-----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, FShTjK+gUXAV1yINbPaxwpnBRh3B5PtyeFcIS/kZGsYin7oRhj6Q6NEF3V65iCSE zDMxIiAtYB5tS7lcZcUB2Q== 0000891804-03-000650.txt : 20030307 0000891804-03-000650.hdr.sgml : 20030307 20030307120545 ACCESSION NUMBER: 0000891804-03-000650 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030307 EFFECTIVENESS DATE: 20030307 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-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-01829 FILM NUMBER: 03595663 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-30D 1 file001.txt LIBERTY ACORN FUNDS Liberty Acorn Funds Annual Report December 31, 2002 [PHOTO] Liberty Acorn Family of Funds Annual Report 2002 ================================================================================ >Why You May Not Have Received A 1099-DIV Tax Form for 2002 Liberty Acorn International Class A was the only Liberty Acorn fund that declared a distribution in 2002. Therefore, if you were a Liberty Acorn International Class A shareholder, and your total distribution was $10.00 or more, you were sent a 1099-DIV tax form. If you owned any other Liberty Acorn fund, there were no distributions in 2002 and we did not send you a 1099, unless you sold fund shares. We have managed the Liberty Acorn Funds so as to avoid paying capital gain distributions in 2002. It's bad enough to lose money and worse to have to pay capital gains taxes to boot. Liberty Acorn International Class A Distributions
Record Short-term Long-term and Income Capital Capital Reinvestment Ex-dividend Payable Dividend Gain Gain Price Date Date --------- ---------- --------- ------------ ----------- -------- December 2002 0.01 None None $15.23 12/6/02 12/11/02
================================================================================ >Net Asset Value Per Share as of 12/31/02
Liberty Liberty Acorn Liberty Liberty Acorn Liberty Acorn Fund International Acorn USA Foreign Forty Acorn Twenty - --------------------------------------------------------------------------------------- Class A $15.34 $15.32 $14.18 $10.24 $13.93 - --------------------------------------------------------------------------------------- Class B $15.13 $15.11 $14.01 $10.08 $13.73 - --------------------------------------------------------------------------------------- Class C $15.12 $15.11 $14.01 $10.09 $13.73 - ---------------------------------------------------------------------------------------
- ---------------------------- Not FDIC | May Lose Value | ----------------- Insured | No Bank Guarantee - ---------------------------- There is no assurance that the trends described in this report will continue or come to pass because, in part, economic and market conditions change frequently. An investment in any of these Funds presents certain risks, including stock market fluctuations due to economic and business developments. Liberty Acorn Family of Funds Annual Report 2002 Table of Contents Liberty Acorn Family of Funds Share Class Performance 2 Fund Performance vs. Benchmarks 3 Squirrel Chatter: Plastics 4 Liberty Acorn Fund In a Nutshell 6 At a Glance 7 Major Portfolio Changes 16 Statement of Investments 18 Liberty Acorn International In a Nutshell 8 At a Glance 9 Major Portfolio Changes 27 Statement of Investments 29 Portfolio Diversification 33 Liberty Acorn USA In a Nutshell 10 At a Glance 11 Major Portfolio Changes 34 Statement of Investments 35 Liberty Acorn Foreign Forty In a Nutshell 12 At a Glance 13 Major Portfolio Changes 38 Statement of Investments 39 Portfolio Diversification 41 Liberty Acorn Twenty In a Nutshell 14 At a Glance 15 Major Portfolio Changes 42 Statement of Investments 43 Liberty Acorn Family of Funds Statements of Assets and Liabilities 44 Statements of Operations 45 Statements of Changes in Net Assets 46 Financial Highlights 50 Notes to Financial Statements 56 Report of Independent Auditors 61 Board of Trustees and Management of Acorn 63 1 Liberty Acorn Family of Funds >Share Class Performance Average Annual Total Returns through 12/31/02
Class A Class B Class C Without With Without With Without With Sales Charge Sales Charge Sales Charge Sales Charge Sales Charge Sales Charge - ------------------------------------------------------------------------------------------------------------------------- Liberty Acorn Fund (6/10/70) - ------------------------------------------------------------------------------------------------------------------------- 3 month* 7.35% 1.18% 7.15% 2.15% 7.08% 6.08% - ------------------------------------------------------------------------------------------------------------------------- 1 year -13.82 -18.78 -14.37 -18.66 -14.38 -15.24 - ------------------------------------------------------------------------------------------------------------------------- 5 years 7.18 5.91 6.88 6.61 6.87 6.87 - ------------------------------------------------------------------------------------------------------------------------- 10 years 12.35 11.69 12.20 12.20 12.19 12.19 - ------------------------------------------------------------------------------------------------------------------------- Life of Fund 15.46 15.25 15.41 15.41 15.41 15.41 - ------------------------------------------------------------------------------------------------------------------------- Liberty Acorn International (9/23/92) - ------------------------------------------------------------------------------------------------------------------------- 3 month* 3.58% -2.37% 3.28% -1.72% 3.28% 2.28% - ------------------------------------------------------------------------------------------------------------------------- 1 year -16.46 -21.26 -17.07 -21.22 -17.02 -17.85 - ------------------------------------------------------------------------------------------------------------------------- 5 years 1.61 0.42 1.32 1.01 1.32 1.32 - ------------------------------------------------------------------------------------------------------------------------- 10 years 7.42 6.79 7.27 7.27 7.27 7.27 - ------------------------------------------------------------------------------------------------------------------------- Life of Fund 7.91 7.29 7.76 7.76 7.76 7.76 - ------------------------------------------------------------------------------------------------------------------------- Liberty Acorn USA (9/4/96) - ------------------------------------------------------------------------------------------------------------------------- 3 month* 8.16% 1.94% 8.02% 3.02% 8.02% 7.02% - ------------------------------------------------------------------------------------------------------------------------- 1 year -18.97 -23.63 -19.48 -23.51 -19.48 -20.29 - ------------------------------------------------------------------------------------------------------------------------- 5 years 2.60 1.40 2.33 1.99 2.33 2.33 - ------------------------------------------------------------------------------------------------------------------------- Life of Fund 9.28 8.26 9.05 9.05 9.05 9.05 - ------------------------------------------------------------------------------------------------------------------------- Liberty Acorn Foreign Forty (11/23/98) - ------------------------------------------------------------------------------------------------------------------------- 3 month* 2.91% -3.00% 2.75% -2.25% 2.75% 1.75% - ------------------------------------------------------------------------------------------------------------------------- 1 year -15.16 -20.04 -15.72 -19.93 -15.71 -16.55 - ------------------------------------------------------------------------------------------------------------------------- 3 year -19.55 -21.12 -19.97 -20.77 -19.94 -19.94 - ------------------------------------------------------------------------------------------------------------------------- Life of Fund 0.96 -0.48 0.58 0.09 0.60 0.60 - ------------------------------------------------------------------------------------------------------------------------- Liberty Acorn Twenty (11/23/98) - ------------------------------------------------------------------------------------------------------------------------- 3 month* 5.93% -0.16% 5.78% 0.78% 5.78% 4.78% - ------------------------------------------------------------------------------------------------------------------------- 1 year -8.17 -13.45 -8.77 -13.33 -8.77 -9.68 - ------------------------------------------------------------------------------------------------------------------------- 3 year 3.33 1.31 2.83 1.88 2.83 2.83 - ------------------------------------------------------------------------------------------------------------------------- Life of Fund 10.87 9.28 10.48 10.12 10.48 10.48 - -------------------------------------------------------------------------------------------------------------------------
* Quarterly numbers are not annualized. Past performance does not guarantee future results. Returns and value of an investment will vary, resulting in a gain or loss on sale. All results shown assume reinvestment of distributions. The "with sales charge" returns include the maximum 5.75% sales charge for Class A shares, the appropriate Class B contingent deferred sales charge for the holding period after purchase as follows: through first year - 5%, second year - 4%, third year -5%, fourth year - - 3%, fifth year - 2%, sixth year - 1%, thereafter - 0%; and the Class C contingent deferred sales charge of 1% for the first year only. Performance of the different share classes will vary based on differences in sales charges and fees associated with each class. Performance results reflect any voluntary waivers or reimbursements of Fund expenses by the Adviser or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. Class A, B and C share (newer class shares) performance information includes returns of the Fund's Class Z shares (the oldest existing Fund class) for periods prior to the inception of the newer class shares. The newer class shares were first offered for sale on October 16, 2000. These Class Z share returns are not restated to reflect any expense differential (e.g., Rule 12b-1 fees) between Class Z shares and the newer class shares. Had the expense differential been reflected, the returns for the periods prior to the inception of Class A, B and C shares would have been lower. 2 > Fund Performance vs. Benchmarks Class A shares, without Sales Charge, Average Annual Total Returns through 12/31/02+
4th* 1 3 5 10 Life Quarter year years years years of Fund - -------------------------------------------------------------------------------------------------- Liberty Acorn Fund (6/10/70) 7.35% -13.82% 0.00% 7.18% 12.35% 15.46% - -------------------------------------------------------------------------------------------------- S&P 500 8.44% -22.10% -14.55% -0.59% 9.35% 11.65% - -------------------------------------------------------------------------------------------------- Russell 2000 6.16% -20.48% -7.54% -1.36% 7.15% NA - -------------------------------------------------------------------------------------------------- Lipper Small-Cap Core Funds Index 5.79% -19.23% -2.56% 1.39% 8.70% NA - -------------------------------------------------------------------------------------------------- Lipper Mid-Cap Core Funds Index 6.59% -17.37% -5.84% 2.90% 9.28% NA - -------------------------------------------------------------------------------------------------- Liberty Acorn International (9/23/92) 3.58% -16.46% -19.39% 1.61% 7.42% 7.91% - -------------------------------------------------------------------------------------------------- EMI Global ex-US 4.82% -6.89% -11.44% -1.10% 3.00% 2.45% - -------------------------------------------------------------------------------------------------- EAFE 6.45% -15.94% -17.24% -2.89% 4.01% 3.44% - -------------------------------------------------------------------------------------------------- Lipper Int'l Small- Cap Funds Index 3.02% -7.95% -13.54% 2.93% NA NA - -------------------------------------------------------------------------------------------------- Liberty Acorn USA (9/4/96) 8.16% -18.97% -4.40% 2.60% -- 9.28% - -------------------------------------------------------------------------------------------------- Russell 2000 6.16% -20.48% -7.54% -1.36% -- 3.53% - -------------------------------------------------------------------------------------------------- Lipper Small-Cap Core Funds Index 5.79% -19.23% -2.56% 1.39% -- 5.67% - -------------------------------------------------------------------------------------------------- S&P 500 8.44% -22.10% -14.55% -0.59% -- 6.31% - -------------------------------------------------------------------------------------------------- Liberty Acorn Foreign Forty (11/23/98) 2.91% -15.16% -19.55% -- -- 0.96% - -------------------------------------------------------------------------------------------------- EAFE 6.45% -15.94% -17.24% -- -- -6.78% - -------------------------------------------------------------------------------------------------- SSB World ex-US Cap Range $2-$10B 3.95% -9.18% -10.33% -- -- -1.99% - -------------------------------------------------------------------------------------------------- Lipper International Funds Index 6.64% -13.83% -15.99% -- -- -4.31% - -------------------------------------------------------------------------------------------------- Liberty Acorn Twenty (11/23/98) 5.93% -8.17% 3.33% -- -- 10.87% - -------------------------------------------------------------------------------------------------- S&P MidCap 400 5.83% -14.51% -0.05% -- -- 6.04% - -------------------------------------------------------------------------------------------------- Lipper Mid-Cap Growth Index 4.70% -28.47% -22.06% -- -- -1.57% - -------------------------------------------------------------------------------------------------- S&P 500 8.44% -22.10% -14.55% -- -- -5.32% - --------------------------------------------------------------------------------------------------
+ Class A shares (newer class shares) performance information includes returns of the Funds' Class Z shares (the oldest existing Fund class) for periods prior to the inception of the newer class shares. * Quarterly numbers are not annualized. Past performance does not guarantee future results. Mutual fund performance changes over time. Please visit libertyfunds.com for daily performance updates. The investment return and principal value of an investment in any Liberty Acorn Fund will fluctuate so that fund shares, when redeemed, may be worth more or less than their original cost. Description of indexes: S&P 500 is a broad, market-weighted average of U.S. blue-chip company stock performance. S&P Mid-Cap 400 is a broad market-weighted index of 400 stocks that are in the next size/tier down from the S&P 500. Russell 2000 is an unmanaged, market-weighted index of 2000 smaller U.S. companies, formed by taking the largest 3,000 companies and eliminating the largest 1,000. EMI Global ex-US is an index of the bottom 20% of institutionally investable capital of developed and emerging countries, selected by index sponsor, outside the U.S. EAFE is Morgan Stanley's Europe, Australasia and Far East Index, an unmanaged, widely recognized international benchmark that comprises 20 major markets in proportion to world stock market capitalization. SSB World ex-US Cap Range $2-$10 Billion is a subset of Salomon Smith Barney's Broad Market Index, representing a mid-cap developed market index excluding the U.S. Lipper Indexes include the largest funds tracked by Lipper, Inc. in the named category. Lipper Mid-Cap Core Funds Index -- 30 mid-cap core funds; Lipper Mid-Cap Growth Index -- 30 mid-cap growth funds; Lipper International Funds Index -- 30 largest non-U.S. funds, not including non-U.S. small cap funds; Lipper International Small-Cap Funds Index -- 10 largest non-U.S. funds investing in small cap companies, including Liberty Acorn International; Lipper Small-Cap Core Funds Index -- 30 largest small cap core funds, including Liberty Acorn Fund. All indexes are unmanaged and returns include reinvested distributions. A more complete description of each index is included in the Liberty Acorn Funds statement of additional information. It is not possible to invest directly in an index. 3 >Squirrel Chatter: Plastics [PHOTO] The movie "The Graduate" came out in 1967. There were several famous lines in the film, including Dustin Hoffman as Ben Braddock telling Anne Bancroft, "Mrs. Robinson, you're trying to seduce me!" (Good forecast!) Another was a poolside conversation between a Mr. McGuire and Ben. Mr. McGuire: "Ben, I want to say just one word to you -just one word." Ben: "Yes sir." Mr. McGuire, gravely: "Plastics." Ben: "Exactly how do you mean?" Mr. McGuire: "There's a great future in plastics. Think about it. Will you think about it?"(1) This instantly became the best one-liner of the decade. The question is, why was it funny? At the time, guitarist and potter were respected vocations. Looking for a means to make real money, perhaps by making plastics, was considered selling out. There was no shortage of musicians or artisans in the 60s. Most ended up stowing the guitar in an attic when a prospective spouse said, "Yeah, you're cool, but no way will I shack up with somebody who doesn't have a job. How do you intend to support our family?" How good was the advice about plastics? In fact, from 1980 to 2001 the plastics industry expanded steadily at a rate of 3.7%, a very satisfactory growth rate. The value of shipments for the plastics industry in 2000 was $132 billion and still growing. The amount of plastic use per person in the United States has more than doubled over the last 20 years, and the rest of the world is starting to catch up. Plastics technology has improved too. The LEXAN polycarbonate shell for your laptop or cell phone is a highly sophisticated component. So, there was nothing wrong with Mr. McGuire's idea. It was a whole lot better than telling Ben to look for work in the steel, textile or coal industries. Making good long-term forecasts is quite complicated. It's interesting to go back and find those who attempted to predict what the future might bring and see how they did. One guy who was brave enough to make a 100-year forecast was the famous economist John Maynard Keynes. He wrote an essay in 1930 called, "Economic Possibilities for our Grandchildren"(2) that was bold, interesting and likely to be correct. 1930 was not a happy year. The boom of the Twenties turned into the Great Depression. The banking system was collapsing. For the next half dozen years, the problems of unemployment, stagnation and poverty seemed overwhelming. Political revolution, either fascist or communist, was a real threat. Still, Keynes looked across the decades to a time of prosperity. Using the power of compound interest, he calculated that in the year 2030 per capita GDP might well be eight times what it was in 1930, assuming stable population and no important wars. The assumption of a stable population proved to be fairly accurate in Europe, North America and Japan, and generally incorrect for most of the rest of the world. The assumption of no important wars was violated in the late 1930s but despite that unfortunate event, the 2030 projections are still on target. Per capita GDP in the United States ($22,000) is four times what it was in 1929 and another doubling in the next 28 years is certainly plausible. Keynes' belief in future economic growth developed a concept barely over a century old at that time. He saw the great age of scientific and technological innovations as a harbinger of even greater things to come. He listed 15 areas that he believed would drive future economic growth. Power generation (coal, steam, electricity and petroleum) and materials (steel, rubber, cotton and the chemical industries) dominated his list, taking eight spots. Another three focused on machinery (automatic machinery, mass production and printing). Communication, in the form of the wireless, received just one position in the 15. He gave credit for recent advances to scientists such as Newton, Darwin and Einstein and "thousands of other things and men." He thought that future discoveries and inventions, in a peaceful society without excessive population growth, would be able to solve the economic problem of scarcity that had plagued mankind forever. There were some interesting industries on Keynes' list that were and are important but are not areas that anyone invests in anymore, such as coal, steam, rubber and cotton. (Steam power is now confined to the innards of electrical generating plants.) The chemical industry has continued to be crucial, including the sub-sectors of pharmaceuticals, fertilizers and, of course, plastics. However, the great chemical companies of Keynes' era -- DuPont, Dow, Rohm & Haas - -- have gone from being at the forefront of growth to becoming commodity-producing companies barely earning their cost of capital. Forbes recently wrote on DuPont, describing it as a low-return, struggling company.(3) Keynes would have undoubtedly been surprised to see the vast expansion of electronics and computers. Today when one talks about technology stocks one means primarily the computer industry, and plastics don't count. However, there are strong signs that many high-tech categories are becoming commodities too (cell phones, DRAMs, PCs). Keynes gave very good advice. The long-term future of the world was excellent despite the horrid short-term problems of the Great Depression. Mr. McGuire was right. Plastics was a fine growth industry. Still, advising Ben to go to work for IBM would have been even better advice. Rotation continues. Once-great companies have disappeared or have become relatively unimportant - -Pennsylvania Railroad, U.S. Steel, A&P, and (alas) FAO Schwartz. The total economy grows steadily, but industries and companies go through a life cycle of birth, growth, maturity and decay. The objective of small-cap and mid-cap investing is to find companies in the growth stage and get out as they mature. Sounds easy enough. 4 2002 Scarlet A Winners "The political problem of mankind is to combine three things: Economic Efficiency, Social Justice, and Individual Liberty ... The third prefers, above everything, to give unhindered opportunity to the exceptional and aspiring."(4) We believe our analysts and portfolio managers are exceptional and aspiring. In addition to our stellar internal resources, we get valuable assistance from other members of the investment world. We honor these individuals with the coveted Scarlet A certificate. To win this prize for 2002, the recommended stock had to increase more than 40% and make more than $20 million on the domestic side. The international criteria were an increase of at least 30% and a $5 million gain. Natural gas producer XTO Energy topped the list of 2002 domestic winners. A terrific long-term holding for the funds, XTO (then Cross Timbers Oil) was a Scarlet A winner in 2000 as well. The credit, once again, goes to Brad Beago of Credit Lyonnais Securities for bringing us this idea. Also an encore appearance, prison management company Wackenhut earns a Scarlet A for Jim Macdonald of First Analysis for the second year in a row. Matt Reiner of Paradigm Capital Management earns the A for Avid Technology, a provider of digital editing software and systems. Small- and middle-market bank Anglo Irish Bank led the international winners. Credit goes to David Smith of Davy Stockbrokers in Dublin for this winning suggestion. Italian offshore oil and drilling company Saipem also earns a Scarlet A for 2002. We've held this stock for over seven years and, most recently, have turned to David Dudlyke of Credit Suisse First Boston and Peter Los of Rabo Securities for valuable insight and guidance on the stock. /s/ Ralph Wanger Ralph Wanger Chief Investment Officer, Liberty Wanger Asset Management, L.P. Lead Portfolio Manager, Liberty Acorn Trust - -------------------------------------------------------------------------------- Who Should Pay the Tax on Dividends? In the first quarter of 2002, "Squirrel Chatter" discussed dividends. What a good idea it would be to restore the practice of paying them! We suggested that institutions might soon start demanding dividends again and companies would therefore reinstate them. In January, the Bush administration proposed a series of tax changes including changing the taxation of dividends. There is a plausible theory of taxation that says every stream of income should be taxed, but only once. Single-taxation is true for corporate bond interest, but not true for dividends, which are taxed first at the corporate level and then at the shareholder level. Most other countries tax dividends only once. Bush suggested eliminating the tax to the shareholder, which we believe is better than the current approach, but not the correct solution. We feel the right way to do it is to make dividends deductible to the corporation (paid out of pre-tax income, the same way bond interest is handled). Then the shareholder getting the dividend would pay tax at his own tax rate. The administration plan to eliminate the tax at the shareholder level has some undesirable side effects. First, corporate managers have no incentive to increase dividends since their economics have not changed. Second, there would be unwelcome competition for income with the municipal bond community, the REIT industry, etc. In order to cure some of these defects, Bush's tax proposal then added on a cost-basis adjustment for undistributed profits. This would cause every shareholder to have to perform some arcane bookkeeping adjustments each year. The tax code should be simplified, not made more complex. However, in our opinion the basic idea of increasing dividends is terrific. Why do we want to see more dividends? From the shareholder's point of view, a dollar of certain dividend income is more valuable than the riskier prospects for a dollar in capital gains. Second, we believe leaving the cash in the corporate treasury is unwise. In certain cases, the money is either wasted repurchasing stock at bloated prices, used for foolish capital investments, or taken by management in the form of excessive stock option grants. Returning the money to the shareholders would reduce waste and mishandling. - ---------- (1) "The Graduate" is based on a book by the same name, written by Charles Webb and first published in 1963. (2) Keynes, John Maynard, Essays In Persuasion, Harcourt, Brace and Company, New York, 1932, pgs. 358-373. (3) Forbes, February 3, 2003, pgs. 54-60. (4) Keynes, John Maynard, Liberalism and Labour, 1926. 5 Liberty Acorn Fund >In a Nutshell [PHOTOS] Liberty Acorn Fund dropped 13.82% (Class A shares, without sales charge) in 2002, but still outperformed all of its benchmarks (see Page 3 for performance data). During the fourth quarter, Liberty Acorn Fund rose 7.35%, somewhat better than small-cap averages but slightly less than the large-cap S&P 500. While we are not happy to lose money during the year, we are proud that we have given back only a little of our bull market gains and that the Fund has great long-term performance. The Fund's outperformance for the year was the result of strong individual stock selection and relatively small investments in the worst groups. The Fund's best stocks were in a variety of industries. Commonwealth Bancorp's stock more than doubled in the year. Video-editing equipment producer Avid Technology showed a 90% jump, ladies' accessories company Coach bagged a 67% gain, while guard and prison company Wackenhut secured a 73% profit on a takeover. We had less than half the market weightings in biotech and technology equipment stocks, groups that halved during the year. Problem stocks for the year included Dynegy, off over 90%, AmeriCredit, down 75%, and THQ, which fell 59%. We have given up on Dynegy, but continue to hold AmeriCredit and THQ. We think AmeriCredit will recover when the economy improves and the consumer finance shakeout ends. We believe THQ will benefit when the video game cycle shifts from core gamer software to mass market titles. Technology and media stocks were the Fund's biggest winners in the fourth quarter. Avid more than doubled while employee timeclock maker Kronos booked a 50% gain. While both companies produce technology hardware, related software and services have been keys to their success. CATV company Mediacom rebounded 65% from a deeply discounted valuation, while Getty Images rose over 50% on improved free cash flow. A year ago we mentioned that we were buying computer software and services stocks. We thought the stocks were cheap, balance sheets were in good shape, costs were controlled, and revenue growth would eventually accelerate. We continued to buy during the year as additional opportunities arose. Our selections were off less than their group for the year, and were profitable in the fourth quarter. We recently added to the Fund's energy holdings because we believed that a number of energy stocks did not reflect an improved outlook for domestic natural gas. We think that purchases of these and numerous other stocks will prove rewarding over the long run. /s/ Ralph Wanger /s/ Charles P. McQuaid Ralph Wanger Charles P. McQuaid Lead Portfolio Manager Co-Portfolio Manager - -------------------------------------------------------------------------------- Money in the Banks Shareholders of Commonwealth Bancorp, a Philadelphia savings and loan, recently approved its sale to a subsidiary of the Royal Bank of Scotland. Commonwealth was our latest in a string of successful investments in banks and S&Ls. Many banks and S&Ls are regional franchises with loyal customers, high local market shares, and low cost deposits. The group benefits from being downstream from technology by cutting costs through computerization. The banking industry consists of thousands of independent entities in the United States. Since economies of scale exist, the industry has been consolidating and acquisition premiums appear justified. When purchased at the right price, bank stocks often prove rewarding. With nearly 200 public small-cap banks and S&Ls to chose from, there are lots of stocks to analyze. We welcome David Frank who joined us in 2002 to follow part of the group plus other financial services stocks. - -------------------------------------------------------------------------------- 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. Investments in foreign securities have special risks, including political or economic instability, higher costs, different regulations, accounting standards, trading practices and levels of information, and currency exchange rate fluctuations. As of 12/31/02, the Fund's positions in the holdings mentioned were: Commonwealth Bancorp, 0.1%; Avid Technology, 0.8%; Coach, 1.0%; Wackenhut, 0.0%; Dynegy, 0.0.%; AmeriCredit, 0.7%; THQ, 0.4%; Kronos, 0.8%; Mediacom, 0.3%; Getty Images, 0.6%. A 6 Liberty Acorn Fund >At a Glance Ticker Symbol: LACAX Pretax and After-tax Average Annual Total Returns (Based on Class A share returns) - -------------------------------------------------------------------------------- >Through December 31, 2002 ------------------------------------------------ 1 year 5 years 10 years ------------------------------------------------ Returns before NAV -13.82% 7.18% 12.35% taxes POP -18.78 5.91 11.69 - -------------------------------------------------------------------------------- Returns after taxes NAV -13.82 5.27 10.16 on distributions POP -18.78 4.03 9.51 - -------------------------------------------------------------------------------- Returns after taxes NAV -8.49 5.72 9.88 on distributions and POP -11.53 4.66 9.29 sale of fund shares - -------------------------------------------------------------------------------- Russell 2000 (pretax) -20.48 -1.36 7.15 - -------------------------------------------------------------------------------- S&P 500 (pretax) -22.10 -0.59 9.35 - -------------------------------------------------------------------------------- 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 Fund Portfolio Diversification - -------------------------------------------------------------------------------- >as a % of net assets, as of December 31, 2002 [THE FOLLOWING WAS REPRESENTED AS A PIE CHART IN THE PRINT MATERIAL] 22.7% Information Software/Services 12.6% Computer Related Hardware 6.7% Media 2.3% Telecommunications 1.1% 5.8% Real Estate 7.1% Energy/Minerals 9.3% Health Care 19.1% Consumer Goods/Services 13.7% Finance 11.8% Industrial Goods/Services 10.5% Other* * Other includes cash and other assets less liabilities of 10.1%. Foreign equities within the portfolio were 7.8% diversified by country as follows: 4.7% Europe; 1.4% Canada; 0.9% Asia without Japan; 0.2% Australia; 0.5% Japan; 0.1% Latin America. - -------------------------------------------------------------------------------- The Value of a $10,000 Investment in Liberty Acorn Fund - -------------------------------------------------------------------------------- >December 31, 1992 through December 31, 2002 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 6/10/1970, but until 10/16/2000, 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 10/16/2000 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 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 Adviser or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. The S&P 500 is a broad, market-weighted average of U.S. blue-chip company stock performance. 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. Indexes are 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. Past performance does not guarantee future results. Performance changes over time. Visit libertyfunds.com for daily updates. Total Net Assets: $5,740.6 million Line Chart: Libery Liberty Acorn Acorn with without sales sales Russell S&P charge charge 2000 500 12/31/92 10000 9425 10000 10000 10430 9830.28 10338.5 10086.3 10400.8 9802.75 10099.7 10223.8 10963.5 10333.1 10427.4 10439.5 10688.3 10073.7 10141.2 10187.2 11569 10903.8 10589.9 10459.7 11700.9 11028.1 10656 10490.4 11641.2 10971.9 10803.1 10448.1 12409.5 11696 11269.8 10844.6 12771.9 12037.5 11587.9 10761.5 13258.5 12496.1 11886.1 10984 12757.3 12023.8 11494.9 10879.3 13231.9 12471.1 11887.9 11010.9 13298.1 12533.4 12260.6 11385.1 13137.2 12381.8 12216.3 11076.2 12501.3 11782.5 11571.3 10593.2 12605.1 11880.3 11640.1 10729.1 12462.6 11746 11509.4 10905.2 12036.4 11344.3 11118.5 10637.9 12425.2 11710.8 11301.2 10987.2 12998 12250.6 11931 11437.6 12835.5 12097.5 11891 11157.9 12788 12052.7 11844.1 11408.6 12290.6 11583.9 11365.7 10993.1 12246.3 11542.2 11671.1 11156.2 12016.1 11325.2 11523.9 11445.5 12406.6 11693.2 12003.2 11891.6 12586.5 11862.8 12210 12242.5 12726.2 11994.5 12481.5 12603 13116.9 12362.7 12696.1 13106.7 13646.9 12862.2 13354.6 13411.1 14310.1 13487.3 14124 13855.9 14461.8 13630.2 14416.2 13890.7 14755.4 13906.9 14673.6 14477 14138.6 13325.6 14017.3 14425.2 14543 13706.7 14606.2 15058.4 14794.5 13943.9 14991.6 15348.5 15034.2 14169.7 14975.6 15870.9 15622 14723.8 15442.3 16018 15926.7 15010.9 15756.6 16172.2 16775.6 15811 16599.1 16410.7 17374.5 16375.4 17253.3 16833.8 17037.4 16057.7 16544.8 16898.1 16158.3 15229.2 15099.7 16151.6 16777.1 15812.4 15976.2 16492.3 17394.5 16394.3 16600.8 17420.5 17305.8 16310.7 16344.9 17901 17792.1 16769.1 17018.4 19254 18131.9 17089.3 17464.4 18872.5 18770.2 17690.9 17813.5 20051.6 18529.9 17464.5 17381.5 20128.2 17686.8 16669.8 16561.3 19378.5 17784.1 16761.5 16607.5 20535.3 19194.4 18090.7 18455.1 21785.6 20075.4 18921 19246 22761.6 21103.2 19889.8 20141.6 24572.6 21200.3 19981.3 20602.5 23196.1 22826.4 21513.9 22110.4 24466.4 22153 20879.2 21139.1 23649.3 22153 20879.2 21002.3 24744.1 22662.5 21359.4 21370 25169 22261.4 20981.4 21032.7 25447.5 23888.7 22515.1 22588 27282.8 25381.8 23922.3 23519.6 28680 25754.9 24274 23649.6 28968.4 24781.3 23356.4 22376 28470.6 25311.7 23856.2 22423 29627 23876.5 22503.6 20607.8 29311.5 19521.4 18398.9 16606.2 25073.7 20374.5 19203 17905.8 26680 21403.4 20172.7 18636.1 28850.2 22283.1 21001.8 19612.4 30598.7 24025.6 22644.2 20826 32362 24011.2 22630.6 21102.8 33715.2 22928.3 21609.9 19393.5 32667.4 23171.3 21839 19696.3 33974.3 25066.8 23625.4 21461.3 35290.1 25465.3 24001.1 21774.8 34456.7 26825.2 25282.7 22759.4 36369 27214.1 25649.3 22135 35233.4 26419.5 24900.4 21315.7 35059.1 26274.2 24763.4 21320.4 34097.9 27067.7 25511.3 21406.7 36255.7 28986.8 27320 22684.9 36992.7 32039.1 30196.8 25252.9 39171.5 31260.5 29463 24847.3 37203.4 33576.9 31646.2 28950.5 36499.2 32176.8 30326.6 27041.8 40069.8 31069.9 29283.4 25414.5 38864.3 30414.3 28665.5 23933.3 38066.9 31588.3 29772 26019.6 39005.3 31717.8 29894 25182.5 38395.5 34030 32073.3 27104 40780.4 34598.3 32608.9 26307.3 38627.5 33698.8 31761.1 25133 38464.2 31926.2 30090.5 22553.1 35431.7 35224.2 33198.8 24490 35605.1 35858.2 33796.4 25765 36868.3 34936.7 32927.8 24074.4 33506.6 33340.1 31423 22896.8 31384 36270.7 34185.1 24688 33822.8 37808.5 35634.6 25294.8 34049.4 38303.8 36101.4 26168.3 33220.7 37553.1 35393.8 24751.8 32893.7 36054.7 33981.6 23952.3 30834.5 31144.1 29353.3 20728.1 28344.5 32477 30609.6 21941.1 28885 34951.8 32942.1 23639.7 31100.7 37181.7 35043.8 25098.8 31373.2 36806.2 34689.8 24837.8 30915.3 36324 34235.4 24157 30319.1 38975.7 36734.6 26098.6 31459.4 38870.4 36635.4 26336.4 29552.1 37681 35514.3 25167.6 29334.4 35759.2 33703.1 23918.8 27244.6 31496.8 29685.7 20306.3 25121 31748.7 29923.2 20254.6 25286 29847 28130.8 18800.1 22537.9 31100.5 29312.3 19402.8 24521.6 33106.5 31202.9 21134.4 25964.9 12/31/02 32045.8 30205.4 19957.7 24439.5 Without Class A Class B Class C Class Z sales charge $32,046 $31,610 $31,589 $32,446 - -------------------------------------------------------------------------------- With sales charge $30,205 $31,610 $31,589 N/A - -------------------------------------------------------------------------------- Liberty Acorn Fund - A at NAV $32,046 Liberty Acorn Fund - A with sales charge $30,205 S&P 500 $24,440 Russell 2000 $19,958 - -------------------------------------------------------------------------------- Liberty Acorn Fund Top 10 Holdings (as a % of net assets) - -------------------------------------------------------------------------------- 1. International Game Technology 3.2% Slot Machines & Progressive Jackpots 2. XTO Energy 2.1% Natural Gas Producer 3. Expeditors International of Washington 1.6% International Freight Forwarder 4. First Health Group 1.6% PPO Network 5. Harley-Davidson 1.2% Motorcycles & Related Merchandise 6. Lincare Holdings 1.2% Home Health Care Services 7. TCF Financial 1.1% Great Lakes Bank 8. SEI Investments 1.1% Mutual Fund Administration & Investment Management 9. Coach 1.0% Designer & Retailer of Branded Leather Accessories 10. Peoples Bank Bridgeport 1.0% Connecticut Savings & Loan 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. - -------------------------------------------------------------------------------- 7 A Liberty Acorn International >In a Nutshell [PHOTO] Liberty Acorn International rose 3.58% (Class A shares, without sales charge) in the fourth quarter. Making some money was welcome after the unrelenting market declines of last summer, and the bounce helped to trim the Fund's loss for the year a bit. The Fund's 16.46% drop for the year was in line with the large-cap oriented EAFE Index but worse than the Fund's smaller cap benchmark, the EMI Global ex-US Index, which only slid 6.89%. However, the Lipper Small-Cap Funds Average* lost 12.13%, which suggests that the benchmark held a lot of stocks that the fund managers didn't own. One of the differences between Liberty Acorn International's portfolio and that of the EMI Global ex-US Index is market capitalization. A main driver of the benchmark's outperformance for the year was the outperformance of micro-caps (companies smaller than $250 million). The median size of companies in our portfolio at the end of December was $640 million vs. $334 million for our small-cap benchmark. The smallest stocks slid the least in a year when nothing worked. What did the portfolio look like at the end of the year? The number of holdings in the Fund was up only slightly from last year, at 168 names. But the Fund assets were more evenly spread across the portfolio. Increasing diversification reduced risk, evidenced by the fact that portfolio volatility was less than two-thirds that of the EAFE Index. We also brought the median market capitalization down by $342 million from $982 million a year ago. The embedded dividend yield rose to 2.6%, but we did not pass on taxable income to shareholders. Greater tax efficiency is one of the few benefits of the bear market. In many respects, today's environment is a mirror image of 1999. Our mood then was ebullient and our valuation models were stretched. Now our mood is muted, and our valuation models have room for error. We don't expect the bull's return anytime soon, but we think the bear must be getting tired by now. We continue to believe that discipline and teamwork should pay off in a world where stock picking is king. /s/ Leah Joy Zell Leah Joy Zell Lead Portfolio Manager - -------------------------------------------------------------------------------- Harmony Is Good As Gold Likely the largest gold miner you've never heard of, Harmony Gold came into being over the last five years through the consolidation of several South African gold mines. It is currently the fifth largest producer of gold in the world. We added the stock to Liberty Acorn International's portfolio in March 2002 because it was trading at a substantial discount to better-known gold companies. With the listing of Harmony's ADRs* on the New York Stock Exchange in December 2002, we expected the valuation gap to its higher-trading peers to decline and boost the share price. The Fund's investment in the stock was up 29% at year-end. * An ADR, or American Depository Receipt, is a certificate issued by a U.S. bank and traded in the U.S. as domestic shares. The certificate represents the number of foreign securities the U.S. bank holds in that security's country of origin. - -------------------------------------------------------------------------------- * The Lipper Small-Cap Funds Average is an equally-weighted average return of all funds in the Lipper International Small-Cap category. As of December 31, 2002, the total number of funds in the category was 98. Investments in foreign securities have special risks, including political or economic instability, higher costs, different regulations, accounting standards, trading practices and levels of information, and currency exchange rate fluctuations. 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 12/31/02, the Fund's position in Harmony Gold was 0.9%. I 8 Liberty Acorn International >At a Glance Ticker Symbol: LAIAX Pretax and After-tax Average Annual Total Returns (Based on Class A share returns) - -------------------------------------------------------------------------------- >Through December 31, 2002 ------------------------------------------ 1 year 5 years 10 years ------------------------------------------ Returns before NAV -16.46% 1.61% 7.42% taxes POP -21.26 0.42 6.79 - -------------------------------------------------------------------------------- Returns after taxes NAV -16.48 0.45 6.55 on distributions POP -21.28 -0.73 5.92 - -------------------------------------------------------------------------------- Returns after taxes NAV -10.10 1.63 6.37 on distributions and POP -13.05 0.66 5.81 sale of fund shares - -------------------------------------------------------------------------------- EMI Global -6.89 -1.10 3.00 ex-US (pretax) - -------------------------------------------------------------------------------- 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 International Portfolio Diversification - -------------------------------------------------------------------------------- >as a % of net assets, as of December 31, 2002 [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL] 20.8% Industrials 0.5% Computer Software 0.7% Computer Hardware 0.6% Telecom 0.9% Technology Services 5.5% Broadcasting & Media Content 7.6% Business Services 9.3% Health Care 19.3% Other Industries 19.0% Consumer Goods & Services 9.4% Financials 6.4% Other* * Cash and other assets less liabilities. - -------------------------------------------------------------------------------- The Value of a $10,000 Investment in Liberty Acorn International - -------------------------------------------------------------------------------- >December 31, 1992 through December 31, 2002 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 9/23/1992, but until 10/16/2000, 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 10/16/2000 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 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 Adviser or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. The EMI Global ex-US is Salomon Smith Barney's index of the bottom 20% of institutionally investable capital of developed and emerging countries, as selected by Salomon, excluding the U.S. The index is unmanaged and returns for the index and Fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. Past performance does not guarantee future results. Performance changes over time. Visit libertyfunds.com for daily updates. Total Net Assets: $1,311.4 million Line Chart:
Liberty Acorn Liberty Acorn International International EMI with sales without Global charge charge ex-US 12/31/92 10000 9425 10000 10084 9504.17 10089.3 10720.3 10103.9 10448.1 11225.2 10579.8 11500 11646.2 10976.5 12556 12075.9 11381.5 13222.1 12085.6 11390.7 12714.3 12085.6 11390.7 13105.9 12871.1 12131 13782.1 13011.4 12263.3 13494.5 13619.1 12836 13447 13674.9 12888.6 12322.8 14909.8 14052.4 13114.6 15555.3 14660.9 14426.2 15499.3 14608.1 14527.1 14825.1 13972.7 14289.4 14927.4 14069.1 14716.9 14843.8 13990.3 14504.1 14544 13707.7 14806.7 14946.9 14087.4 14981.5 15416.2 14529.8 15152 15425.4 14538.5 14720.6 15453.2 14564.6 14969.4 14597.1 13757.8 14106.1 14343.1 13518.4 14193.3 13693.4 12906 13602.6 13608.5 12826 13378.4 13853.4 13056.8 13892.4 14277.3 13456.4 14324.5 14502.9 13669 14141.1 14710.3 13864.5 13984.8 15510.5 14618.7 14768.4 15350.8 14468.1 14418.9 15737.6 14832.7 14515.9 15248.2 14371.4 14082 15031.6 14167.3 14203.2 15625.4 14726.9 14737.1 16237.9 15304.2 15084.9 16728.3 15766.4 15261 17029.4 16050.2 15582.8 17576.1 16565.4 16386.3 18094.5 17054.1 16258 18329.8 17275.8 16250.4 17745.1 16724.7 15619.5 18000.6 16965.5 15774.5 18114 17072.4 15862.5 18293.3 17241.5 15761.5 18794.6 17713.9 16033.5 18854.7 17770.5 15628 19307.2 18197 15403 19548.5 18424.5 15712.3 19259.2 18151.8 15517 18980 17888.6 15306.3 19807.5 18668.6 16209 20403.7 19230.5 16620.4 20538.4 19357.4 16460.1 19449.8 18331.5 15739.7 20266.7 19101.4 15991.4 19168.3 18066.1 15216.1 18965.1 17874.6 14511.1 18891.1 17804.9 14209.2 19157.5 18055.9 14655.2 20697.8 19507.6 15763.4 22320.5 21037 16525.6 22782.5 21472.5 16659.3 23172.1 21839.7 16800.8 22766.6 21457.5 16208.7 22912.3 21594.8 16106.3 19991 18841.5 13989.7 19111.3 18012.5 13679.6 19749.7 18614.1 14622.2 20869.5 19669.5 15125.9 21802.3 20548.7 15446.5 22306 21023.4 15338.8 21636.8 20392.7 15051.4 22056.5 20788.3 15703.5 23375.5 22031.4 16661.3 23522.8 22170.2 16251.8 25470.5 24005.9 16884 26377.2 24860.5 17428.7 27136.9 25576.5 17735.4 27590.1 26003.7 17654.8 28782 27127 17493.8 33093.5 31190.6 18123 39076.8 36829.9 19356.6 38932.2 36693.6 18987.6 45192.6 42594 19718.1 43800.6 41282.1 19805.7 38702.2 36476.8 18505.2 35826.7 33766.6 18118.2 37589.3 35427.9 19218.7 37119.4 34985.1 18581.9 37954.6 35772.2 19114 36019 33947.9 18132.6 33339.2 31422.1 17035.4 30612 28851.8 16284.7 31239.5 29443.3 16921.2 32642.2 30765.3 17236.3 30282.2 28541 16566.6 27359.9 25786.8 15283.5 28407.8 26774.4 16283.8 28211.8 26589.6 16251.1 26818.2 25276.1 15699.8 25737.4 24257.5 15239.4 25204.6 23755.3 15197.5 21759.2 20508 13218.9 22786.2 21476 13756 24055.4 22672.2 14321.5 24495.6 23087.1 14439.4 23895.4 22521.5 14178 23814.2 22444.9 14415.3 25043 23603 15354.5 25856.9 24370.1 15674.2 25738 24258 16175.8 24682.7 23263.5 15544.9 22066.3 20797.5 14216.3 21706.7 20458.5 14130.4 19757.4 18621.3 12826.7 19850.3 18708.9 13116.5 20451.7 19275.8 13606.8 12/31/02 20432.8 19257.9 13444.8
Without Class A Class B Class C Class Z sales charge $20,460 $20,168 $20,168 $20,680 - -------------------------------------------------------------------------------- With sales charge $19,283 $20,168 $20,168 N/A Liberty Acorn International - A at NAV $20,460 Liberty Acorn International - A with sales charge $19,283 EMI Global ex-US $13,445 - -------------------------------------------------------------------------------- Liberty Acorn International Top 10 Holdings (as a % of net assets) - -------------------------------------------------------------------------------- 1. Rhoen-Klinikum (Germany) 2.2% Hospital Management 2. Neopost (France) 1.5% Postage Meter Machines 3. Power Financial (Canada) 1.3% Life Insurance & Mutual Funds 4. Kerry Group (Ireland) 1.2% Food Ingredients 5. Anglo Irish Bank (Ireland) 1.2% Small Business & Middle Market Banking 6. Hunter Douglas (Netherlands) 1.2% Decorative Window Coverings 7. Kaba Holdings (Switzerland) 1.1% Building Security Systems 8. Geberit International 1.1% (Switzerland) Plumbing Supplies 9. Amer Group (Finland) 1.1% Branded Sporting Goods 10. Pargesa (Switzerland) 1.0% Industrial & Media Conglomerate 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. - -------------------------------------------------------------------------------- 9 I Liberty Acorn USA >In a Nutshell [PHOTO] Liberty Acorn USA ended the year on a strong note. The Fund was up 8.16% (Class A shares, without sales charge) for the fourth quarter, outperforming the 6.16% gain of the Russell 2000. The fourth quarter rally was not enough to undo the declines of earlier quarters but Liberty Acorn USA did perform better than the benchmark for the year. The Fund was off 18.97% vs. a 20.48% decline for the Russell 2000. The market bottomed out at the end of October and previously pummeled tech stocks were the first to bounce back. Kronos, a provider of labor management software, was among the Fund's best performers for the quarter and the year. The company has maintained double-digit revenue growth throughout the technology depression. We added Kronos to the Fund mid-year, capturing the best portion of the stock's 2002 performance. Group 1 Software was also a winner for the year and quarter. Group 1 sells address verification software that cleanses data used in customer relationship management software, essentially providing the little system that makes the big system work. Zebra Technologies, a manufacturer of bar code printers, rose 24% in 2002 as new applications for its product were unveiled. Outside the technology sector, annual winners included security company Wackenhut, which increased over 73% when acquired by Group 4 Falck early in the year. ITT Educational Services gained 28%, benefiting from growing enrollment as people looked for ways to increase job skills in this tight economy. Steris, a manufacturer of equipment sterilization devices, enjoyed a 34% gain thanks to strong growth in its hospital sales and building sales momentum in the scientific and industrial sectors. Coach, designer and retailer of leather accessories, benefited from well-received extensions to its product line, increasing 65% in Liberty Acorn USA. The worst performer for the year was auto-lender AmeriCredit. Although we believe company fundamentals are sound, industry-wide concerns and the negative impact of a stock offering late in the year crushed its stock price. Nursing home operator Beverly Enterprises declined as lawsuit furor in the industry made it necessary to build liability reserves, hurting the company's bottom line. JDA Software dropped as orders for its retailing software slowed in response to the weak economy. NDCHealth Group, a provider of drug marketing services, suffered along with pharmaceutical manufacturers as pharmaceutical sales slowed in the year. In December 1999, Amazon.com CEO Jeff Bezos was named Time magazine's Person of the Year. Talk about bad 'Timing!' One year later, the NASDAQ was 39% lower and Amazon's own stock price had tumbled 80%. This past December, Time selected three corporate whistle blowers as its Persons of the Year 2002. Hmm... We already learned the lesson that when CEO's ruled the world and graced the covers of our national newsmagazines, it was a bad time to buy stocks. Is it possible that today, when CEO's are doing perp walks and corporate vigilantes are our new cover girls, we all should be buying stocks? /s/ Robert A. Mohn Robert A. Mohn Lead Portfolio Manager - -------------------------------------------------------------------------------- Turning Dirt Into Dollars Attracted to its unique franchise in the consumer lawn and garden products category, we first purchased Scotts Company in June 2002. Scotts has excellent brand names (Scotts, MiracleGro, Ortho, Roundup) that allow it to garner high market share in a category that has been experiencing strong revenue growth. Management is also in the midst of a multi-year process of transforming the company to be a more innovative, marketing driven, traditional consumer products company with efficient manufacturing and distribution capabilities. Scotts' goal: "To be the Procter & Gamble of lawn and garden." We believe this process along with continued investment in its brands should result in higher returns on capital and ultimately a higher valuation. Since the Fund's initial purchase, Scotts is up nearly 17%. - -------------------------------------------------------------------------------- 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 12/31/02, the Fund's positions in the holdings mentioned were: Kronos, 2.7%; Group 1 Software, 0.9%; Zebra Technologies, 2.3%; Wackenhut, 0.0%; Group 4 Falck, 0.0%; ITT Educational Services, 3.9%; Steris, 2.4%; Coach, 0.6%; AmeriCredit, 2.0%; Beverly Enterprises, 0.0%; JDA Software, 2.6%; NDCHealth Group, 1.8%; Scotts Company, 2.5%. U 10 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, 2002 ------------------------------------------ Life of 1 year 5 years Fund ------------------------------------------ Returns before NAV -18.97% 2.60% 9.28% taxes POP -23.63 1.40 8.26 - -------------------------------------------------------------------------------- Returns after taxes NAV -18.97 1.74 8.43 on distributions POP -23.63 0.55 7.42 - -------------------------------------------------------------------------------- Returns after taxes NAV -11.65 2.00 7.58 on distributions and POP -14.51 1.02 6.70 sale of fund shares - -------------------------------------------------------------------------------- Russell 2000 (pretax) -20.48 -1.36 3.53 - -------------------------------------------------------------------------------- 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, 2002 [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL] 38.1% Information Software & Services 24.1% Telecommunications 5.3% Media 4.6% Computer Related Hardware 4.1% 4.8% Energy/Minerals 5.8% Industrial Goods/Services 9.8% Finance 20.6% Health Care 12.3% Consumer Goods/Services 8.6% Other* * Other includes cash and other assets less liabilities of 7.8%. - -------------------------------------------------------------------------------- The Value of a $10,000 Investment in Liberty Acorn USA - -------------------------------------------------------------------------------- >September 4, 1996 through December 31, 2002 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 9/4/1996, but until 10/16/2000, 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 10/16/2000 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 Adviser 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. Past performance does not guarantee future results. Performance changes over time. Visit libertyfunds.com for daily updates. Total Net Assets: $323.5 million Line Chart:
Liberty Liberty Acorn Acorn USA USA A with Russell A at NAV Sales charge 2000 9/4/96 10000 9425 10000 9/30/96 10720 10103.6 10359.9 10810 10188.5 10200.2 11259.8 10612.3 10620.5 12/31/96 11649.3 10979.5 10898.9 12209.7 11507.6 11116.7 11919.1 11233.7 10847.1 3/31/97 11479.3 10819.2 10335.3 11419.6 10762.9 10364.1 12509 11789.7 11517.1 6/30/97 13318.3 12552.5 12010.7 13998.9 13194 12569.6 14348.9 13523.8 12857.2 9/30/97 15338.9 14457 13798.3 15139.5 14269 13192.1 15169.8 14297.5 13106.8 12/31/97 15412.5 14526.3 13336.2 15076.5 14209.6 13125.7 16320.4 15381.9 14096.3 3/31/98 17400.8 16400.2 14677.7 17992.4 16957.8 14758.8 17227.7 16237.1 13964 6/30/98 17525.8 16518 13993.4 16593.4 15639.3 12860.5 13936.8 13135.4 10363.3 9/30/98 14152.8 13339 11174.3 14655.2 13812.5 11630.1 15404.1 14518.4 12239.4 12/31/98 16306.8 15369.1 12996.7 15778.4 14871.2 13169.4 14896.4 14039.9 12102.8 3/31/99 15017.1 14153.6 12291.7 16096.8 15171.2 13393.2 16735.9 15773.5 13588.8 6/30/99 17651.3 16636.4 14203.3 18048.5 17010.7 13813.6 16823 15855.7 13302.3 9/30/99 16866.7 15896.9 13305.2 17860.2 16833.2 13359.1 18810.3 17728.7 14156.8 12/31/99 20059.3 18905.9 15759.4 19054.4 17958.7 15506.3 19868 18725.6 18066.9 3/31/00 19820.3 18680.6 16875.8 17568.7 16558.5 15860.3 16526.9 15576.6 14935.9 6/30/00 16834.3 15866.3 16237.9 16748.4 15785.4 15715.4 17765.1 16743.6 16914.5 9/30/00 17642.5 16628 16417.4 17642.5 16628 15684.5 16613.9 15658.6 14074.5 12/31/00 18230.5 17182.2 15283.3 19382.6 18268.1 16079 19320.6 18209.7 15023.9 3/31/01 18866.6 17781.7 14289 21145.7 19929.8 15406.9 22321.3 21037.9 15785.6 6/30/01 22933 21614.3 16330.6 23164.6 21832.6 15446.7 22516 21221.3 14947.8 9/30/01 19257.9 18150.6 12935.6 19306 18196 13692.6 20433.5 19258.6 14752.6 12/31/01 21628.9 20385.2 15663.2 21875.5 20617.6 15500.3 21120.8 19906.3 15075.5 3/31/02 22911.8 21594.4 16287.1 23246.3 21909.6 16435.6 21923.6 20663 15706.1 6/30/02 20601.6 19417 14926.8 17783.3 16760.8 12672.4 17511.2 16504.3 12640.1 9/30/02 16201.4 15269.8 11732.4 16967.7 15992.1 12108.6 18438.8 17378.6 13189.2 12/31/02 17527.5 16519.7 12454.8
Without Class A Class B Class C Class Z sales charge $17,527 $17,298 $17,298 $17,744 - -------------------------------------------------------------------------------- With sales charge $16,520 $17,298 $17,298 N/A - -------------------------------------------------------------------------------- Liberty Acorn USA - A at NAV $17,527 Liberty Acorn USA - A with sales charge $16,520 Russell 2000 $12,455 - -------------------------------------------------------------------------------- Liberty Acorn USA Top 10 Holdings (as a % of net assets) - -------------------------------------------------------------------------------- 1. First Health Group 4.6% PPO Network 2. ITT Educational Services 3.9% Technology-oriented Post-secondary Degree Programs 3. Micros Systems 3.7% Information Systems for Restaurants & Hotels 4. Kronos 2.7% Labor Management Solutions 5. Edwards Lifesciences 2.6% Heart Valves 6. JDA Software 2.6% Applications/Software & Services for Retailers 7. Salem Communications 2.6% Radio Stations for Religious Programming 8. Scotts Company 2.5% Consumer Lawn & Garden Products 9. Commonwealth Telephone 2.5% Rural Phone Franchises & CLEC 10. Lincare Holdings 2.4% Home Health Care Services 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. - -------------------------------------------------------------------------------- 11 U Liberty Acorn Foreign Forty >In a Nutshell [PHOTOS] Liberty Acorn Foreign Forty ended the year on a positive note, up 2.91% (Class A shares, without sales charge) for the fourth quarter. The Fund benchmark, the SSB World ex-US Cap Range $2-$10B Index, was up 3.95% and the EAFE Index increased 6.45% in the quarter. The Fund finished the year down 15.16%, ahead of EAFE, which was off 15.94%, but behind the SSB World ex-US Cap Range $2-$10B's 9.18% decline. Business spending continued to be down in 2002 but consumer spending remained strong and helped offset some of the weakness in equity markets. Mortgage activity, especially in the UK and Ireland, reached historic highs as refinancings and new home purchases showed no signs of slowing down. One major beneficiary of this was Irish Life & Permanent, the Fund's second best performer for the year. The strong mortgage market and new savings incentives initiated by the Irish government helped push the share price up 9% in 2002. The company has also been buying back shares. The Fund's best performer this year was another Irish financial name, Anglo Irish Bank. This niche, small business bank continues to take market share away from its larger competitors. For the year, the stock increased 85%. The rapid deceleration in telecommunications spending took its toll on Amdocs, the Fund's biggest loser for the year. Amdocs has a 20-year track record of providing excellent billing software and customer care services to communications providers around the globe. However, the company's substantial cash position and solid technology were not enough to combat the weak spending environment. Shortly after management announced weak earnings, the stock fell 78%. Other stocks that dragged down performance included Computershare, a share registry service based in Australia. The company was hurt by a decrease in corporate actions during the year and fell 50% after a profit warning. Nintendo, a manufacturer of video games and equipment in Japan, was down 47% for the year. The yen strengthened against the dollar, which translated into higher costs and lower revenues for Nintendo. The share price was also hurt by Nintendo's slow release of new game titles. It's impossible to say when the equity markets will recover. Although we believe valuations look reasonable, especially in Europe, the uncertainty created by possible military action in the Middle East will likely result in more market volatility. We will continue to look for opportunities to upgrade the holdings in the portfolio with stocks that represent better values. /s/ Todd M. Narter /s/ Christopher J. Olson Todd M. Narter Christopher J. Olson Co-Portfolio Manager Co-Portfolio Manager - -------------------------------------------------------------------------------- A Toast to Lion Nathan Lion Nathan is a beer brewer in Australia and New Zealand. It is a well-run company with a simple business model and many attributes we like to see in any stock. It is a high cash-flow business with solid earnings growth and a premium yield, paying out 70% of its earnings in dividends. Most importantly, it has a duopoly in the Australian beer market with its other major competitor, Fosters, which allows for greater control over pricing. Other avenues of growth include a large modern brewery in Suzhou, China and a selective foray into the premium wine business. We added the stock to the Fund in the summer of 2002 and it has increased 20% so far. - -------------------------------------------------------------------------------- Mid-cap stocks tend to be more volatile and may be less liquid than the stocks of larger companies. Investments in foreign securities have special risks, including political or economic instability, higher costs, different regulations, accounting standards, trading practices and levels of information, and currency exchange rate fluctuations. As of 12/31/02, the Fund's positions in the holdings mentioned were: Irish Life & Permanent, 1.6%; Anglo Irish Bank, 3.2%; Amdocs, 0.0%; Computershare, 0.0%; Nintendo, 0.0%, Lion Nathan, 3.8%. F40 12 Liberty Acorn Foreign Forty >At a Glance Ticker Symbol: LAFAX Pretax and After-tax Average Annual Total Returns (Based on Class A share returns) - -------------------------------------------------------------------------------- >Through December 31, 2002 ---------------------------------------- Life of 1 year 3 years Fund ---------------------------------------- Returns before NAV -15.16% -19.55% 0.96% taxes POP -20.04 -21.12 -0.48 - -------------------------------------------------------------------------------- Returns after taxes NAV -15.16 -19.66 0.84 on distributions POP -20.04 -21.23 -0.61 - -------------------------------------------------------------------------------- Returns after taxes NAV -9.31 -14.90 0.75 on distributions and POP -12.30 -16.01 -0.40 sale of fund shares - -------------------------------------------------------------------------------- SSB World ex-US Cap -9.18 -10.33 -1.99 Range $2-$10B (pretax) - -------------------------------------------------------------------------------- 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 Foreign Forty Portfolio Diversification - -------------------------------------------------------------------------------- >as a % of net assets, as of December 31, 2002 [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL] 10.6% Energy/Minerals 13.0% Information Technology 15.1% Industrial Goods/Services 20.2% Consumer Goods/Services 18.9% Finance 12.8% Health Care 9.4% Other* * Other includes cash and other assets less liabilities of 6.7%. - -------------------------------------------------------------------------------- The Value of a $10,000 Investment in Liberty Acorn Foreign Forty - -------------------------------------------------------------------------------- >November 23, 1998 through December 31, 2002 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 11/23/1998, but until 10/16/2000, 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 10/16/2000 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 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 Adviser or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. SSB World ex-US Cap Range $2-$10B is a subset of Salomon Smith Barney's Broad Market Index, representing a mid-cap developed market index excluding the U.S. The index is unmanaged and returns for the index and Fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. Past performance does not guarantee future results. Performance changes over time. Visit libertyfunds.com for daily updates. Total Net Assets: $33.4 million Line Chart:
Liberty Acorn Liberty Acorn SSB Foreign Foreing World ex-US Forty - A Forty - A Cap At NAV with sales charge Range $2-$10B 11/23/98 10000 9425 10000 10140 9556.95 10045.1 12/31/98 10999.9 10367.4 10338.8 11789.7 11111.8 10309.8 11589.2 10922.9 10051.8 3/31/99 11978.6 11289.9 10449.2 12238.6 11534.9 11032.4 12168.8 11469.1 10566.6 6/30/99 13108.2 12354.5 10952.7 13509.4 12732.6 11362 13770.1 12978.3 11489.6 9/30/99 13620 12836.9 11529.7 14130.7 13318.2 11535.1 16996.5 16019.2 11864.4 12/31/99 19972.5 18824.1 12771.7 19661 18530.5 12154.3 24240 22846.2 12310.7 3/31/00 23088.6 21761 12679.7 21255.4 20033.2 12171.7 18919.4 17831.5 11975.8 6/30/00 19848.3 18707.1 12610.8 19465.3 18346 12203.1 20263.3 19098.2 12586.3 9/30/00 19234 18128 12168 18487.7 17424.7 11791 16126.8 15199.5 11439.8 12/31/00 17307.3 16312.1 11998.2 17862.9 16835.8 11938.6 15814 14904.7 11505 3/31/01 13694.9 12907.5 10607.5 14411.2 13582.5 11390.6 14370.8 13544.5 11293.2 6/30/01 13761.5 12970.2 10999.4 13040.4 12290.6 10723.4 12766.5 12032.5 10626.2 9/30/01 10612.8 10002.6 9391.94 11283.5 10634.8 9769.16 11903 11218.6 10118.3 12/31/01 12258.9 11554 10140.2 11628.8 10960.2 9840.78 11486.9 10826.4 9990.63 3/31/02 11893.6 11209.7 10562.2 12258.7 11553.8 10755.6 12380.1 11668.2 11097.3 6/30/02 11993.8 11304.2 10712.1 10704.5 10089 9752.72 10897.2 10270.6 9729.61 9/30/02 10104.9 9523.9 8859.06 10084.7 9504.86 9017.25 10328.8 9734.87 9476.41 12/31/02 10401.2 9803.11 9209.34
Without Class A Class B Class C Class Z sales charge $10,401 $10,239 $10,249 $10,452 - -------------------------------------------------------------------------------- With sales charge $ 9,803 $10,039 $10,249 N/A - -------------------------------------------------------------------------------- Liberty Acorn Foreign Forty - A at NAV $10,401 Liberty Acorn Foreign Forty - A with sales charge $9,803 SSB World ex-US Cap Range $2-$10B: $9,209 - -------------------------------------------------------------------------------- Liberty Acorn Foreign Forty Top 10 Holdings (as a % of net assets) - -------------------------------------------------------------------------------- 1. Kerry Group (Ireland) 4.8% Food Ingredients 2. Synthes-Stratec (Switzerland) 4.6% Products for Orthopedic Surgery 3. Kaba Holdings (Switzerland) 4.5% Building Security Systems 4. Oriental Land (Japan) 4.4% Disney Theme Park Operator 5. Rhoen-Klinikum (Germany) 3.8% Hospital Management 6. Lion Nathan (Australia) 3.8% Beer Brewer/Distributor 7. Orix (Japan) 3.3% Finance Leasing 8. Anglo Irish Bank (Ireland) 3.2% Small Business & Middle Market Banking 9. Talisman Energy (Canada) 3.2% Oil & Gas Producer 10. TVB (Hong Kong) 2.8% Television Programming & Broadcasting 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. - -------------------------------------------------------------------------------- 13 F40 Liberty Acorn Twenty >In a Nutshell [PHOTO] Liberty Acorn Twenty gained 5.93% (Class A shares, without sales charge) during the fourth quarter, ahead of the S&P MidCap 400's 5.83% return but behind the S&P 500's 8.44% increase. For 2002, the Fund finished a difficult year down 8.17%, considerably ahead of the S&P MidCap 400's 14.51% loss and the S&P 500's 22.10% drop. We are never happy with a losing year, but on a relative basis the Fund did quite well. Boston Scientific followed 2001's 75% return with a 78% gain in 2002. Favorable legal rulings against a competitor solidified its position in the emerging drug-eluting stent market. Although Boston Scientific should see explosive growth in sales and earnings in 2004, the stock's current valuation reflects a scenario with little room for error, and after nearly tripling the Fund's money since August 2000, we sold the stock in early 2003 to search for new stocks with better risk/return characteristics. Fidelity National Financial, the country's largest title insurer, returned 26% for the Fund since our purchase early last year due to robust growth in home purchases and mortgage refinancings given the current low interest rate environment. Like Boston Scientific, we believe the stock is fully valued and have sold our position in the new year. During the fourth quarter, the Fund sold its long-held position in H&R Block for a 17% year-to-sale loss. H&R Block's business has been increasingly targeted for class action lawsuits surrounding its controversial refund anticipation loan program. Although these lawsuits today appear manageable, our initial analysis dramatically underestimated the magnitude and frequency of possible future adverse judgements. In addition, our confidence in management diminished considerably following their limited, initial disclosure of pending class action lawsuits against the company. The other significant dollar loss in the Fund came from Liberty Media, down 35% for the year. In Liberty's case, we have high conviction that management will continue to build business value through both private and public investments. We believe the stock at current levels is one of the most attractively valued securities in the Fund and accordingly, it is Liberty Acorn Twenty's largest position. It is never easy to take a loss, but our outstanding team of analysts is working hard to provide positive returns over a long period with, most importantly, below average risk. I am very grateful to Ralph Wanger, Chuck McQuaid, Rob Mohn, Jason Selch, Ben Andrews, Susie Hultquist, Harold Lichtenstein, Grant McKay, Rob Chalupnik, Todd Griesbach, and David Frank for all their help with the Fund and for providing compelling stock ideas. Thanks also to traders Deb Wolfe, Shelley Maish, and Mike Olah. Finally, we thank you for your continued investment in Liberty Acorn Twenty. /s/ John H. Park John H. Park Lead Portfolio Manager - -------------------------------------------------------------------------------- A Change of Heart We purchased Guidant in December to replace Boston Scientific, which we sold in January 2003. Guidant in many ways reminds us of Boston Scientific two years ago when the Fund first purchased its stock. Like Boston Scientific, Guidant is a major player in the cardiac medical device industry. It has an undervalued business (implantable cardiac defibrillators) overshadowed by problems in its coronary stent division. Again, similar to Boston Scientific, Guidant is developing new products (drug eluting stents) for its stent business that we believe should pay off over the next five years, but short-term sales and earnings will be negatively affected by loss of market share to new technology. Most importantly, like Boston in late 2000, investors are paying nothing for this new product in today's stock price and we believe they are getting a good core business at a discounted valuation. - -------------------------------------------------------------------------------- Liberty Acorn Twenty is a non-diversified fund. The performance of each of its holdings will have a greater impact on the Fund's total return, and may make the Fund's returns more volatile than a more diversified fund. Mid-cap stocks tend to be more volatile and may be less liquid than the stocks of larger companies. As of 12/31/02, the Fund's positions in the holdings mentioned were: Boston Scientific, 5.6%; Guidant, 4.4%; Fidelity National Financial, 2.7%; H&R Block, 0.0%; Liberty Media, 8.6%. 14 Liberty Acorn Twenty >At a Glance Ticker Symbol: LTFAX Pretax and After-tax Average Annual Total Returns (Based on Class A share returns) - -------------------------------------------------------------------------------- >Through December 31, 2002 -------------------------------------- Life of 1 year 3 years Fund -------------------------------------- Returns before NAV -8.17% 3.33% 10.87% taxes POP -13.45 1.31 9.28 - -------------------------------------------------------------------------------- Returns after taxes NAV -8.17 2.65 10.22 on distributions POP -13.45 0.64 8.65 - -------------------------------------------------------------------------------- Returns after taxes NAV -5.02 2.53 8.76 on distributions and POP -8.26 0.90 7.43 sale of fund shares - -------------------------------------------------------------------------------- S&P MidCap -14.51 -0.05 6.04 400 (pretax) - -------------------------------------------------------------------------------- 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 Twenty Portfolio Diversification - -------------------------------------------------------------------------------- >as a % of net assets, as of December 31, 2002 [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL] 26.9% Health Care 5.9% Industrial Goods/Services 8.6% Media 9.0% Computer Related Hardware 12.0% Software & Services 19.6% Finance 12.1% Consumer Goods/Services 5.9% Other* * Cash and other assets less liabilities. - -------------------------------------------------------------------------------- The Value of a $10,000 Investment in Liberty Acorn Twenty - -------------------------------------------------------------------------------- >November 23, 1998 through December 31, 2002 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 11/23/1998, but until 10/16/2000, 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 10/16/2000 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 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 Adviser or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. The S&P MidCap 400 is a broad, market-weighted index of 400 stocks that are in the next size/tier down from the S&P 500. The index is unmanaged and returns for the index and the Fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. Past performance does not guarantee future results. Performance changes over time. Visit libertyfunds.com for daily updates. Total Net Assets: $168.3 million Line Chart:
Liberty Liberty Acorn Twenty - A Acorn Twenty - A S&P at NAV with sales charge MidCap 400 11/23/98 10000 9425 10000 10030 9453.28 9911.29 12/31/98 10710 10094.2 11108.9 11000.3 10367.8 10676.2 10709.9 10094 10117.2 3/31/99 11479.9 10819.8 10399.9 12709.4 11978.6 11220.2 12729.7 11997.8 11268.8 6/30/99 13040.4 12290.5 11872.2 13190.3 12431.9 11619.9 12059.9 11366.5 11221.7 9/30/99 12109.4 11413.1 10875.1 12969.1 12223.4 11429.3 13249.2 12487.4 12029.2 12/31/99 13846.8 13050.6 12744.1 13472.9 12698.2 12385.2 13553.8 12774.4 13252 3/31/00 14170.5 13355.6 14361.1 13463.4 12689.2 13859.6 13099.8 12346.6 13686.7 6/30/00 14319.4 13496.1 13887.7 13931.4 13130.3 14107.1 15431.8 14544.5 15682.2 9/30/00 15799.1 14890.6 15574.8 15928.6 15012.7 15046.7 14382 13555 13910.9 12/31/00 15454.8 14566.2 14975.1 15903 14988.6 15308.6 14972.7 14111.8 14435 3/31/01 14381.3 13554.4 13361.8 15421 14534.3 14835.8 16263 15327.9 15181.3 6/30/01 15989.8 15070.4 15120 15836.3 14925.7 14894.8 15092 14224.2 14407.6 9/30/01 14162.3 13348 12615.5 14458.3 13627 13173.5 15957.7 15040.1 14153.5 12/31/01 16637.5 15680.8 14884.7 16308 15370.3 14807.3 15957.4 15039.9 14825.6 3/31/02 16506.3 15557.2 15885.4 15606.8 14709.4 15811.1 16045.3 15122.7 15544.4 6/30/02 15770.9 14864.1 14406.7 14772.6 13923.2 13011.2 15124.2 14254.6 13076.6 9/30/02 14422.5 13593.2 12023.1 15212.8 14338.1 12544.1 15968.9 15050.7 13269.8 12/31/02 15277 14398.5 12724.5
Without Class A Class B Class C Class Z sales charge $15,277 $15,058 $15,058 $15,397 - -------------------------------------------------------------------------------- With sales charge $14,399 $14,858 $15,058 N/A - -------------------------------------------------------------------------------- Liberty Acorn Twenty - A at NAV $15,277 Liberty Acorn Twenty - A with sales charge $14,399 S&P MidCap 400 $12,725 - -------------------------------------------------------------------------------- Liberty Acorn Twenty Top 10 Holdings (as a % of net assets) - -------------------------------------------------------------------------------- 1. Liberty Media 8.6% CATV Programming & Media Company Holdings 2. First Health Group 7.3% PPO Network 3. TCF Financial 6.0% Great Lakes Bank 4. Expeditors International of Washington 5.9% International Freight Forwarder 5. Synopsys 5.9% Software for Designing Semiconductor Chips 6. Boston Scientific 5.6% Stents & Catheters 7. Associated Banc-Corp 4.7% Midwest Bank 8. IMS Health 4.5% Prescription Data to Pharmaceutical Industry 9. International Game Technology 4.5% Slot Machines & Progressive Jackpots 10. Guidant 4.4% Stents, Defibrillators & Other Cardiac Medical Devices 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. - -------------------------------------------------------------------------------- 15 20 Liberty Acorn Fund >Major Portfolio Changes in the Fourth Quarter Number of Shares ------------------------ 09/30/02 12/31/02 Additions - -------------------------------------------------------------------------------- Information Activision 800,000 1,000,000 Analysts International 2,250,000 2,300,000 Aspect Communications 2,000,000 3,356,000 Avid Technology 1,876,000 1,900,000 Commonwealth Telephone 800,000 850,000 Concurrent Computer 0 1,500,000 Crown Castle International 2,000,000 2,500,000 E.Piphany 4,434,000 4,900,000 Euronet Worldwide 300,000 405,100 Euronext (France) 280,000 300,000 Gray Television 0 1,400,000 II VI 0 116,000 Information Holdings 700,000 800,000 Insight Communications 1,500,000 1,550,000 Integrated Circuit Systems 840,000 920,000 JDA Software 2,050,000 2,150,000 Lawson Software 2,721,000 3,000,000 Liberty Media 2,500,000 2,605,000 Mediacom Communications 2,000,000 2,100,000 MRO Software 1,400,000 1,900,000 Navigant Consulting 2,200,000 2,236,000 Novell 7,300,000 7,700,000 Pioneer-Standard Electronics 985,000 1,200,000 PRIMEDIA 1,400,000 1,700,000 Proquest 240,000 300,000 RealNetworks 800,000 1,200,000 RSA Security 2,456,000 2,500,000 Seachange International 2,250,000 2,350,000 Skillsoft Publishing 0 8,430,000 SPSS 430,000 500,000 Supertex 0 284,000 Systems & Computer Technology 2,526,000 2,620,000 THQ 1,550,000 1,850,000 United Global Com 312,000 1,500,000 Western Wireless 1,700,000 1,750,000 Witness Systems 500,000 1,176,000 - -------------------------------------------------------------------------------- Health Care Ciphergen Biosystems 1,080,000 1,430,000 Diagnostic Products 0 171,000 Enzon Pharmaceuticals 660,000 1,115,000 (formerly known as Enzon) First Health Group 3,668,000 3,716,000 Inhale Therapeutic Systems 1,583,000 1,968,000 Medarex 355,000 1,500,000 NDCHealth Group 2,187,000 2,317,000 Sangamo Biosciences 660,000 1,000,000 Synaptic Pharmaceutical 832,000 917,000 - -------------------------------------------------------------------------------- Consumer Goods/Services Action Performance 0 500,000 American Woodmark 0 82,000 Chico's Fas 2,360,000 2,400,000 Christopher & Banks 1,910,000 2,095,000 Genesco 315,000 395,000 International Speedway Motors 385,000 525,000 Jones Apparel 1,230,000 1,300,000 Kerry Group (Ireland) 1,000,000 1,100,000 Michael's Stores 1,115,000 1,200,000 Orkla (Norway) 601,500 665,000 Pinnacle Entertainment 742,000 1,771,000 Princeton Review 1,344,000 1,400,000 SCP Pool 750,000 861,000 Six Flags 2,425,000 3,025,000 Steven Madden 655,000 750,000 - -------------------------------------------------------------------------------- Finance Anchor Bancorp Wisconsin 1,008,000 1,098,000 Bank of Bermuda 0 127,000 Downey Financial 273,000 559,000 DVI Health Services 850,000 900,000 First Federal Capital 300,000 362,000 Glacier Bancorp 807,000 848,000 Hawthorne Financial 65,000 300,000 Housing Development Finance (India) 449,803 1,199,606 Peoples Bank Bridgeport 2,163,000 2,184,000 Quaker City Bancorp 0 347,000 RLI 912,000 1,000,000 (includes the effect of a 2 for 1 stock split) TFC Financial 1,026,000 1,461,000 A 16 Number of Shares ------------------------ 09/30/02 12/31/02 Additions, continued - -------------------------------------------------------------------------------- Industrial Goods/Services Ametek 850,000 925,000 Bacou Dalloz (France) 38,000 50,000 Clarcor 1,300,000 1,400,000 Cuno 650,000 725,000 Esco Technologies 750,000 893,000 Exel (United Kingdom) 0 500,000 Florida Rock Industries 250,000 325,000 Forward Air 740,000 1,000,000 G & K Services 300,000 409,000 Hughes Supply 0 400,000 Osmonics 0 151,000 Pall 600,000 730,000 Spartech 1,600,000 1,850,000 Tetra Tech 2,100,000 2,400,000 UTI Worldwide 575,000 650,000 - -------------------------------------------------------------------------------- Energy/Minerals Carbo Ceramics 423,000 500,000 FMC Technologies 1,034,000 1,100,000 Newpark Resources 3,700,000 4,500,000 Southwestern Energy 906,000 1,150,000 Talisman Energy (Canada) 0 300,000 Ultra Petroleum (Canada) 1,960,000 2,500,000 Western Gas 0 525,000 Westport Resources 0 360,000 - -------------------------------------------------------------------------------- Other Industries Crescent Real Estate Equities 0 670,000 Macerich Company 625,000 800,000 United Dominion Realty 404,000 650,000 Sales - -------------------------------------------------------------------------------- Information American Management Systems 805,000 560,000 Axcelis Technologies 825,000 0 Concord EFS 1,508,000 393,000 International Game Technology 2,880,000 2,457,000 Kronos 1,259,000 1,180,000 Moore (Canada) 800,000 600,000 Shuffle Master 1,562,000 1,327,000 Smart Force 6,000,000 0 Telephone & Data Systems 350,000 300,000 TietoEnator (Finland) 350,000 0 Universal Electronics 365,000 0 - -------------------------------------------------------------------------------- Health Care Alliance Unichem (United Kingdom) 900,000 0 Beverly Enterprises 417,000 0 - -------------------------------------------------------------------------------- Consumer Goods/Services Coach 2,114,000 1,774,000 Columbia Sportswear 285,000 200,000 Ducati Motor (Italy) 6,500,000 3,910,000 Furniture Brands International 1,020,000 510,000 Goodman Fielder (Australia) 7,000,000 5,000,000 Hokuto (Japan) 200,000 0 ITT Educational Services 2,400,000 2,225,000 MyTravel (United Kingdom) 3,000,000 0 Nutreco Holdings (Netherlands) 256,754 0 Pier 1 Imports 550,000 500,000 Station Casinos 1,550,000 1,250,000 - -------------------------------------------------------------------------------- Finance Aeon Credit Service (Japan) 190,000 0 Affiliated Managers Group 1,105,000 738,000 BKF Capital Group 240,000 209,000 Commonwealth Bancorp 724,000 167,000 Irish Life & Permanent (Ireland) 400,000 300,000 Julius Baer (Switzerland) 18,000 0 Knight Trading 1,253,000 0 Texas Regional Bancshares 1,204,000 900,000 Umpqua Holdings 284,000 0 - -------------------------------------------------------------------------------- Industrial Goods/Services Applied Industrial Technologies 750,000 575,000 Cadiz 2,400,000 0 Intermagnetics General 400,000 290,000 Waste Recycling Group (United Kingdom) 1,350,000 0 - -------------------------------------------------------------------------------- Energy/Minerals Dynegy 1,283,000 0 Harmony Gold (South Africa) 370,000 0 Tesoro Petroleum 770,000 0 XTO Energy 5,150,000 4,800,000 - -------------------------------------------------------------------------------- Other Industries AMLI Residential 73,000 0 Summit Properties 211,000 0 17 A Liberty Acorn Fund >Statement of Investments December 31, 2002 Number of Shares Value (000) - -------------------------------------------------------------------------------- Common Stocks and Other Equity-Like Securities: 89.9% - -------------------------------------------------------------------------------- Information: 22.7% Media >TV Broadcasting: 0.4% 1,400,000 Gray Television $ 13,650 Mid Market Affiliated TV Stations 2,300,000 TVB (Hong Kong) 7,255 Television Programming & Broadcasting 200,000 Young Broadcasting (b) 2,634 Television Stations - -------------------------------------------------------------------------------- 23,539 >Radio Broadcasting: 0.6% 850,000 Salem Communications (b) 21,225 Radio Stations for Religious Programming 700,000 Cumulus Media, Cl. A (b) 10,409 Radio Stations in Small Cities - -------------------------------------------------------------------------------- 31,634 >Television Programming/CATV: 1.3% 2,605,000 Liberty Media (b) 23,289 CATV Programming & Media Company Holdings 1,550,000 Insight Communications (b) 19,189 CATV Franchises in Midwest 2,100,000 Mediacom Communications (b) 18,501 Cable Television Franchises 1,000,000 Corus Entertainment (Canada) (b) 11,996 Television Programming & Radio Stations 1,500,000 United Global Com (b) 3,600 Video, Voice & Data Services - -------------------------------------------------------------------------------- 76,575 Telecommunications >Telecommunications/Wireline Communications: 0.5% 850,000 Commonwealth Telephone (b) 30,464 Rural Phone Franchises & CLEC - -------------------------------------------------------------------------------- >Mobile Communications: 0.6% 300,000 Telephone & Data Systems 14,106 Cellular & Telephone Services 2,500,000 Crown Castle International (b) 9,375 Communication Towers in USA & UK 1,750,000 Western Wireless (b) 9,275 Rural Cellular Phone Franchises 533,000 COMARCO (b) (c) 4,610 Wireless Network Testing - -------------------------------------------------------------------------------- 37,366 Computer Related Hardware >Computer Hardware/Related Systems: 1.2% 2,350,000 Seachange International (b) (c) 14,453 Systems for Video on Demand & Ad Insertion 238,000 Zebra Technologies (b) 13,637 Bar Code Printers 525,000 Avocent (b) 11,665 Computer Control Switches 331,900 Neopost (France) (b) 10,686 Postage Meters 535,000 Excel Technologies (b) 9,571 Laser Systems & Electro-Optical Components 230,000 Applied Films (b) 4,598 Thin-Film Glass Coating Equipment Number of Shares or Principal Amount (000) Value (000) - -------------------------------------------------------------------------------- 1,500,000 Concurrent Computer (b) $ 4,320 Video on Demand Services & Software 116,000 II VI (b) 1,863 Laser Components $ 3,000 Tidel Technologies, 6% Note Due 9/8/04 (b) 450 63,158 Tidel Technologies (b) -- ATM Machines - -------------------------------------------------------------------------------- 71,243 >Gaming Equipment: 3.7% 2,457,000 International Game Technology (b) 186,535 Slot Machines & Progressive Jackpots 1,327,000 Shuffle Master (b)(c) 25,359 Card Shufflers, Casino Games & Slot Machines - -------------------------------------------------------------------------------- 211,894 >Contract Manufacturing: 0.1% 338,000 Jabil Circuit (b) 6,057 Electronic Manufacturing Services - -------------------------------------------------------------------------------- >Instrumentation: 1.0% 700,000 Mettler Toledo (b) 22,442 Laboratory Equipment 511,000 Dionex (b) 15,182 Ion & Liquid Chromatography 1,700,000 Spectris (United Kingdom) 7,743 Electronic Instrumentation & Controls 555,000 Trimble Navigation (b) 6,932 GPS-Based Instruments 227,000 Varian (b) 6,513 Analytical Instruments - -------------------------------------------------------------------------------- 58,812 >Semiconductors/Related Equipment: 0.7% 920,000 Integrated Circuit Systems (b) 16,790 Silicon Timing Devices 664,000 Asyst Technologies (b) 4,880 Semiconductor Fab Automation Equipment 679,000 IXYS (b) 4,794 Power Semiconductors 261,000 Actel (b) 4,233 Field Programmable Gate Arrays 284,000 Supertex (b) 4,229 Mixed-Signal Semiconductors 519,000 Microsemi (b) 3,161 Analog/Mixed Signal Semiconductors - -------------------------------------------------------------------------------- 38,087 Software/Services >Business Software: 6.2% 1,180,000 Kronos (b)(c) 43,648 Labor Management Solutions 1,900,000 Avid Technology (b)(c) 43,605 Digital Nonlinear Editing Software & Systems 3,350,000 JD Edwards (b) 37,788 Mid Market ERP & Supply Chain Software 7,700,000 Novell (b) 25,718 Security & Identity Management Software 1,050,000 Micros Systems (b)(c) 23,541 Information Systems for Restaurants & Hotels 1,900,000 MRO Software (b)(c) 23,076 Enterprise Management Software A 18 Number of Shares Value (000) - -------------------------------------------------------------------------------- >Business Software--continued 2,620,000 Systems & Computer Technology (b)(c) $ 22,532 Enterprise Software & Services 2,150,000 JDA Software (b)(c) 20,769 Applications/Software & Services for Retailers 4,900,000 E.Piphany (b)(c) 20,433 CRM Software 3,000,000 Lawson Software (b) 17,250 Enterprise Resource Planning (ERP) Software 3,200,000 Multex.Com (b)(c) 13,440 Online Investment Research 500,000 Hyperion Solutions (b) 12,835 Analytical Application Software 1,750,000 MAPICS (b)(c) 12,163 Mid Market ERP Software 3,356,000 Aspect Communications (b)(c) 9,531 Call Center Software 500,000 SPSS (b) 6,995 Statistical Analysis Software 450,000 Sybase (b) 6,030 Database Software 3,200,000 Indus International (b)(c) 5,248 Enterprise Asset Management Software 3,300,000 BSQUARE (b)(c) 4,161 Software To Help Design Mobile Devices 1,176,000 Witness Systems (b)(c) 4,045 Customer Experience Management Software 200,000 Radiant Systems (b) 1,926 Point of Sale Systems for Convenience Stores 800,000 Actuate (b) 1,416 Information Delivery Software & Solutions 70,000 Group 1 Software (b) 837 Address Verification Software 1,400,000 ClickSoftware Technologies (b)(c) 267 Service Chain Optimization Software - -------------------------------------------------------------------------------- 357,254 >Consumer Software: 0.7% 1,850,000 THQ (b) 24,513 Entertainment Software 1,000,000 Activision (b) 14,590 Entertainment Software - -------------------------------------------------------------------------------- 39,103 >Computer Services: 1.1% 3,260,000 Ciber (b)(c) 16,789 Software Services & Staffing 4,600,000 AnswerThink Consulting (b)(c) 11,500 IT Integrator for Fortune 2000 4,200,000 iGATE Corporation (b)(c) 11,004 Technology Staffing Services 560,000 American Management Systems (b) 6,714 Software Development Services 500,000 Pomeroy Computer Resources (b) 5,850 Network Integration Services 2,300,000 Analysts International (b)(c) 4,554 Technology Staffing Services 600,000 Torex (United Kingdom) 3,081 Application Software for Hospital Management & Retail 511,000 New Horizons Worldwide (b) 2,018 Computer Training Services - -------------------------------------------------------------------------------- 61,510 >Business Information/Marketing Services/Publishing: 1.9% 1,200,000 Getty Images (b) 36,660 Photographs for Publications & Electronic Media 463,000 Choicepoint (b) 18,284 Fraud Protection Information 2,685,000 InfoUSA (b)(c) 13,344 Business Data for Sales Leads 2,236,000 Navigant Consulting (b)(c) 13,192 Consulting Firm 800,000 Information Holdings (b) 12,416 Scientific & Medical Publications, Patent Information 300,000 Proquest (b) 5,880 Information Services for Education & Automotive Markets 600,000 Moore (Canada) (b) 5,428 Commercial Printing 1,700,000 PRIMEDIA (b) 3,502 Specialty Magazines & Other Publications - -------------------------------------------------------------------------------- 108,706 >Internet: 0.8% 8,430,000 Skillsoft Publishing (b) 23,183 Integrated E-Learning Solutions 2,500,000 RSA Security (b) 14,975 Enterprise Security Software 1,200,000 RealNetworks (b) 4,572 Streaming Software & Content 1,051,030 Vital Stream, Cl. C (b) 230 421,621 Vital Stream, Cl. B (b) 87 Streaming Services for the Internet 250,000 NeoPlanet, Series A (b) 29 53,376 NeoPlanet, Series B (b) 11 Web Browser 265,841 Bigfoot International, Series A (b)(c) 2 Internet Direct Marketing - -------------------------------------------------------------------------------- 43,089 >Electronics Distribution: 0.3% 1,200,000 Pioneer-Standard Electronics 11,016 Component & Computer Distribution 585,000 Avnet 6,336 Electronic Components Distribution - -------------------------------------------------------------------------------- 17,352 >Transaction Processors: 1.6% 1,467,000 Global Payments 46,959 Credit Card Processor 600,000 Cubic 11,058 Revenue Collection & Defense Systems 175,000 Deutsche Boerse (Germany) 7,003 Trading, Clearing & Settlement Services for Financial Markets 300,000 Euronext (France) 6,516 Trading, Clearing & Settlement Services for Financial Markets 393,000 Concord EFS (b) 6,186 Credit Card Processor 8,000,000 Travelsky Technology (Hong Kong) 5,539 Online Air Travel Bookings in China 4,200,000 Hong Kong Exchanges & Clearing (Hong Kong) 5,278 Trading, Clearing & Settlement Services for Financial Markets 19 A Liberty Acorn Fund >Statement of Investments, continued Number of Shares Value (000) - -------------------------------------------------------------------------------- >Transaction Processors--continued 405,100 Euronet Worldwide (b) $ 3,042 ATM Processor - -------------------------------------------------------------------------------- 91,581 ---------- Information: Total 1,304,266 - -------------------------------------------------------------------------------- Health Care: 9.3% >Biotechnology/Drug Delivery: 2.0% 1,115,000 Enzon Pharmaceuticals (formerly known as Enzon) (b) 18,643 Polymer Delivery Technology for Improved Drugs 1,968,000 Inhale Therapeutic Systems (b) 15,901 Pulmonary Drug Delivery 426,000 NPS Pharmaceuticals (b) 10,722 Small Molecule Drugs 1,875,000 Locus Discovery, Series D, Pfd. (b) 7,500 High Throughput Rational Drug Design 1,500,000 Medarex (b) 5,925 Humanized Antibodies 917,000 Synaptic Pharmaceutical (b)(c) 5,814 Receptor Targeted Drug Design 225,000 Martek Biosciences (b) 5,661 Fatty Acids for Baby Formula & Other Foods 1,430,000 Ciphergen Biosystems (b)(c) 4,933 Protein Chips used for Drug Target Discovery 304,000 Alexion Pharmaceuticals (b) 4,292 Monoclonal Antibodies 416,000 Diversa (b) 3,765 Molecular Breeding 555,000 Arena Pharmaceuticals (b) 3,613 Novel Drug Targeting Technology 386,000 Protein Design Labs (b) 3,281 Computer Designed Monoclonal Antibodies 1,000,000 Sangamo Biosciences (b) 3,010 Therapeutics & Diagnostics for Cancer & Cardiovascular Disease 389,000 Atherogenic (b) 2,882 Drugs for Atherosclerosis, Rheumatoid Arthritis, Asthma 365,000 Maxygen (b) 2,781 Molecular Breeding 1,320,000 Aclara Biosciences (b) 2,772 Microfluidic Systems for Drug Development 160,000 Myriad Genetics (b) 2,336 Gene Discovery & Diagnostic Products 1,258,000 Corvas International (b) 1,950 Rational Drug Design 1,249,999 Perlegen Sciences (b) 1,950 Large Scale Gene Sequencing 528,000 Pharmacyclics (b) 1,885 Light Activated Drugs for Cancer & Vascular Diseases 461,000 SYRRX, Series C (b) 1,614 X-Ray Crystallography 320,000 Incyte Genomics (b) 1,459 Bioinformatics & Drug Development 210,000 Gene Logic (b) 1,321 Gene Expression Database 316,000 Guilford Pharmaceuticals (b) 1,258 Drug Delivery & Neurology Drugs 325,000 Genzyme Molecular Oncology Division (b) 569 Gene Expression Technology & Cancer Drugs 326,000 Microdose (b) 39 Drug Inhalers - -------------------------------------------------------------------------------- 115,876 >Medical Equipment/Laboratory Supplies: 2.7% 1,725,000 Steris (b) 41,831 Sterilization Devices 1,234,000 Edwards Lifesciences (b) 31,430 Heart Valves 583,000 Orthofix International (b) 16,353 Bone Fixation & Stimulation Devices 1,495,000 Novoste (b)(c) 10,794 Radiation Catheters for In-stent Restenosis 550,000 Kensey Nash (b) 10,049 Angioplasty Closure & Other Medical Devices 600,000 Sola International (b) 7,800 Specialty Eyeglass Lenses 350,000 Haemonetics (b) 7,511 Blood & Plasma Collection Equipment 770,000 Visx (b) 7,377 Laser Eye Surgery Equipment 171,000 Diagnostic Products 6,604 Immunodiagnostic Kits 155,000 Essilor International (France) 6,380 Eyeglass Lenses 419,000 Viasys Healthcare (b) 6,239 Respiratory & Neurology Medical Equipment 800,000 Smith & Nephew (United Kingdom) 4,899 Medical Equipment & Supplies - -------------------------------------------------------------------------------- 157,267 >Pharmaceuticals: 0.1% 131,264 Yuhan (South Korea) 5,744 Ethical Drug Producer - -------------------------------------------------------------------------------- >Hospital Management: 0.1% 210,000 Rhoen-Klinikum (Germany) 6,017 Hospital Management - -------------------------------------------------------------------------------- >Medical Supplies: 0.4% 650,000 Owens & Minor 10,673 Distribution of Medical Supplies 360,000 Techne (b) 10,284 Cytokines, Antibodies, Other Reagents For Life Sciences - -------------------------------------------------------------------------------- 20,957 >Services: 4.0% 3,716,000 First Health Group (b) 90,485 PPO Network 2,096,000 Lincare Holdings (b) 66,276 Home Health Care Services 2,317,000 NDCHealth Group (c) 46,108 Health Claims Processing & Drug Marketing Services 1,200,000 Dendrite International (b) 8,964 Software for Pharmaceutical Sales Force 440,000 Medquist (b) 8,914 Medical Transcription Services A 20 Number of Shares Value (000) - -------------------------------------------------------------------------------- >Services--continued 550,000 Serologicals (b) $ 6,050 Blood Collection & Antibody Production 700,000 Nestor Healthcare (United Kingdom) 2,399 Supplier Of Outsourced Health Care Staffing Solutions - -------------------------------------------------------------------------------- 229,196 ---------- Health Care: Total 535,057 - -------------------------------------------------------------------------------- Consumer Goods/Services: 19.1% Goods >Leisure Vehicles: 1.7% 1,500,000 Harley-Davidson 69,300 Motorcycles & Related Merchandise 1,365,000 Monaco Coach (b) 22,591 Recreational Vehicles 3,910,000 Ducati Motor (Italy) (b) 7,360 Motorcycles & Related Merchandise - -------------------------------------------------------------------------------- 99,251 >Furniture/Textiles: 1.5% 718,000 Mohawk Industries (b) 40,890 Carpet & Flooring 725,000 Hon Industries 20,503 Office Furniture & Fireplaces 510,000 Furniture Brands International (b) 12,163 Furniture 750,000 Herman Miller 13,800 Office Furniture - -------------------------------------------------------------------------------- 87,356 >Food & Beverages: 0.8% 1,100,000 Kerry Group (Ireland) 14,708 Food Ingredients 665,000 Orkla (Norway) 11,315 Diversified Consumer Goods 2,150,000 Lion Nathan (Australia) 6,860 Beer Brewer/Distributor 23,200 Radegerger Gruppe (Germany) 6,326 Brewery 5,000,000 Goodman Fielder (Australia) 5,008 Consumer Goods - -------------------------------------------------------------------------------- 44,217 >Nondurables: 1.2% 570,000 Scotts Company (b) 27,953 Consumer Lawn & Garden Products 2,300,000 Helen of Troy (b)(c) 26,772 Hairdryers & Curling irons 255,000 Uni-Charm (Japan) 10,113 Infant Hygiene & Feminine Care Products 601,000 First Years (c) 6,046 Infant & Toddler Products - -------------------------------------------------------------------------------- 70,884 >Durable Goods: 0.9% 861,000 SCP Pool (b) 25,141 Distributor of Swimming Pool Supplies 580,740 Hunter Douglas (Netherlands) 17,388 Decorative Window Coverings 8,030,000 Waterford Wedgwood (Ireland) 4,126 Crystal, Tableware & Cookware 82,000 American Woodmark 3,895 Kitchen Cabinet - -------------------------------------------------------------------------------- 50,550 >Apparel: 2.6% 1,774,000 Coach (b) 58,400 Designer & Retailer of Branded Leather Accessories 1,300,000 Jones Apparel (b) 46,072 Women's Apparel 750,000 Steven Madden (b)(c) 13,553 Wholesaler/Retailer of Fashion Footwear 880,000 Nautica Enterprises (b) 9,777 Casual Apparel 200,000 Columbia Sportswear (b) 8,884 Active Outdoor Apparel, Footwear & Accessories 870,000 Skechers USA (b) 7,386 Footwear Designer & Marketer 225,000 Hugo Boss Designs (Germany) 2,367 Fashion Apparel - -------------------------------------------------------------------------------- 146,439 Services >Retail: 4.2% 2,400,000 Chico's Fas (b) 45,384 Women's Specialty Retail 2,095,000 Christopher & Banks (b)(c) 43,471 Women's Apparel Retailer 1,200,000 Michaels Stores (b) 37,560 Craft & Hobby Specialty Retailer 500,000 Whole Foods Market (b) 26,365 Natural Food Supermarkets 1,400,000 Borders Group (b) 22,540 Bookstores 536,000 Zale (b) 17,098 Specialty Retailer of Jewelry 713,000 Hot Topic (b) 16,313 Music Inspired Retailer of Apparel, Accessories & Gifts 500,000 Pier 1 Imports 9,465 Imported Furniture & Tchotchkes 805,000 Aeropostale (b) 8,509 Mall Based Teen Retailer 395,000 Genesco (b) 7,359 Multi-Concept Branded Footwear Retailer 750,000 Gadzooks (b)(c) 3,525 Teen Apparel Retailer 300,000 Gaiam (b) 3,111 Healthy Living Catalog & E-Commerce - -------------------------------------------------------------------------------- 240,700 >Travel: 1.1% 1,535,000 Intrawest (Canada) 17,840 Owner/Operator of Ski Resorts 950,000 Vail Resorts (b) 14,412 Owner/Operator of Ski Resorts 3,050,000 LaQuinta (b) 13,420 Owner/Franchiser of Mid-Priced Hotels 725,000 Navigant International (b)(c) 8,939 Corporate Travel Agency 25,800 Kuoni Reisen (Switzerland) (b) 4,869 Tour Operator 430,000 NH Hoteles (Spain) (b) 3,693 Business Hotel - -------------------------------------------------------------------------------- 63,173 21 A Liberty Acorn Fund >Statement of Investments, continued Number of Shares Value (000) - -------------------------------------------------------------------------------- >Consumer Services: 1.4% 2,225,000 ITT Educational Services (b) $ 52,399 Technology oriented Post-secondary Degree Programs 2,000,000 Bally Total Fitness (b)(c) 14,180 National Chain of Fitness Centers 1,400,000 Princeton Review (b)(c) 6,930 College Preparation Courses 100,000 Weight Watchers (b) 4,597 Weight Loss Program - -------------------------------------------------------------------------------- 78,106 >Entertainment/Leisure Products: 1.1% 525,000 International Speedway Motors 19,577 Largest Motorsport Racetrack Owner & Operator 3,025,000 Six Flags (b) 17,273 Worldwide Theme Park Operator 1,750,000 Magna Entertainment, Cl. A (b) 10,850 Owner/Operator Thoroughbred Racetracks 500,000 Action Performance 9,500 Motorsport Collectibles & Merchandising 265,000 Speedway Motors 6,832 Motorsport Racetrack Owner & Operator - -------------------------------------------------------------------------------- 64,032 >Casinos: 1.3% 1,910,000 Alliance Gaming (b) 32,527 Diversified Gaming Company 1,250,000 Station Casinos (b) 22,125 Casinos & Riverboats 1,771,000 Pinnacle Entertainment (b)(c) 12,273 Regional Riverboat Casinos 635,000 Monarch Casino & Resort (b)(c) 8,719 Casino/Hotel in Reno 113,000 Lakes Entertainment (b) 610 Gaming Entrepreneur - -------------------------------------------------------------------------------- 76,254 >Restaurants: 0.2% 1,067,000 Autogrill (Italy) (b) 8,303 Restaurants & Catering for Travelers 158,000 Cheesecake Factory (b) 5,712 Casual Dining Restaurant - -------------------------------------------------------------------------------- 14,015 >Cruise Lines: 1.1% 1,400,000 Carnival 34,930 Largest Cruise Line 1,260,000 Steiner Leisure (b)(c) 17,564 Spas & Hair/Skin Products on Cruise Ships 26,800,000 Star Cruises (Singapore) (b) 7,772 Cruise Line - -------------------------------------------------------------------------------- 60,266 ---------- Consumer Goods/Services: Total 1,095,243 - -------------------------------------------------------------------------------- Finance: 13.7% >Banks: 4.1% 1,461,000 TCF Financial 63,831 Great Lakes Bank 1,608,000 Associated Banc-Corp 54,576 Midwest Bank 900,000 Texas Regional Bancshares 31,987 TexMex Bank 2,830,000 Anglo Irish Bank (Ireland) 20,122 Small Business & Middle Market Banking 848,000 Glacier Bancorp 19,988 Mountain States Bank 1,634,000 Republic 19,232 Michigan Bank 605,000 Chittenden 15,415 Vermont & Western Massachusetts Bank 300,000 Hawthorne Financial (b) 8,562 Real Estate Lender - -------------------------------------------------------------------------------- 233,713 >Savings & Loans: 2.4% 2,184,000 Peoples Bank Bridgeport 54,906 Connecticut Savings & Loan 1,098,000 Anchor Bancorp Wisconsin 22,783 Wisconsin Thrift 559,000 Downey Financial 21,801 California Home Lender 347,000 Quaker City Bancorp (b)(c) 11,427 LA Real Estate Lender 1,199,606 Housing Development Finance (India) 8,961 Mortgage Loan Provider in India 167,000 Commonwealth Bancorp 7,744 Philadelphia Savings & Loan 362,000 First Federal Capital 6,990 Wisconsin Thrift 50,000 Superior Financial 919 Biggest Little Rock Thrift - -------------------------------------------------------------------------------- 135,531 >Insurance: 3.3% 1,320,000 HCC Insurance Holdings 32,472 Aviation Insurance 826,000 Leucadia National 30,818 Insurance Holding Company 138,000 Markel (b) 28,359 Specialty Insurance 1,000,000 RLI 27,900 Specialty Insurance 995,000 Protective Life 27,382 Life Insurance 706,000 Philadelphia Consolidated Holding (b) 24,992 Specialty Insurance 210,000 StanCorp Financial 10,259 Group Life, Disability & 401K 350,000 Scottish Annuity & Life 6,108 Life Reinsurer 300,000 Irish Life & Permanent (Ireland) 3,240 Savings Products - -------------------------------------------------------------------------------- 191,530 >Money Management: 2.8% 2,230,000 SEI Investments 60,611 Mutual Fund Administration & Investment Management 738,000 Affiliated Managers Group (b) 37,121 Asset Management Holding Company 1,100,000 Neuberger Berman 36,839 Asset Manager for High Net Worth A 22 Number of Shares Value (000) - -------------------------------------------------------------------------------- >Money Management--continued 480,000 Eaton Vance $ 13,560 Specialty Mutual Funds 127,000 Bank of Bermuda 4,051 Fund Administration 209,000 BKF Capital Group (b) 3,689 Institutional Money Manager 1,360,000 Edinburgh Fund Managers (United Kingdom) 2,802 Investment Management 200,000 The Investment Company of China (China) 410 Closed-End Fund - -------------------------------------------------------------------------------- 159,083 >Finance Companies: 1.1% 5,531,000 AmeriCredit (b) 42,810 Auto Lending 1,820,000 World Acceptance (b)(c) 13,850 Personal Loans 900,000 DVI Health Services (b)(c) 6,795 Leases for Big Medical Equipment - -------------------------------------------------------------------------------- 63,455 ---------- Finance: Total 783,312 - -------------------------------------------------------------------------------- Industrial Goods/Services: 11.8% >Steel: 0.5% 945,000 Gibraltar Steel (c) 17,993 Steel Processing 850,000 Maruichi Steel Tube (Japan) 9,956 Processed Steel 370,000 Atchison Casting (b) 111 Steel Foundries - -------------------------------------------------------------------------------- 28,060 >Industrial Goods: 2.1% 1,400,000 Clarcor (c) 45,178 Mobile & Industrial Filters 750,000 Donaldson 27,000 Industrial Air Filtration 1,000,000 Watsco 16,380 HVAC Distribution 575,000 Applied Industrial Technologies 10,867 Industrial Components Distribution 201,000 Mine Safety Appliances 6,482 Safety Equipment 290,000 Intermagnetics General (b) 5,696 Superconducting Wire 1,300,000 Grafton Group (Ireland) 4,908 Builders, Wholesalers & DIY Retailing 50,000 Bacou Dalloz (France) (b) 4,509 Safety Equipment - -------------------------------------------------------------------------------- 121,020 >Construction: 0.5% 140,000 Technip-Coflexip (France) 10,013 Global Oil Engineering & Construction 325,000 Florida Rock Industries 12,366 Concrete & Aggregates 395,000 Northwest Pipe Company (b)(c) 6,834 Water Transmission Pipe - -------------------------------------------------------------------------------- 29,213 >Specialty Chemicals & Industrial Materials: 1.0% 1,850,000 Spartech (c) 38,166 Plastics Distribution & Compounding 20,000 Givaudan (Switzerland) 8,965 Industrial Fragrances & Flavors 900,000 NuCo2 (b)(c) 7,245 Bulk CO2 Gas Distribution to Restaurants 347,000 SYMYX (b) 4,369 Materials & Chemicals - -------------------------------------------------------------------------------- 58,745 >Machinery: 1.5% 925,000 Ametek 35,603 Aerospace/Industrial Instruments 893,000 Esco Technologies (b)(c) 33,041 Filtration & Test Equipment 400,000 Hughes Supply 10,928 Industrial Distribution 605,000 Zardoya Otis (Spain) 7,963 Elevator Manufacturer & Service Provider - -------------------------------------------------------------------------------- 87,535 >Outsourcing Services & Training: 0.5% 2,400,000 Labor Ready (b)(c) 15,408 Temporary Manual Labor 9,500,000 Li & Fung (Hong Kong) 9,014 Sourcing of Consumer Goods 600,000 GP Strategies (b) 3,030 Training Programs - -------------------------------------------------------------------------------- 27,452 >Conglomerates: 0.1% 2,800 Pargesa (Switzerland) 5,061 Industrial & Media Holdings 250,000 Jenoptik (Germany) 2,569 Clean Room Construction & Electrical Components - -------------------------------------------------------------------------------- 7,630 >Industrial Suppliers: 0.2% 1,000,000 Xstrata (United Kingdom) (b) 10,446 Diversified Mining Holding Company - -------------------------------------------------------------------------------- >Logistics: 2.6% 2,900,000 Expeditors International of Washington 94,685 International Freight Forwarder 1,000,000 Forward Air (b) 19,410 Freight Transportation Between Airports 650,000 UTI Worldwide 17,063 International Freight Forwarder 500,000 Exel (United Kingdom) 5,537 Global Logistics & Freight Forwarding 4,800,000 Sembcorp Logistics (Singapore) 4,344 Logistic Services for Marine Transport 759,000 Hub Group (b)(c) 3,643 Truck & Rail Freight Forwarder 600,000 Airnet Systems (b)(c) 2,952 Check & Other Small Package Shipment - -------------------------------------------------------------------------------- 147,634 23 A Liberty Acorn Fund >Statement of Investments, continued Number of Shares Value (000) - -------------------------------------------------------------------------------- >Water: 1.5% 2,400,000 Tetra Tech (b) $ 29,280 Resource Management & Infrastructure Consulting 725,000 Cuno (b) 24,012 Filtration & Fluids Clarification 900,000 Insituform Technologies (b) 15,345 Water/Sewer Pipe Repair 730,000 Pall 12,176 Filtration & Fluids Clarification 151,000 Osmonics (b) 2,558 Filtration & Fluids Clarification - -------------------------------------------------------------------------------- 83,371 >Other Industrial Services: 1.3% 1,500,000 Clark/Bardes Consulting (b)(c) 28,875 Executive Compensation & Benefits Consulting 409,000 G & K Services 14,479 Uniform Rental 825,000 Mobile Mini (b)(c) 12,928 Leases Portable Storage Units 3,160,000 Serco Group (United Kingdom) 7,788 Facilities Management 550,000 Toppan Forms (Japan) 6,178 Business Forms & Printing Services 780,000 Hagemeyer (Netherlands) 5,644 Maintenance, Repair & Operating Supply Distribution - -------------------------------------------------------------------------------- 75,892 ---------- Industrial Goods/Services: Total 676,998 - -------------------------------------------------------------------------------- Energy/Minerals: 7.1% >Independent Power: 0.2% 570,000 Gamesa (Spain) (b) 9,331 Spanish Wind Turbines 720,000 Millennium Cell (b) 1,721 Fuel Cell Technology - -------------------------------------------------------------------------------- 11,052 >Oil/Gas Producers: 4.0% 4,800,000 XTO Energy 118,560 Natural Gas Producer 680,000 Evergreen Resources (b) 30,498 Coal Seam Gas Producer 2,500,000 Ultra Petroleum (Canada) (b) 24,750 Natural Gas Producer 525,000 Western Gas 19,346 Oil Producer & Coal Seam Gas Producer 1,150,000 Southwestern Energy (b) 13,168 Natural Gas Producer 300,000 Talisman Energy (Canada) 10,796 Oil & Gas Producer 360,000 Westport Resources (b) 7,488 Oil & Gas Producer 2,265,000 Tipperary (b)(c) 4,530 Coal Seam Gas Producer - -------------------------------------------------------------------------------- 229,136 >Distribution/Marketing/Refining: 1.2% 1,400,000 Equitable Resources 49,056 Natural Gas Utility & Producer 761,000 Atmos Energy 17,747 Natural Gas Utility 1,270,000 Aquila (b) 4,623 Electric Utility Holding Company - -------------------------------------------------------------------------------- 71,426 >Oil Services: 1.7% 1,100,000 FMC Technologies (b) 22,473 Oil & Gas Well Head Manufacturer 3,200,000 Saipem (Italy) 21,377 Offshore Oil Construction & Drilling 4,500,000 Newpark Resources (b)(c) 19,575 Drilling Fluid Services to Oil & Gas Industry 500,000 Carbo Ceramics 16,850 Natural Gas Well Stimulants 900,000 Hanover Compressor (b) 8,262 Natural Gas Compressor Rental 850,000 Enerflex Systems (Canada) 8,071 Natural Gas Compressor - -------------------------------------------------------------------------------- 96,608 ---------- Energy/Minerals: Total 408,222 - -------------------------------------------------------------------------------- Other Industries: 6.2% >Real Estate: 5.8% 1,160,000 The Rouse Company 36,772 Regional Shopping Malls 615,000 General Growth Properties 31,980 Regional Shopping Malls 875,000 SL Green Realty 27,650 Manhattan Office Buildings 800,000 Macerich Company 24,600 Regional Shopping Malls 699,000 Forest City Enterprises, Cl. B 23,626 Commercial & Residential Property Developer 700,000 Manufactured Home Communities 20,741 Manufactured Home Communities 675,000 First Industrial Realty Trust 18,900 Industrial Properties 1,099,000 LaSalle Hotel Properties (c) 15,386 Upscale/Full Service Hotels 540,000 AMB Property 14,774 Industrial Properties 450,000 BRE Properties 14,040 West Coast Apartments 400,000 Chelsea Properties Group 13,324 Outlet Malls 425,000 Mills 12,470 Regional Shopping Malls 700,000 Keystone Property Trust 11,879 Industrial Properties 670,000 Crescent Real Estate Equities 11,149 Class A Office Buildings 380,000 Federal Realty Investment Trust 10,686 Shopping Centers 650,000 United Dominion Realty 10,634 Apartments A 24 Number of Shares Value (000) - -------------------------------------------------------------------------------- >Real Estate--continued 200,000 Essex Property Trust $ 10,170 West Coast Apartments 525,000 Glimcher Realty Trust 9,319 Regional Malls & Community Shopping Centers 425,372 Security Capital European Realty (b) 6,381 Real Estate Investments 2,800,000 Consorcio (Mexico) (b) 4,165 Low/Medium Income House Builder 190,000 Consolidated Tomoka 3,658 16,000 Acres of Florida Land - -------------------------------------------------------------------------------- 332,304 >Regulated Utilities: 0.4% 1,100,000 Unisource Energy 19,019 Electric Utility in Arizona 600,000 Red Electrica (Spain) 6,066 Spanish Power Grid - -------------------------------------------------------------------------------- 25,085 ---------- Other Industries: Total 357,389 Total Common Stocks and Other ---------- Equity-Like Securities: 89.9% 5,160,487 (Cost: $4,316,068) Principal Amount (000) Value (000) - -------------------------------------------------------------------------------- Short-Term Obligations: 9.6% Yield 1.00%-1.45% Due 1/02/03-2/03/03 $57,000 Toyota Motor Credit $ 56,998 57,000 American Express Credit 56,992 57,000 Coca Cola Enterprises 56,982 57,000 American General Finance 56,962 55,447 Colgate Palmolive 55,390 48,062 State Street Boston 48,043 44,190 Bell South 44,167 40,239 United Parcel Services 40,209 31,076 Sara Lee 31,044 31,000 Prudential Funding 30,971 24,954 Chevron Texaco 24,947 19,590 Virginia Electric 19,582 17,000 General Electric Capital 16,989 10,000 US Treasury Bill 9,993 3,328 Repurchase agreement with State Street Bank & Trust Co., dated 12/31/02, due 01/02/03 at 1.000%, collateralized by Federal Home Loan Bank Notes maturing 01/16/04, market value $3,395 (repurchase proceeds $3,328) 3,328 - -------------------------------------------------------------------------------- (Amortized Cost: $552,597) 552,597 ---------- Total Investments: 99.5% 5,713,084 (Cost: $4,868,665) (a) Cash and Other Assets Less Liabilities: 0.5% 27,557 ---------- Total Net Assets: 100% $5,740,641 ================================================================================ 25 A Liberty Acorn Fund >Statement of Investments, continued - -------------------------------------------------------------------------------- >Notes to Statement of Investments (in thousands) (a) At December 31, 2002, for federal income tax purposes cost of investments is $4,866,978 and net unrealized appreciation was $846,106, consisting of gross unrealized appreciation of $1,539,335 and gross unrealized depreciation of $693,229. (b) Non-income producing security. (c) On December 31, 2002, the fund held the following percentages of the outstanding voting shares of the companies listed below: World Acceptance 10.39% AnswerThink Consulting 9.95% Multex.Com 9.87% Hub Group 9.85% MAPICS 9.50% Analysts International 9.50% Novoste 9.24% Indus International 9.10% BSQUARE 8.95% Clark/Bardes Consulting 8.90% Seachange International 8.79% NuCo2 8.46% Synaptic Pharmaceutical 8.35% Gadzooks 8.19% igate Corporation 8.17% Helen Of Troy 8.16% Christopher & Banks 8.12% Steiner Leisure 7.88% Systems & Computer Technology 7.80% MRO Software 7.80% Shuffle Master 7.60% COMARCO 7.57% JDA Software 7.57% First Years 7.32% Avid Technology 7.16% Esco Technologies 7.11% Pinnacle Entertainment 6.83% E.Piphany 6.73% Monarch Casino & Resort 6.70% NDCHealth Group 6.67% Bigfoot International, Series A 6.38% Aspect Communications 6.37% Spartech 6.32% Micros Systems 6.04% Bally Total Fitness 6.03% Northwest Pipe Company 6.03% Newpark Resources 6.00% Kronos 5.99% DVI Health Services 5.94% Airnet Systems 5.91% Gibraltar Steel 5.91% Steve Madden 5.90% Lasalle Hotel Properties 5.88% Labor Ready 5.85% Mobile Mini 5.78% Tipperary 5.77% Clarcor 5.62% Quaker City Bancorp 5.60% ClickSoftware Technologies 5.32% InfoUSA 5.26% Ciphergen Biosystems 5.25% Navigant Consulting 5.24% Witness Systems 5.16% Navigant International 5.14% Princeton Review 5.11% Ciber 5.06% The aggregate cost and value of these companies at December 31, 2002, was $947,736 and $831,151 respectively. Investments in affiliate companies represent 14.48% of total net assets at December 31, 2002. Investment activity and income amounts relating to affiliates during the year ended December 31, 2002 were as follows: Dividend Income $ 577 Net realized gain or loss $ 23,488 Change in unrealized gain or loss $(347,830) Purchases $ 208,061 Proceeds from sales $ 64,278 In addition, additional purchases of existing portfolio holdings that were not considered affiliates in prior years, resulted in the fund owning more than 5% of the outstanding shares of certain issues at December 31, 2002. Therefore, the cost and market value affiliate disclosure amounts include both acquisitions of new investments in affiliates during the year, as well as prior year investment holdings that became affiliates during the current year. (d) On December 31, 2002, the market value of foreign securities represents 7.79% of total net assets. The Fund's foreign portfolio was diversified as follows: Value Percent ==================================================================== Canada $ 78,881 1.37% Ireland 47,104 0.82 United Kingdom 44,695 0.78 France 38,104 0.66 Italy 37,040 0.65 Hong Kong 27,086 0.47 Spain 27,053 0.47 Japan 26,247 0.46 Germany 24,282 0.42 Netherlands 23,032 0.40 Switzerland 18,895 0.33 Singapore 12,116 0.21 Australia 11,868 0.21 Norway 11,315 0.20 India 8,961 0.16 South Korea 5,744 0.10 Mexico 4,165 0.07 China 410 0.01 -------- ---- Total Foreign Portfolio $446,998 7.79% ======== ==== A 26 Liberty Acorn International >Major Portfolio Changes in the Fourth Quarter Number of Shares -------------------------- 09/30/02 12/31/02 Additions - -------------------------------------------------------------------------------- Europe >Germany Software AG 475,000 655,000 Zapf Creation 187,000 220,000 >Norway Den Norske Bank 0 1,990,000 >Finland Jaakko Poyry 417,000 455,500 >Sweden Intrum Justitia 1,245,000 1,505,000 Perbio Science 0 263,000 >France/Belgium Bacou Dalloz 93,000 130,000 Groupe Bourbon 61,596 100,000 Neopost 450,000 600,000 Omega Pharma (Belgium) 30,000 370,000 Technip-Coflexip 150,000 160,000 Vallourec 0 50,000 >United Kingdom/Ireland Bunzl 720,000 1,000,000 Euro Money Institutional Investors 1,360,000 1,580,000 Exel 0 800,000 Hit Entertainment 2,100,000 2,600,000 Kerry Group (Ireland) 1,000,000 1,200,000 RPS Group 15,000 3,600,000 Torex 1,112,000 1,200,000 >Switzerland Schindler 0 40,000 >Italy Permasteelisa 163,000 370,000 >Spain Amadeus Global Travel 0 500,000 Cortefiel 1,000,000 1,137,045 Telefonica Publicidad Info 0 800,000 >Netherlands/Luxembourg Fugro 184,736 200,000 Hagemeyer 880,000 1,185,000 Tenaris (Luxembourg) 0 400,000 - -------------------------------------------------------------------------------- Asia >Hong Kong Aeon Credit Service 4,990,000 5,000,000 China Oilfield Services 0 10,000,000 Global Bio-Chem Technology Group 33,600,000 35,000,000 Hainan Meilan Airport 0 8,000,000 JCG Holding 10,300,000 12,000,000 Lerado Group 10,000,000 15,000,000 Techtronic Industries 0 5,500,000 >Japan ARRK 140,000 220,000 Daiseki 225,000 350,000 Eneserve 120,000 150,000 Fuji Seal 170,000 195,000 NIFCO 500,000 675,000 Sugi Pharmacy 0 50,000 Toyo Technica 330,000 870,000 >Taiwan ASE Test 1,600,000 2,200,000 >South Korea Cheil Communications 100,000 140,000 >Singapore Delgro 0 3,000,000 >India Hero Honda Motors 1,200,000 1,500,000 Housing Development Finance 850,197 1,700,000 - -------------------------------------------------------------------------------- Other Countries >Australia/New Zealand Jupiters 0 3,000,000 Sky City Entertainment 0 500,000 The Warehouse Group (New Zealand) 650,000 1,000,000 >Canada Kingsway Financial 0 500,000 Shawcor 0 600,000 27 I Liberty Acorn International >Major Portfolio Changes, continued Number of Shares -------------------------- 09/30/02 12/31/02 Sales - -------------------------------------------------------------------------------- Europe >Germany Rhoen-Klinikum 445,000 435,000 Rhoen-Klinikum Pfd. 550,000 500,000 Stinnes 700,000 0 >Poland Bank Polska Kasa 250,000 0 >Finland Instrumentarium 368,000 183,000 KCI Konecranes International 237,000 0 TietoEnator 400,000 0 >Sweden Cardo 290,000 0 >France/Belgium IPSOS 75,000 35,453 Penauille Polyservice 247,580 0 >United Kingdom/Ireland Alliance Unichem 1,600,000 0 First Choice Holidays 2,000,000 0 First Technology 500,000 0 Holmes Place 1,500,000 0 Homestyle Group 1,100,000 475,000 Smith & Nephew 800,000 600,000 Waste Recycling Group 1,000,000 0 Waterford Wedgwood (Ireland) 13,000,000 12,030,000 >Switzerland Julius Baer 65,000 0 >Italy Autogrill 1,750,000 1,350,000 >Spain Prosegur 780,000 685,000 Transportes Azkar 758,000 0 >Netherlands/Luxembourg Nutreco Holdings 227,777 0 OCE 650,000 0 - -------------------------------------------------------------------------------- Asia >Hong Kong Hang Lung Properties 3,500,000 0 Li & Fung 6,500,000 5,000,000 SCMP Group 11,000,000 0 TVB 4,700,000 3,000,000 >Japan Banyu Pharmaceutical 920,000 0 Hokuto 216,000 0 Nintendo 120,000 0 Nissan Healthcare Food Service 450,000 55,000 Orix 280,000 180,000 >Singapore Sembcorp Logistics 10,000,000 9,000,000 >India Dr Reddy's Laboratories 200,000 0 - -------------------------------------------------------------------------------- Latin America >Argentina Siderca 350,000 0 - -------------------------------------------------------------------------------- Other Countries >Australia/New Zealand Goodman Fielder 11,000,000 5,000,000 Perpetual Trustees 450,000 350,000 >Canada Moore 600,000 450,000 >United States MIH 830,000 0 I 28 Liberty Acorn International >Statement of Investments December 31, 2002 Number of Shares Value (000) - -------------------------------------------------------------------------------- Common Stocks and Other Equity-Like Securities: 93.6% - -------------------------------------------------------------------------------- Europe: 56.2% >Germany/Austria: 7.5% 500,000 Rhoen-Klinikum Pfd. $ 14,325 435,000 Rhoen-Klinikum 14,142 Hospital Management 275,000 Deutsche Boerse 11,005 Trading, Clearing & Settlement Services for Financial Markets 770,000 Jenoptik 7,914 Clean Room Construction & Electrical Components 400,000 Kali & Salz 7,278 Potash Products, Fertilizers, Salt & Waste Management 680,000 Hugo Boss Designs 7,153 Fashion Apparel 500,000 GFK 6,717 Market Research Services 200,000 Flughafen Wien (Austria) 6,712 Vienna Airport Authority 655,000 Software AG 6,189 Database Software 220,000 Zapf Creation 5,892 Toy Manufacturer 1,000,000 Takkt 3,681 Mail Order Retailer of Office & Warehouse Durables 70,000 Beru 3,157 Auto Parts & Electronics 250,000 Norddeutsche Affinerie 2,661 Copper Smelter/Copper Products 200,000 Lion Bioscience (b) 1,275 Bioinformatics - -------------------------------------------------------------------------------- 98,101 >Denmark: 0.5% 100,000 Kobenhavns Lufthavne 7,199 Copenhagen Airport Authority - -------------------------------------------------------------------------------- >Norway: 1.6% 681,000 Orkla 11,587 Diversified Consumer Goods 1,990,000 DNB Holding 9,355 Bank - -------------------------------------------------------------------------------- 20,942 >Finland: 2.2% 384,000 Amer Group 14,054 Branded Sporting Goods 183,000 Instrumentarium 7,327 Anesthesia & Critical Care Medical Equipment 455,500 Jaakko Poyry 7,165 Engineering Consultants in Forestry, Energy - -------------------------------------------------------------------------------- 28,546 >Sweden: 1.3% 505,000 Castellum 7,087 Office, Warehouse & Retail Property Company 1,505,000 Intrum Justitia (b) 7,011 Receivables Management & Debt Collection 263,000 Perbio Science (b) 2,995 Consumables to Biotech/Pharmaceutical Industries - -------------------------------------------------------------------------------- 17,093 >France/Belgium: 9.0% 600,000 Neopost (b) 19,317 Postage Meter Machines 320,000 Essilor International 13,172 Eyeglass Lenses 130,000 Bacou Dalloz (b) 11,725 Safety Equipment 160,000 Technip-Coflexip 11,443 Global Oil Engineering & Construction 370,000 Omega Pharma (Belgium) 10,601 OTC Products, Pharmacy & Dental Supplies 650,000 NRJ 9,884 Radio Network 425,000 Euronext 9,230 Trading, Clearing & Settlement Services for Financial Markets 250,000 RTL Group (Belgium) 7,420 TV & Radio Broadcaster 100,000 Groupe Bourbon 7,089 Food Retailer 355,000 Grandvision 7,036 European Eyeglass Retailer 500,000 Fininfo 6,706 Data Feeds for French Banks & Brokers 50,000 Vallourec 2,934 Seamless Tubes 35,453 IPSOS 2,099 Market Research - -------------------------------------------------------------------------------- 118,656 >United Kingdom/Ireland: 13.0% 1,200,000 Kerry Group (Ireland) 16,045 Food Ingredients 2,200,000 Anglo Irish Bank (Ireland) 15,642 Small Business & Middle Market Banking 2,320,000 Spectris 10,567 Electronic Instruments & Controls 2,250,000 SSL International 9,280 Medical & Footcare Products 2,600,000 Hit Entertainment 8,945 Television Shows for Children 800,000 Exel 8,859 Global Logistics & Freight Forwarding 5,500,000 Tullow Oil (b) 8,706 Oil & Gas Producer 800,000 Irish Life & Permanent (Ireland) 8,641 Savings Products 700,000 Xstrata (b) 7,312 Diversified Mining Holding Company 2,100,000 Weir Group 7,165 Manufacturer of Industrial Pumps & Valves 1,200,000 Expro International 7,146 Offshore Oil Field Services 1,800,000 Grafton Group (Ireland) 6,796 Builders, Wholesalers & DIY Retailing 3,600,000 RPS Group 6,403 Environmental Consulting 12,030,000 Waterford Wedgwood (Ireland) 6,182 Crystal, Tableware & Cookware 1,200,000 Torex 6,161 Application Software for Hospital Management & Retail 1,000,000 Bunzl 6,116 Distribution of Disposable Products to Food Industry 29 I Liberty Acorn International >Statement of Investments, continued Number of Shares Value (000) - -------------------------------------------------------------------------------- >United Kingdom/Ireland--continued 1,580,000 Euro Money Institutional Investor $ 6,103 Financial Publications 2,250,000 Serco Group 5,545 Facilities Management 330,000 Cobham 5,365 Aerospace 1,400,000 Nestor Healthcare 4,798 Supplier of Outsourced Health Care Staffing Solutions 600,000 Smith & Nephew 3,674 Medical Equipment & Supplies 900,000 Meggitt 2,558 Aerospace, Defense & Electronics 410,000 Charles Taylor Consulting 1,650 Mutual Insurance Management 475,000 Homestyle Group 1,246 Retailer of Curtains, Upholstery & Related Furniture - -------------------------------------------------------------------------------- 170,905 >Switzerland: 7.2% 80,000 Kaba Holdings 14,865 Building Security Systems 50,000 Geberit International 14,388 Plumbing Supplies 7,500 Pargesa 13,557 Industrial & Media Conglomerate 30,000 Givaudan 13,448 Industrial Fragrances & Flavors 21,000 Synthes-Stratec 12,875 Products for Orthopedic Surgery 40,000 Schindler 7,794 Elevator Manufacturer & Service Provider 160,000 Bachem 7,519 Peptides 30,000 Kuoni Reisen (b) 5,661 Tour Operator 90,000 Bon Appetit 3,807 Wholesale Food Distributor and Specialty Restaurant/Retailer - -------------------------------------------------------------------------------- 93,914 >Italy: 2.3% 2,000,000 Saipem 13,360 Offshore Oil Construction & Drilling 1,350,000 Autogrill (b) 10,505 Restaurants & Catering for Travelers 370,000 Permasteelisa 5,816 Curtain Walls 141,000 De Longhi 628 Consumer Appliances for Heating, Air Conditioning & Cooking 6,540 Davide Campari (b) 204 Beverages - -------------------------------------------------------------------------------- 30,513 >Spain: 5.3% 1,300,000 Red Electrica 13,142 Spanish Power Grid 990,000 Zardoya Otis 13,030 Elevator Manufacturer & Service Provider 1,400,000 NH Hoteles (b) 12,024 Business Hotel 1,199,500 Abengoa 7,044 Engineering & Construction 685,000 Prosegur 6,968 Security Guards 422,000 Gamesa (b) 6,908 Spanish Wind Turbines 1,137,045 Cortefiel 5,187 Apparel Retailer 800,000 Telefonica Publicidado Info 2,542 Spanish Telephone Directories 500,000 Amadeus Global Travel 2,061 Travel Reservation System - -------------------------------------------------------------------------------- 68,906 >Netherlands/Luxembourg: 6.3% 520,000 Hunter Douglas 15,569 Decorative Window Coverings 360,000 OPG Groep 12,383 Pharmaceutical Wholesaler & Retailer 200,000 Fugro 9,046 Survey & GPS services 670,000 IM Tech 8,832 Technical Engineering 1,280,000 Ses Global (Luxembourg) (b) 8,591 Satellite Broadcasting Services 1,185,000 Hagemeyer 8,575 Maintenance, Repair & Operating Supply Distribution 400,000 Tenaris (b) 7,688 Steel Pipe for Oil Wells & Pipelines 500,000 Vopak (b) 6,465 Oil Storage & Chemical Distribution 520,000 United Services Group 5,813 Temporary Staffing Services - -------------------------------------------------------------------------------- 82,962 ---------- Europe: Total 737,737 - -------------------------------------------------------------------------------- Asia: 26.5% >Hong Kong: 6.8% 8,000,000 Hong Kong Exchanges & Clearing 10,053 Trading, Clearing & Settlement Services for Financial Markets 3,000,000 TVB 9,463 Television Programming & Broadcasting 35,000,000 Global Bio-Chem Technology Group 9,313 Corn-Based Food Products 2,000,000 Wing Hang Bank 6,399 Consumer & Commercial Banking 12,000,000 JCG Holding 5,886 Consumer Finance 8,500,000 Travelsky Technology 5,886 Online Air Travel Bookings in China 15,000,000 Zhejiang Expressway 5,770 Toll Road Builder & Operator 22,000,000 Tingyi Holding 5,713 Instant Noodles 19,000,000 Jiangsu Express 5,604 Toll Road Builder & Operator 5,500,000 Techtronic Industries 5,219 Power Tool Manufacturer I 30 Number of Shares Value (000) - -------------------------------------------------------------------------------- >Hong Kong--continued 5,000,000 Li & Fung $ 4,745 Sourcing of Consumer Goods 8,000,000 Hainan Meilan Airport (b) 3,821 Airport Operator 15,000,000 Linmark 3,366 Apparel/Hard Goods Sourcing Agent 10,000,000 China Oilfield Services (b) 2,436 Offshore Oilfield Services 15,000,000 Lerado Group 2,404 Baby Paraphernalia 5,000,000 Aeon Credit Service 1,699 Credit Card Issuer 3,000,000 Convenience Retail (b) 750 Exclusive Circle K Franchisee for HK & China - -------------------------------------------------------------------------------- 88,527 >Japan: 10.4% 1,000,000 Maruichi Steel Tube 11,713 Processed Steel 180,000 Orix 11,595 Leasing & Other Financial Services 267,000 Uni-Charm 10,589 Infant Hygiene & Feminine Care Products 875,000 Yakult Honsha 9,961 Dairy Based Beverages 410,000 Daito Trust Construction 9,062 Apartment Builder 195,000 Fuji Seal 9,047 Packaging Materials & Machinery 220,000 ARRK 8,151 Prototypes & Molds for New Product Development 700,000 Toppan Forms 7,863 Business Forms & Printing Services 870,000 Toyo Technica 7,838 Value Added Reseller of Imported Instrumentation 675,000 NIFCO 7,332 Industrial Fasteners 325,000 Aderans 7,252 Hair Pieces 35,000 Bellsystem24 6,829 Call Centers 150,000 Eneserve 5,823 Sells & Maintains In-house Power Generators 350,000 Daiseki 5,473 Waste Disposal & Recycling 200,000 BML 3,671 Clinical Testing 400,000 Tenma 3,267 Molded Plastic Products 140,000 Goldcrest 3,095 Apartment Developer 450,000 Kawasumi Laboratories 2,861 Medical Supplies 1,150,000 OMC Card (b) 2,857 Credit Card Issuer 50,000 Sugi Pharmacy 1,844 Drugstores 55,000 Nissin Healthcare Food Service 1,000 Hospital Catering - -------------------------------------------------------------------------------- 137,123 >Taiwan: 1.8% 5,850,000 Advantech 10,552 Computer Based Industrial Automation 2,200,000 Ase Test (b) 8,800 Semiconductor Packaging & Test Services 6,150,000 Chroma Ate 3,710 Test & Measurement Instruments - -------------------------------------------------------------------------------- 23,062 >South Korea: 3.8% 750,000 S1 Corporation 13,153 Security Services 140,000 Cheil Communications 10,989 Advertising 500,000 Hyundai Mobis 9,190 Auto Parts 131,264 Yuhan 5,744 Ethical Drug Producer 100,000 Samsumg Fire & Marine 5,464 Non-Life Insurance 475,000 Samyoung Heat Exchange (c) 4,726 Power Plant Related Machinery - -------------------------------------------------------------------------------- 49,266 >Singapore: 2.1% 9,000,000 Sembcorp Logistics 8,146 Logistic Services for Marine Transport 25,000,000 Star Cruises (b) 7,250 Cruise Line 5,000,000 Singapore Technical Engineering 4,756 Defense Supplier 9,000,000 Comfort Group 4,047 Taxi Service 3,000,000 Delgro 3,718 Bus & Taxi Service - -------------------------------------------------------------------------------- 27,917 >India: 1.6% 1,700,000 Housing Development Finance 12,700 Mortgage Loan Provider in India 1,500,000 Hero Honda Motors 8,490 Motorcycle Manufacturer - -------------------------------------------------------------------------------- 21,190 ---------- Asia: Total 347,085 - -------------------------------------------------------------------------------- Latin America: 1.2% >Mexico: 1.0% 700,000 Grupo Aeroportuario 8,225 Mexican Airport Authority 3,500,000 Consorcio ARA (b) 5,206 Low/Medium Income House Builder - -------------------------------------------------------------------------------- 13,431 >Brazil: 0.2% 1,000,000 Cia De Consessoes Rodoviaria (b) 2,090 Brazilian Tollroads - -------------------------------------------------------------------------------- ---------- Latin America: Total 15,521 31 I Liberty Acorn International >Statement of Investments, continued Number of Shares Value (000) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Other Countries: 9.7% >Australia/New Zealand: 3.0% 3,000,000 Jupiters $ 9,387 Casino 2,500,000 Lion Nathan 7,977 Australian Beer Brewer/Distributor 350,000 Perpetual Trustees 6,358 Investment Management 5,000,000 Computershare 5,205 Financial Software/Services 5,000,000 Goodman Fielder 5,009 Consumer Goods 1,000,000 The Warehouse Group (New Zealand) 3,833 Warehouse Club 500,000 Sky City Entertainment 2,118 Casino/Entertainment Complex - -------------------------------------------------------------------------------- 39,887 >Canada: 5.4% 750,000 Power Financial 17,234 Life Insurance & Mutual Funds 1,000,000 Corus Entertainment (b) 11,996 Television Programming & Radio Stations 330,000 Talisman Energy 11,876 Oil & Gas Producer 3,500,000 Canadian 88 (b) 5,628 Natural Gas Producer 600,000 Shawcor 5,298 Oil & Gas Pipeline Products 450,000 Intrawest 5,230 Owner/Operator of Ski Resorts 750,000 Altagas Services 4,553 Natural Gas Gatherer & Processor 500,000 Kingsway Financial (b) 4,333 Auto & Specialty Insurance 450,000 Moore (b) 4,071 Commercial Printing - -------------------------------------------------------------------------------- 70,219 Number of Shares or Principal Amount (000) Value (000) - -------------------------------------------------------------------------------- >Russia: 0.4% 8,827 Khanty Mansiysk (b) $ 3,400 $1,500 Khanty Mansiysk 10% Notes Due 12/31/03-12/31/04 (b) 1,350 Oil Production in Russia - -------------------------------------------------------------------------------- 4,750 >South Africa: 0.9% 700,000 Harmony Gold 11,997 Gold Mining - -------------------------------------------------------------------------------- Other: Total 126,853 Total Common Stocks and Other ---------- Equity-Like Securities: 93.6% 1,227,196 (Cost: $1,349,917) Short-Term Obligations: 4.3% $56,790 Repurchase agreement with State Street Bank & Trust Co., dated 12/31/02, due 01/02/03 at 1.000%, collateralized by Federal Home Loan Bank Notes maturing 01/16/04, market value $57,930 (repurchase proceeds $56,790) 56,790 - -------------------------------------------------------------------------------- (Cost: $56,790) 56,790 ---------- Total Investments: 97.9% 1,283,986 (Cost: $1,406,707) (a) Cash and Other Assets Less Liabilities: 2.1% 27,458 ---------- Total Net Assets: 100% $1,311,444 ================================================================================ - -------------------------------------------------------------------------------- >Notes to Statement of Investments (in thousands) (a) At December 31, 2002, for federal income tax purposes cost of investments is $1,417,839 and net unrealized depreciation was $133,853 consisting of gross unrealized appreciation of $83,535 and gross unrealized depreciation of $217,388. (b) Non-income producing security. (c) On December 31, 2002, the fund held the following percentages of the outstanding voting shares of the companies listed below: Samyoung Heat Exchange (South Korea) 6.33% The aggregate cost and value of this company at December 31, 2002, was $8,990 and $4,726 respectively. Investments in affiliate companies represent 0.36% of total net assets at December 31, 2002. Investment activity and income amounts relating to affiliates during the year ended December 31, 2002 were as follows: Dividend Income $ -- Net realized gain or loss $ -- Change in unrealized gain or loss $(4,264) Purchases $ 8,990 Proceeds from sales $ -- (d) On December 31, 2002, $473,438 or 36.1% of the Fund's net assets was denominated in the Euro currency. I 32 Liberty Acorn International >Portfolio Diversification At December 31, 2002, the Fund's portfolio investments as a percent of net assets was diversified as follows: Value (000) Percent - -------------------------------------------------------------------------------- >Computer Hardware Semiconductors $ 8,800 0.7% - -------------------------------------------------------------------------------- 8,800 0.7 >Computer Software Internet 6,189 0.5 - -------------------------------------------------------------------------------- 6,189 0.5 >Technology Services Embedded Systems 5,886 0.4 Full Service 6,161 0.5 - -------------------------------------------------------------------------------- 12,047 0.9 >Telecom Cable 8,591 0.6 - -------------------------------------------------------------------------------- 8,591 0.6 >Broadcasting & Media Content Radio & TV Broadcasting 35,712 2.7 Hybrid Internet 15,351 1.2 Media Content Providers 14,095 1.1 Market Research 6,717 0.5 - -------------------------------------------------------------------------------- 71,875 5.5 >Health Care Services 58,820 4.5 Devices & Consumable 32,361 2.5 Drugs 21,184 1.6 Biotech 8,794 0.7 - -------------------------------------------------------------------------------- 121,159 9.3 >Business Services Business Services 54,123 4.1 BPO 28,584 2.2 Logistics 17,005 1.3 - -------------------------------------------------------------------------------- 99,712 7.6 >Financials Lending Institutions 60,444 4.6% Insurance 37,322 2.8 Asset Management 25,641 2.0 - -------------------------------------------------------------------------------- 123,407 9.4 >Consumer Goods & Services Branded Goods 148,573 11.3 Leisure 51,905 4.0 Retail Outlets 31,374 2.4 Distribution/ E-Commerce 16,676 1.3 - -------------------------------------------------------------------------------- 248,528 19.0 >Industrials Goods 216,709 16.5 Electronic Manufacturing 22,100 1.7 R&D Design Firms 15,932 1.2 Construction 10,201 0.8 Distribution 8,575 0.6 - -------------------------------------------------------------------------------- 273,517 20.8 >Other Industries Energy 113,668 8.7 Real Estate 47,317 3.6 Utilities 40,004 3.0 Not-Classified 38,825 3.0 Conglomerate 13,557 1.0 - -------------------------------------------------------------------------------- 253,371 19.3 Total Common Stocks and Other Equity-Like Securities: ---------------------- 1,227,196 93.6 Short-Term Obligations: 56,790 4.3 ---------------------- Total Investments: 1,283,986 97.9 Cash and Other Assets Less Liabilities: 27,458 2.1 ---------------------- Total Net Assets: $1,311,444 100.0% ================================================================================ 33 I Liberty Acorn USA >Major Portfolio Changes in the Fourth Quarter Number of Shares ----------------------- 09/30/02 12/31/02 Additions - -------------------------------------------------------------------------------- Information Euronet Worldwide 0 200,000 Gray Television 0 138,500 Group 1 Software 221,400 241,000 (includes the effect of a 2 for 1 stock split) JDA Software 679,000 864,000 Mediacom Communications 535,000 600,000 Multex.Com 325,000 500,000 - -------------------------------------------------------------------------------- Health Care NDCHealth Group 268,300 298,300 - -------------------------------------------------------------------------------- Consumer Goods/Services Christopher & Banks 125,500 212,500 Genesco 0 75,000 - -------------------------------------------------------------------------------- Finance Downey Financial 0 35,000 - -------------------------------------------------------------------------------- Industrial Goods/Services Forward Air 0 59,600 - -------------------------------------------------------------------------------- Energy/Minerals Ultra Petroleum (Canada) 0 135,000 Western Gas 0 30,000 - -------------------------------------------------------------------------------- Other Industries Crescent Real Estate Equities 0 66,700 Sales - -------------------------------------------------------------------------------- Information Axcelis Technologies 235,000 0 Telephone & Data Systems 70,000 30,000 - -------------------------------------------------------------------------------- Consumer Goods/Services Coach 132,000 62,000 Columbia Sportswear 113,000 9,000 ITT Educational Services 570,000 535,000 - -------------------------------------------------------------------------------- Finance Markel 39,000 21,000 U 34 Liberty Acorn USA >Statement of Investments December 31, 2002 Number of Shares Value (000) - -------------------------------------------------------------------------------- Common Stocks: 92.2% - -------------------------------------------------------------------------------- Information: 38.1% >Broadcasting: 3.0% 333,100 Salem Communications (b) $ 8,318 Radio Stations for Religious Programming 138,500 Gray Television 1,350 Mid Market Affiliated TV Stations - -------------------------------------------------------------------------------- 9,668 >Television Programming: 1.6% 600,000 Mediacom Communications (b) 5,286 Cable Television Franchises - -------------------------------------------------------------------------------- >Telecommunications/Wireline Communications: 2.6% 227,800 Commonwealth Telephone (b) 8,164 Rural Phone Franchises & CLEC - -------------------------------------------------------------------------------- >Mobile Communications: 2.7% 730,000 Western Wireless (b) 3,869 Rural Cellular Phone Franchises 490,000 Crown Castle International (b) 1,837 Communication Towers in USA & UK 182,700 Comarco (b) 1,580 Wireless Network Testing 30,000 Telephone and Data Systems 1,411 Cellular & Telephone Services - -------------------------------------------------------------------------------- 8,697 >Computer Services: 2.7% 786,000 RCM Technologies (b)(c) 3,073 Technology Staffing Services 232,000 American Management Systems (b) 2,782 Software Development Services 670,000 AnswerThink Consulting (b) 1,675 IT Integrator for Fortune 2000 149,600 Ciber (b) 770 Software Services & Staffing 256,600 Analysts International (b) 508 Technology Staffing Services - -------------------------------------------------------------------------------- 8,808 >Business/Consumer Software: 16.9% 527,600 Micros Systems (b) 11,829 Information Systems for Restaurants & Hotels 238,200 Kronos (b) 8,811 Labor Management Solutions 864,000 JDA Software (b) 8,346 Applications/Software & Services for Retailers 378,500 MRO Software (b) 4,597 Enterprise Management Software 1,330,000 Novell (b) 4,442 Security & Identity Management Software 370,000 JD Edwards (b) 4,174 Mid Market ERP & Supply Chain Software 241,000 Group 1 Software (b) 2,880 Address Verification Software 192,500 THQ (b) 2,551 Entertainment Software 505,000 E.Piphany (b) 2,106 CRM Software 500,000 Multex.Com (b) 2,100 Online Investment Research 140,000 SPSS (b) 1,959 Statistical Analysis Software 68,000 Activision (b) 992 Entertainment Software - -------------------------------------------------------------------------------- 54,787 >Transaction Processors: 2.6% 211,640 Global Payments 6,775 Credit Card Processor 200,000 Euronet Worldwide (b) 1,502 ATM Processor - -------------------------------------------------------------------------------- 8,277 >Business Information/Marketing Services/Publishing: 1.9% 102,800 Getty Images (b) 3,141 Photographs for Publications & Electronic Media 108,600 Information Holdings (b) 1,685 Scientific & Medical Publications, Patent Information 240,000 Navigant Consulting (b) 1,416 Consulting Firm - -------------------------------------------------------------------------------- 6,242 >Computer Hardware/Semiconductors/ Related Equipment: 4.1% 129,000 Zebra Technologies (b) 7,392 Bar Code Printers 175,300 Integrated Circuit Systems (b) 3,199 Silicon Timing Devices 424,100 Seachange International (b) 2,608 Systems for Video on Demand & Ad Insertion - -------------------------------------------------------------------------------- 13,199 --------- Information: Total 123,128 - -------------------------------------------------------------------------------- Health Care: 20.6% >Biotechnology/Drug Delivery: 3.1% 720,000 Inhale Therapeutic Systems (b) 5,818 Pulmonary Drug Delivery 131,400 Enzon Pharmaceuticals (formerly known as Enzon) (b) 2,197 Polymer Delivery Technology for Improved Drugs 375,000 Locus Discovery, Series D, Pfd. (b) 1,500 High Throughput Rational Drug Design 154,000 SYRRX, Series C (b) 539 X-Ray Crystallography 363,636 Metabolex, Series F (b) 91 Drugs for Diabetes - -------------------------------------------------------------------------------- 10,145 >Medical Equipment: 6.7% 335,000 Edwards Lifesciences (b) 8,532 Heart Valves 314,000 Steris (b) 7,615 Sterilization Devices 345,000 Novoste (b) 2,491 Radiation Catheters for In-stent Restenosis 105,200 Viasys Healthcare (b) 1,566 Respiratory & Neurology Medical Equipment 135,600 Visx (b) 1,299 Laser Eye Surgery - -------------------------------------------------------------------------------- 21,503 35 U Liberty Acorn USA >Statement of Investments, continued Number of Shares Value (000) - -------------------------------------------------------------------------------- >Medical Supplies: 1.6% 182,800 Techne (b) $ 5,222 Cytokines, Antibodies, Other Reagents For Life Sciences - -------------------------------------------------------------------------------- >Services: 9.2% 609,000 First Health Group (b) 14,829 PPO Network 246,800 Lincare Holdings (b) 7,804 Home Health Care Services 298,300 NDCHealth Group 5,936 Health Claims Processing & Drug Marketing Services 100,000 Dendrite International (b) 747 Software for Pharmaceutical Sales Force 26,000 Medquist (b) 527 Medical Transcription Services - -------------------------------------------------------------------------------- 29,843 --------- Health Care: Total 66,713 - -------------------------------------------------------------------------------- Consumer Goods/Services: 12.3% >Consumer Services: 4.0% 535,000 ITT Educational Services (b) 12,599 Technology oriented Post-secondary Degree Program 48,900 Bally Total Fitness (b) 347 National Chain of Fitness Centers - -------------------------------------------------------------------------------- 12,946 >Apparel: 2.0% 182,200 Steven Madden (b) 3,292 Wholesaler/Retailer of Fashion Footwear 62,000 Coach (b) 2,041 Designer & Retailer of Branded Leather Accessories 108,000 Skechers USA (b) 917 Footwear Designer & Marketer 9,000 Columbia Sportswear (b) 400 Active Outdoor Apparel, Footwear & Accessories - -------------------------------------------------------------------------------- 6,650 >Entertainment: 1.1% 91,300 International Speedway Motors 3,405 Largest Motorsport Racetrack Owner & Operator - -------------------------------------------------------------------------------- >Nondurables: 2.5% 167,200 Scotts Company (b) 8,199 Consumer Lawn & Garden Products - -------------------------------------------------------------------------------- >Retail: 2.7% 212,500 Christopher & Banks (b) 4,409 Women's Apparel Retailer 347,000 Gadzooks (b) 1,631 Teen Apparel Retailer 75,000 Genesco (b) 1,397 Multi-Concept Branded Footwear Retailer 110,500 Aeropostale (b) 1,168 Mall Based Teen Retailer - -------------------------------------------------------------------------------- 8,605 --------- Consumer Goods/Services: Total 39,805 - -------------------------------------------------------------------------------- Finance: 9.8% >Banks: 1.3% 158,125 Chittenden 4,029 Vermont & West Massachusetts Bank - -------------------------------------------------------------------------------- >Finance Companies: 3.4% 846,500 AmeriCredit (b) 6,552 Auto Lending 590,000 World Acceptance (b) 4,490 Personal Loans - -------------------------------------------------------------------------------- 11,042 >Savings & Loan: 1.3% 116,400 Anchor Bancorp Wisconsin 2,415 Wisconsin Thrift 35,000 Downey Financial 1,365 California Home Lender 16,500 Peoples Bank Bridgeport 415 Connecticut Savings & Loan - -------------------------------------------------------------------------------- 4,195 >Money Management: 0.3% 40,000 SEI Investments 1,087 Mutual Fund Administration & Investment Management - -------------------------------------------------------------------------------- >Insurance: 3.5% 290,000 HCC Insurance Holdings 7,134 Aviation Insurance 21,000 Markel (b) 4,315 Specialty Insurance - -------------------------------------------------------------------------------- 11,449 --------- Finance: Total 31,802 - -------------------------------------------------------------------------------- Industrial Goods/Services: 5.8% >Specialty Chemicals/Industrial Materials: 0.8% 95,000 Spartech 1,960 Plastics Distribution & Compounding 100,000 NuCo2 (b) 805 Bulk CO2 Gas Distribution to Restaurants - -------------------------------------------------------------------------------- 2,765 >Construction: 0.4% 30,000 Florida Rock Industries 1,141 Concrete & Aggregates - -------------------------------------------------------------------------------- >Machinery: 0.7% 58,100 Esco Technologies (b) 2,150 Filtration & Test Equipment - -------------------------------------------------------------------------------- >Water: 1.4% 134,000 Cuno (b) 4,438 Filtration & Fluids Clarification 18,000 Osmonics (b) 305 Filtration & Fluids Clarification - -------------------------------------------------------------------------------- 4,743 U 36 Number of Shares Value (000) - -------------------------------------------------------------------------------- >Logistics: 0.9% 346,000 Hub Group (b) $ 1,661 Truck & Rail Freight Forwarder 59,600 Forward Air (b) 1,157 Freight Transportation Between Airports - -------------------------------------------------------------------------------- 2,818 >Industrial Services: 1.6% 206,900 Insurance Auto Auctions (b) 3,432 Auto Salvage Services 95,000 Clark/Bardes Consulting (b) 1,829 Executive Compensation & Benefits Consulting - -------------------------------------------------------------------------------- 5,261 --------- Industrial Goods/Services: Total 18,878 - -------------------------------------------------------------------------------- Energy/Minerals: 4.8% >Oil Services: 1.1% 651,000 Newpark Resources (b) 2,832 Drilling Fluid Services to Oil & Gas Industry 30,700 FMC Technologies (b) 627 Oil & Gas Well Head Manufacturer - -------------------------------------------------------------------------------- 3,459 >Oil & Gas Producers: 0.9% 135,000 Ultra Petroleum (Canada) (b) 1,337 Natural Gas Producer 30,000 Western Gas 1,105 Oil & Coal Seam Gas Producer 47,100 Southwestern Energy (b) 539 Natural Gas Producer - -------------------------------------------------------------------------------- 2,981 >Distribution/Marketing/Refining: 2.8% 193,000 Atmos Energy 4,501 Natural Gas Utility 122,600 Equitable Resources 4,296 Natural Gas Utility & Producer 115,000 Aquila (b) 419 Electric Utility Holding Company - -------------------------------------------------------------------------------- 9,216 --------- Energy/Minerals: Total 15,656 Number of Shares or Principal Amount (000) Value (000) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Other Industries: 0.8% >Real Estate: 0.8% 47,000 The Rouse Company $ 1,490 Regional Shopping Malls 66,700 Crescent Real Estate Equities 1,110 Class A Office Buildings - -------------------------------------------------------------------------------- 2,600 --------- Other Industries: Total 2,600 --------- Total Common Stocks: 92.2% 298,582 (Cost: $312,495) Short-Term Obligations: 7.9% $13,000 American Express Credit, 1.350%, due 01/02/03 13,000 12,441 Repurchase agreement with State Street Bank & Trust Co., dated 12/31/02, due 01/02/03 at 1.000%, collateralized by Federal Home Loan Bank Notes maturing 01/16/04, market value $12,690 (repurchase proceeds $12,441) 12,441 - -------------------------------------------------------------------------------- (Cost: $25,441) 25,441 --------- Total Investments: 100.1% 324,023 (Cost: $337,936) (a) Cash and Other Assets Less Liabilities: (0.1%) (500) --------- Total Net Assets: 100% $ 323,523 ================================================================================ - -------------------------------------------------------------------------------- >Notes to Statement of Investments (in thousands) (a) At December 31, 2002, for federal income tax purposes cost of investments is $338,182 and net unrealized depreciation was $14,159 consisting of gross unrealized appreciation of $43,586 and gross unrealized depreciation of $57,745. (b) Non-income producing security. (c) On December 31, 2002, the fund held the following percentages of the outstanding voting shares of the companies listed below: RCM Technologies 7.42% The aggregate cost and value of these companies at December 31, 2002, was $5,636 and $3,073 respectively. Investments in affiliate companies represent 0.95% of total net assets at December 31, 2002. The change in unrealized gain(loss) in these companies amounted to $(621) during the year ended December 31, 2002. There was no other investment activity during the year. 37 U Liberty Acorn Foreign Forty >Major Portfolio Changes in the Fourth Quarter Number of Shares ------------------------- 09/30/02 12/31/02 Additions - -------------------------------------------------------------------------------- Europe >United Kingdom BG Group 0 200,000 Reed Elsevier 0 90,000 Sales - -------------------------------------------------------------------------------- Europe >France Suez 45,000 0 >United Kingdom Alliance Unichem 150,000 0 - -------------------------------------------------------------------------------- Asia >Japan Nintendo 7,000 0 - -------------------------------------------------------------------------------- Other Countries >Australia Goodman Fielder 1,200,000 0 F40 38 Liberty Acorn Foreign Forty >Statement of Investments December 31, 2002 Number of Shares Value (000) - -------------------------------------------------------------------------------- Common Stocks: 93.3% - -------------------------------------------------------------------------------- Europe: 68.1% >Germany: 6.3% 39,500 Rhoen-Klinikum $ 1,284 Hospital Management 12,400 Deutsche Boerse 496 Trading, Clearing & Settlement Services for Financial Markets 5,000 Henkel 317 Chemicals, Detergents & Non-Food Consumer Brands - -------------------------------------------------------------------------------- 2,097 >Denmark: 2.1% 26,000 Jyske Bank (b) 705 Retail & Corporate Banking - -------------------------------------------------------------------------------- >Norway: 5.3% 201,000 DNB Holding 945 Bank 48,000 Orkla 817 Diversified Consumer Goods - -------------------------------------------------------------------------------- 1,762 >France/Belgium: 8.2% 25,000 Neopost (b) 805 Postage Meter Machines 11,000 Technip-Coflexip 787 Global Oil Engineering & Construction 20,000 Euronext 434 Trading, Clearing & Settlement Services for Financial Markets 9,000 Essilor International 370 Eyeglass Lenses 10,000 AGF 335 Life & Health Insurance - -------------------------------------------------------------------------------- 2,731 >United Kingdom/Ireland: 29.0% 120,000 Kerry Group (Ireland) 1,604 Food Ingredients 150,000 Anglo Irish Bank (Ireland) 1,067 Small Business & Middle Market Banking 80,000 Exel 886 Global Freight Forwarding 200,000 BG Group 863 Oil & Gas Producer 160,000 Compass Group 850 International Concession & Contract Caterer 80,000 Xstrata (b) 836 Diversified Mining Holding Company 70,000 Standard Chartered 795 International Banking Group 90,000 Reed Elsevier 771 Scientific, Legal, Education & Business Publisher 120,000 Bunzl 734 Supplier of Business to Business Consumables 50,000 Irish Life & Permanent (Ireland) 540 Life Insurance 25,000 Cobham 406 Aerospace 30,000 Smith & Nephew 184 Medical Equipment & Supplies 10,000 Man Group 143 Hedge Fund Manager - -------------------------------------------------------------------------------- 9,679 >Switzerland: 16.0% 2,500 Synthes-Stratec 1,533 Products for Orthopedic Surgery 8,000 Kaba Holdings 1,486 Building Security Systems 2,100 Givaudan 941 Industrial Fragrances & Flavors 2,100 Geberit International 604 Plumbing Supplies 3,000 Schindler 585 Elevator Manufacturer & Service Provider 100 Pargesa Holdings 181 Industrial & Media Conglomerate - -------------------------------------------------------------------------------- 5,330 >Italy: 1.2% 52,000 Autogrill (b) 405 Restaurants & Catering for Travelers ------- Europe: Total 22,709 - -------------------------------------------------------------------------------- Asia: 13.8% >Hong Kong: 2.9% 300,000 TVB 946 Television Programming & Broadcasting - -------------------------------------------------------------------------------- >Singapore: 0.3% 100,000 Singapore Technical Engineering 95 Defense Supplier - -------------------------------------------------------------------------------- >Japan: 10.6% 24,000 Oriental Land 1,453 Disney Theme Park Operator 17,000 Orix 1,095 Finance Leasing 65,000 Terumo 899 Medical Supplies 1,600 NIDEC 100 Hard Disk drive Spindle Motor Manufacturer - -------------------------------------------------------------------------------- 3,547 ------- Asia: Total 4,588 - -------------------------------------------------------------------------------- Other Countries: 11.4% >Australia: 3.8% 400,000 Lion Nathan 1,276 Beer Brewer/Distributor - -------------------------------------------------------------------------------- 39 F40 Liberty Acorn Foreign Forty >Statement of Investments, continued Number of Shares Value (000) - -------------------------------------------------------------------------------- >Canada: 7.6% 29,600 Talisman Energy $ 1,065 Oil & Gas Producer 64,000 Corus Entertainment (b) 768 Television Programming & Radio Stations 30,000 Power Financial 689 Life Insurance & Mutual Funds - -------------------------------------------------------------------------------- 2,522 ------- Other: Total 3,798 ------- Total Common Stocks: 93.3% 31,095 (Cost: $31,277) Principal Amount (000) Value (000) - -------------------------------------------------------------------------------- Short-Term Obligations: 6.5% $2,175 Repurchase agreement with State Street Bank & Trust Co., dated 12/31/02, due 01/02/03 at 1.000%, collateralized by Federal Home Loan Bank Notes maturing 01/16/04, market value $2,200 (repurchase proceeds $2,175) $ 2,175 - -------------------------------------------------------------------------------- (Cost: $2,175) 2,175 ------- Total Investments: 99.8% 33,270 (Cost: $33,452) (a) Cash and Other Assets Less Liabilities: 0.2% 82 ------- Total Net Assets: 100% $33,352 ================================================================================ - -------------------------------------------------------------------------------- >Notes to Statement of Investments (in thousands) (a) At December 31, 2002, for federal income tax purposes cost of investments is $34,489 and net unrealized depreciation was $1,219, consisting of gross unrealized appreciation of $2,449 and gross unrealized depreciation of $3,668. (b) Non-income producing security. (c) At December 31, 2002, $8,445 or 25.3% of the Fund's net assets was denominated in Euro currency. F40 40 Liberty Acorn Foreign Forty >Portfolio Diversification At December 31, 2002, the Fund's portfolio investments as a percent of net assets was diversified as follows: Value (000) Percent - -------------------------------------------------------------------------------- >Information Technology Television Broadcasting $ 946 2.9% Transaction Processors 930 2.8 Computer Hardware and Related Equipment 905 2.7 Publishing 771 2.3 Television Programming 768 2.3 - -------------------------------------------------------------------------------- 4,320 13.0 >HealthCare Medical Equipment 2,087 6.3 Hospital Management 1,284 3.8 Hospital/ Laboratory Supplies 899 2.7 - -------------------------------------------------------------------------------- 4,270 12.8 >Consumer Goods/Services Food 2,421 7.3 Other Entertainment 1,453 4.4 Beverage 1,276 3.8 Restaurants 1,255 3.8 Nondurables 317 0.9 - -------------------------------------------------------------------------------- 6,722 20.2 >Finance Banks 3,512 10.5 Other Finance Companies 1,095 3.3 Insurance 875 2.6 Money Management 832 2.5 - -------------------------------------------------------------------------------- 6,314 18.9 >Industrial Goods/Services Construction 1,486 4.5 Speciality Chemicals 941 2.8 Outsourcing and Training Services 734 2.2 Other Industrial Services 680 2.1 Industrial Materials 604 1.8 Electrical Components 406 1.2 Conglomerates 181 0.5 - -------------------------------------------------------------------------------- 5,032 15.1 >Energy/Minerals Oil/Gas Producers 1,928 5.8 Non Ferrous Metals 836 2.5 Oil Services 787 2.3 - -------------------------------------------------------------------------------- 3,551 10.6 >Other Transportation 886 2.7 - -------------------------------------------------------------------------------- 886 2.7 Total Common Stocks: 31,095 93.3 Short-Term Obligations: 2,175 6.5 ------------------- Total Investments: 33,270 99.8 Cash and Other Assets Less Liabilities 82 0.2 ------------------- Net Assets $33,352 100.0% ================================================================================ 41 F40 Liberty Acorn Twenty >Major Portfolio Changes in the Fourth Quarter Number of Shares ---------------------------- 09/30/02 12/31/02 Additions - -------------------------------------------------------------------------------- Information Liberty Media 850,000 1,610,000 Moody's 90,000 165,000 Synopsys 145,000 215,000 Tektronix 150,000 225,000 - -------------------------------------------------------------------------------- Health Care First Health Group 340,000 505,000 Guidant 0 240,000 IMS Health 330,000 475,000 - -------------------------------------------------------------------------------- Consumer Goods/Services Costco 0 210,000 International Speedway Motors 90,000 150,000 - -------------------------------------------------------------------------------- Finance Associated Banc-Corp 165,000 235,000 Fidelity National Finance 110,000 140,000 TCF Financial 85,000 230,000 - -------------------------------------------------------------------------------- Industrial Goods/Services Expeditors International of Washington 245,000 305,000 Sales - -------------------------------------------------------------------------------- Information Concord EFS 213,000 0 H&R Block 225,000 0 20 42 Liberty Acorn Twenty >Statement of Investments December 31, 2002 Number of Shares Value (000) - -------------------------------------------------------------------------------- Common Stocks: 94.1% - -------------------------------------------------------------------------------- Information: 29.6% >Television Programming: 8.6% 1,610,000 Liberty Media (b) $ 14,393 CATV Programming & Media Company Holdings - -------------------------------------------------------------------------------- >Instrumentation: 4.5% 225,000 Tektronix (b) 4,093 Analytical Instruments 160,000 Waters (b) 3,485 Chromatography, Mass Spectrometry, Thermal Analysis - -------------------------------------------------------------------------------- 7,578 >Gaming Equipment: 4.5% 100,000 International Game Technology (b) 7,592 Slot Machines & Progressive Jackpots - -------------------------------------------------------------------------------- >Business Software: 8.0% 215,000 Synopsys (b) 9,922 Software for Designing Semiconductor Chips 310,000 JD Edwards (b) 3,497 Mid Market ERP & Supply Chain Software - -------------------------------------------------------------------------------- 13,419 >Business Information: 4.0% 165,000 Moody's 6,813 Ratings Service for Credit Obligations -------- Information: Total 49,795 - -------------------------------------------------------------------------------- Health Care: 26.9% >Medical Equipment: 10.0% 220,000 Boston Scientific (b) 9,354 Stents & Catheters 240,000 Guidant (b) 7,404 Stents, Defibrillators & Other Cardiac Medical Devices - -------------------------------------------------------------------------------- 16,758 >Services: 14.8% 505,000 First Health Group (b) 12,297 PPO Network 475,000 IMS Health 7,600 Prescription Data to Pharmaceutical Industry 160,000 Lincare Holdings (b) 5,059 Home Health Care Services - -------------------------------------------------------------------------------- 24,956 >Hospital/Laboratory Supplies: 2.1% 125,000 Techne (b) 3,571 Cytokines, Antibodies, Other Reagents for Life Sciences -------- Health Care: Total 45,285 - -------------------------------------------------------------------------------- Consumer Goods/Services: 12.1% >Leisure Vehicles: 2.3% 85,000 Harley-Davidson 3,927 Motorcycles & Related Merchandise - -------------------------------------------------------------------------------- >Retail: 3.5% 210,000 Costco (b) 5,893 Warehouse Superstores - -------------------------------------------------------------------------------- Number of Shares or Principal Amount (000) Value (000) - -------------------------------------------------------------------------------- >Entertainment: 3.3% 150,000 International Speedway Motors $ 5,593 Largest Motorsport Racetrack Owner & Operator - -------------------------------------------------------------------------------- >Furniture & Manufacturers: 3.0% 140,000 Jones Apparel (b) 4,962 Women's Apparel -------- Consumer Goods/Services: Total 20,375 - -------------------------------------------------------------------------------- Finance: 19.6% >Banks: 10.7% 230,000 TCF Financial 10,049 Great Lakes Bank 235,000 Associated Banc-Corp 7,976 Midwest Bank - -------------------------------------------------------------------------------- 18,025 >Insurance: 7.0% 35,000 Markel (b) 7,192 Specialty Insurance 140,000 Fidelity National Financial 4,596 Title Insurance & Other Services - -------------------------------------------------------------------------------- 11,788 >Money Management: 1.9% 115,000 SEI Investments 3,126 Mutual Fund Administration & Investment Management -------- Finance: Total 32,939 - -------------------------------------------------------------------------------- Industrial Goods/Services: 5.9% >Logistics: 5.9% 305,000 Expeditors International of Washington 9,958 International Freight Forwarder -------- Industrial Goods/Services: Total 9,958 -------- Total Common Stocks: 94.1% (Cost: $143,163) 158,352 Short-Term Obligations: 4.9% $4,199 Repurchase agreement with State Street Bank & Trust Co., dated 12/31/02, due 01/02/03 at 1.000%, collateralized by Federal Home Loan Bank Notes maturing 01/16/04, market value $4,285 (repurchase proceeds $4,199) 4,199 4,000 American Express Credit, 1.350%, due 01/02/03 4,000 - -------------------------------------------------------------------------------- (Cost: $8,199) 8,199 -------- Total Investments: 99.0% 166,551 (Cost: $151,362) (a) Cash and Other Assets Less Liabilities: 1.0% 1,759 -------- Total Net Assets: 100% $168,310 ================================================================================ >Notes to Statement of Investments (in thousands) (a) At December 31, 2002, for federal income tax purposes cost of investments is $151,383 and net unrealized appreciation was $15,168, consisting of gross unrealized appreciation of $19,963 and gross unrealized depreciation of $4,795. (b) Non-income producing security. 43 20 Liberty Acorn Family of Funds >Statements of Assets and Liabilities
Liberty Liberty Liberty Acorn Acorn Acorn December 31, 2002 Fund International USA - -------------------------------------------------------------------------------------------------------------------------- (in thousands) Assets Investments, at value (cost: Liberty Acorn Fund $4,868,665; Liberty Acorn International $1,406,707; Liberty Acorn USA $337,936; Liberty Acorn Foreign Forty $33,452; Liberty Acorn Twenty $151,362) $5,713,084 $1,283,986 $324,023 Cash 34 1 -- Foreign currency (cost: Liberty Acorn Fund $99; Liberty Acorn International $23,854, Liberty Foreign Forty $5) 100 23,645 -- Receivable for: Investments sold 641 284 -- Fund shares sold 35,980 4,755 801 Dividends and interest 4,049 2,644 36 Expense reimbursement due from Advisor -- -- -- Deferred Trustees' Compensation Investments 785 398 56 Other assets 245 77 4 - -------------------------------------------------------------------------------------------------------------------------- Total Assets 5,754,918 1,315,790 324,920 Liabilities Payable for: Investments purchased 4,273 879 126 Fund shares redeemed 7,498 2,222 1,019 Foreign capital gains tax 293 187 -- Custodian 76 172 12 Management fee 9 8 -- Administration fee 5 1 -- Legal and audit fees 63 60 12 Reports to shareholders 166 78 23 Deferred Trustees' fees 785 398 56 Transfer agent fee 809 123 58 Other liabilities 300 218 91 - -------------------------------------------------------------------------------------------------------------------------- Total Liabilities 14,277 4,346 1,397 - -------------------------------------------------------------------------------------------------------------------------- Net Assets $5,740,641 $1,311,444 $323,523 ========================================================================================================================== Composition of Net Assets Paid in capital $4,949,255 $1,660,450 $361,356 Undistributed net investment income (Accumulated net investment loss) 3,601 5,460 (50) Accumulated net realized loss (55,964) (224,336) (23,870) Net unrealized appreciation (depreciation) on: Investments (net of unrealized PFIC gains of $409 for Liberty Acorn Fund and $7,225 for Liberty Acorn International) 844,010 (129,946) (13,913) Foreign currency transactions (261) (184) -- - -------------------------------------------------------------------------------------------------------------------------- Net Assets $5,740,641 $1,311,444 $323,523 ========================================================================================================================== Net asset value and redemption price per share - Class A (a) $15.34 $15.32 $14.18 (Net assets/shares) ($724,121/47,211) ($33,806/2,206) ($32,422/2,286) Maximum offering price per share - Class A (b) $16.28 $16.25 $15.05 (Net asset value and redemption price per share/front-end sales charge) ($15.34/.9425) ($15.32/.9425) ($14.18/.9425) Net asset value and offering price per share - Class B (a) $15.13 $15.11 $14.01 (Net assets/shares) ($618,727/40,903) ($22,560/1,493) ($37,478/2,675) Net asset value and offering price per share - Class C (a) $15.12 $15.11 $14.01 (Net assets/shares) ($376,024/24,862) ($14,575/964) ($18,313/1,307) Net asset value, offering price and redemption price per share - Class Z $15.50 $15.40 $14.28 (Net assets/shares) ($4,021,769/259,396) ($1,240,503/80,565) ($235,310/16,474) Liberty Liberty Acorn Acorn December 31, 2002 Foreign Forty Twenty - ------------------------------------------------------------------------------------------- (in thousands) Assets Investments, at value (cost: Liberty Acorn Fund $4,868,665; Liberty Acorn International $1,406,707; Liberty Acorn USA $337,936; Liberty Acorn Foreign Forty $33,452; Liberty Acorn Twenty $151,362) $33,270 $166,551 Cash 1 1 Foreign currency (cost: Liberty Acorn Fund $99; Liberty Acorn International $23,854, Liberty Foreign Forty $5) 5 -- Receivable for: Investments sold -- -- Fund shares sold 111 2,061 Dividends and interest 143 7 Expense reimbursement due from Advisor 12 19 Deferred Trustees' Compensation Investments -- -- Other assets 5 7 - ------------------------------------------------------------------------------------------- Total Assets 33,547 168,646 Liabilities Payable for: Investments purchased -- -- Fund shares redeemed 98 251 Foreign capital gains tax -- -- Custodian 8 1 Management fee -- -- Administration fee -- -- Legal and audit fees 20 16 Reports to shareholders 13 17 Deferred Trustees' fees 12 12 Transfer agent fee 14 33 Other liabilities 30 6 - ------------------------------------------------------------------------------------------- Total Liabilities 195 336 - ------------------------------------------------------------------------------------------- Net Assets $33,352 $168,310 =========================================================================================== Composition of Net Assets Paid in capital $71,416 $153,684 Undistributed net investment income (Accumulated net investment loss) 5 (11) Accumulated net realized loss (37,901) (552) Net unrealized appreciation (depreciation) on: Investments (net of unrealized PFIC gains of $409 for Liberty Acorn Fund and $7,225 for Liberty Acorn International) (182) 15,189 Foreign currency transactions 14 -- - ------------------------------------------------------------------------------------------- Net Assets $33,352 $168,310 =========================================================================================== Net asset value and redemption price per share - Class A (a) $10.24 $13.93 (Net assets/shares) ($2,612/255) ($31,742/2,279) Maximum offering price per share - Class A (b) $10.86 $14.78 (Net asset value and redemption price per share/front-end sales charge) ($10.24/.9425) ($13.93/.9425) Net asset value and offering price per share - Class B (a) $10.08 $13.73 (Net assets/shares) ($1,835/182) ($33,106/2,411) Net asset value and offering price per share - Class C (a) $10.09 $13.73 (Net assets/shares) ($2,915/289) ($10,919/795) Net asset value, offering price and redemption price per share - Class Z $10.29 $14.04 (Net assets/shares) ($25,990/2,525) ($92,543/6,589)
(a) Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (b) On sales of $50,000 or more the offering price is reduced. See accompanying notes to financial statements. A I U F40 20 44 Liberty Acorn Family of Funds >Statements of Operations For the Year Ended December 31, 2002
Liberty Liberty Liberty Liberty Liberty Acorn Acorn Acorn Acorn Acorn (in thousands) Fund International USA Foreign Forty Twenty - --------------------------------------------------------------------------------------------------------------------------------- Investment Income: Dividend income $ 46,122 $ 30,303 $ 1,215 $ 718 $ 547 Interest income 7,733 1,575 497 39 167 - --------------------------------------------------------------------------------------------------------------------------------- 53,855 31,878 1,712 757 714 Foreign taxes withheld (813) (3,077) -- (71) -- - --------------------------------------------------------------------------------------------------------------------------------- Total Investment Income 53,042 28,801 1,712 686 714 Expenses: Management fees 37,007 12,863 3,027 381 1,095 Administration fees 2,747 774 163 20 61 12b-1 Service & Distribution fees 9,825 473 680 66 360 Custody fees 486 1,013 17 46 8 Legal and audit fees 380 159 52 36 33 Transfer agent fee 6,201 1,174 505 95 278 Trustees' fee 301 96 17 13 15 Registration and blue sky 531 129 109 82 91 Reports to shareholders 436 189 79 37 49 Other expenses 208 77 13 2 5 - --------------------------------------------------------------------------------------------------------------------------------- Total expenses 58,122 16,947 4,662 778 1,995 Less custody fees paid indirectly (1) --* (1) --* --* Less reimbursement of expenses by Advisor -- -- -- (131) (57) - --------------------------------------------------------------------------------------------------------------------------------- Net Expenses 58,121 16,947 4,661 647 1,938 - --------------------------------------------------------------------------------------------------------------------------------- Net Investment Income (Loss) (5,079) 11,854 (2,949) 39 (1,224) Net Realized and Unrealized Gain (Loss) on Portfolio Positions: Net realized gain (loss) on: Investments (57,647) (85,045) (17,552) (6,827) (508) Forward foreign currency contracts -- (2,222) -- -- -- Foreign currency transactions 38 (1,351) -- (18) -- - --------------------------------------------------------------------------------------------------------------------------------- Net realized loss (57,609) (88,618) (17,552) (6,845) (508) ================================================================================================================================= Net change in net unrealized appreciation/ depreciation on: Investments (778,327) (190,086) (56,039) 1,141 (7,857) Foreign currency transactions (328) 1,695 -- 10 -- - --------------------------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation/depreciation (778,655) (188,391) (56,039) 1,151 (7,857) ================================================================================================================================= Net realized and unrealized loss (836,264) (277,009) (73,591) (5,694) (8,365) - --------------------------------------------------------------------------------------------------------------------------------- Net Decrease in Net Assets resulting from Operations $(841,343) $(265,155) $(76,540) $(5,655) $(9,589) =================================================================================================================================
* Rounds to less than $500. See accompanying notes to financial statements. A I U F40 20 45 Liberty Acorn Family of Funds >Statements of Changes in Net Assets
Liberty Liberty Acorn Acorn Fund International Year ended Year ended Year ended Year ended Increase (Decrease) in Net Assets December 31, December 31, December 31, December 31, - ---------------------------------------------------------------------------------------------------------------------------- (in thousands) 2002 2001 2002 2001 Operations: Net investment income (loss) $ (5,079) $ 8,831 $ 11,854 $ 12,043 Net realized gain (loss) on investments, forward foreign currency contracts, futures and foreign currency transactions (57,609) 25,700 (88,618) (140,634) Change in net unrealized appreciation (depreciation) of investments, forward foreign currency contracts and foreign currency transactions (778,655) 244,013 (188,391) (375,330) - ---------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) from Operations (841,343) 278,544 (265,155) (503,921) Distribution to Shareholders From: Net investment income - Class A -- -- (24) -- Net realized gain - Class A -- (2,844) -- (398) Net investment income - Class B -- -- -- -- Net realized gain - Class B -- (2,637) -- (273) Net investment income - Class C -- -- -- -- Net realized gain - Class C -- (1,296) -- (230) Net investment income - Class Z -- (8,940) (9,265) -- Net realized gain -- Class Z -- (80,989) -- (38,229) - ---------------------------------------------------------------------------------------------------------------------------- Total Distribution to Shareholders -- (96,706) (9,289) (39,130) Share Transactions: Subscriptions - Class A 645,380 307,484 264,875 239,039 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- -- -- -- Distributions reinvested - Class A -- 2,629 17 334 Redemptions -- Class A (134,555) (37,092) (251,764) (220,639) - ---------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) -- Class A 510,825 273,021 13,128 18,734 Subscriptions - Class B 490,366 273,803 15,847 18,727 Distributions reinvested - Class B -- 2,424 -- 231 Redemptions -- Class B (67,763) (15,884) (6,194) (3,880) - ---------------------------------------------------------------------------------------------------------------------------- Net Increase -- Class B 422,603 260,343 9,653 15,078 Subscriptions - Class C 330,698 151,838 43,176 46,327 Distributions reinvested - Class C -- 1,220 -- 199 Redemptions -- Class C (53,861) (16,911) (40,348) (33,605) - ---------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) -- Class C 276,837 136,147 2,828 12,921 Subscriptions - Class Z 917,983 634,962 649,314 855,561 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- -- -- -- Distributions reinvested - Class Z -- 81,436 8,562 35,680 Redemptions -- Class Z (509,628) (630,511) (768,033) (1,203,599) - ---------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) -- Class Z 408,355 85,887 (110,157) (312,358) - ---------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) from Share Transactions 1,618,620 755,398 (84,548) (265,625) - ---------------------------------------------------------------------------------------------------------------------------- Total Increase (Decrease) in Net Assets 777,277 937,236 (358,992) (808,676) Net Assets: Beginning of period 4,963,364 4,026,128 1,670,436 2,479,112 - ---------------------------------------------------------------------------------------------------------------------------- End of period $ 5,740,641 $ 4,963,364 $ 1,311,444 $ 1,670,436 ============================================================================================================================ Undistributed Net Investment Income (Accumulated Net Investment Loss or Overdistributed Net Investment Income) $ 3,601 $ (420) $ 5,460 $ 5,051 ============================================================================================================================ Liberty Liberty Acorn Acorn USA Foreign Forty Year ended Year ended Year ended Year ended Increase (Decrease) in Net Assets December 31, December 31, December 31, December 31, - ---------------------------------------------------------------------------------------------------------------------- (in thousands) 2002 2001 2002 2001 Operations: Net investment income (loss) $ (2,949) $ (1,409) $ 39 $ (374) Net realized gain (loss) on investments, forward foreign currency contracts, futures and foreign currency transactions (17,552) 7,406 (6,845) (30,434) Change in net unrealized appreciation (depreciation) of investments, forward foreign currency contracts and foreign currency transactions (56,039) 31,876 1,151 (9,135) - ---------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) from Operations (76,540) 37,873 (5,655) (39,943) Distribution to Shareholders From: Net investment income - Class A -- -- -- (3) Net realized gain - Class A -- (155) -- (23) Net investment income - Class B -- -- -- (2) Net realized gain - Class B -- (181) -- (13) Net investment income - Class C -- -- -- (5) Net realized gain - Class C -- (90) -- (30) Net investment income - Class Z -- -- -- (66) Net realized gain -- Class Z -- (3,172) -- (441) - ---------------------------------------------------------------------------------------------------------------------- Total Distribution to Shareholders -- (3,598) -- (583) Share Transactions: Subscriptions - Class A 35,469 32,901 54,708 56,509 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund 22 -- -- -- Distributions reinvested - Class A -- 144 -- 23 Redemptions -- Class A (15,616) (13,214) (54,724) (55,501) - ---------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) -- Class A 19,875 19,831 (16) 1,031 Subscriptions - Class B 33,711 31,389 2,363 2,027 Distributions reinvested - Class B -- 155 -- 13 Redemptions -- Class B (13,914) (4,458) (2,245) (778) - ---------------------------------------------------------------------------------------------------------------------- Net Increase -- Class B 19,797 27,086 118 1,262 Subscriptions - Class C 14,839 14,042 5,117 8,387 Distributions reinvested - Class C -- 84 -- 11 Redemptions -- Class C (5,070) (1,321) (5,510) (6,283) - ---------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) -- Class C 9,769 12,805 (393) 2,115 Subscriptions - Class Z 125,400 83,357 72,837 146,755 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund 10,075 -- -- -- Distributions reinvested - Class Z -- 3,020 -- 450 Redemptions -- Class Z (75,563) (113,912) (79,344) (202,928) - ---------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) -- Class Z 59,912 (27,535) (6,507) (55,723) - ---------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) from Share Transactions 109,353 32,187 (6,798) (51,315) - ---------------------------------------------------------------------------------------------------------------------- Total Increase (Decrease) in Net Assets 32,813 66,462 (12,453) (91,841) Net Assets: Beginning of period 290,710 224,248 45,805 137,646 - ---------------------------------------------------------------------------------------------------------------------- End of period $ 323,523 $ 290,710 $ 33,352 $ 45,805 ====================================================================================================================== Undistributed Net Investment Income (Accumulated Net Investment Loss or Overdistributed Net Investment Income) $ (50) $ (52) $ 5 $ (16) ====================================================================================================================== Liberty Acorn Twenty Year ended Year ended Increase (Decrease) in Net Assets December 31, December 31, - ----------------------------------------------------------------------------------- (in thousands) 2002 2001 Operations: Net investment income (loss) $ (1,224) $ (496) Net realized gain (loss) on investments, forward foreign currency contracts, futures and foreign currency transactions (508) 823 Change in net unrealized appreciation (depreciation) of investments, forward foreign currency contracts and foreign currency transactions (7,857) 6,110 - ----------------------------------------------------------------------------------- Net Increase (Decrease) from Operations (9,589) 6,437 Distribution to Shareholders From: Net investment income - Class A -- -- Net realized gain - Class A -- (21) Net investment income - Class B -- -- Net realized gain - Class B -- (23) Net investment income - Class C -- -- Net realized gain - Class C -- (9) Net investment income - Class Z -- -- Net realized gain -- Class Z -- (135) - ----------------------------------------------------------------------------------- Total Distribution to Shareholders -- (188) Share Transactions: Subscriptions - Class A 31,504 11,048 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- -- Distributions reinvested - Class A -- 19 Redemptions -- Class A (10,199) (3,166) - ----------------------------------------------------------------------------------- Net Increase (Decrease) -- Class A 21,305 7,901 Subscriptions - Class B 27,565 10,371 Distributions reinvested - Class B -- 21 Redemptions -- Class B (5,862) (2,066) - ----------------------------------------------------------------------------------- Net Increase -- Class B 21,703 8,326 Subscriptions - Class C 8,806 3,892 Distributions reinvested - Class C -- 8 Redemptions -- Class C (2,268) (389) - ----------------------------------------------------------------------------------- Net Increase (Decrease) -- Class C 6,538 3,511 Subscriptions - Class Z 46,496 11,389 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- -- Distributions reinvested - Class Z -- 128 Redemptions -- Class Z (17,872) (12,911) - ----------------------------------------------------------------------------------- Net Increase (Decrease) -- Class Z 28,624 (1,394) - ----------------------------------------------------------------------------------- Net Increase (Decrease) from Share Transactions 78,170 18,344 - ----------------------------------------------------------------------------------- Total Increase (Decrease) in Net Assets 68,581 24,593 Net Assets: Beginning of period 99,729 75,136 - ----------------------------------------------------------------------------------- End of period $ 168,310 $ 99,729 =================================================================================== Undistributed Net Investment Income (Accumulated Net Investment Loss or Overdistributed Net Investment Income) $ (11) $ (9) ===================================================================================
See accompanying notes to financial statements. A I U F40 20 46 & 47 Liberty Acorn Family of Funds >Statements of Changes in Net Assets continued
Liberty Liberty Acorn Acorn Fund International Year ended Year ended Year ended Year ended Changes in Shares of Beneficial Interest: December 31, December 31, December 31, December 31, - ------------------------------------------------------------------------------------------------------------------------ (in thousands) 2002 2001 2002 2001 Subscriptions - Class A 38,478 18,209 15,488 12,434 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- -- -- -- Shares issued in reinvestment and capital gains - Class A -- 146 1 16 Less shares redeemed -- Class A (8,482) (2,202) (14,677) (11,489) - ------------------------------------------------------------------------------------------------------------------------ Net Increase -- Class A 29,996 16,153 812 961 Subscriptions -- Class B 29,099 16,110 923 900 Shares issued in reinvestment and capital gains -- Class B -- 135 -- 11 Less shares redeemed -- Class B (4,407) (963) (376) (203) - ------------------------------------------------------------------------------------------------------------------------ Net Increase -- Class B 24,692 15,282 547 708 Subscriptions -- Class C 19,804 8,969 2,573 2,305 Shares issued in reinvestment and capital gains -- Class C -- 68 -- 10 Less shares redeemed -- Class C (3,475) (1,000) (2,396) (1,695) - ------------------------------------------------------------------------------------------------------------------------ Net Increase (Decrease) - Class C 16,329 8,037 177 620 Subscriptions - Class Z 54,769 37,199 38,166 42,524 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- -- -- -- Shares issued in reinvestment and capital gains - Class Z -- 4,491 484 1,705 Less shares redeemed -- Class Z (31,314) (37,172) (45,408) (60,018) - ------------------------------------------------------------------------------------------------------------------------ Net Increase (Decrease) -- Class Z 23,455 4,518 (6,758) (15,789) - ------------------------------------------------------------------------------------------------------------------------ Net Increase (Decrease) in Shares of Beneficial Interest 94,472 43,990 (5,222) (13,500) - ------------------------------------------------------------------------------------------------------------------------ Liberty Liberty Acorn Acorn USA Foreign Forty Year ended Year ended Year ended Year ended Changes in Shares of Beneficial Interest: December 31, December 31, December 31, December 31, - ---------------------------------------------------------------------------------------------------------------------- (in thousands) 2002 2001 2002 2001 Subscriptions - Class A 2,124 1,880 4,749 4,477 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund 2 -- -- -- Shares issued in reinvestment and capital gains - Class A -- 9 -- 2 Less shares redeemed -- Class A (1,009) (774) (4,731) (4,427) - ---------------------------------------------------------------------------------------------------------------------- Net Increase -- Class A 1,117 1,115 18 52 Subscriptions -- Class B 2,019 1,815 220 145 Shares issued in reinvestment and capital gains -- Class B -- 9 -- 1 Less shares redeemed -- Class B (937) (277) (211) (64) - ---------------------------------------------------------------------------------------------------------------------- Net Increase -- Class B 1,082 1,547 9 82 Subscriptions -- Class C 892 800 459 652 Shares issued in reinvestment and capital gains -- Class C -- 5 -- 1 Less shares redeemed -- Class C (335) (78) (495) (526) - ---------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) - Class C 557 727 (36) 127 Subscriptions - Class Z 7,498 4,826 6,884 10,085 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund 724 -- -- -- Shares issued in reinvestment and capital gains - Class Z -- 179 -- 32 Less shares redeemed -- Class Z (4,844) (6,839) (7,419) (14,609) - ---------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) -- Class Z 3,378 (1,834) (535) (4,492) - ---------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Shares of Beneficial Interest 6,134 1,555 (544) (4,231) - ---------------------------------------------------------------------------------------------------------------------- Liberty Acorn Twenty Year ended Year ended Changes in Shares of Beneficial Interest: December 31, December 31, - -------------------------------------------------------------------------------------- (in thousands) 2002 2001 Subscriptions - Class A 2,229 778 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- -- Shares issued in reinvestment and capital gains - Class A -- 1 Less shares redeemed -- Class A (735) (225) - -------------------------------------------------------------------------------------- Net Increase -- Class A 1,494 554 Subscriptions -- Class B 1,955 736 Shares issued in reinvestment and capital gains -- Class B -- 1 Less shares redeemed -- Class B (431) (151) - -------------------------------------------------------------------------------------- Net Increase -- Class B 1,524 586 Subscriptions -- Class C 630 281 Shares issued in reinvestment and capital gains -- Class C -- 1 Less shares redeemed -- Class C (164) (29) - -------------------------------------------------------------------------------------- Net Increase (Decrease) - Class C 466 253 Subscriptions - Class Z 3,286 812 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- -- Shares issued in reinvestment and capital gains - Class Z -- 9 Less shares redeemed -- Class Z (1,263) (965) - -------------------------------------------------------------------------------------- Net Increase (Decrease) -- Class Z 2,023 (144) - -------------------------------------------------------------------------------------- Net Increase (Decrease) in Shares of Beneficial Interest 5,507 1,249 - --------------------------------------------------------------------------------------
See accompanying notes to financial statements. A I U F40 20 48 & 49 Liberty Acorn Family of Funds >Financial Highlights Liberty Acorn Fund
Class A Shares Year Ended December 31, - ---------------------------------------------------------------------------------------------------------- Selected data for a share outstanding throughout each period 2002 2001 2000(a) Net Asset Value, Beginning of Period $ 17.80 $ 17.19 $ 17.88 Income from Investment Operations Net investment income (loss) (b) (0.07) (0.05) 0.01 Net realized and unrealized gain (loss) (2.39) 1.01 1.22 - ---------------------------------------------------------------------------------------------------------- Total from Investment Operations (2.46) 0.96 1.23 - ---------------------------------------------------------------------------------------------------------- Less Distributions Declared to Shareholders From net investment income -- -- (0.06) From net realized gains -- (0.35) (1.86) - ---------------------------------------------------------------------------------------------------------- Total Distributions Declared to Shareholders -- (0.35) (1.92) - ---------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 15.34 $ 17.80 $ 17.19 ========================================================================================================== Total Return (c) (13.82)% 5.56% 7.40%(d) - ---------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets Expenses (e) 1.42% 1.42% 1.03%(f) Net investment income (loss) (e) (0.45)% (0.33)% 0.39%(f) Portfolio turnover rate 13% 20% 29%(d) Net assets at end of period (000's) $724,121 $306,405 $18,252
(a) Class A Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) The benefits derived from custody fees paid indirectly had no impact. (f) Annualized.
Class B Shares Year Ended December 31, - ----------------------------------------------------------------------------------------------------------- Selected data for a share outstanding throughout each period 2002 2001 2000(a) Net Asset Value, Beginning of Period $ 17.67 $ 17.17 $ 17.88 Income from Investment Operations Net investment loss (b) (0.17) (0.16) (0.01) Net realized and unrealized gain (loss) (2.37) 1.01 1.22 - ----------------------------------------------------------------------------------------------------------- Total from Investment Operations (2.54) 0.85 1.21 - ----------------------------------------------------------------------------------------------------------- Less Distributions Declared to Shareholders From net investment income -- -- (0.06) From net realized gains -- (0.35) (1.86) - ----------------------------------------------------------------------------------------------------------- Total Distributions Declared to Shareholders -- (0.35) (1.92) - ----------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 15.13 $ 17.67 $ 17.17 =========================================================================================================== Total Return (c) (14.37)% 4.92% 7.27%(d) - ----------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets Expenses (e) 2.07% 2.07% 1.68%(f) Net investment loss (e) (1.10)% (0.98)% (0.26)%(f) Portfolio turnover rate 13% 20% 29%(d) Net assets at end of period (000's) $618,727 $286,422 $15,951
(a) Class B Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) The benefits derived from custody fees paid indirectly had no impact. (f) Annualized.
Class C Shares Year Ended December 31, - ---------------------------------------------------------------------------------------------------------- Selected data for a share outstanding throughout each period 2002 2001 2000(a) Net Asset Value, Beginning of Period $ 17.66 $ 17.17 $17.88 Income from Investment Operations Net investment loss (b) (0.17) (0.17) (0.01) Net realized and unrealized gain (loss) (2.37) 1.01 1.22 - ---------------------------------------------------------------------------------------------------------- Total from Investment Operations (2.54) 0.84 1.21 - ---------------------------------------------------------------------------------------------------------- Less Distributions Declared to Shareholders From net investment income -- -- (0.06) From net realized gains -- (0.35) (1.86) - ---------------------------------------------------------------------------------------------------------- Total Distributions Declared to Shareholders -- (0.35) (1.92) - ---------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 15.12 $ 17.66 $17.17 ========================================================================================================== Total Return (c) (14.38)% 4.86% 7.27%(d) - ---------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets Expenses (e) 2.07% 2.07% 1.68%(f) Net investment loss (e) (1.10)% (0.98)% (0.26)%(f) Portfolio turnover rate 13% 20% 29%(d) Net assets at end of period (000's) $376,024 $150,727 $8,510
(a) Class C Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) The benefits derived from custody fees paid indirectly had no impact. (f) Annualized. See accompanying notes to financial statements. A I U F40 20 50 Liberty Acorn International
Class A Shares Year Ended December 31, - ---------------------------------------------------------------------------------------------------------- Selected data for a share outstanding throughout each period 2002 2001 2000(a) Net Asset Value, Beginning of Period $ 18.35 $ 23.84 $ 28.67 Income from Investment Operations Net investment income (b) 0.05 0.01 0.02 Net realized and unrealized loss (3.07) (5.11) (1.26) - ---------------------------------------------------------------------------------------------------------- Total from Investment Operations (3.02) (5.10) (1.24) - ---------------------------------------------------------------------------------------------------------- Less Distributions Declared to Shareholders From net investment income (0.01) -- -- From net realized gains -- (0.39) (3.59) - ---------------------------------------------------------------------------------------------------------- Total Distributions Declared to Shareholders (0.01) (0.39) (3.59) - ---------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 15.32 $ 18.35 $ 23.84 ========================================================================================================== Total Return (c) (16.46)% (21.59)% (4.85)%(d) - ---------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets Expenses (e) 1.56% 1.65% 1.59%(f) Net investment income (e) 0.30% 0.03% 0.40%(f) Portfolio turnover rate 52% 45% 63%(d) Net assets at end of period (000's) $ 33,806 $ 25,587 $10,323
(a) Class A Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) The benefits derived from custody fees paid indirectly had no impact. (f) Annualized.
Class B Shares Year Ended December 31, - ---------------------------------------------------------------------------------------------------------- Selected data for a share outstanding throughout each period 2002 2001 2000(a) Net Asset Value, Beginning of Period $ 18.22 $ 23.81 $28.67 Income from Investment Operations Net investment loss (b) (0.06) (0.12) (0.01) Net realized and unrealized loss (3.05) (5.08) (1.26) - ---------------------------------------------------------------------------------------------------------- Total from Investment Operations (3.11) (5.20) (1.27) - ---------------------------------------------------------------------------------------------------------- Less Distributions Declared to Shareholders From net realized gains -- (0.39) (3.59) - ---------------------------------------------------------------------------------------------------------- Total Distributions Declared to Shareholders -- (0.39) (3.59) - ---------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 15.11 $ 18.22 $23.81 ========================================================================================================== Total Return (c) (17.07)% (22.04)% (4.97)%(d) - ---------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets Expenses (e) 2.21% 2.30% 2.24%(f) Net investment loss (e) (0.35)% (0.62)% (0.25)%(f) Portfolio turnover rate 52% 45% 63%(d) Net assets at end of period (000's) $ 22,560 $ 17,235 $5,675
(a) Class B Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) The benefits derived from custody fees paid indirectly had no impact. (f) Annualized.
Class C Shares Year Ended December 31, - ---------------------------------------------------------------------------------------------------------- Selected data for a share outstanding throughout each period 2002 2001 2000(a) Net Asset Value, Beginning of Period $ 18.21 $ 23.81 $28.67 Income from Investment Operations Net investment loss (b) (0.06) (0.13) (0.01) Net realized and unrealized loss (3.04) (5.08) (1.26) - ---------------------------------------------------------------------------------------------------------- Total from Investment Operations (3.10) (5.21) (1.27) - ---------------------------------------------------------------------------------------------------------- Less Distributions Declared to Shareholders From net realized gains -- (0.39) (3.59) - ---------------------------------------------------------------------------------------------------------- Total Distributions Declared to Shareholders -- (0.39) (3.59) - ---------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 15.11 $ 18.21 $23.81 ========================================================================================================== Total Return (c) (17.02)% (22.08)% (4.97)%(d) - ---------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets Expenses (e) 2.21% 2.30% 2.24%(f) Net investment loss (e) (0.35)% (0.62)% (0.25)%(f) Portfolio turnover rate 52% 45% 63%(d) Net assets at end of period (000's) $ 14,575 $ 14,327 $3,965
(a) Class C Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) The benefits derived from custody fees paid indirectly had no impact. (f) Annualized. See accompanying notes to financial statements. A I U F40 20 51 Liberty Acorn Family of Funds >Financial Highlights continued Liberty Acorn USA
Class A Shares Year Ended December 31, - ---------------------------------------------------------------------------------------------------------- Selected data for a share outstanding throughout each period 2002 2001 2000(a) Net Asset Value, Beginning of Period $ 17.50 $ 14.88 $13.83 Income from Investment Operations Net investment loss (b) (0.19) (0.19) (0.01) Net realized and unrealized gain (loss) (3.13) 2.96 1.06 - ---------------------------------------------------------------------------------------------------------- Total from Investment Operations (3.32) 2.77 1.05 - ---------------------------------------------------------------------------------------------------------- Less Distributions Declared to Shareholders From net realized gains -- (0.15) -- - ---------------------------------------------------------------------------------------------------------- Total Distributions Declared to Shareholders -- (0.15) -- - ---------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 14.18 $ 17.50 $14.88 ========================================================================================================== Total Return (c) (18.97)% 18.65% 7.59%(d) - ---------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets Expenses (e) 1.74% 1.84% 1.17%(f) Net investment loss (e) (1.21)% (1.13)% (0.49)%(f) Portfolio turnover rate 31% 24% 45%(d) Net assets at end of period (000's) $ 32,422 $ 20,455 $ 798
(a) Class A Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) The benefits derived from custody fees paid indirectly had no impact. (f) Annualized.
Class B Shares Year Ended December 31, - ---------------------------------------------------------------------------------------------------------- Selected data for a share outstanding throughout each period 2002 2001 2000(a) Net Asset Value, Beginning of Period $ 17.40 $ 14.87 $13.83 Income from Investment Operations Net investment loss (b) (0.29) (0.30) (0.03) Net realized and unrealized gain (loss) (3.10) 2.96 1.07 - ---------------------------------------------------------------------------------------------------------- Total from Investment Operations (3.39) 2.66 1.04 - ---------------------------------------------------------------------------------------------------------- Less Distributions Declared to Shareholders From net realized gains -- (0.13) -- - ---------------------------------------------------------------------------------------------------------- Total Distributions Declared to Shareholders -- (0.13) -- - ---------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 14.01 $ 17.40 $14.87 ========================================================================================================== Total Return (c) (19.48)% 17.92% 7.52%(d) - ---------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets Expenses (e) 2.39% 2.49% 1.82%(f) Net investment loss (e) (1.86)% (1.78)% (1.14)%(f) Portfolio turnover rate 31% 24% 45%(d) Net assets at end of period (000's) $ 37,478 $ 27,722 $ 685
(a) Class B Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) The benefits derived from custody fees paid indirectly had no impact. (f) Annualized.
Class C Shares Year Ended December 31, - ---------------------------------------------------------------------------------------------------------- Selected data for a share outstanding throughout each period 2002 2001 2000(a) Net Asset Value, Beginning of Period $ 17.40 $ 14.87 $13.83 Income from Investment Operations Net investment loss (b) (0.29) (0.30) (0.03) Net realized and unrealized gain (loss) (3.10) 2.96 1.07 - ---------------------------------------------------------------------------------------------------------- Total from Investment Operations (3.39) 2.66 1.04 - ---------------------------------------------------------------------------------------------------------- Less Distributions Declared to Shareholders From net realized gains -- (0.13) -- - ---------------------------------------------------------------------------------------------------------- Total Distributions Declared to Shareholders -- (0.13) -- - ---------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 14.01 $ 17.40 $14.87 ========================================================================================================== Total Return (c) (19.48)% 17.92% 7.52%(d) - ---------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets Expenses (e) 2.39% 2.49% 1.82%(f) Net investment loss (e) (1.86)% (1.78)% (1.14)%(f) Portfolio turnover rate 31% 24% 45%(d) Net assets at end of period (000's) $ 18,313 $ 13,049 $ 347
(a) Class C Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) The benefits derived from custody fees paid indirectly had no impact. (f) Annualized. See accompanying notes to financial statements. A I U F40 20 52 Liberty Acorn Foreign Forty
Class A Shares Year Ended December 31, - ---------------------------------------------------------------------------------------------------------- Selected data for a share outstanding throughout each period 2002 2001 2000(a) Net Asset Value, Beginning of Period $ 12.07 $ 17.15 $17.71 Income from Investment Operations Net investment loss (b) (0.01) (0.09) (0.03) Net realized and unrealized loss (1.82) (4.90) (0.53) - ---------------------------------------------------------------------------------------------------------- Total from Investment Operations (1.83) (4.99) (0.56) - ---------------------------------------------------------------------------------------------------------- Less Distributions Declared to Shareholders From net investment income -- (0.01) -- From net realized gains -- (0.08) -- - ---------------------------------------------------------------------------------------------------------- Total Distributions Declared to Shareholders -- (0.09) -- - ---------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 10.24 $ 12.07 $17.15 ========================================================================================================== Total Return (c) (15.16)%(d) (29.17)%(d) (3.16)%(e) - ---------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets Expenses (f) 1.80% 1.80% 1.29%(g) Net investment loss (f) (0.09)% (0.67)% (0.79)%(g) Reimbursement 0.33% 0.23% -- Portfolio turnover rate 102% 82% 79%(e) Net assets at end of period (000's) $ 2,612 $ 2,861 $3,172
(a) Class A Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Had the Advisor not reimbursed a portion of expenses, total return would have been reduced. (e) Not annualized. (f) The benefits derived from custody fees paid indirectly had no impact. (g) Annualized.
Class B Shares Year Ended December 31, - ---------------------------------------------------------------------------------------------------------- Selected data for a share outstanding throughout each period 2002 2001 2000(a) Net Asset Value, Beginning of Period $ 11.96 $ 17.13 $17.71 Income from Investment Operations Net investment loss (b) (0.08) (0.18) (0.05) Net realized and unrealized loss (1.80) (4.90) (0.53) - ---------------------------------------------------------------------------------------------------------- Total from Investment Operations (1.88) (5.08) (0.58) - ---------------------------------------------------------------------------------------------------------- Less Distributions Declared to Shareholders From net investment income -- (0.01) -- From net realized gains -- (0.08) -- - ---------------------------------------------------------------------------------------------------------- Total Distributions Declared to Shareholders -- (0.09) -- - ---------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 10.08 $ 11.96 $17.13 ========================================================================================================== Total Return (c) (15.72)%(d) (29.73)%(d) (3.27)%(e) - ---------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets Expenses (f) 2.45% 2.45% 1.94%(g) Net investment loss (f) (0.74)% (1.32)% (1.44)%(g) Reimbursement 0.33% 0.23% -- Portfolio turnover rate 102% 82% 79%(e) Net assets at end of period (000's) $ 1,835 $ 2,069 $1,551
(a) Class B Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Had the Advisor not reimbursed a portion of expenses, total return would have been reduced. (e) Not annualized. (f) The benefits derived from custody fees paid indirectly had no impact. (g) Annualized.
Class C Shares Year Ended December 31, - ---------------------------------------------------------------------------------------------------------- Selected data for a share outstanding throughout each period 2002 2001 2000(a) Net Asset Value, Beginning of Period $ 11.97 $ 17.14 $17.71 Income from Investment Operations Net investment loss (b) (0.08) (0.18) (0.05) Net realized and unrealized loss (1.80) (4.90) (0.52) - ---------------------------------------------------------------------------------------------------------- Total from Investment Operations (1.88) (5.08) (0.57) - ---------------------------------------------------------------------------------------------------------- Less Distributions Declared to Shareholders From net investment income -- (0.01) -- From net realized gains -- (0.08) -- - ---------------------------------------------------------------------------------------------------------- Total Distributions Declared to Shareholders -- (0.09) -- - ---------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 10.09 $ 11.97 $17.14 ========================================================================================================== Total Return (c) (15.71)%(d) (29.71)%(d) (3.22)%(e) - ---------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets Expenses (f) 2.45% 2.45% 1.94%(g) Net investment loss (f) (0.74)% (1.32)% (1.44)%(g) Reimbursement 0.33% 0.23% -- Portfolio turnover rate 102% 82% 79%(e) Net assets at end of period (000's) $ 2,915 $ 3,885 $3,399
(a) Class C Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Had the Advisor not reimbursed a portion of expenses, total return would have been reduced. (e) Not annualized. (f) The benefits derived from custody fees paid indirectly had no impact. (g) Annualized. See accompanying notes to financial statements. A I U F40 20 53 Liberty Acorn Family of Funds >Financial Highlights continued Liberty Acorn Twenty
Class A Shares Year Ended December 31, - ------------------------------------------------------------------------------------------------------------ Selected data for a share outstanding throughout each period 2002 2001 2000(a) Net Asset Value, Beginning of Period $ 15.17 $ 14.12 $13.47 Income from Investment Operations Net investment income (loss) (b) (0.16) (0.10) 0.01 Net realized and unrealized gain (loss) (1.08) 1.18 0.84 - ------------------------------------------------------------------------------------------------------------ Total from Investment Operations (1.24) 1.08 0.85 - ------------------------------------------------------------------------------------------------------------ Less Distributions Declared to Shareholders From net investment income -- -- (0.01) From net realized gains -- (0.03) (0.19) - ------------------------------------------------------------------------------------------------------------ Total Distributions Declared to Shareholders -- (0.03) (0.20) - ------------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $ 13.93 $ 15.17 $14.12 ============================================================================================================ Total Return (c) (8.17)%(d) 7.65%(d) 6.32%(e) - ------------------------------------------------------------------------------------------------------------ Ratios to Average Net Assets Expenses 1.70%(f) 1.70% 0.76%(f)(g) Net investment income (loss) (1.11)%(f) (0.79)% 0.23%(f)(g) Reimbursement 0.10% 0.18% -- Portfolio turnover rate 40% 82% 116%(e) Net assets at end of period (000's) $ 31,742 $ 11,900 $3,267
(a) Class A Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Had the Advisor not reimbursed a portion of expenses, total return would have been reduced. (e) Not annualized. (f) The benefits derived from custody fees paid indirectly had no impact. (g) Annualized.
Class B Shares Year Ended December 31, - ------------------------------------------------------------------------------------------------------------ Selected data for a share outstanding throughout each period 2002 2001 2000(a) Net Asset Value, Beginning of Period $ 15.05 $ 14.10 $13.47 Income from Investment Operations Net investment loss (b) (0.25) (0.20) (0.01) Net realized and unrealized gain (loss) (1.07) 1.18 0.84 - ------------------------------------------------------------------------------------------------------------ Total from Investment Operations (1.32) 0.98 0.83 - ------------------------------------------------------------------------------------------------------------ Less Distributions Declared to Shareholders From net investment income -- -- (0.01) From net realized gains -- (0.03) (0.19) - ------------------------------------------------------------------------------------------------------------ Total Distributions Declared to Shareholders -- (0.03) (0.20) - ------------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $ 13.73 $ 15.05 $14.10 ============================================================================================================ Total Return (c) (8.77)%(d) 6.95%(d) 6.17%(e) - ------------------------------------------------------------------------------------------------------------ Ratios to Average Net Assets Expenses 2.35%(f) 2.35% 1.41%(f)(g) Net investment loss (1.76)%(f) (1.44)% (0.42)%(f)(g) Reimbursement 0.10% 0.18% -- Portfolio turnover rate 40% 82% 116%(e) Net assets at end of period (000's) $ 33,106 $ 13,358 $4,249
(a) Class B Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Had the Advisor not reimbursed a portion of expenses, total return would have been reduced. (e) Not annualized. (f) The benefits derived from custody fees paid indirectly had no impact. (g) Annualized. See accompanying notes to financial statements. A I U F40 20 54 Liberty Acorn Twenty continued
Class C Shares Year Ended December 31, - ------------------------------------------------------------------------------------------------------------ Selected data for a share outstanding throughout each period 2002 2001 2000(a) Net Asset Value, Beginning of Period $ 15.05 $ 14.10 $13.47 Income from Investment Operations Net investment loss (b) (0.25) (0.20) (0.01) Net realized and unrealized gain (loss) (1.07) 1.18 0.84 - ------------------------------------------------------------------------------------------------------------ Total from Investment Operations (1.32) 0.98 0.83 - ------------------------------------------------------------------------------------------------------------ Less Distributions Declared to Shareholders From net investment income -- -- (0.01) From net realized gains -- (0.03) (0.19) - ------------------------------------------------------------------------------------------------------------ Total Distributions Declared to Shareholders -- (0.03) (0.20) - ------------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $ 13.73 $ 15.05 $14.10 ============================================================================================================ Total Return (c) (8.77)%(d) 6.95%(d) 6.17%(e) - ------------------------------------------------------------------------------------------------------------ Ratios to Average Net Assets Expenses 2.35%(f) 2.35% 1.41%(f)(g) Net investment loss (1.76)%(f) (1.44)% (0.42)%(f)(g) Reimbursement 0.10% 0.18% -- Portfolio turnover rate 40% 82% 116%(e) Net assets at end of period (000's) $ 10,919 $ 4,945 $1,070
(a) Class C Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Had the Advisor not reimbursed a portion of expenses, total return would have been reduced. (e) Not annualized. (f) The benefits derived from custody fees paid indirectly had no impact. (g) Annualized. See accompanying notes to financial statements. A I U F40 20 55 Liberty Acorn Family of Funds >Notes to Financial Statements 1. Nature of Operations Liberty Acorn Fund, Liberty Acorn International, Liberty Acorn USA, Liberty Acorn Foreign Forty and Liberty Acorn Twenty (the "Funds") are series of Liberty Acorn Trust (the "Trust"), an open-end management investment company organized as a Massachusetts business trust. The investment objective of each Fund is to seek long-term growth of capital. The Funds may issue an unlimited number of shares. The Funds offer four classes of shares: Class A, Class B, Class C and Class Z. Class A shares are sold with a front-end sales charge. A contingent deferred sales charge is assessed to Class A shares purchased without an initial sales charge on redemptions made within eighteen months on an original purchase of $1 million to $25 million. Class B shares are subject to an annual distribution fee and a contingent deferred sales charge. Class B shares will convert to Class A shares in three, four or eight years after purchase, depending on the program under which shares are purchased. Class C shares are subject to a contingent deferred sales charge on redemptions made within one year after purchase and an annual distribution fee. Class Z shares are offered continuously at net asset value. There are certain restrictions on the purchase of Class Z shares. The financial highlights for Class Z shares are presented in a separate annual report. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are borne pro rata on the basis of the relative net assets of all classes, except each class bears certain expenses unique to that class such as distribution services, transfer agent, and certain other class specific expenses. Differences in class expenses may result in payment of different dividend distributions for each class. All the share classes of the Trust have equal rights with respect to voting subject to class specific arrangements. On July 26, 2002, Liberty Acorn USA acquired all of the net assets of the Stein Roe Small Company Growth Fund ("Stein Roe Fund") pursuant to a plan of reorganization approved by the Stein Roe Fund shareholders on June 28, 2002. The acquisition was accomplished by a tax-free exchange of 1,139,488 shares of the Stein Roe Fund (valued at $10,096,640) for 726,123 shares of Liberty Acorn USA. The net assets of the Stein Roe Fund were combined with the net assets of Liberty Acorn USA on the acquisition date and included $3,125,202 of unrealized depreciation on investments. The aggregate net assets of the Liberty Acorn USA immediately before and after acquisition were $306,945,066 and $317,041,706, respectively. 2. Significant Accounting Policies >Security valuation Investments are stated at fair value. Securities traded on securities exchanges or in over-the-counter markets in which transaction prices are reported are valued at the last sales price at the time of valuation. Securities for which there are no reported sales on the valuation date are valued at the latest bid quotation. Money market instruments having a maturity of 60 days or less from the valuation date are valued on an amortized cost basis. Securities for which quotations are not available and any other assets are valued at a fair value as determined in good faith by the Board of Trustees. >Repurchase agreements The Funds may engage in repurchase transactions. The Funds, through their custodians, receive delivery of underlying securities collateralizing repurchase agreements. The Funds' investment adviser determines that the value of the underlying securities is at all time at least equal to the resale price. In the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings. >Foreign currency translations Values of investments denominated in foreign currencies are converted into U.S. dollars using the spot market rate of exchange at the time of valuation. Purchases and sales of investments and dividend and interest income are translated into U.S. dollars using the spot market rate of exchange prevailing on the respective dates of such transactions. The gain or loss resulting from changes in foreign exchange rates is included with net realized and unrealized gain or loss from investments, as appropriate. >Security transactions and investment income Security transactions are accounted for on the trade date (date the order to buy or sell is executed) and dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as soon as the information is available to the Funds. Interest income is recorded on the accrual basis and includes amortization of discounts and premiums (if any) on money market instruments and long-term debt instruments when required for federal income tax purposes. Realized gains and losses from security transactions are reported on an identified cost basis. A I U F40 20 56 >Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. >Financial instruments Each Fund may purchase or sell exchange-traded financial futures contracts, which are contracts that obligate that Fund to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Funds enter into such contracts to hedge a portion of their portfolio. Gains and losses are reflected as "Net Realized Gain (Loss) on Futures" in the Statements of Operations. Additionally, each Fund, except for Liberty Acorn USA and Liberty Acorn Twenty may engage in portfolio hedging with respect to changes in foreign currency exchange rates by entering into forward foreign currency contracts to purchase or sell foreign currencies. The Statements of Operations reflect gains and losses as realized for closed forward foreign currency contracts and unrealized for open contracts. The Funds bear the market risk that arises from changes in the value of financial instruments and securities indices (futures contracts) or from changes in foreign currency rates (forward foreign currency contracts) and the credit risk should a counterparty fail to perform under such contracts. None of the Funds entered into any futures contracts during the year ended December 31, 2002. Liberty Acorn Fund, Liberty Acorn USA, Liberty Acorn Foreign Forty and Liberty Acorn Twenty did not enter into any forward foreign currency contracts during the year ended December 31, 2002. >Fund share valuation Fund shares are sold and redeemed on a continuing basis at net asset value. Net asset value per share is determined daily as of the close of trading on the New York Stock Exchange on each day the Exchange is open for trading. All income, expenses (other than the Class A, Class B and Class C 12b-1 service and distribution fees, and Class A, Class B, Class C and Class Z shares Transfer Agent fee) and realized and unrealized gains (losses) are allocated to each class proportionately based on relative net assets for purposes of determining the net asset value of each class. >Custody fees Custody fees are reduced based on each Fund's cash balances maintained with the custodian. The amount is disclosed as a reduction of total expenses in the Statement of Operations. >Federal income taxes The Funds have complied with the special provisions of the Internal Revenue Code available to regulated investment companies and, in the manner provided therein, distribute all their taxable income, as well as any net realized gain on sales of investments and foreign currency transactions reportable for federal income tax purposes. Accordingly, the Fund paid no federal income taxes and no federal income tax provision was required. >Distributions to Shareholders Distributions to shareholders are recorded on the ex-date. 3. Federal Tax Information The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for: income on real estate investment trust ("REITs"), deferral of losses from wash sales, foreign currency transactions, net operating losses, treatment of passive foreign investment companies gains, capital loss carryforwards, non-deductible expenses and post-October losses. Reclassifications are made to the Funds' capital accounts to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended December 31, 2002, permanent items identified and reclassified among the components of net assets are as follows:
Undistributed Net Investment Income (Accumulated Accumulated Unrealized Net Investment Net Realized Paid-In Appreciation Loss) Gain (Loss) Capital (Depreciation) - ----------------------------------------------------------------------------------------------- (in thousands) Liberty Acorn Fund $ 9,100 $ 3,607 $(12,298) $(409) Liberty Acorn International (2,156) 1,356 -- 800 Liberty Acorn USA 2,951 (4,353) 1,402 -- Liberty Acorn Foreign Forty (18) (367) -- 385 Liberty Acorn Twenty 1,222 -- (1,222) --
Net investment income, net realized gains (losses) and net assets were not affected by this reclassification. A I U F40 20 57 Liberty Acorn Family of Funds >Notes to Financial Statements (continued) The tax character of distributions paid during 2002 and 2001 were as follows: Liberty Acorn Fund 2002 2001 - -------------------------------------------------------------------------------- (in thousands) Ordinary Income $ -- $ 8,940 Long-Term Capital Gains -- 87,766 ================================================================================ Liberty Acorn International 2002 2001 - -------------------------------------------------------------------------------- (in thousands) Ordinary Income $9,289 $ -- Long-Term Capital Gains -- 39,130 ================================================================================ Liberty Acorn USA 2002 2001 - -------------------------------------------------------------------------------- (in thousands) Ordinary Income $ -- $ 1,475 Long-Term Capital Gains -- 2,123 ================================================================================ Liberty Acorn Foreign Forty 2002 2001 - -------------------------------------------------------------------------------- (in thousands) Ordinary Income $ -- $ 76 Long-Term Capital Gains -- 507 ================================================================================ Liberty Acorn Twenty 2002 2001 - -------------------------------------------------------------------------------- (in thousands) Ordinary Income $ -- $ -- Long-Term Capital Gains -- 188 ================================================================================ As of December 31, 2002, the components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Long-Term Unrealized Ordinary Capital Appreciation Income Gains (Depreciation) - -------------------------------------------------------------------------------- (in thousands) Liberty Acorn Fund $ -- $ -- $ 845,845 Liberty Acorn International 5,858 -- (134,036) Liberty Acorn USA -- -- (14,159) Liberty Acorn Foreign Forty 18 -- (1,203) Liberty Acorn Twenty -- -- 15,168 The difference between book-basis and tax-basis unrealized appreciation (depreciation), if applicable, is attributable primarily to the return of capital on REITs, tax deferral of losses on certain securities (wash sales), recognition of unrealized gains on certain foreign investment (PFIC's), and foreign currency transactions. The following capital loss carryforwards are available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code: Year of Liberty Liberty Acorn Liberty Acorn Expiration Acorn Fund International USA - -------------------------------------------------------------------------------- (in thousands) 2008 $ -- $ -- $ 126 2009 -- 111,479 3,634 2010 38,238 76,335 17,936 - -------------------------------------------------------------------------------- TOTAL $38,238 $187,814 $21,696 Year of Liberty Acorn Liberty Acorn Expiration Foreign Forty Twenty - -------------------------------------------------------------------------------- (in thousands) 2009 $23,084 $ -- 2010 12,528 530 - -------------------------------------------------------------------------------- TOTAL $35,612 $530 During the year ended December 31, 2002, the capital loss carryforward acquired by Liberty Acorn USA as a result of the merger with Stein Roe Fund was $3,760. Expired capital loss carryforwards, if any, are recorded as a reduction of paid-in capital. Under current tax rules, certain capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As of December 31, 2002, for federal income tax purposes, post-October losses were deferred to January 1, 2003 as follows: Amount - -------------------------------------------------------------------------------- (in thousands) Liberty Acorn Fund $15,436 Liberty Acorn International 32,617 Liberty Acorn USA 1,921 Liberty Acorn Foreign Forty 1,251 Liberty Acorn Twenty -- - -------------------------------------------------------------------------------- Liberty Acorn Fund, Liberty Acorn International and Liberty Acorn Foreign Forty have elected to mark-to-market their investments in Passive Foreign Investment Companies ("PFIC's") for federal income tax purposes. Gains and losses relating to PFIC's are treated as ordinary income for federal income tax purposes. A summary of transactions relating to PFIC's is as follows (in thousands): A I U F40 20 58 Liberty Acorn Fund - -------------------------------------------------------------------------------- Cumulative unrealized appreciation on PFIC's recognized in prior years at December 31, 2001 $ -- Unrealized appreciation (depreciation) on PFIC's recognized for federal income tax purposes during 2002 409 Unrealized appreciation recognized in prior years on PFIC's sold during 2002 -- ------- Cumulative unrealized appreciation on PFIC's carried forward at December 31, 2002 $ 409 ------- Liberty Acorn International - -------------------------------------------------------------------------------- Cumulative unrealized appreciation on PFIC's recognized in prior years at December 31, 2001 $ 8,026 Unrealized appreciation (depreciation) on PFIC's recognized for federal income tax purposes during 2002 319 Unrealized appreciation recognized in prior years on PFIC's sold during 2002 (1,120) ------- Cumulative unrealized appreciation on PFIC's carried forward at December 31, 2002 $ 7,225 ------- Liberty Acorn Foreign Forty - -------------------------------------------------------------------------------- Cumulative unrealized appreciation on PFIC's recognized in prior years at December 31, 2001 $ 385 Unrealized appreciation (depreciation) on PFIC's recognized for federal income tax purposes during 2002 -- Unrealized appreciation recognized in prior years on PFIC's sold during 2002 (385) ------- Cumulative unrealized appreciation on PFIC's carried forward at December 31, 2002 $ -- ------- 4. Transactions with Affiliates The Funds' investment adviser, Liberty Wanger Asset Management, L.P. ("Liberty WAM"), an indirect wholly-owned subsidiary of Columbia Management Group, Inc., which in turn is a wholly-owned subsidiary of Fleet National Bank, which in turn is a wholly-owned subsidiary of FleetBoston Financial Corporation ("Fleet"), furnishes continuing investment supervision to each Fund and is responsible for the overall management of the Funds' business affairs. Under the Funds' investment management agreement, fees are accrued daily and paid monthly to Liberty WAM at the annual rates shown in the table below for each fund. Liberty Acorn Fund - -------------------------------------------------------------------------------- Net asset value: For the first $700 million .75% Next $1.300 billion .70% Net assets in excess of $2 billion .65% Liberty Acorn International - -------------------------------------------------------------------------------- Net asset value: For the first $100 million 1.20% Next $400 million .95% Net assets in excess of $500 million .75% Liberty Acorn USA - -------------------------------------------------------------------------------- Net asset value: For the first $200 million .95% Net assets in excess of $200 million .90% Liberty Acorn Foreign Forty - -------------------------------------------------------------------------------- On average daily net assets: .95% Liberty Acorn Twenty - -------------------------------------------------------------------------------- On average daily net assets: .90% >Expense Limit The Funds' adviser has voluntarily agreed to reimburse the ordinary operating expenses (exclusive of distribution and service fees, interest, taxes and extraordinary expenses, if any) exceeding 1.45% of the average annual net assets for Liberty Acorn Foreign Forty Class A, Class B and Class C shares and 1.35% of the average annual net assets for Liberty Acorn Twenty Class A, Class B and Class C shares, respectively. Liberty WAM has also contracted to provide administrative services to each Fund at an annual rate of .05% of average daily net assets. Liberty Funds Distributor, Inc. (the "Distributor"), an indirect subsidiary of Fleet, is each Fund's principal underwriter. For the year ended December 31, 2002, Liberty Acorn Fund, Liberty Acorn International, Liberty Acorn USA, Liberty Acorn Foreign Forty and Liberty Acorn Twenty have been advised that the Distributor retained $791,119 underwriting discounts on the sale of Class A shares and received contingent deferred sales charges of $1,483,339, $117,890, $172,205, $98,690, and $13,717, respectively, on Class A, Class B and Class C share redemptions. Each Fund has adopted a 12b-1 plan which requires the payment of a monthly service fee to the Distributor equal to 0.25% of the average net assets attributable to Class A, Class B and Class C shares as of the 20th of each month. The plan also requires the payment of a monthly distribution fee to the Distributor equal to 0.10%, 0.75% and 0.75%, annually, of the A I U F40 20 59 Liberty Acorn Family of Funds >Notes to Financial Statements continued average daily net assets attributable to Class A, Class B and Class C shares, respectively. The contingent deferred sales charges and the fees received from the 12b-1 plan are used principally as repayment to the Distributor for amounts paid by the Distributor to dealers who sold such shares. Liberty Funds Services, Inc. (the "Transfer Agent"), an affiliate of the Adviser, provides shareholder services to the Fund and receives reimbursement for certain out of pocket expenses. Transfer agent fees are comprised of 0.07% annually of the average daily net assets attributable to Class A, Class B and Class C shares plus charges based on the number of shareholder accounts and transactions. Certain officers and trustees of the Trust are also officers of Liberty WAM. The Trust makes no direct payments to its officers and trustees who are affiliated with Liberty WAM. Trustees' fees and expenses for the year ended December 31, 2002 are as follows: Year Ended December 31, - -------------------------------------------------------------------------------- (in thousands) 2002 Liberty Acorn Fund $301 Liberty Acorn International 96 Liberty Acorn USA 17 Liberty Acorn Foreign Forty 13 Liberty Acorn Twenty 15 The Trust provides a deferred compensation plan for its independent trustees. Under this deferred compensation plan, a trustee may elect to defer all or a portion of his or her compensation. Amounts deferred are retained by the Trust and represent an unfunded obligation of the Trust. The value of amounts deferred is determined by reference to the change in value of Class Z shares of one or more series of the Trust or a money market fund as specified by the participant. Benefits are payable upon retirement. During the year ended December 31, 2002, the Funds engaged in purchases and sales transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions complied with Rule 17a-7 under the Investment Company Act of 1940 and were as follows: Funds Purchases Sales - -------------------------------------------------------------------------------- (in thousands) Liberty Acorn Fund $8,836 $2,201 Liberty Acorn International 9,652 5,822 Liberty Acorn USA -- 480 Liberty Acorn Foreign Forty Fund 546 823 Liberty Acorn Twenty Fund 384 -- 5. Borrowing Arrangements The Trust participates in a $150,000,000 credit facility which was entered into to facilitate portfolio liquidity. No amounts were borrowed under this facility for the year ended December 31, 2002. 6. Investment Transactions The aggregate cost of purchases and proceeds from sales other than short-term obligations for the year ended December 31, 2002 were: Liberty Acorn Fund - -------------------------------------------------------------------------------- (in thousands) 2002 Investment securities Purchases $2,045,844 Proceeds from sales 678,890 ================================================================================ Liberty Acorn International - -------------------------------------------------------------------------------- (in thousands) 2002 Investment securities Purchases $ 761,252 Proceeds from sales 852,166 ================================================================================ Liberty Acorn USA - -------------------------------------------------------------------------------- (in thousands) 2002 Investment securities Purchases $ 182,553 Proceeds from sales 92,203 ================================================================================ Liberty Acorn Foreign Forty - -------------------------------------------------------------------------------- (in thousands) 2002 Investment securities Purchases $ 38,295 Proceeds from sales 47,417 ================================================================================ Liberty Acorn Twenty - -------------------------------------------------------------------------------- (in thousands) 2002 Investment securities Purchases $ 119,852 Proceeds from sales 45,879 ================================================================================ A I U F40 20 60 Report of Independent Auditors To the Board of Trustees and Shareholders of Liberty Acorn Trust We have audited the accompanying statements of assets and liabilities, including the statements of investments of Liberty Acorn Fund, Liberty Acorn International, Liberty Acorn USA, Liberty Acorn Twenty and Liberty Acorn Foreign Forty, comprising the Liberty Acorn Trust, as of December 31, 2002, the related statements of operations, changes in net assets, and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of investments owned as of December 31, 2002, by correspondence with the custodian and brokers or other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective Funds of the Liberty Acorn Trust as of December 31, 2002, the results of their operations and changes in their net assets and financial highlights for the periods indicated therein, in conformity with accounting principles generally accepted in the United States. ERNST & YOUNG LLP Chicago, Illinois February 7, 2003 A I U F40 20 61 Notes - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A I U F40 20 62 Board of Trustees and Management of Acorn The board of trustees serve indefinite terms of unlimited duration provided that a majority of trustees always has been elected by shareholders. The trustees appoint their own successors, provided that at least two-thirds of the trustees, after such appointment, have been elected by shareholders. Shareholders may remove a trustee, with or without cause, upon the vote of two-thirds of Acorn's outstanding shares at any meeting called for that purpose. A trustee may be removed, with or without cause, upon the vote of a majority of the trustees. The names of the trustees and officers of Acorn, the date each was first elected or appointed to office, their principal business occupations and other directorships they have held during at least the last five years, are shown below. Each trustee serves in such capacity for each of the six series of Acorn. Mr. Wanger also serves as a trustee for each of the four series of the Wanger Advisors Trust.
- ------------------------------------------------------------------------------------------------------------------------------------ Year First Elected or Name, Position(s) with Acorn Appointed Principal Occupation(s) during and Age at January 1, 2003 to Office Past Five Years Other Directorships - ------------------------------------------------------------------------------------------------------------------------------------ Trustees who are not interested persons of Acorn: - ------------------------------------------------------------------------------------------------------------------------------------ Margaret Eisen, 49, 2002 Formerly managing director, DeGuardiola Chair, Institute for Financial Markets; Trustee Advisors; formerly managing director, director, Global Financial Group North American Equities at General (venture capital fund of funds) Motors Asset Management; prior thereto, director of Worldwide Pension Investments for DuPont Asset Management. - ------------------------------------------------------------------------------------------------------------------------------------ Leo A. Guthart, 65, 1994 Executive vice president, Honeywell AptarGroup, Inc. (producer of dispensing Trustee International (home and building valves, pumps and closures); Symbol control); Chairman, Cylink Corporation Technologies, Inc. (manufacturer of (supplier of encryption equipment); bar code scanning equipment) former chairman of the board of trustees, Hofstra University; chairman and chief executive officer, Topspin Partners, L.P. - ------------------------------------------------------------------------------------------------------------------------------------ Jerome Kahn, Jr., 68, Trustee 1987 Former president, William Harris None. Investors, Inc. (investment adviser). - ------------------------------------------------------------------------------------------------------------------------------------ Steven N. Kaplan, 43, Trustee 1999 Neubauer Family Professor of None. Entrepreneurship and Finance, Graduate School of Business, University of Chicago. - ------------------------------------------------------------------------------------------------------------------------------------ David C. Kleinman, 67, 1972 Adjunct professor of strategic Sonic Foundry, Inc. (software); AT&T Trustee management, University of Chicago Latin America. Graduate School of Business; Business consultant. - ------------------------------------------------------------------------------------------------------------------------------------ Allan B. Muchin, 67, 1998 Chairman emeritus, Katten Muchin Zavis Alberto-Culver Company (toiletries); Trustee Rosenman (law firm). Carl Buddig & Company. - ------------------------------------------------------------------------------------------------------------------------------------ Robert E. Nason, 66, 1998 Consultant and private investor since None. Trustee and chairman 1998; from 1990-1998, executive partner and chief executive officer, member of the executive committee of Grant Thornton, LLP (public accounting firm) and member of the policy board of Grant Thornton International. - ------------------------------------------------------------------------------------------------------------------------------------ John A. Wing, 67, 2002 Frank Wakely Gunsaulus Professor of Law AmerUs Life Holdings (life insurance); Trustee and Finance, and chairman of the Center LDF, Inc. and Labe Federal Bank for the Study of Law and Financial (banking); Margo Caribe, Inc. (farming). Markets, Illinois Institute of Technology; prior thereto, chairman of the board and chief executive officer of ABN-AMRO Incorporated, formerly The Chicago Corporation; chief executive officer of Market Liquidity Network, LLC. - ------------------------------------------------------------------------------------------------------------------------------------ Trustees who are an interested person of Acorn: - ------------------------------------------------------------------------------------------------------------------------------------ Charles P. McQuaid, 49, 1994 Portfolio manager since 1995 and None. Trustee and Senior director of research since July 1992 of Vice President(1) Liberty WAM; Principal, WAM from July 1995 to September 29, 2000; senior vice president, Wanger Advisors Trust. - ------------------------------------------------------------------------------------------------------------------------------------ Ralph Wanger, 68, 1994 President, Chief Investment Officer and Wanger Advisors Trust (4 portfolios). Trustee and President*(1) portfolio manager, Liberty WAM since 1992; principal, WAM from July 1992 until September 29, 2000; president, WAM Ltd. from July 1992 to September 29, 2000; president and director, WAM Acquisition GP, Inc. since September 29, 2000; president, Wanger Advisors Trust; director, Wanger Investment Company plc. - ------------------------------------------------------------------------------------------------------------------------------------ Officers of Acorn: - ------------------------------------------------------------------------------------------------------------------------------------ J. Kevin Connaughton, 38, 2001 Treasurer of the Liberty Funds and of None. Assistant Treasurer the Liberty All-Star Funds since December, 2000 (formerly controller of the Liberty Funds and of the Liberty All-Star Funds from February 1998 to October 2000); Treasurer of the Stein Roe Funds since February 2001 (formerly controller from May 2000 to February 2001); Treasurer of the Galaxy Funds since September 2002; senior vice president of Liberty Funds Group since January 2001 (formerly vice president of Colonial Management Associates from February 1998 to October 2000); Senior Tax Manager, Coopers & Lybrand, LLP from April 1996 to January 1998. - ------------------------------------------------------------------------------------------------------------------------------------ Kevin S. Jacobs, 41, 2001 Assistant vice president, Liberty Funds None. Assistant Secretary Group since June 2000; senior legal product manager, First Union Corp. September 1999 to June 2000; prior thereto, senior legal product manager, Colonial Management Associates. - ------------------------------------------------------------------------------------------------------------------------------------ Kenneth A. Kalina, 43, 1995 Chief financial officer, Liberty WAM None. Assistant Treasurer since April 2000; assistant treasurer, Wanger Advisors Trust; fund controller, Liberty WAM since September 1995; director, New Americas Small Cap Fund. - ------------------------------------------------------------------------------------------------------------------------------------ Bruce H. Lauer, 45, 1995 Chief operating officer, Liberty WAM None. Vice President, Secretary since April 1995; principal, WAM from and Treasurer January 2000 to September 29, 2000; vice president, treasurer and assistant secretary, Wanger Advisors Trust; director, Wanger Investment Company plc and New Americas Small Cap Fund. - ------------------------------------------------------------------------------------------------------------------------------------ Jean Loewenberg, 57, 2002 General counsel, Columbia Management None. Assistant Secretary Group, Inc. since December 2001; senior vice president since November 1996 and assistant general counsel since September, Fleet National Bank. - ------------------------------------------------------------------------------------------------------------------------------------ Robert A. Mohn, 41, 1997 Analyst and portfolio manager, Liberty None. Vice President WAM since August 1992; principal, WAM from 1995 to September 29, 2000; vice president, Wanger Advisors Trust. - ------------------------------------------------------------------------------------------------------------------------------------ Todd Narter, 38, 2001 Analyst and portfolio manager, Liberty None. Vice President WAM since June 1997; vice president, Wanger Advisors Trust. - ------------------------------------------------------------------------------------------------------------------------------------ Christopher Olson, 38, 2001 Analyst and portfolio manager, Liberty None. Vice President WAM since January 2001; vice president, Wanger Advisors Trust; prior thereto, director and portfolio strategy analyst with UBS Asset Management/Brinson Partners. - ------------------------------------------------------------------------------------------------------------------------------------ John H. Park, 35, 1998 Analyst and portfolio manager, Liberty None. Vice President WAM since July 1993; principal, WAM from 1998 to September 29, 2000; vice president, Wanger Advisors Trust. - ------------------------------------------------------------------------------------------------------------------------------------ Vincent P. Pietropaolo, 37, 2001 Vice president and Counsel, Liberty None. Assistant Secretary Funds Group since December 1999; associate, Morgan Lewis & Bockius, October 1998 to December 1999; product manager, Putnam Investments April 1997 to October 1998. - ------------------------------------------------------------------------------------------------------------------------------------ Joseph Turo, 35, 2002 Assistant General Counsel, Columbia None. Assistant Secretary Management Group, Inc. since January 2002; senior counsel, Fleet National Bank since August 1997; prior thereto, associate, Ropes & Gray. - ------------------------------------------------------------------------------------------------------------------------------------ Leah J. Zell, 53, 1994 Analyst, and portfolio manager, Liberty None. Vice President* WAM since July 1992; vice president, Wanger Advisors Trust; director and managing member of trust committee, Chai Trust Company. - ------------------------------------------------------------------------------------------------------------------------------------
(1) Trustee who is an "interested person" of the Trust and of Liberty WAM, as defined in the Investment Company Act of 1940, because he is an officer of the Trust and an employee of Liberty WAM. The address for the trustees and officers of the Trust is Liberty Wanger Asset Management, L.P., 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606. Acorn's Statement of Additional Information includes additional information about Acorn's trustees and officers. You may obtain a free copy of the Statement of Additional Information, or request any other information and discuss your questions about us, by writing or calling toll-free: Liberty Funds Distributor, Inc. One Financial Center Boston, MA 02111-2621 1-800-426-3750 www.libertyfunds.com * Mr. Wanger and Ms. Zell are married to each other. A I U F40 20 63 The Liberty Acorn - --------------------- Family of Funds Investment Adviser Liberty Wanger Asset Management, L.P. 227 West Monroe Street, Suite 3000 Chicago, Illinois 60606 1-800-922-6769 Distributor Liberty Funds Distributor, Inc. One Financial Center Boston, Massachusetts 02111-2621 Transfer Agent, Dividend Disbursing Agent Liberty Funds Services, Inc. P.O. Box 8081 Boston, Massachusetts 02266-8081 1-800-962-1585 Legal Counsel Bell, Boyd & Lloyd LLC Chicago, Illinois Independent Auditors Ernst & Young LLP Chicago, Illinois This report, including the schedules of investments, is submitted for the general information of the shareholders of Liberty Acorn Trust. This report is not authorized for distribution unless preceded or accompanied by a prospectus. Find out what's new - visit our web site at: www.libertyfunds.com Our e-mail address is: ServiceInquiries@ColumbiaManagement.com Shareholders should not include personal information such as account numbers, Social Security numbers or taxpayer identification numbers in e-mail. We are unable to accept account transactions sent via e-mail. The Funds mail one shareholder report to each shareholder address. If you would like more than one report, please call 800-426-3750 and additional reports will be sent to you. This report has been prepared for shareholders of Liberty Acorn Funds. This report may also be used as sales literature when preceded or accompanied by the current prospectus which provides details of sales charges, investment objectives and operating policies of the Funds and with the most recent copy of the Liberty Funds Performance Update. Annual Report: Liberty Acorn Funds A I U F40 20 64 Liberty Funds believes in financial choice At Liberty, it's our job to help you achieve your financial goals. So whether it's saving for your kids' education, building your retirement nest egg, or managing your income... we can help. We offer a diverse family of mutual funds representing a wide selection of investment styles and specialized money management. It's all designed to help you reach for financial freedom - however you define it. Liberty believes in professional advice Today's ever-changing financial markets can challenge even the most seasoned investors. That's why we recommend working with a financial advisor. With an advisor you have an experienced, knowledgeable professional looking out for your best interests. Your advisor can help you establish a plan for reaching your personal financial goals and help you stay on track over the long-term. It's a relationship that's focused on you and your needs. Liberty Acorn Funds Annual Report, December 31, 2002 ------------- PRSRT STD [LOGO](TM) Liberty Funds U.S. POSTAGE PAID A Member of Columbia Management Group HOLLISTON, MA PERMIT NO. 20 ------------- (C)2002 Liberty Funds Distributor, Inc. A Member of Columbia Management Group One Financial Center, Boston, MA 02111-2621 ACN-02/468M-0103 (02/03) (03/0480) -----END PRIVACY-ENHANCED MESSAGE-----