Management, L.P., dated November 1, 2001. 6.2 Organizational Expenses Agreement between Acorn Investment Trust and Wanger Asset Management, L.P., dated September 3, 1996. (3) 6.3 Administration Agreement between Liberty Acorn Trust (on behalf of Liberty Acorn Fund, Liberty Acorn International, Liberty Acorn USA, Liberty Acorn Twenty and Liberty Acorn Foreign Forty) and Liberty Wanger Asset Management, L.P., dated September 29, 2000. (7) 7. Underwriting Agreement between Liberty Acorn Trust and Liberty Funds Distributor, Inc. dated November 1, 2001. 8. Not Applicable. 9.1 Custodian contract between the Registrant and State Street Bank and Trust Company dated July 1, 1992. (2) 9.2 Letter agreement applying custodian contract (exhibit 8.1) relating to Acorn USA. (4) 9.3 Amendment to custodian contract between Liberty Acorn Trust and State Street Bank and Trust Company dated November 21, 2000. (7) 10.1 Rule 12b-1 Distribution Plan dated September 29, 2000. (7) 10.2 Rule 12b-1 Plan Implementing Agreement dated November 1, 2001. 10.3 Plan Pursuant to Rule 18f-3(d) dated September 29, 2000. (7) 11. Opinion and Consent of Counsel of Ropes & Gray with respect to the Acquisition of Stein Roe Small Company Growth Fund 12. Opinion and Consent of Counsel on Tax Matters and Consequences to Shareholders of Ropes & Gray with respect to the Acquisition of Stein Roe Small Company Growth Fund, to be filed by Post-Effective Amendment 13. Not Applicable. 14.1 Consent of Independent Accountants (PWC)
2 14.2 Consent of Independent Auditors (E&Y), to be filed by Amendment. 15. Not Applicable. 16. Not Applicable. 17.1 Transfer Agency and Service Agreement between Liberty Acorn Trust and Liberty Funds Services, Inc., dated September 29, 2000. (7) 17.2 Code of Ethics, as amended September 29, 2000. (7) 17.3 Code of Ethics for Non-Interested Board Members, as amended May 23, 2001. 17.4 Code of Ethics of Liberty Funds Distributor, Inc., the principal underwriter of the Funds, effective September 29, 2000. (6) 17.5 Form of Proxy Card and Proxy Insert of Stein Roe Small Company Growth Fund 17.6 The following documents, each filed via EDGAR and listed with its filing accession number, are incorporated by reference into the Proxy/Prospectus that is part of this Registration Statement: - - The Prospectuses of Stein Roe Small Company Growth Fund dated February 1, 2002 with respect to Class A and S shares - 0000021832-02-000017 - - The Prospectuses of Liberty Acorn USA dated May 1, 2001 with respect to Class A, B, C and Z shares - 0001021408-01-500547 - As supplemented on August 31, 2001 - 0000950131-01-503272 - As supplemented on November 2, 2001 - 0000021847-01-500207 - - The Statements of Additional Information of Stein Roe Small Company Growth Fund dated February 1, 2002 with respect to Class A and S shares - 21832-02-000019 - As supplemented on February 1, 2002 with respect to Class A shares - 0000021847-02-000035 - - The Report of Independent Accountants and financial statements included in the Annual Report to Shareholders of the Stein Roe Small Company Growth Fund dated September 30, 2001 - 0000891804-01-502179 (Class S), 0000950135-01-503701 (Class A) 3 The following document, filed via EDGAR and listed with its filing accession number, is incorporated by reference into the Statement of Additional Information that is part of this Registration Statement: - - The Report of Independent Auditors and financial statements included in the Annual Report to Shareholders of Liberty Acorn USA dated December 31, 2001 - 0000891804-02-000513 (1) Previously filed. Incorporated by reference to the exhibit of the same number filed in post-effective amendment No. 53 to the registrant's registration statement, Securities Act file number 2-34223 (the "Registration Statement"), filed on April 30, 1996. (2) Previously filed. Incorporated by reference to exhibit 8.1 in post-effective amendment No. 53 to the Registration Statement filed on April 30, 1996. (3) Previously filed. Incorporated by reference to exhibit 5.3 filed in post-effective amendment No. 61 to the Registration Statement filed on April 30, 1998. (4) Previously filed. Incorporated by reference to exhibit 8.3 filed in post-effective amendment No. 61 to the Registration Statement filed on April 30, 1998. (5) Previously filed. Incorporated by reference to exhibit b.2 filed in post-effective amendment No. 69 to the Registration Statement filed on September 29, 2000. (6) Previously filed. Incorporated by reference to the exhibit of the same number filed in post-effective amendment No. 69 to the Registration Statement filed on September 29, 2000. (7) Previously filed. Incorporated by reference to the exhibit of the same number filed in post-effective amendment No. 70 to the Registration Statement filed on May 1, 2001. 4 ITEM 17. Undertakings (1) The undersigned Registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is a part of this Registration Statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act, the reoffering prospectus will contain the information called for by the applicable registration form for reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (2) The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as a part of an amendment to this Registration Statement and will not be used until the amendment is effective, and that, in determining any liability under the 1933 Act, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them. (3) The Registrant undertakes to file the opinion of counsel supporting the tax consequences of the proposed reorganization required by Item 16(12) through an amendment to this Registration Statement no later than a reasonable time after the closing of the transaction. 5 SIGNATURES As required by the Securities Act of 1933, this Registration Statement has been signed on behalf of the Registrant, Liberty Acorn Trust, in the City of Chicago and State of Illinois on March 27, 2002. LIBERTY ACORN TRUST By /s/ Ralph Wanger --------------------------------- Ralph Wanger, President As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Name Title Date ---- ----- ---- /s/ Robert E. Nason Trustee and chairman ) - ------------------------ Robert E. Nason ) ) /s/ Leo A. Guthart Trustee ) - ------------------------ Leo A. Guthart ) ) /s/ Irving B. Harris Trustee ) - ------------------------ Irving B. Harris ) /s/ Jerome Kahn, Jr. Trustee ) ----------------------- Jerome Kahn, Jr. ) ) /s/ Steven N. Kaplan Trustee ) - ------------------------ Steven N. Kaplan ) ) /s/ David C. Kleinman Trustee ) - ------------------------ David C. Kleinman ) ) /s/ Charles P. McQuaid Trustee ) March 27, 2002 - ------------------------ Charles P. McQuaid ) ) /s/ Allan B. Muchin Trustee ) - ------------------------ Allan B. Muchin ) ) /s/ Ralph Wanger Trustee and President ) - ------------------------ (principal executive ) Ralph Wanger officer) ) ) /s/ Bruce H. Lauer Treasurer (principal ) - ------------------------ financial and ) Bruce H. Lauer accounting ) officer )
6 INDEX OF EXHIBITS FILED WITH THIS AMENDMENT
EXHIBIT NUMBER EXHIBIT - ------ ------- 6.1 Investment Advisory Agreement between Liberty Acorn Trust (on behalf of Liberty Acorn Fund, Liberty Acorn International, Liberty Acorn USA, Liberty Acorn Twenty and Liberty Acorn Foreign Forty) and Liberty Wanger Asset Management, L.P., dated November 1, 2001. 7. Underwriting Agreement between Liberty Acorn Trust and Liberty Funds Distributor, Inc. dated November 1, 2001. 10.2 Rule 12b-1 Plan Implementing Agreement dated November 1, 2001. 11. Opinion and Consent of Counsel of Ropes & Gray with respect to the Acquisition of Stein Roe Small Company Growth Fund 14.1 Consent of Independent Accountants (PWC) 17.3 Code of Ethics for Non-Interested Board Members, as amended May 23, 2001. 17.5 Form of Proxy Card and Proxy Insert of Stein Roe Small Company Growth Fund
EX-99.6(1) 3 b42376lfex99-61.txt INVESTMENT ADVISORY AGREEMENT EXHIBIT 6.1 INVESTMENT ADVISORY AGREEMENT LIBERTY ACORN TRUST, a Massachusetts business trust registered under the Investment Company Act of 1940 (the "1940 Act") as an open-end diversified management investment company ("Liberty Acorn"), and LIBERTY WANGER ASSET MANAGEMENT, L.P., a Delaware limited partnership registered under the Investment Advisers Act of 1940 as an investment adviser ("Liberty WAM"), agree that: 1. ENGAGEMENT OF LIBERTY WAM. Liberty Acorn appoints Liberty WAM to furnish investment advisory and other services to Liberty Acorn for its series designated Liberty Acorn Fund, Liberty Acorn International, Liberty Acorn USA, Liberty Acorn Twenty and Liberty Acorn Foreign Forty (each, a "Fund," and collectively, the "Funds")), and Liberty WAM accepts that appointment, for the period and on the terms set forth in this agreement. If Liberty Acorn establishes one or more series in addition to the Funds named above with respect to which it desires to retain Liberty WAM as investment adviser hereunder, and if Liberty WAM is willing to provide such services under this agreement, Liberty Acorn and Liberty WAM may add such new series to this agreement, by written supplement to this agreement. Such supplement shall include a schedule of compensation to be paid to Liberty WAM by Liberty Acorn with respect to such series and such other modifications of the terms of this agreement with respect to such series as Liberty Acorn and Liberty WAM may agree. Upon execution of such a supplement by Liberty Acorn and Liberty WAM, that series will become a Fund hereunder and shall be subject to the provisions of this agreement to the same extent as the Funds named above, except as modified by the supplement. 2. SERVICES OF LIBERTY WAM. (a) INVESTMENT MANAGEMENT. Subject to the overall supervision and control of Liberty Acorn's board of trustees (the "Board"), Liberty WAM shall have supervisory responsibility for the general management and investment of the Funds' assets. Liberty WAM shall comply with the 1940 Act and with all applicable rules and regulations of the Securities and Exchange Commission, the provisions of the Internal Revenue Code applicable to the Funds as regulated investment companies, the investment policies and restrictions, portfolio transaction policies and the other statements concerning the Funds in Liberty Acorn's agreement and declaration of trust, bylaws, and registration statements under the 1940 Act and the Securities Act of 1933 (the "1933 Act"), and policy decisions and procedures adopted by the Board from time to time. Liberty WAM is authorized to make the decisions to buy and sell securities and other assets for the Funds, to place the Funds' portfolio transactions with broker-dealers, and to negotiate the terms of such transactions including brokerage commissions on brokerage transactions, on behalf of the Funds. Liberty WAM is authorized to exercise discretion within the Funds' policy concerning allocation of its portfolio brokerage, as permitted by law, including but not limited to section 28(e) of the Securities Exchange Act of 1934, and in so doing shall not be required to make any reduction in its investment advisory fees. Liberty Acorn hereby authorizes any entity or person associated with Liberty WAM that is a member of a national securities exchange to effect any transaction on the exchange for the account of a Fund to the extent permitted by and in accordance with Section 11(a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder. Liberty Acorn hereby consents to the retention by such entity or person of compensation for such transactions in accordance with Rule 11a-2(T)(a)(iv). Liberty WAM may, where it deems it to be advisable, aggregate orders with other securities of the same type to be sold or purchased by one or more Funds with like orders on behalf of other clients of Liberty WAM (as well as clients of other investment advisers affiliated with Liberty WAM, in the event that Liberty WAM and such affiliated investment advisers share common trading facilities). In such event, Liberty WAM (or Liberty WAM and its affiliated advisers, as the case may be) will allocate the shares so sold or purchased, as well as the expenses incurred in the transaction, in a manner it (or it and they) consider to be equitable and fair and consistent with its (or its or their) fiduciary obligations to clients. (b) REPORTS AND INFORMATION. Liberty WAM shall furnish to the Board periodic reports on the investment strategy and performance of the Funds and such additional reports and information as the Board or the officers of Liberty Acorn may reasonably request. Liberty Acorn shall furnish or otherwise make available to Liberty WAM such copies of financial statements, proxy statements, reports, and other information relating to the business and affairs of each Fund as Liberty WAM may, at any time or from time to time, reasonably require in order to discharge its obligations under this agreement. (c) CUSTOMERS OF FINANCIAL INSTITUTIONS. It is understood that Liberty WAM may, but shall not be obligated to, make payments from its own resources to financial institutions (which may include banks, broker-dealers, recordkeepers, administrators and others) that provide, either directly or through agents, administrative and other services with respect to shareholders who are customers of such institutions, including establishing shareholder accounts, assisting Liberty Acorn's transfer agent with respect to recording purchase and redemption transactions, advising shareholders about the status of their accounts, current yield and dividends declared and such related services as the shareholders or the Funds may request. (d) BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3 under the 1940 Act, Liberty WAM agrees to maintain records relating to its services under this agreement, and further agrees that all records that it maintains for Liberty Acorn are the property of Liberty Acorn and to surrender promptly to Liberty Acorn any of such records upon Liberty Acorn's request; provided that Liberty WAM may at its own expense make and retain copies of any such records. Liberty WAM further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act. (e) STATUS OF LIBERTY WAM. Liberty WAM shall for all purposes herein be deemed to be an independent contractor and not an agent of Liberty Acorn and shall, unless otherwise expressly provided or authorized, have no authority to act for or represent Liberty Acorn in any way. Liberty WAM agrees to notify the Trust promptly of any change in the identity of Liberty WAM's general partner. 3. ADMINISTRATIVE SERVICES. Liberty WAM shall supervise the business and affairs of Liberty Acorn and each Fund and shall provide such services and facilities as may be required for effective administration of Liberty Acorn and the Funds as are not provided by employees or other agents engaged by Liberty Acorn; provided that Liberty WAM shall not have any obligation to provide under this agreement any such services which are the subject of a separate agreement or arrangement between Liberty Acorn and Liberty WAM, any affiliate of Liberty WAM, or any third party administrator. 4. USE OF AFFILIATED COMPANIES AND SUBCONTRACTORS. In connection with the services to be provided by Liberty WAM under this agreement, Liberty WAM may, to the extent it deems appropriate, and subject to compliance with the requirements of applicable laws and regulations and upon receipt of approval of the Trustees, make use of (i) its affiliated companies and their directors, trustees, officers, and employees and (ii) subcontractors selected by Liberty WAM, provided that Liberty WAM shall supervise and remain fully responsible for the services of all such third parties in accordance with and to the extent provided by this agreement. All costs and expenses associated with services provided by any such third parties shall be borne by Liberty WAM or such parties. 5. EXPENSES TO BE PAID BY LIBERTY ACORN. Except as otherwise provided in this agreement or any other contract to which Liberty Acorn is a party, Liberty Acorn shall pay all expenses incidental to its organization, operations and business, including, without limitation: (a) all charges of depositories, custodians, sub-custodians and other agencies for the safekeeping and servicing of its cash, securities and other property and of its transfer agents and registrars and its dividend disbursing and redemption agents, if any; (b) all charges of its administrator, if any; (c) all charges of legal counsel and of independent auditors; (d) all compensation of trustees other than those affiliated with Liberty WAM or Liberty Acorn's administrator, if any, and all expenses incurred in connection with their services to Liberty Acorn; (e) all expenses of preparing, printing and distributing notices, proxy solicitation materials and reports to shareholders of the Funds; (f) all expenses of meetings of shareholders of the Funds; (g) all expenses of registering and maintaining the registration of Liberty Acorn under the 1940 Act and of shares of the Funds under the 1933 Act, including all expenses of preparation, filing and printing of annual or more frequent revisions of the Funds' registration statements under the 1940 Act and 1933 Act, and of supplying each then existing shareholder or beneficial owner of shares of the Funds of a copy of each revised prospectus or supplement thereto, and of supplying a copy of the statement of additional information upon request to any then existing shareholder; (h) all costs of borrowing money; 2 (i) all expenses of publication of notices and reports to shareholders and to governmental bodies or regulatory agencies; (j) all taxes and fees payable to federal, state or other governmental agencies, domestic or foreign, and all stamp or other taxes; (k) all expenses of printing and mailing certificates for shares of a Fund; (l) all expenses of bond and insurance coverage required by law or deemed advisable by the Board; (m) all expenses of qualifying and maintaining qualification of, or providing appropriate notification of intention to sell relating to, shares of the Funds under the securities laws of the various states and other jurisdictions, and of registration and qualification of Liberty Acorn under any other laws applicable to Liberty Acorn or its business activities; (n) all fees, dues and other expenses related to membership of Liberty Acorn in any trade association or other investment company organization; and (o) any extraordinary expenses. In addition to the payment of expenses, Liberty Acorn shall also pay all brokers' commissions and other charges relating to the purchase and sale of portfolio securities for each Fund. 6. ALLOCATION OF EXPENSES PAID BY LIBERTY ACORN. Any expenses paid by Liberty Acorn that are attributable solely to the organization, operation or business of a Fund or Funds shall be paid solely out of the assets of that Fund or Funds. Any expense paid by Liberty Acorn that is not solely attributable to a Fund or Funds, nor solely to any other series of Liberty Acorn, shall be apportioned in such manner as Liberty Acorn or Liberty Acorn's administrator determines is fair and appropriate, or as otherwise specified by the Board. 7. EXPENSES TO BE PAID BY LIBERTY WAM. Liberty WAM shall furnish to Liberty Acorn, at Liberty WAM's own expense, office space and all necessary office facilities, equipment and personnel required to provide its services pursuant to this agreement. Liberty WAM shall also assume and pay all expenses of placement of securities orders and related bookkeeping. 8. COMPENSATION OF LIBERTY WAM. For the services to be rendered and the expenses to be assumed and to be paid by Liberty WAM under this agreement, Liberty Acorn on behalf of the respective Funds shall pay to Liberty WAM fees accrued daily and paid monthly at the annual rates (as a percentage of the Fund's net assets) shown below: LIBERTY ACORN FUND ASSETS RATE OF FEE ------ ----------- First $700 million 0.75% $700 million to $2 billion 0.70% In excess of $2 billion 0.65% LIBERTY ACORN INTERNATIONAL ASSETS RATE OF FEE ------ ----------- First $100 million 1.20% $100 million to $500 million 0.95% In excess of $500 million 0.75% LIBERTY ACORN USA ASSETS RATE OF FEE ------ ----------- First $200 million 0.95% In excess of $200 million 0.90% 3 LIBERTY ACORN TWENTY All Assets 0.90% LIBERTY ACORN FOREIGN FORTY All Assets 0.95% The fees attributable to each Fund shall be a separate charge to such Fund and shall be the several (and not joint or joint and several) obligation of each such Fund. 9. SERVICES OF LIBERTY WAM NOT EXCLUSIVE. The services of Liberty WAM to Liberty Acorn under this agreement are not exclusive, and Liberty WAM shall be free to render similar services to others so long as its services under this agreement are not impaired by such other activities. 10. SERVICES OTHER THAN AS ADVISER. Within the limits permitted by law, Liberty WAM or an affiliate of Liberty WAM may receive compensation from Liberty Acorn for other services performed by it for Liberty Acorn which are not within the scope of the duties of Liberty WAM under this agreement, including the provision of brokerage services. 11. STANDARD OF CARE. To the extent permitted by applicable law, neither Liberty WAM nor any of its partners, officers, agents, employees or affiliates shall be liable to Liberty Acorn or its shareholders for any loss suffered by Liberty Acorn or its shareholders as a result of any error of judgment, or any loss arising out of any investment, or as a consequence of any other act or omission of Liberty WAM or any of its affiliates in the performance of Liberty WAM's duties under this agreement, except for liability resulting from willful misfeasance, bad faith or gross negligence on the part of Liberty WAM or such affiliate, or by reason of reckless disregard by Liberty WAM or such affiliate of the obligations and duties of Liberty WAM under this agreement. 12. EFFECTIVE DATE, DURATION AND RENEWAL. This agreement shall become effective on November 1, 2001. Unless terminated as provided in Section 13, this agreement shall continue in effect as to a Fund until July 31, 2003 and thereafter from year to year only so long as such continuance is specifically approved at least annually (a) by a majority of those trustees who are not interested persons of Liberty Acorn or of Liberty WAM, voting in person at a meeting called for the purpose of voting on such approval, and (b) by either the Board or vote of the holders of a "majority of the outstanding shares" of that Fund (which term as used throughout this agreement shall be construed in accordance with the definition of "vote of a majority of the outstanding voting securities of a company" in section 2(a)(42) of the 1940 Act). 13. TERMINATION. This agreement may be terminated as to a Fund at any time, without payment of any penalty, by the Board, or by a vote of the holders of a majority of the outstanding shares of that Fund, upon 60 days' written notice to Liberty WAM. This agreement may be terminated by Liberty WAM at any time upon 60 days' written notice to Liberty Acorn. This agreement shall terminate automatically in the event of its assignment (as defined in Section 2(a)(4) of the 1940 Act). 14. AMENDMENT. This agreement may be amended in accordance with the 1940 Act. 15. NON-LIABILITY OF TRUSTEES AND SHAREHOLDERS. A copy of the declaration of trust of Liberty Acorn is on file with the Secretary of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of Liberty Acorn by its officers as officers and not individually. All obligations of Liberty Acorn hereunder shall be binding only upon the assets of Liberty Acorn (or the appropriate Fund) and shall not be binding upon any trustee, officer, employee, agent or shareholder of Liberty Acorn. Neither the authorization of any action by the trustees or shareholders of Liberty Acorn nor the execution of this agreement on behalf of Liberty Acorn shall impose any liability upon any trustee, officer or shareholder of Liberty Acorn. 16. USE OF MANAGER'S NAME. Liberty Acorn may use the name "Liberty" or any other name derived from the name "Liberty" only for so long as this agreement or any extension, renewal or amendment hereof remains in effect, including any similar agreement with any organization that shall remain affiliated with Liberty Financial Companies, Inc. and shall have succeeded to the business of Liberty WAM as investment adviser. At such time as this agreement or any extension, renewal or amendment hereof, or such other similar agreement shall no longer be in effect, Liberty Acorn will (by amendment of its agreement and declaration of trust if necessary) cease to use any name derived from the name "Liberty" or otherwise connected with Liberty WAM, or with any organization that shall have succeeded to Liberty WAM's business as investment adviser. 4 17. NOTICES. Any notice, demand, change of address or other communication to be given in connection with this agreement shall be given in writing and shall be given by personal delivery, by registered or certified mail or by transmittal by facsimile or other electronic medium addressed to the recipient as follows (or at such other address or addresses as a party may provide to the other from time to time, by notice): If to Liberty WAM: Liberty Wanger Asset Management, L.P. Attention: Bruce H. Lauer 227 West Monroe Street, Suite 3000 Chicago, Illinois 60606 Telephone: 312 634-9200 Facsimile: 312 634-0016 with a copy to: If to Liberty Acorn: Liberty Acorn Trust 227 West Monroe Street, Suite 3000 Chicago, Illinois 60606 Telephone: 312 634-9200 Facsimile: 312 634-1919 with a copy to: Bell, Boyd & Lloyd LLC Attention: Cameron S. Avery Three First National Plaza, Suite 3300 Chicago, Illinois 60602 Telephone: 312/372-1121 Facsimile: 312/372-2098 All notices shall be conclusively deemed to have been given on the day of actual delivery thereof and, if given by registered or certified mail, on the fifth business day following the deposit thereof in the mail and, if given by facsimile or other electronic medium, on the day of transmittal thereof (upon electronic confirmation of receipt thereof). 18. GOVERNING LAW. This agreement shall be construed and interpreted in accordance with the laws of the State of Illinois and the laws of the United States of America applicable to contracts executed and to be performed therein. 5 Dated as of November 1, 2001 LIBERTY ACORN TRUST By: /s/ RALPH WANGER Name: Title: LIBERTY WANGER ASSET MANAGEMENT, L.P. By WAM Acquisition GP, Inc. Its General Partner By: /S/ BRUCE LAUER 6 EX-99.7 4 b42376lfex99-7.txt UNDERWRITING AGREEMENT EXHIBIT 7 UNDERWRITING AGREEMENT BETWEEN LIBERTY ACORN TRUST AND LIBERTY FUNDS DISTRIBUTOR, INC. THIS UNDERWRITING AGREEMENT ("Agreement"), is hereby made by and between Liberty Acorn Trust, a business trust organized and existing under the laws of the Commonwealth of Massachusetts (hereinafter called the "Fund"), and Liberty Funds Distributor, Inc., a corporation organized and existing under the laws of the Commonwealth of Massachusetts (hereinafter called the "Distributor"). WITNESSETH: WHEREAS, the Fund is engaged in business as an open-end management investment company registered under the Investment Company Act of 1940, as amended ("ICA-40"); and WHEREAS, the Distributor is registered as a broker-dealer under the Securities Exchange Act of 1934, as amended ("SEA-34") and the laws of each state (including the District of Columbia and Puerto Rico) in which it engages in business to the extent such law requires, and is a member of the National Association of Securities Dealers ("NASD") and the Securities Investor Protection Corporation (such registrations and membership are referred to collectively as the "Registrations"); and WHEREAS, the Fund desires the Distributor to act as the distributor in the public offering of its shares of beneficial interest (hereinafter called "Shares"); WHEREAS, the Fund shall pay all charges of its transfer, shareholder recordkeeping, dividend disbursing and redemption agents, if any; all expenses of notices, proxy solicitation material and reports to shareholders; all expenses of preparation of annual or more frequent revisions of the Fund's Prospectus(es) and Statement(s) of Additional Information ("SAIs") and of supplying copies thereof to shareholders; all expenses of registering and maintaining the registration of the Fund under ICA-40 and of the Fund's Shares under the Securities Act of 1933, as amended ("SA-33"); all expenses of filing notices relating to the sale of its Shares under securities laws of various states or other jurisdictions and of registration and qualification of the Fund under all laws applicable to the Fund or its business activities; and WHEREAS, Liberty Wanger Asset Management, L.P. ("Liberty WAM"), investment adviser to the Fund, or its affiliates, may pay expenses incurred in the sale and promotion of the Fund except as provided in the Fund's l2b-1 plan; NOW, THEREFORE, in consideration of the premises and the mutual promises hereinafter set forth, the parties hereto agree as follows: 1. APPOINTMENT. The Fund appoints Distributor to act as principal underwriter (as such term is defined in Sections 2(a)(29) of ICA-40) of its Shares for each series or class of the Fund set forth on Schedule A hereto. 2. DELIVERY OF FUND DOCUMENTS. The Fund has furnished Distributor with properly certified or authenticated copies of each of the following in effect on the date hereof and shall furnish Distributor from time to time properly certified or authenticated copies of all amendments or supplements thereto: (a) Agreement and Declaration of Trust; (b) Bylaws; (c) Resolutions of the Board of Trustees of the Fund (hereinafter referred to as the "Board") selecting Distributor as distributor and approving this form of agreement and authorizing its execution. The Fund shall furnish Distributor promptly with copies of any registration statements filed by it with the Securities and Exchange Commission ("SEC") under SA-33 or ICA-40, together with any financial statements and exhibits included therein, and all amendments or supplements thereto hereafter filed. The Fund also shall furnish Distributor such other certificates or documents which Distributor may from time to time, in its discretion, reasonably deem necessary or appropriate in the proper performance of its duties. 3. DISTRIBUTION OF SHARES. (a) Subject to the provisions of Paragraphs 6, 7, 10, 11, 12, 13 and 14 hereof, and to such minimum purchase and other requirements as may from time to time be described in the Fund's Prospectus(es), Distributor, acting as principal for its own account and not as agent for the Fund, shall have the right to purchase Shares from the Fund. Distributor shall sell Shares only in accordance with the Fund's Prospectus(es), on a "best efforts" basis. Distributor shall purchase Shares from the Fund at a price equal to the net asset value, shall sell Shares at the public offering price as defined in Paragraph 8, and shall retain all sales charges. (b) The Fund shall pay all expenses associated with notices, proxy solicitation material, the preparation of annual or more frequent revisions to the Fund's Prospectus(es) and SAI(s) and of printing and supplying the currently effective Prospectus(es) and SAI(s) to shareholders, other than those necessitated by Distributor's activities or rules and regulations related to Distributor's activities where such amendments or supplements result in expenses which the Fund would not otherwise have incurred. (c) The Distributor (or its affiliates) shall pay the costs of printing and supplying all copies of the Prospectus(es) and SAI(s) that it may reasonably request for use in connection with the distribution of Shares. The Distributor will also pay the expenses of the preparation, excluding legal fees, and printing of all amendments and supplements to the Fund's Prospectus(es) and SAI(s) if the amendment or supplement arises from Distributor's activities or rules and regulations related to Distributor's activities and those expenses would not otherwise have been 2 incurred by the Fund. Distributor will pay all expenses incurred by Distributor in advertising, promoting and selling Fund Shares. (d) Prior to the continuous offering of any Shares of any series of the Fund established during the term of this Agreement, commencing on a date agreed upon by the Fund and the Distributor, the Distributor may solicit subscriptions for such Shares during a subscription period which shall last for such period as may be agreed upon by the parties hereto. The subscriptions will be payable within three business days after the termination of the subscription period, at which time that series of the Fund will commence operations. 4. SELLING AGREEMENTS. Distributor is authorized to enter into agreements with other broker-dealers providing for the solicitation of unconditional orders for purchases of the Fund's Shares authorized for issuance and registered under SA-33 and fix therein the portion of the sales charge which may be reallowed to the selected dealers, as permitted under that Fund's Prospectus(es). All such agreements shall be either in the form of agreement attached hereto or in such other form as may be approved by the officers of the Fund ("Selling Agreement"). Within the United States, the Distributor shall offer and sell Shares to such selected dealers as are members in good standing of the NASD; "banks" as such term is defined in Section 3(a)(6) of the Exchange Act or a "bank holding company" as such term is defined in the Bank Holding Company Act of 1956, as amended, duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was organized; and such other entities or purchasers as the parties hereto otherwise mutually agree in writing. 5. CONDUCT OF BUSINESS. Other than as set forth in the Fund's currently effective Prospectus(es), Distributor will not distribute any sales material or statements except literature or advertising which conforms to the requirements of federal and state securities laws and regulations which have been filed, where necessary, with the appropriate regulatory authorities. Upon any Fund's request, Distributor will furnish the Fund with copies of all such materials prior to their use. Any sales material or statements the substance of which is not included in the Prospectus(es) or SAI(s) shall be submitted for advance approval by the Fund. 6. SOLICITATION OF ORDERS TO PURCHASE SHARES BY FUND. The rights granted to the Distributor shall be non-exclusive in that the Fund reserves the right to solicit purchases from, and sell its Shares to, investors. Further, the Fund reserves the right to issue Shares in connection with the merger or consolidation of any other investment company, trust or personal holding company with the Fund or any series of the Fund, or the Fund's acquisition, by the purchase or otherwise, of all or substantially all of the assets of an investment company, trust or personal holding company, or substantially all of the outstanding shares or interests of any such entity. Any right granted to Distributor to solicit purchases of shares will not apply to Shares that may be offered by any Fund to shareholders by virtue of their being shareholders of the Fund. 7. SHARES COVERED BY THIS AGREEMENT. This Agreement relates to the solicitation of orders to purchase Shares that are duly authorized and registered and available for sale by the Fund, including redeemed or repurchased Shares if and to the extent that they may be legally sold and if, but only if, a Fund authorizes the Distributor to sell them. 3 8. PUBLIC OFFERING PRICE. The public offering price for the Fund's Shares will be the net asset value per Share next determined by the Fund after the Distributor or its appointed agent receives the order plus any sales charge as set forth in the Fund's applicable Prospectus(es). The net asset value per Share shall be determined in the manner provided in the Fund's Agreement and Declaration of Trust as now in effect or as may be amended, and as reflected in the Fund's then current Prospectus(es) and SAI(s). 9. COMPENSATION. (a) SALES CHARGE. Distributor shall be entitled to charge a sales charge on the sale or redemption, as appropriate, of such series and classes of the Fund's Shares as set forth in the Fund's then current Prospectus(es). Distributor may allow any dealers with which it has signed selling agreements such commissions or discounts from and not exceeding the total sales charge as Distributor shall deem advisable, so long as any such commissions or discounts are set forth in the Fund's current Prospectus(es) to the extent required by the applicable federal and state securities laws. Distributor may also make payments to dealers from Distributor's own resources, subject to the following conditions: (a) any such payments shall not create any obligation for or recourse against the Fund or any series or class, and (b) the terms and conditions of any such payments are consistent with the Fund's Prospectus(es) and applicable federal and state securities laws and are disclosed in the Prospectus(es) or SAI(s) to the extent such laws may require. (b) DISTRIBUTION PLANS. Distributor shall also be entitled to compensation for its services as provided in any Distribution Plan adopted as to any series and class of the Fund's Shares pursuant to Rule 12b-1 under the 1940 Act. 10. SUSPENSION OF SALES. If and whenever the determination of the Fund's net asset value is suspended and until such suspension is terminated, the Distributor shall not accept orders for Shares except for unconditional orders placed before the suspension. In addition, the Fund reserves the right to suspend sales of Shares if, in the judgment of the Board of the Fund, it is in the best interest of the Fund to do so, such suspension to continue for such period as may be determined by the Board of the Fund; and in that event, (i) at the direction of the Fund, Distributor shall suspend receipt and acceptance of orders to purchase Shares of the Fund until otherwise instructed by the Fund and (ii) the Distributor shall not accept orders to purchase Shares while such suspension remains in effect unless otherwise directed by the Board. 11. ORDERS AND PAYMENT FOR SHARES. (a) Distributor shall direct orders for the purchase of Shares of any series to the Fund's transfer agent. At or prior to the time of delivery of any Shares, the Distributor will pay or cause to be paid to the custodian of the Fund's assets, for the account of such series, an amount in cash equal to the purchase price of such Shares. The Fund's custodian and transfer agent shall be identified in its Prospectus(es). 4 (b) The Fund, or any agent of the Fund designated in writing by the Fund, shall be promptly advised of all purchase orders for Fund Shares received by the Distributor. Any order may be rejected by the Fund; provided, however, that the Fund will not arbitrarily or without reasonable cause refuse to accept or confirm orders for the purchase of Fund Shares from eligible investors. 12. REPURCHASE OR REDEMPTION OF SHARES BY THE FUND. (a) Any of the outstanding Fund Shares may be tendered to the transfer agent for redemption at any time, other than when the Fund suspends redemptions as permitted by its Prospectus(es) or applicable law, and the Fund agrees to repurchase or redeem the Shares so tendered in accordance with its obligations as set forth in its Agreement and Declaration of Trust, as amended from time to time, and in accordance with the applicable provisions set forth in the Prospectus(es) and SAI(s). The price to be paid to redeem or repurchase the Shares shall be equal to the net asset value calculated in accordance with the provisions of the Fund's Prospectus(es) and SAI(s), less any contingent deferred sales charge ("CDSC"), redemption fee or other charge(s), if any, set forth in the Prospectus(es) or SAI(s) of the Fund relating to the Shares redeemed. All payments by the Fund hereunder shall be made in the manner set forth below. (b) If Shares are tendered to the transfer agent for redemption or repurchase by the Fund within seven business days after Distributor's acceptance of the original purchase order for such Shares, Distributor will immediately refund to the Fund the full sales commission (net of allowances to dealers or brokers) allowed to Distributor on the original sale, and will promptly, upon receipt thereof, pay to the Fund any refunds from dealers or brokers of the balance of sales commissions reallowed by Distributor. The transfer agent shall notify Distributor of such tender for redemption within ten days of the day on which notice of such tender for redemption is received by the transfer agent. (c) The transfer agent shall pay the total amount of the redemption price as defined in the above paragraph 12(a), pursuant to the instructions of the Distributor in Federal Funds on or before the seventh business day subsequent to its having received the notice of redemption in proper form except as otherwise provided in the Prospectus(es) or SAI(s) of the Fund. The proceeds of any redemption of Shares shall be paid by the transfer agent as follows: (i) any applicable CDSC shall be paid to the Distributor, and (ii) the balance shall be paid to or for the account of the shareholder, in each case in accordance with the applicable provision of the Prospectus(es) and SAI(s). 13. PURCHASES FOR DISTRIBUTOR'S OWN ACCOUNT. Distributor may purchase Shares for its own investment account upon Distributor's written assurance that the purchase is for investment purposes and that the Shares will not be resold except through redemption by the Fund. 5 14. INVESTMENT PROGRAMS. In connection with any program under which Liberty WAM or one of its affiliates offers investment advice to shareholders, the Distributor is authorized to offer and sell Shares of the Fund, as principal, to participants in such program. The terms of this Agreement shall apply to such sales, including terms as to the offering price of Shares, the proceeds to be paid to the Fund, the duties of the Distributor, the payment of expenses and indemnification obligations of the Fund and the Distributor. 15. AUTHORIZED REPRESENTATIONS. No Fund is authorized by the Distributor to give on behalf of the Distributor any information or to make any representations other than the information and representations contained in the Fund's registration statement filed with the SEC under SA-33 and/or ICA-40 as it may be amended from time to time. 16. REGISTRATION OF ADDITIONAL SHARES. The Fund hereby agrees to register an indefinite number of Shares pursuant to Rule 24f-2 under ICA-40, as amended. The Fund will, in cooperation with the Distributor, take such action as may be necessary from time to time to file in any state mutually agreeable to the Distributor and the Fund, any notices relating to the sale of the Shares (so registered or otherwise qualified for sale under SA-33) required by applicable state law or regulation; provided, however, that nothing herein shall be deemed to prevent the Fund from filing notices relating to its Shares without approval of the Distributor in any state it deems appropriate. 17. CONFORMITY WITH LAW. Distributor agrees that in soliciting orders to purchase Shares it shall duly conform in all respects with applicable federal and state laws and the rules and regulations of the NASD. Distributor will use its best efforts to maintain its Registrations in good standing during the term of this Agreement and will promptly notify the Fund and Liberty WAM in the event of the suspension or termination of any of the Registrations. The Distributor will observe and be bound by all the provisions of the Fund's Agreement and Declaration of Trust (and of any fundamental policies adopted by the Fund pursuant to ICA-40, written notice of which shall have been given to the Distributor) which at the time in any way require, limit, restrict or prohibit or otherwise regulate any action on the part of the Distributor. 18. INDEPENDENT CONTRACTOR. Distributor shall be an independent contractor and neither the Distributor, nor any of its officers, directors, employees, or representatives is or shall be an employee of the Fund in the performance of Distributor's duties hereunder. Distributor shall be responsible for its own conduct and the employment, control, and conduct of its agents and employees and for injury to such agents or employees or to others through its agents and employees and agrees to pay all employee taxes thereunder. Distributor may appoint sub-agents or distribute through dealers or otherwise as Distributor may determine from time to time, but this Agreement shall not be construed as authorizing any dealer or other person to accept orders for sale or repurchase on the Fund's behalf or otherwise act as the Fund's agent for any purpose. 19. INDEMNIFICATION. Distributor agrees to indemnify and hold harmless the Fund and each of the members of its Board and its officers, employees and representatives and each person, if any, who controls the Fund within the meaning of Section 15 of SA-33 against any and all losses, liabilities, damages, claims and expenses (including the reasonable costs of investigating or defending any alleged loss, liability, damage, claim or expense and reasonable legal counsel fees incurred in connection therewith) to which the Fund or such of the members of 6 its Board and of its officers, employees, representatives, or controlling person or persons may become subject under SA-33, under any other statute, at common law, or otherwise, arising out of or based upon (i) any violation of an applicable law, rule or regulation or wrongful act by Distributor or any of Distributor's directors, officers, employees or representatives, or (ii) any untrue statement or alleged untrue statement of a material fact contained in a registration statement, Prospectus, SAI, shareholder report or other information covering Shares of the Fund filed or made public by the Fund or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon information furnished to the Fund by Distributor in writing. In no case (i) is Distributor's indemnity in favor of the Fund, or any person indemnified, to be deemed to protect the Fund or such indemnified person against any liability to which the Fund or such person would otherwise be subject by reason of willful misfeasance, bad faith, or negligence in the performance of its or his duties or by reason of its or his reckless disregard of its or his obligations and duties under this Agreement or (ii) is Distributor to be liable under its indemnity agreement contained in this paragraph with respect to any claim made against the Fund or any person indemnified unless the Fund or such person, as the case may be, shall have notified Distributor in writing of the claim within a reasonable time after the summons, or other first written notification, giving information of the nature of the claim served upon the Fund or upon such person (or after the Fund or such person shall have received notice of such service on any designated agent). However, failure to notify Distributor of any such claim shall not relieve Distributor from any liability which Distributor may have to the Fund or any person against whom such action is brought otherwise than on account of Distributor's indemnity agreement contained in this Paragraph. Distributor shall be entitled to participate, at its own expense, in the defense, or, if Distributor so elects, to assume the defense of any suit brought to enforce any such claim but, if Distributor elects to assume the defense, such defense shall be conducted by legal counsel chosen by Distributor and satisfactory to the persons indemnified who are defendants in the suit. In the event that Distributor elects to assume the defense of any such suit and retain such legal counsel, persons indemnified who are defendants in the suit shall bear the fees and expenses of any additional legal counsel retained by them. If Distributor does not elect to assume the defense of any such suit, Distributor will reimburse persons indemnified who are defendants in such suit for the reasonable fees of any legal counsel retained by them in such litigation. The Fund agrees to indemnify and hold harmless Distributor and each of its directors, officers, employees, and representatives and each person, if any, who controls Distributor within the meaning of Section 15 of SA-33 against any and all losses, liabilities, damages, claims or expenses (including the damage, claim or expense and reasonable legal counsel fees incurred in connection therewith) to which Distributor or such of its directors, officers, employees, representatives or controlling person or persons may become subject under SA-33, under any other statute, at common law, or otherwise arising out of or based upon (i) any violation of applicable law, rule or regulation or wrongful act by the Fund or any of the members of the Fund's Board, or the Fund's officers, employees or representatives other than Distributor, or (ii) any untrue statement or alleged untrue statement of a material fact contained in a registration statement, Prospectus, SAI, shareholder report or other information covering Shares filed or made public by the Fund or any amendment thereof or supplement thereto, or the omission or 7 alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading unless such statement or omission was made in reliance upon information furnished by Distributor to the Fund. In no case (i) is the Fund's indemnity in favor of the Distributor or any person indemnified to be deemed to protect the Distributor or such indemnified person against any liability to which Distributor or such indemnified person would otherwise be subject by reason of willful misfeasance, bad faith, or negligence in the performance of its or his duties or by reason of its or his reckless disregard of its or his obligations and duties under this Agreement, or (ii) is the Fund to be liable under its indemnity agreement contained in this Paragraph with respect to any claim made against Distributor or any person indemnified unless Distributor, or such person, as the case may be, shall have notified the Fund in writing of the claim within a reasonable time after the summons, or other first written notification, giving information of the nature of the claim served upon Distributor or upon such person (or after Distributor or such person shall have received notice of such service on any designated agent). However, failure to notify the Fund of any such claim shall not relieve the Fund from any liability which the Fund may have to Distributor or any person against whom such action is brought otherwise than on account of the Fund's indemnity agreement contained in this Paragraph. With respect to any claim by the Distributor for recovery of any liability of the Fund arising hereunder allocated to a particular series of the Fund if there be more than one (whether in accordance with the express terms hereof or otherwise), the Distributor shall have recourse solely against the assets of that series to satisfy such claim and shall have no recourse against the assets of any other series for such purpose. The Fund shall be entitled to participate, at its own expense, in the defense or, if the Fund so elects, to assume the defense of any suit brought to enforce such claim but, if the Fund elects to assume the defense, such defense shall be conducted by legal counsel chosen by the Fund and satisfactory to the persons indemnified who are defendants in the suit. In the event that the Fund elects to assume the defense of any such suit and retain such legal counsel, the persons indemnified who are defendants in the suit shall bear the fees and expenses of any additional legal counsel retained by them. If the Fund does not elect to assume the defense of any such suit, the Fund will reimburse the persons indemnified who are defendants in such suit for the reasonable fees and expenses of any legal counsel retained by them in such litigation. 20. DURATION AND TERMINATION OF THIS AGREEMENT. With respect to the Fund and the Distributor, this Agreement shall become effective on November 1, 2001. After this Agreement shall become effective, unless terminated as provided herein, it shall remain in effect through July 31, 2003 and from year to year thereafter, but only so long as such continuance is specifically approved at least annually (a) by a vote of majority of the members of the Board of the Fund who are not interested persons of the Distributor or of the Fund, voting in person at a meeting called for the purpose of voting on such approval, and (b) by the vote of either the Board of the Fund or a majority of the outstanding Shares of the Fund. This Agreement may be terminated by and between the Fund and Distributor at any time, without the payment of any penalty (a) on 60 days' written notice, by the Board of the Fund or by a vote of a majority of the outstanding Shares of the Fund, or by Distributor, or (b) immediately, on written notice by the Board of the Fund, in the event of termination or suspension of any of the Registrations. This Agreement will automatically terminate in the event of its assignment. In interpreting the 8 provisions of this Paragraph 20 the definitions contained in Section 2(a) of ICA-40 (particularly the definitions of "interested person", "assignment", and "majority of the outstanding Shares") shall be applied. 21. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be changed, waived, discharged, or terminated orally, but only by an instrument in writing signed by each party against which enforcement of the change, waiver, discharge, or termination is sought. If the Fund should at any time deem it necessary or advisable in the best interests of the Fund that any amendment of this Agreement be made in order to comply with the recommendations or requirements of the SEC or any other governmental authority or to obtain any advantage under state or Federal tax laws and notifies Distributor of the form of such amendment, and the reasons therefor, and if Distributor should decline to assent to such amendment, the Fund may terminate this Agreement forthwith. If Distributor should at any time request that a change be made in the Fund's Agreement and Declaration of Trust or by-laws or in its methods of doing business, in order to comply with any requirements of Federal law or regulations of the SEC, or of a national securities association of which Distributor is or may be a member, relating to the sale of Shares, and the Fund should not make such necessary changes within a reasonable time, Distributor may terminate this Agreement forthwith. 22. LIABILITY. It is understood and expressly stipulated that neither the shareholders of the Fund nor the members of the Board of the Fund shall be personally liable hereunder. The obligations of the Fund are not personally binding upon, nor shall resort to the private property of, any of the members of the Board of the Fund, nor of the shareholders, officers, employees or agents of the Fund, but only the property of the applicable series of the Fund shall be bound. A copy of the Declaration of Trust and of each amendment thereto has been filed by the Trust with the Secretary of State of The Commonwealth of Massachusetts, as well as any other governmental office where such filing may from time to time be required. 23. MISCELLANEOUS. The captions in this Agreement are included for convenience or reference only, and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 24. NOTICE. Any notice required or permitted to be given by a party to this Agreement or to any other party hereunder shall be deemed sufficient if delivered in person or sent by registered or certified mail postage prepaid, addressed by the party giving notice to each such other party at the address provided below or to the last address furnished by each such other party to the party giving notice. If to the Fund: 227 West Monroe Street, Suite 3000 Chicago, Illinois 60606-5016 Attn: Secretary 9 If to Distributor: One Financial Center Boston, Massachusetts 02111 Attn: General Counsel Liberty Funds Group LLC LIBERTY FUNDS DISTRIBUTOR, INC. By: _______________________ Co-President ATTEST: LIBERTY ACORN TRUST By: ________________________ Vice President ATTEST: Assistant Secretary 10 Schedule A to Underwriting Agreement Between Liberty Acorn Trust and Liberty Funds Distributor, Inc. The series of the Trust covered by this agreement are: Liberty Acorn Fund Liberty Acorn International Liberty Acorn USA Liberty Acorn Twenty Liberty Acorn Foreign Forty Dated as of November 1, 2001. A-1 EX-99.10(2) 5 b42376lfex99-102.txt RULE 12B-1 Exhibit 10.2 LIBERTY ACORN TRUST RULE 12B-1 PLAN IMPLEMENTING AGREEMENT Liberty Acorn Trust ("Trust"), on behalf of each series (each a "Fund") of the Trust designated in Appendix 1 from time to time, acting severally, and Liberty Funds Distributor, Inc. ("LFDI"), a Massachusetts corporation, agree as of November 1, 2001: 1. 12B-1 PLAN. The Trust, on behalf of its Funds, has adopted [one or more] "Rule l2b-1 Plan[s]" (each, a "Plan") pursuant to Rule l2b-1 (the "Rule") under the Investment Company Act of 1940 (the "Act"). Under the Rule, a Fund may, pursuant to a Plan, pay LFDI a specified portion of the assets attributable to a class of shares of that Fund ("Class of Shares") to be used for the purposes specified in the Plan. A Plan shall continue in effect with respect to a Class of Shares only so long as specifically approved for that Class at least annually as provided in the Rule. A Plan may not be amended to increase materially the service fee or distribution fee with respect to a Class of Shares without such shareholder approval as is required by the Rule or any applicable orders of the Securities and Exchange Commission, and all material amendments of the Plan must be approved in the manner described in the Rule. A Plan may be terminated with respect to a Class of Shares at any time as provided in the Rule without payment of any penalty. This Agreement shall apply to each Fund named in Appendix 1 as that Appendix may be amended from time to time by the parties, in writing. 2. PAYMENTS, EXPENDITURES AND REPORTS. A. Each Fund shall pay LFDI the amount then due LFDI under a Plan on the 20th day of each month, or, if such day is not a business day, the next business day thereafter, during the term of this Agreement. B. LFDI shall expend the amounts paid to it by the Funds under a Plan in its discretion, so long as such expenditures are consistent with the Rule, the Plan, and any instructions LFDI may receive from the Trustees of the Trust. C. LFDI shall make all reports required under the Act, the Rule or a Plan to the Trustees of the Trust, as provided in the Act, the Rule and any Plan or as requested by the Trustees. 3. CONTINUATION; AMENDMENT; TERMINATION; NOTICE. A. This Agreement (i) supersedes and replaces any contract or agreement relating to the subject matter hereof in effect prior to the date hereof, (ii) shall continue in effect as to the Trust or a Fund only so long as specifically approved at least annually by the Trustees or shareholders of the Trust or Fund, and (iii) may be amended at any time by written agreement of the parties, each in accordance with the Act and the Rule. B. This Agreement (i) shall terminate with respect to any Fund or any Class of Shares immediately upon the effective date of any later dated agreement, with respect to that Fund or Class of Shares, relating to the subject matter hereof, (ii) may be terminated by the Trust with respect to one or more Funds upon 60 days' notice without penalty by a vote of the Trustees of the Trust or by LFDI or otherwise in accordance with the Act, and (iii) will terminate immediately with respect to any party in the event of its assignment by that party (as defined in the Act). Upon termination, the obligations of the parties under this Agreement shall cease except for unfulfilled obligations and liabilities arising prior to termination. C. All notices required under this Agreement shall be in writing and delivered to the office of the other party. 4. AGREEMENT AND DECLARATION OF TRUST. A copy of the document establishing the Trust is filed with the Secretary of The Commonwealth of Massachusetts. As to the Trust, this Agreement is executed by officers not as individuals and is not binding upon any of the Trustees, officers or shareholders of the Trust individually but only upon the assets of the relevant Fund. Agreed: LIBERTY ACORN TRUST LIBERTY FUNDS DISTRIBUTOR, INC. By: By: -------------------------------- ---------------------------- Vice President and Treasurer Co-President 2 APPENDIX 1 Liberty Acorn Fund Liberty Acorn International Liberty Acorn USA Liberty Acorn Twenty Liberty Acorn Foreign Forty I-1 EX-99.11 6 b42376lfex99-11.txt OPINION AND CONSENT OF ROPES & GRAY EXHIBIT 11 [Ropes & Gray Letterhead] March 27, 2002 Liberty Acorn USA c/o Liberty Acorn Trust One Financial Center Boston, Massachusetts 02111 Re: Registration Statement on Form N-14 Ladies and Gentlemen: We have acted as counsel to Liberty Acorn USA (the "Acquiring Fund"), a series of Liberty Acorn Trust (the "Trust"), in connection with the Registration Statement of the Trust on Form N-14 (the "Registration Statement") being filed by the Trust today under the Securities Act of 1933, as amended (the "Act"), relating to the proposed combination of the Acquiring Fund with the Stein Roe Small Company Growth Fund (the "Acquired Fund"), a series of Liberty-Stein Roe Funds Investment Trust (the "Acquired Fund Trust"), and the issuance of shares of beneficial interest of specified classes of the Acquiring Fund in connection therewith (the "Shares"), all in accordance with the terms of the Agreement and Plan of Reorganization by and among the Trust on behalf of the Acquiring Fund, the Acquired Fund Trust on behalf of the Acquired Fund, and Columbia Management Group, Inc. (the "Agreement and Plan of Reorganization"), in substantially the form included in the Registration Statement. We have examined the Trust's Agreement and Declaration of Trust and amendments thereto (collectively, the "Agreement and Declaration of Trust") and the Trust's By-Laws, as amended. We have also examined such other documents and records as we have deemed necessary for the purposes of this opinion. We have assumed for purposes of this opinion that, prior to the date of the issuance of the Shares, (1) the Trustees of each of the Trust and the Acquired Fund Trust and the shareholders of the Acquired Fund will have taken all action required of them for the approval the Agreement and Plan of Reorganization, (2) the Trustees of the Trust will have taken all requisite action to Liberty Acorn USA c/o Liberty Acorn Trust March 27, 2002 -2- establish and designate Class A, B, C and Z shares of the Acquiring Fund, and (3) the Agreement and Plan of Reorganization will have been duly executed and delivered by each party thereto. Based upon the foregoing, we are of the opinion that: 1. The Trust is a duly organized and validly existing unincorporated association under the laws of The Commonwealth of Massachusetts and is authorized to issue an unlimited number of its shares of beneficial interest. 2. When issued in accordance with the Agreement and Plan of Reorganization, the Shares will be validly issued, fully paid and nonassessable by the Trust. The Trust is an entity of the type commonly known as a "Massachusetts business trust." Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of the Trust. However, the Agreement and Declaration of Trust disclaims shareholder liability for acts or obligations of the Trust and requires that a notice of such disclaimer be given in each note, bond, contract, instrument, certificate or undertaking entered into or executed by the Trust or its Trustees. The Agreement and Declaration of Trust provides that in case any shareholder or former shareholder shall be held to be personally liable solely by reason of his or her being or having been a shareholder and not because of his or her acts or omissions or for some other reason, the shareholder or former shareholder (or his or her heirs, executors, administrators or other legal representatives or, in the case of a corporation or other entity, its corporate or other general successor) shall be entitled to be held harmless from and indemnified against all loss and expense arising from such liability, but only out of the assets of the particular series of shares of which he or she is or was a shareholder. Thus, the risk of a shareholder's incurring financial loss on account of shareholder liability is limited to circumstances in which the particular series of which he or she is or was a shareholder would be unable to meet its obligations. We understand that this opinion is to be used in connection with the registration of the Shares for offering and sale pursuant to the Act. We consent to the filing of this opinion with and as part of the Registration Statement. Very truly yours, /s/ Ropes & Gray ---------------------------- Ropes & Gray EX-99.14.1 7 b42376lfex99-14_1.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 14.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Combined Prospectus and Proxy Statement and Statement of Additional Information constituting parts of this Registration Statement on Form N-14 (the "Registration Statement") of our reports dated November 8, 2001, relating to the financial statements and financial highlights appearing in the September 30, 2001 Annual Reports to Shareholders of Stein Roe Small Company Growth Fund, which are also incorporated by reference into the Registration Statement. We also consent to the references to us under the heading "Financial Highlights" in the Prospectuses and "Independent Accountants" in the Statements of Additional Information of Stein Roe Small Company Growth Fund dated February 1, 2002, which have also been incorporated by reference into the Registration Statement. PricewaterhouseCoopers LLP Boston, Massachusetts March 27, 2002 EX-99.17.3 8 b42376lfex99-17_3.txt CODE OF ETHICS FOR NON-INTERESTED BOARD MEMBERS Exhibit 17.3 LIBERTY ACORN TRUST CODE OF ETHICS FOR NON-INTERESTED BOARD MEMBERS (ADOPTED EFFECTIVE JUNE 15, 1996; AMENDED EFFECTIVE MAY 25, 1999, SEPTEMBER 29, 2000 AND MAY 23, 2001) The Investment Company Act and rules require that Liberty Acorn Trust ("Liberty Acorn" or the "Fund") establish standards and procedures for the detection and prevention of certain conflicts of interest, including activities by which persons having knowledge of the investments and investment intentions of Liberty Acorn might take advantage of that knowledge for their own benefit. For that purpose, Liberty Acorn has adopted this Code of Ethics (the "Code") applicable to those members of Liberty Acorn's board of trustees who are not affiliated with Liberty Acorn or Liberty Wanger Asset Management, L.P. ("Liberty WAM"), Liberty Acorn's investment adviser. Any questions about the Code or about the applicability of the Code to a personal securities transaction should be directed to Liberty WAM's designated compliance officer or chief operating officer, or counsel for the Fund. I. STATEMENT OF PRINCIPLE GENERAL PROHIBITIONS. The Investment Company Act and rules make it illegal for any person covered by the Code, directly or indirectly, in connection with the purchase or sale of a security held or to be acquired by the Fund to: a. employ any device, scheme, or artifice to defraud the Funds; b. make to the Funds any untrue statement of a material fact or omit to state to the Funds a material fact necessary in order to make the statements made, in light of circumstances under which they are made, not misleading; c. engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon the Funds; or d. engage in any manipulative practice with respect to the Funds. PERSONAL SECURITIES TRANSACTIONS. The Code regulates personal securities transactions as a part of the effort by the Fund to detect and prevent conduct that might violate the general prohibitions outlined above. A personal securities transaction is a transaction in a SECURITY in which the person subject to this Code has a BENEFICIAL INTEREST. SECURITY is interpreted very broadly for this purpose, and includes any right to acquire any security (an option or warrant, for example). You have a BENEFICIAL INTEREST in a security in which you have, directly or indirectly, the opportunity to profit or share in any profit derived from a transaction in the security, or in which you have an indirect interest, including beneficial ownership by your spouse or minor children or other dependents living in your household, or your share of securities held by a partnership of which you are a general partner. Technically, the rules under section 16 of the Securities Exchange Act of 1934 will be applied to determine if you have a beneficial interest in a security (even if the security would not be within the scope of section 16). Examples of beneficial interest and a copy of Rule 16a-1(a), defining beneficial ownership, are attached as Appendix A. In any situation where the potential for conflict exists, transactions for the Fund must take precedence over any personal transaction. The Fund's non-interested trustees owe a duty to the Fund and its shareholders to conduct their personal securities transactions in a manner which does not interfere with the portfolio transactions of the Fund, take inappropriate advantage of their relationship with the Fund, or create any actual or potential conflict of interest between their interests and the interests of the Fund and its shareholders. Situations not specifically governed by this Code of Ethics will be resolved in light of this general principle. II. TO WHOM THE CODE'S RESTRICTIONS APPLY The Code applies to the Fund's outside board members -- those members of the board of Liberty Acorn who are not affiliated with Liberty WAM, are not officers or 5% shareholders of Liberty Acorn, and are not otherwise "interested persons" of Liberty WAM. The outside board members subject to the Code are listed on Schedule A hereto. III. RESTRICTIONS ON PERSONAL SECURITIES TRANSACTIONS A. NO TRANSACTIONS WITH THE FUNDS. No outside board member shall knowingly sell to or purchase from the Fund any security or other property, except securities issued by the Fund. B. NO CONFLICTING TRANSACTIONS. No outside board member shall purchase or sell any security in which such person has or would thereby acquire a beneficial interest which the person knows or has reason to believe is being purchased or sold or considered for purchase or sale by the Fund, until the Fund's transactions have been completed or consideration of such transactions has been abandoned. IV. COMPLIANCE PROCEDURES A. REPORTING PERSONAL SECURITIES TRANSACTIONS. 1. An outside board member shall report to WAM's compliance officer, within ten days after the end of the calendar quarter in which a reportable transaction occurs, any personal securities transaction in which the outside board member, at the time of the transaction, knew, or in the ordinary course of fulfilling his 2 duties as a trustee should have known, that on the day of the transaction or within 15 days before or after that day a purchase or sale of that security was made by or considered for the Fund. B. FORM OF REPORTS. Reports of personal securities transactions may be in any form (including copies of confirmations or monthly statements) but must include (i) the date of the transaction, the title and number of shares, and the principal amount of each security involved; (ii) the nature of the transaction (i.e., purchase, sale, gift, or other type of acquisition or disposition); (iii) the price at which the transaction was effected; (iv) the name of the broker, dealer, or bank with or through whom the transaction was effected; and (v) the name of the reporting person. C. MONITORING OF TRANSACTIONS. WAM's compliance officer will review the reports of personal securities transactions of the Fund's outside board members. D. CERTIFICATION OF COMPLIANCE. Each outside board member is required to certify annually that he or she has read and understands the Code and recognizes that he or she is subject to the Code. To accomplish this, the Secretary of the Fund shall annually distribute a copy of the Code and request certification. E. REVIEW BY THE FUND'S BOARD. The officers of the Fund shall prepare an annual report to the board that: 1. summarizes existing procedures concerning personal investing and any changes in those procedures during the past year; 2. identifies any violations of the Code requiring significant remedial action during the past year; and 3. identifies any recommended changes in existing restrictions or procedures based upon experience under the Code, evolving industry practices, or developments in applicable laws or regulations. V. EXEMPT TRANSACTIONS The provisions of this Code are intended to restrict the personal investment activities of persons subject to the Code only to the extent necessary to accomplish the purposes of the Code. Therefore, the provisions of Section III (Restrictions on Personal Securities Transactions) and Section IV (Compliance Procedures) of this Code shall not apply to: A. Purchases or sales effected in any account over which the persons subject to this Code have no direct or indirect influence or control; B. Purchases or sales of: 1. U.S. government securities; 2. shares of open-end investment companies (mutual funds), including but not limited to shares of any series of Liberty Acorn or WAT; and 3 3. bank certificates of deposit or commercial paper. C. Purchases or sales over which neither the person subject to this Code nor the Fund has control; D. Purchases that are part of an automatic dividend reinvestment plan; E. Purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of securities to the extent such rights were acquired from such issuer, and sales of such rights so acquired; F. Purchases or sales in an account managed by an independent investment adviser with discretion where the trustee has no advance knowledge of the transactions before they had been executed; and G. Purchases or sales that receive the prior approval of the Fund's compliance officer or chief operating officer because they are not inconsistent with this Code or the provisions of Rule 17j-1(a) under the Investment Company Act of 1940. A copy of Rule 17j-1 is attached as Appendix B. VI. CONSEQUENCES OF FAILURE TO COMPLY WITH THE CODE Compliance with this Code of Ethics is a condition of retention of positions with the Fund. The Fund's board of trustees shall determine what action is appropriate for any breach of the provisions of the Code by an outside board member, which may include removal from the board. Reports filed pursuant to the Code will be maintained in confidence but will be reviewed by WAM or the Fund to verify compliance with the Code. Additional information may be required to clarify the nature of particular transactions. VII. RETENTION OF RECORDS WAM's designated compliance officer shall maintain the records listed below for a period of five years at the Fund's principal place of business in an easily accessible place: A. a list of all persons subject to the Code during the period; B. receipts signed by all persons subject to the Code acknowledging receipt of copies of the Code and acknowledging that they are subject to it; C. a copy of each code of ethics that has been in effect at any time during the period; and D. a copy of each report filed pursuant to the Code and a record of any known violation and action taken as a result thereof during the period. 4 * * * * * Adopted effective 5/28/96 Amended effective 5/25/99 Amended effective 9/29/00 Amended effective 5/23/01 5 SCHEDULE A Leo A. Guthart Irving B. Harris Jerome Kahn, Jr. Steven Kaplan David C. Kleinman Roger S. Meier Allan B. Muchin Robert E. Nason APPENDIX A EXAMPLES OF BENEFICIAL OWNERSHIP For purposes of the Code, you will be deemed to have a beneficial interest in a security if you have the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the security. Examples of beneficial ownership under this definition include: - - securities you own, no matter how they are registered, and including securities held for you by others (for example, by a custodian or broker, or by a relative, executor or administrator) or that you have pledged to another (as security for a loan, for example); - - securities held by a trust of which you are a beneficiary (except that, if your interest is a remainder interest and you do not have or participate in investment control of trust assets, you will not be deemed to have a beneficial interest in securities held by the trust); - - securities held by you as trustee or co-trustee, where either you or any member of your immediate family (i.e., spouse, children or descendants, stepchildren, parents and their ancestors, and stepparents, in each case treating a legal adoption as blood relationship) has a beneficial interest (using these rules) in the trust; - - securities held by a trust of which you are the settlor, if you have the power to revoke the trust without obtaining the consent of all the beneficiaries and have or participate in investment control; - - securities held by any partnership in which you are a general partner, to the extent of your interest in partnership capital or profits; - - securities held by a personal holding company controlled by you alone or jointly with others; - - securities held by (i) your spouse, unless legally separated, or you and your spouse jointly, or (ii) your minor children or any immediate family member of you or your spouse (including an adult relative), directly or through a trust, who is sharing your home, even if the securities were not received from you and the income from the securities is not actually used for the maintenance of your household; or - - securities you have the right to acquire (for example, through the exercise of a derivative security), even if the right is not presently exercisable, or securities as to which, through any other type of arrangement, you obtain benefits substantially equivalent to those of ownership. You will NOT be deemed to have beneficial ownership of securities in the following situations: - - securities held by a limited partnership in which you do not have a controlling interest and do not have or share investment control over the partnership's portfolio; and - - securities held by a foundation of which you are a trustee and donor, provided that the beneficiaries are exclusively charitable and you have no right to revoke the gift. Appendix A THESE EXAMPLES ARE NOT EXCLUSIVE. THERE ARE OTHER CIRCUMSTANCES IN WHICH YOU MAY BE DEEMED TO HAVE A BENEFICIAL INTEREST IN A SECURITY. ANY QUESTIONS ABOUT WHETHER YOU HAVE A BENEFICIAL INTEREST SHOULD BE DIRECTED TO LIBERTY WAM'S DESIGNATED COMPLIANCE OFFICER OR CHIEF OPERATING OFFICER. ATTACHMENT A LIBERTY ACORN TRUST CODE OF ETHICS AFFIRMATION I affirm that I have received a copy of the Liberty Acorn Trust Code of Ethics for Non-Interested Board Members (the "Code") and have read and understand it. I acknowledge that I am subject to the Code and will comply with the Code in all respects. Date: ---------------- ------------------------------ Signature EX-99.17.5 9 b42376lfex99-17_5.txt PROXY CARD EXHIBIT 17.5 PLEASE VOTE PROMPTLY ********************************* Your vote is important, no matter how many shares you own. Please vote on the reverse side of this proxy card and sign in the space(s) provided. Return your completed proxy card in the enclosed envelope today. You may receive additional proxies for other accounts. These are not duplicates; you should sign and return each proxy card in order for your votes to be counted. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The signers of this proxy hereby appoint each of Joseph R. Palombo, Jean S. Loewenberg, Joseph T. Turo, Russell L. Kane, and Vincent P. Pietropaolo proxies of the signers, with power of substitution, to vote at the Special Meeting of Shareholders to be held at Boston, Massachusetts, on Friday, June 28, 2002, and at any adjournments, as specified herein and in accordance with their best judgement on any other business that may properly come before this meeting. AFTER CAREFUL REVIEW, THE BOARD OF TRUSTEES UNANIMOUSLY HAS RECOMMENDED A VOTE "FOR" ALL MATTERS. STEIN ROE LOGO ----------------------------------- STEIN ROE SMALL COMPANY GROWTH FUND ----------------------------------- Please be sure to sign and date this proxy. Date ---------- - ----------------------------- ------------------------------ Shareholder sign here Co-owner sign here THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BELOW AND, ABSENT DIRECTION, WILL BE VOTED FOR PROPOSAL 1 LISTED BELOW. THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE HOLDER'S BEST JUDGMENT AS TO ANY OTHER MATTER. THE TRUSTEES RECOMMEND A VOTE FOR THE PROPOSAL: 1. Proposal to approve the Agreement and [ ]FOR [ ]AGAINST Plan of Reorganization with respect to the acquisition of the Stein Roe [ ]ABSTAIN Small Company Growth Fund by Liberty Acorn USA. (Item 1 of the Notice) MARK BOX AT RIGHT FOR ADDRESS CHANGE AND NOTE NEW ADDRESS AT LEFT [_] PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. Please sign exactly as name or names appear hereon. Joint owners should each sign personally. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person. DETACH CARD DETACH CARD TWO CONVENIENT WAYS TO VOTE YOUR PROXY The enclosed proxy statement provides details on important issues affecting your Liberty or Stein Roe Funds. The Board of Trustees recommends that you vote for the proposal. You can vote your proxies over the Internet or by telephone -- it's easy and confidential! If you are voting by Internet or telephone, you should NOT mail your proxy card. Vote by Internet: - Read the proxy statement and have your proxy card available. - Go to www.libertyfunds.com or www.steinroe.com. - Click on the proxy link and follow the instructions provided. Vote by telephone: - Read the proxy statement and have your proxy card available. - When you are ready to vote, call toll free 877-518-9416. - Enter the voter control number located on the upper left corner of your proxy card. - Follow the instructions provided to cast your vote. A representative will be available to answer questions regarding the meeting agenda and execution of proxies. INTERNET AND TELEPHONE VOTING ARE AVAILABLE 24 HOURS A DAY, SEVEN DAYS A WEEK. If you have any questions or concerns, please call 888-___-____ from 9:00 a.m. to 11:00 p.m. EDT Monday through Friday, and Saturdays from 12:00 to 6:00 p.m. -----END PRIVACY-ENHANCED MESSAGE-----