-----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, Tixd9NLLqpa1lwbvBGQfTgNfQCEb2/1XwVzKWv2aAdYXi1FNFsKE9boEd87psS7A LNwYPdiy7aWVvCDbkd/iXw== /in/edgar/work/20000526/0000950131-00-003624/0000950131-00-003624.txt : 20000919 0000950131-00-003624.hdr.sgml : 20000919 ACCESSION NUMBER: 0000950131-00-003624 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000526 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACORN INVESTMENT TRUST CENTRAL INDEX KEY: 0000002110 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 362692100 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30B-2 SEC ACT: SEC FILE NUMBER: 811-01829 FILM NUMBER: 644621 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 ST STE 3000 STREET 2: ATTN: BRUCE LAUER CITY: CHICAGO STATE: IL ZIP: 60606 FORMER COMPANY: FORMER CONFORMED NAME: ACORN FUND INC DATE OF NAME CHANGE: 19920703 N-30B-2 1 FIRST QUARTER REPORT Acorn Family of Funds First Quarter Report March 31, 2000 Managed by Wanger Asset Management, L.P. Acorn Family of Funds First Quarter Report 2000 Table of Contents The Acorn Family of Funds Performance At A Glance 1 Squirrel Chatter: The South Sea Bubble 2 Acorn Fund In a Nutshell 4 At a Glance 5 Major Portfolio Changes 14 Statement of Investments 16 Acorn International In a Nutshell 6 At a Glance 7 Major Portfolio Changes 23 Statement of Investments 26 Portfolio Diversification 30 Acorn USA In a Nutshell 8 At a Glance 9 Major Portfolio Changes 31 Statement of Investments 32 Acorn Foreign Forty In a Nutshell 10 At a Glance 11 Major Portfolio Changes 35 Statement of Investments 36 Portfolio Diversification 37 Acorn Twenty In a Nutshell 12 At a Glance 13 Major Portfolio Changes 38 Statement of Investments 39 Trustees, Officers and Contact Information 40
[PICTURE OF ACORNS] NEW IN THIS REPORT: AFTER-TAX RETURNS Flip through any financial magazine and you'll see fund advertisements touting impressive returns. What these numbers don't show is the effect taxes have on an investment. Mutual funds are subject to taxes that can greatly influence the actual return you get to keep. To help you better understand the tax impact, the Acorn Family of Funds is now including after-tax performance for each of our funds. For an explanation of this new data, turn this over.
NEW IN THIS REPORT: AFTER TAX RETURNS - ----------------------------------------------------------------------------------------------------------------------- Pretax and After-tax Average Annual Total Returns through March 31, 2000 1 Year 5 Years (1) (2) (3) (4) After-tax w/ Tax After-tax w/ Tax Pretax After-tax redemption efficiency Pretax After-tax redemption efficiency ----------------------------------------------------------------------------------------------------------------------- Acorn International 98.56% 96.13% 60.65% 97.54% 25.85% 24.84% 21.64% 96.09% ----------------------------------------------------------------------------------------------------------------------- (5) Foreign Stock Category AVg.* 44.59% 42.39% NA 95.07% 15.54% 13.89% NA 89.38% ----------------------------------------------------------------------------------------------------------------------- Life of Fund After-tax w/ Tax Pretax After-tax redemption efficiency - ------------------------------------------------------------------------ Acorn International 22.76% 22.06% 19.58% 96.92% - ------------------------------------------------------------------------ Foreign Stock Category AVg.*2 NA NA NA NA - ------------------------------------------------------------------------ *Source: Morningstar, Inc. - ------------------------------------------------------------------------
(1) PRETAX RETURNS This is the same average annual total return we've shown for years. These pretax numbers assume that all distributions you receive from the fund are reinvested into new shares. This number does not consider the impact of the tax you pay on income dividends or short- and long-term capital gains. As an owner of mutual fund shares, you can be taxed two ways: on the earnings a fund distributes to you while you own its shares and on the profits you make when you sell or exchange shares. (2) AFTER-TAX RETURNS To determine after-tax total returns on shares that are owned, distributions are treated as taxed at the maximum tax rate in effect at the time they were paid with the balance reinvested. These rates are currently 39.6% for income and short-term capital gain distributions and 20% for long-term capital gain distributions. We use the highest tax rates to demonstrate the worst-case tax scenario. (3) AFTER-TAX W/REDEMPTION After-tax returns with redemptions reflect the additional tax impact of long- term gains or losses realized when fund shares are sold. These returns are taxed at the maximum rate in effect at the time of sale (currently 20%) and assume that you bought your shares at the beginning of the period. Note: State and local taxes are not considered in the calculations. (4) DETERMINING TAX EFFICIENCY The tax efficiency percentage is calculated by dividing the after-tax return by the pretax return. The closer to 100%, the more tax efficient your investment is. For the 1-year period, Acorn International scored a 97.54% tax-efficiency rating meaning the after-tax return was 97.54% of the pretax return. There are many factors that affect tax efficiency. A fund's turnover rate, accounting methods, cash flow and the types of securities held, all influence how tax- friendly an investment is. (5) THE BENCHMARK How do Acorn's funds compare to their peers? To address that question, we are including Morningstar category average performance. The returns provided by Morningstar, Inc. are calculated in the same way as the fund calculations. As you can see, 2.43% of Acorn International's return was lost to federal income tax for the 1-year while its peer group lost an average of 2.2%. Morningstar does not calculate after-tax w/ redemption or life of fund data so we have placed "NA" for "not available" in those spaces. The actual after-tax returns you achieve depend on your tax situation and your own decision to sell or hold fund shares. The Acorn Family of Funds >Performance At A Glance Average Annual Total Returns through 3/31/00
Inception 1st* 1 3 5 10 Life Date Quarter year years years years of Fund - ------------------------------------------------------------------------------------------------------------------ Acorn Fund 6/10/70 0.43% 38.90% 22.06% 20.63% 17.40% 17.00% - ------------------------------------------------------------------------------------------------------------------ S&P 500 2.29% 17.94% 27.37% 26.73% 18.82% 14.67% - ------------------------------------------------------------------------------------------------------------------ Russell 2000 7.08% 37.29% 17.74% 17.22% 14.42% NA - ------------------------------------------------------------------------------------------------------------------ Lipper Small Cap Core Index 10.32% 44.80% 18.19% 17.68% NA NA - ------------------------------------------------------------------------------------------------------------------ S&P MidCap 400 12.69% 38.09% 27.36% 24.03% 19.09% NA - ------------------------------------------------------------------------------------------------------------------ Acorn International 9/23/92 12.09% 98.56% 31.47% 25.85% -- 22.76% - ------------------------------------------------------------------------------------------------------------------ EMI (World ex-U.S.) 2.03% 24.21% 9.24% 7.76% -- 9.43% - ------------------------------------------------------------------------------------------------------------------ EAFE (0.11%) 25.09% 16.30% 12.38% -- 13.00% - ------------------------------------------------------------------------------------------------------------------ IFCI Composite 1.34% 52.68% 0.94% 5.74% -- 9.13% - ------------------------------------------------------------------------------------------------------------------ Lipper Int'l Small Cap Funds Index 10.41% 73.39% 22.94% NA -- NA - ------------------------------------------------------------------------------------------------------------------ Lipper Int'l Funds Index 0.62% 36.93% 17.79% 16.67% -- 15.07% - ------------------------------------------------------------------------------------------------------------------ Acorn USA 9/4/96 (1.19%) 31.99% 19.94% -- -- 21.09% - ------------------------------------------------------------------------------------------------------------------ Russell 2000 7.08% 37.29% 17.74% -- -- 15.76% - ------------------------------------------------------------------------------------------------------------------ Lipper Small Cap Value Index 3.60% 17.99% 8.30% -- -- 10.02% - ------------------------------------------------------------------------------------------------------------------ S&P MidCap 400 12.96% 38.09% 27.36% -- -- 25.52% - ------------------------------------------------- ---------------------------------------------------------------- S&P 500 2.29% 17.94% 27.37% -- -- 27.97% - ------------------------------------------------- ---------------------------------------------------------------- Acorn Foreign Forty 11/23/98 15.60% 92.76% -- -- -- 85.36% - ------------------------------------------------- ---------------------------------------------------------------- EAFE (0.11%) 25.09% -- -- -- 22.75% - ------------------------------------------------------------------------------------------------------------------ SSB World ex-US Cap Range $2-10B (0.71%) 21.34% -- -- -- 19.13% - ------------------------------------------------------------------------------------------------------------------ Lipper International Funds Index 0.62% 36.93% -- -- -- 29.26% - ------------------------------------------------------------------------------------------------------------------ Acorn Twenty 11/23/98 2.34% 23.44% -- -- -- 29.32% - ------------------------------------------------------------------------------------------------------------------ S&P MidCap 400 12.69% 38.09% -- -- -- 30.59% - ------------------------------------------------------------------------------------------------------------------ Lipper Mid Cap Value Index 4.11% 21.35% -- -- -- 14.82% - ------------------------------------------------------------------------------------------------------------------ Russell 2000 7.08% 37.29% -- -- -- 27.70% - ------------------------------------------------------------------------------------------------------------------ S&P 500 2.29% 17.94% -- -- -- 22.04% - ------------------------------------------------------------------------------------------------------------------
*Quarterly numbers are not annualized. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of an investment in any Acorn fund will fluctuate so that fund shares, when redeemed, may be worth more or less than their original cost. MARKETS HAVE RECENTLY BEEN QUITE VOLATILE AND BY THE TIME YOU RECEIVE THIS REPORT SHORT-TERM PERFORMANCE COULD BE DIFFERENT THAN SHOWN HERE. DESCRIPTION OF INDEXES: S&P 500 is a broad, market-weighted index of large companies trading in the U.S. S&P MID CAP 400 is a market-weighted index of companies in the next size/tier down from the S&P 500. RUSSELL 2000 is a market- weighted index of 2000 smaller U.S. companies, formed by taking the largest 3,000 companies and eliminating the largest 1,000. EMI (WORLD EX-US) is an index of the bottom 20% of institutionally investable capital of countries, selected by index sponsor, outside the U.S. EAFE is a broad index of 20 major markets in Europe, Australia and the Far East 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. IFCI COMPOSITE is an index of 31 emerging markets which weights securities according to their market capitalization after adjusting for shares held by other constituents in the index. LIPPER INDEXES include the largest funds tracked by Lipper, Inc. in the named category. LIPPER MID CAP VALUE FUNDS INDEX - 30 mid-cap funds investing in companies considered to be undervalued relative to a major stock index; 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 Acorn International; LIPPER SMALL CAP CORE FUNDS INDEX - 30 largest small cap core funds, including Acorn Fund. All indexes are unmanaged and returns include reinvested distributions. A more complete description of each index is included in the Acorn Funds statement of additional information. 1 >Squirrel Chatter: The South Sea Bubble [Photo Here] In the 1999 Annual Report we retraced the route of Marco Polo in the 1280s. For those shareholders who think we started too early in the last millennium, we are now leaping forward to 1720 London, home of the infamous South Sea Bubble. The South Sea Bubble was the first impressive stock market fiddle. The markets at that time were primitive by today's standards but were driven by several very modern features: political clout, media hype, and the power of stock options. The South Sea Company was incorporated in 1711 by act of Parliament with two purposes. One was to form a monopoly on English trade with Spanish America. The second was an ingenious synthesis of finance, commerce and foreign policy by which (pound)9 million of government debt was assigned by Parliament to the Company. The citizens who had owned the government bonds got stock in the South Sea Company and the interest on the bonds was paid by the treasury to the Company. The interest provided both working capital for Spanish American trade and free cash flow to pay dividends to Company shareholders. The swap was compulsory but the bondholders were eager to do it because (a) the dividend on the stock was about equal to the bond interest they had given up and (b) they turned in the bonds for stock valued at 100, but the stock was selling at a lot more than 100, so an enticing capital gain beckoned. Why did the government grant this monopoly? Because a large part of the export trading profits would go to King George I. The company's political clout was so great that King George signed on as Governor of the Company in 1715 (that office today might be called Honorary Chairman of the Board). The boom-bust stock move that went down in history as the South Sea Bubble did not begin until the end of 1719, with the stock at 123, little improved from its initial price of 100 in 1711. At that time, a second government debt swap was proposed, this time for (pound)31 million, a prodigious sum at that time. To induce the treasury to authorize the swap, the Company agreed to drop the interest rate on the bonds. The interest rate would go down from 6% to 4% after seven years, and the Company also agreed to make an immediate payment to the treasury of (pound)7 million. Great plan, but in order to convince bondholders to swap for stock, the Company had to show that the dividend on the stock would be similar to the yield on the bonds. Since the interest the Company would collect on their bond portfolio was going to drop from 6% to 4% in a few years, the scheme was cash flow negative if the bondholders swapped for stock at 100. If they could be persuaded to turn in their bonds for stock valued at 300, they would be accepting a bad enough deal that the rest of the shareholders would come out okay. The key to the scheme was to keep the stock at a high price and rising enough to sucker the bondholders to turn in safe government debt in return for the chance to make a quick killing in the stock. How could they do it? Step one was public relations. Newspapers and pamphlets were recent innovations in 1720, but the new technology attracted great authors including Addison, Steele, Defoe, and Swift. The newspapers generally helped boost the stock price, although the press could put out anti-Company blasts as well. Another tool was the use of "stock options" to influence politicians and the aristocracy. In the March 20, 2000, Wall Street Journal, there was a story about dot.com companies dealing options to actors who made commercials for them, Whoopi Goldberg and William Shatner being two. And Now A Word From The Duchess A company called World Online International copied the use of a Duchess to hype stock. The company, a highly speculative Internet Service Provider from Amsterdam, hired Sarah "Fergie" Ferguson, Duchess of York. On March 17, 2000, World Online had an IPO at 43, underwritten by ABN Amro Rothschild, the leading Dutch investment banker, and Goldman Sachs, the leading everywhere-else bank. As the stock swooned after the IPO from 43 to 17 (April 14) in less than a month, some investors who had only skimmed the prospectus at the time of the issue were bemused to discover that the founder had sold two-thirds of her stock in a private sale back in December./1/ 2 The South Sea Company had already thought of that in 1720. The Company made deals with numerous Dukes and Earls, 138 Members of Parliament, and most helpfully, the Duchess of Kendal, mistress of King George. Whether Whoopi or the Duchess would appreciate the comparison, they each acted as useful spokespersons for the corporate sponsor. The "stock option" program was not quite as formal as it is in our world. One of the problems that always plagued the South Sea Company was the transfer agency bottleneck, as vigorous trading in the stock had to be processed by a roomful of clerks scratching in big ledgers with quill pens. This method was quite unable to keep up with trading volume./2/ The "option grants" were entries by John Knight, cashier of the Company, in his private ledger known as the Green Book. He simply wrote down the name of the recipient and the exercise price of the stock, set to be somewhat above the market price at the time of the grant. When the stock went above the exercise price, Knight delivered cash to the lucky option holder. Since the winner had not put up any money or taken any risk, this was a popular program. Of course, after the Bubble burst, the Parliamentary Commission set up to investigate these events decided that the payments received were no more than bribes. Lest we think of 1720 as an unsophisticated period, remember that the gentlemen we see portrayed bewigged and stiffly-posed in portraits of the time included Voltaire writing in France, Bach churning out cantatas in Leipzig, and the smartest person ever, Isaac Newton, doing science in England. Newton was asked for his opinion on the South Sea Company and replied, "I can calculate the motions of the heavenly bodies, but not the madness of the people." Newton sold out his South Sea stock on April 20, 1720, making a 100% profit of (pound)7,000, a fortune at the time. Unfortunately, the world's smartest man then went right back in, lost (pound)20,000, and could never bear to hear the South Sea Company referred to for the rest of his life. This may have been the source of the Wall Street proverb, "Never confuse brains with a bull market." How did the stock do? In December 1719, it started at 123. By early April 1720, it was over 300, and at the end of April a public offering was done at 400. In April, Parliament passed the South Sea Bill authorizing the Company to exchange stock for government bonds, and also passed the Bubble Act. This ruling was not intended to deflate "irrational exuberance" in South Sea stock; to the contrary, the Bubble Act was designed to help the South Sea financing by outlawing other companies from doing IPOs. The stock ran higher in May and peaked in early July above 900./3/ This was a dramatic move over a seven-month period, but rather less than the rise of many tech stocks between October 1999 and March 2000. What popped the Bubble? The news from France was a factor. A brilliant Scot, John Law, forced to flee British soil because he had killed a man in a duel over a woman, ended up in Paris. He started a French scheme quite similar to the South Sea Company called the Mississippi Company, to trade with the French-controlled but empty land that is now much of the United States. Also funded by an equity-for-government-debt swap program, the Mississippi Company's first foray to America founded the city of New Orleans but did not get further upriver. Law's scheme collapsed in May 1720. Another grisly bit of bearish news reached London at that time - the outbreak of bubonic plague in Marseilles. This epidemic closed ports for quarantine, halting foreign trade. Whatever the trigger, by midsummer 1720 the Bubble had burst and the South Sea stock plunged, although not to zero. It was still 200 in October 1720 and 160 in December. In fact, the Company lingered on for over a century before being dissolved in 1854. The aftermath of the South Sea Company collapse was typically sour. Parliament set up a committee to investigate and punish. The South Sea officials and directors who had assets, and many did, returned the money - they were simply sent to the Tower of London until they volunteered to make restitution. John Knight, the man with the Green Book containing the list of Members of Parliament and ministers option-bribed by the company, fled to Brabant in Belgium where he was jailed. The information that he had would have been so damaging to so many in England that the ministers finally decided to have the Brabant authorities orchestrate an "escape" for Mr. Knight, who then lived in France until he bribed his way back into England in 1742. The consequences of the South Sea Bubble were important but subtle. There was no depression. Some people gained and others lost by speculation, but the effect (continued on page 22) 3 Acorn Fund >In a Nutshell [Photo here] [Photo here] Acorn Fund was flat in the first quarter, up 0.4%. All our domestic funds suffered the same plight: Our lower weighting in technology vs. our benchmark indexes (see Page 1 for performance data) hurt relative performance. We are highly selective in the tech arena. One of our favorite investment themes is to invest downstream from technology in software, services, media, telecom and biotech companies that are benefiting from tech but that aren't pure technology or Internet plays. We believe these companies often offer excellent growth at reasonable prices. Biotech stocks performed well in the quarter. Corvas International delivered a 148% profit, Inhale Therapeutics inflated 75%, and Myriad Genetics discovered a 30% gain. Acorn Twenty portfolio manager and health care analyst John Park prescribed these companies to Acorn a few years ago when they were cheap. As we all know, gasoline prices skyrocketed in the first quarter. While this was bad for drivers, it was good for the oil and gas industry. Our energy analyst Jason Selch hit pay dirt as Acorn pumped profits from higher energy prices. Electric and gas distribution and trading company Dynegy surged and was Acorn's largest dollar winner in the quarter. U.S. gas and oil producers Devon and Equitable Resources also were up substantially. Bad news was punished severely. For example, Young Broadcasting won a bidding war for a San Francisco TV station but promptly lost that station's network affiliation, resulting in a cancellation of more than 60% of Young's stock price. Carnival's bookings were slightly below target, causing its stock to fall nearly 50%. Kronos and Sykes missed earnings estimates. While both companies remain nicely profitable, their stocks halved. We sold half of our position in Japan's Softbank, an Internet service provider and investment company. We prefer to hold our positions longer than just 12-months but this stellar performer ran up so quickly that we cheerfully took some of our profits off the table. /s/ Ralph Wanger /s/ Charles P. McQuaid Ralph Wanger Charles P. McQuaid Lead Portfolio Manager Co-Portfolio Manager One of our favorite investment themes is to invest downstream from technology in software, services, media, telecom and biotech companies that are benefiting from tech but that aren't pure technology or Internet plays. We believe these companies often offer excellent growth at reasonable prices. Content Remains King As part of our enduring "downstream from technology" theme, we look closely at intellectual content stocks. For example, when cable television companies faced risk from satellite broadcasters, we bought programmers such as Liberty Media, successfully predicting that its content would benefit from additional distribution. We extended our content preference into print media, and benefited as Petersen and CMP Media were acquired. Our most recent success in content is PRIMEDIA, which owns 170 focused consumer publications (ranging from Fly Fisherman to Seventeen), 70 trade magazines (including Beef and Telephony) and thousands of hours of educational videos (shown in schools and workplaces). Under a new management team, the company is rapidly leveraging its content onto the Internet. PRIMEDIA stock jumped 94% in the quarter and was Acorn's second largest dollar winner. Because of recent market volatility, short-term performance of the Fund or its portfolio holdings may be different than stated as of 3/31/00. 4 Acorn Fund >At a Glance Ticker Symbol: ACRNX Pretax and After-tax Average Annual Total Returns - ------------------------------------------------- >Through March 31, 2000
1 Year 5 Year After-tax w/ Tax After-tax w/ Tax Pretax After-tax redemption Efficiency Pretax After-tax redemption Efficiency - -------------------------------------------------------------------------------------------------------------------------- ACORN FUND 38.90% 33.86% 27.55% 87.04% 20.63% 17.59% 16.30% 85.27% - -------------------------------------------------------------------------------------------------------------------------- SMALL BLEND CATEGORY AVG.* 40.14% 37.98% NA 94.62%/+/ 17.41% 14.84% NA 85.24%/+/ - -------------------------------------------------------------------------------------------------------------------------- SMALL GROWTH CATEGORY AVG.* 92.80% 88.99% NA 95.89%/+/ 24.67% 21.93% NA 88.89%/+/ - -------------------------------------------------------------------------------------------------------------------------- 10 Year After-tax w/ Tax Pretax After-tax redemption Efficiency - ------------------------------------------------------------------------- ACORN FUND 17.40% 15.06% 14.08% 86.53% - ------------------------------------------------------------------------- SMALL BLEND CATEGORY AVG.* 13.96% 11.61% NA 83.17%/+/ - ------------------------------------------------------------------------- SMALL GROWTH CATEGORY AVG.* 19.58% 17.10% NA 87.33%/+/ - -------------------------------------------------------------------------
*Source: Morningstar, Inc. Morningstar listed the Fund in the Small Growth Category as of 3/31/00 but the Fund has also regularly appeared in the Small Blend Category so we are showing both. "NA" indicates information not available from Morningstar. Morningstar does not provide Life of Fund data or after tax w/ redemption returns. /+/ Calculated by Wanger Asset Management from Morningstar data. If you own the Fund in a tax-deferred account such as an IRA or a 401(k), this information does not apply to you. Your actual after-tax returns depend on your tax situation and will differ from those shown. After-tax returns reflect past tax-effects and are not predictive of future tax effects. Acorn Fund Portfolio Diversification - ------------------------------------ >as a % of net assets, as of 3/31/00 [PIE CHART] Other* 11.9% Consumer Goods/Services 12.8% Health Care 7.8% Industrial Goods/Services 7.7% Real Estate 5.6% Finance 12.8% Energy/Minerals 7.8% Information 33.6% Media 3.8% Telecom 4.6% Computer Related Hardware 8.0% Software & Services 17.2% *Other includes cash and other assets less liabilities of 10.6%. Acorn Fund NAV on 3/31/00: $18.61 - --------------------------------- Fund Net Assets as of 3/31/00: $4,020.9 million - ------------------------------------------------------------------------------- >Acorn Fund Top 10 Holdings Softbank 2.9% Leading Internet Company in Japan Liberty Media Group, AT&T 1.9% Cable & Satellite Programming Harley-Davidson 1.8% Motorcycles & Related Merchandise Star Cruises 1.8% Cruising/Casino Operations SEI Investments 1.7% Mutual Fund Administration AmeriCredit 1.6% Auto Lending First Health Group 1.5% PPO Network Lincare Holdings 1.4% Home Health Care Services Expeditors International of Washington 1.4% International Freight Forwarder WM Data Nordic 1.4% Computer Services/Consulting 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. The Value of a $10,000 Investment in Acorn Fund - -------------------------------------------------------------------------------- >June 10, 1970 through March 31, 2000 Average Annual Total Return - --------------------------- 1 Year 5 Years 10 Years Life of Fund 38.90% 20.63% 17.40% 17.00% [GRAPH APPEARS HERE] ACORN Fund S&P 6/10/70 $ 10,000 $ 10,000 70 $ 13,587 $ 12,676 71 $ 17,828 $ 14,490 72 $ 19,368 $ 17,242 73 $ 14,765 $ 14,709 74 $ 10,691 $ 10,816 75 $ 13,945 $ 14,842 76 $ 23,045 $ 18,394 77 $ 27,168 $ 17,077 78 $ 31,777 $ 18,200 79 $ 47,790 $ 21,586 80 $ 62,594 $ 28,602 81 $ 58,005 $ 27,195 82 $ 68,208 $ 33,054 83 $ 85,389 $ 40,510 84 $ 89,045 $ 43,051 85 $ 117,142 $ 56,710 86 $ 136,843 $ 67,295 87 $ 142,923 $ 70,828 88 $ 178,370 $ 82,591 89 $ 222,681 $108,761 90 $ 183,674 $105,386 91 $ 270,641 $137,492 92 $ 336,210 $147,928 93 $ 444,889 $162,882 94 $ 411,750 $165,032 95 $ 497,407 $227,047 96 $ 609,569 $279,177 97 $ 761,852 $372,320 98 $ 807,685 $478,724 6/30/99 $ 901,844 $537,999 9/30/99 $ 883,409 $504,404 12/31/99 $1,077,255 $579,455 3/31/2000 $1,081,906 $592,744 This graph compares the results of $10,000 invested in the Acorn Fund on June 10, 1970 (the date the Fund shares were first offered to the public), with the S&P 500 Stock Index with dividends reinvested. The S&P 500 is a broad market- weighted average of U.S. blue-chip companies. The index is unmanaged and returns include reinvested dividends. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. 5 Acorn International >In a Nutshell [Photos here] Acorn International rose 12.1% in the first quarter of the year, well ahead of all its benchmarks and peer groups. Returns came from stock selection more than country allocation. Our four best holdings, defined by contribution to return over the quarter, were Li & Fung, Editoriale L'Espresso, Baltimore Plc., and Amdocs, domiciled in Hong Kong, Italy, the UK and Israel, respectively. The names that hurt performance the most this quarter were Star Cruises of Singapore, Jafco and Trans Cosmos of Japan, Autogrill of Italy, and Atos of France. These have all been successful holdings in the past, which gave back a portion of their previous gains in profit taking. If country allocation does not explain the winners and losers this quarter, can we look to sector exposure as a better predictor of performance? There is an important change in the international investment environment. Companies are compared increasingly to their peers across markets, as opposed to dissimilar companies within their home market. What three of our top performers in the quarter have in common is that they all rose on enthusiasm for technology, while the two Japanese names that fell both reflected disillusionment with Internet- related investments. There is an important change in the international investment environment. Companies are compared increasingly to their peers across markets, as opposed to dissimiliar companies within their home market. We have to admit that we are not exactly sure what constitutes a technology stock in today's world. A lot of pure "dot.com" companies are really old- fashioned businesses distinguished only by the fact that they use the Internet to distribute their goods or services. Some newly listed stocks have innovative business models, but not much else in the way of operations. Other traditional companies source a growing portion of their sales from end markets that did not exist five years ago. Investors tend to paste hasty labels on groups and trade them indiscriminately together, making their stock prices go up and down a lot in a short period. Over the long term, however, fundamentals win out, and the businesses that build value in the real economy, whatever they are called, do the same for shareholders. Our philosophy at Acorn International is to buy quality companies with solid fundamentals, strong market positions, and proven management. We focus on small- to mid-sized companies, because they have the potential to grow for a long time. We are neither market timers nor heavy traders. We do trim hot stocks when the party gets too wild (which happened this past quarter), and add to them after the crowds have left and prices return to sober levels (which we have started to do this quarter). But the most important task we face is deciding what to own in the first place. In that respect, we have a high degree of conviction that the core companies in the portfolio will be the winners in retrospect five years from now. /s/ Leah Joy Zell Leah Joy Zell Lead Portfolio Manager /s/ Margaret Mary Forster Margaret M. Forster Co-Portfolio Manager From Audio to Stereo The craze for media stocks over the last six months passed Audiofina by. Because the ownership structure was complicated and the shares hard to buy, few brokerage firms followed the company and management never appeared before investors. What attracted us to this obscure Belgian holding company, however, was its 50% ownership in a valuable TV and radio network. That obscurity ended early in April when Pearson and Bertelsmann, two European media giants, agreed to merge their TV and radio assets into Audiofina, making it the broadcast media powerhouse of Europe with 22 channels, 18 radio stations, and over 120 million viewers across 11 countries. When the stock lists in London later this year, we believe its brand name, RTL, is poised to become a household name. Because of recent market volatility, short-term performance of the Fund or its portfolio holdings may be different than stated as of 3/31/00. 6 Acorn International >At a Glance Ticker Symbol: ACINX Pretax and After-tax Average Annual Total Returns - ------------------------------------------------- >Through March 31, 2000
----------------------------------------------------------------------------------------------- 1 Year 5 Year ----------------------------------------------------------------------------------------------- Pretax After-tax After-tax w/ Tax Pretax After-tax After-tax w/ Tax redemption Efficiency redemption Efficiency - ------------------------------------------------------------------------------------------------------------------------ ACORN INTERNATIONAL 98.56% 96.13% 60.65% 97.54% 25.85% 24.84% 21.64% 96.09% - ------------------------------------------------------------------------------------------------------------------------ FOREIGN STOCK CATEGORY AVG.* 44.59% 42.39% NA 95.07%/+/ 15.54% 13.89% NA 89.38%/+/ - ------------------------------------------------------------------------------------------------------------------------ Life of Fund ------------------------------------------- Pretax After-tax After-tax w/ Tax redemption Efficiency - ---------------------------------------------------------------------- ACORN INTERNATIONAL 22.76% 22.06% 19.58% 96.92% - ---------------------------------------------------------------------- FOREIGN STOCK CATEGORY AVG.* NA NA NA NA - ----------------------------------------------------------------------
*Source: Morningstar, Inc. "NA" indicates information not available from Morningstar. Morningstar does not provide Life of Fund data or after-tax w/ redemption returns. /+/ Calculated by Wanger Asset Management from Morningstar data. If you own the Fund in a tax-deferred account such as an IRA or a 401(k), this information does not apply to you. Your actual after-tax returns depend on your tax situation and will differ from those shown. After-tax returns reflect past tax-effects and are not predictive of future tax effects. Acorn International Portfolio Diversification - --------------------------------------------- >as a % of net assets, as of 3/31/00 [PIE CHART] Health Care 3.5% Finance 8.1% Other* 8.8% Industrial Goods/Services 14.1% Consumer Goods/Services 15.1% Information 50.4% Media 5.8% Telephone Services 7.0% Telecom 2.5% Computer Related Hardware 8.2% Computer Services 9.3% Publishing 6.2% Software & Services 11.4% *Other includes cash and other assets less liabilities of 5.6%. Fund Net Assets as of 3/31/00: $3,405.1 million - --------------------------------------------------- >Acorn International Top 10 Holdings Li & Fung Hong Kong 3.5% Sourcing of Consumer Goods Serco Group United Kingdom 2.6% Facilities Management Star Cruises Singapore 2.4% Cruise Line Venture Manufacturing Singapore 2.4% Electronic Manufacturing Services Amdocs Israel 1.8% Telecommunications Billing & Customer Care Software TietoEnator Finland 1.8% Computer Services/Consulting Editoriale L'Espresso Italy 1.7% Newspaper & Magazine Publisher Banca Fideuram Italy 1.7% Life Insurance & Mutual Funds Dimension Data South Africa 1.7% Networks & Computer Services Datacraft Asia Singapore 1.6% Network Integrator 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. Acorn International NAV on 3/31/00: $39.60 - ------------------------------------------ The Value of a $10,000 Investment in Acorn International - -------------------------------------------------------- >September 23, 1992 through March 31, 2000 Average Annual Total Return - --------------------------- 1 Year 5 Years Life of Fund 98.56% 25.85% 22.76% [GRAPH APPEARS HERE] - -------------------------------------------- ACORN INT'L EMI-EX US - -------------------------------------------- Sep-1992 $10,000.00 $10,000.00 Dec-1992 $10,679.00 $ 9,590.49 Dec-1993 $15,924.00 $12,573.13 Dec-1994 $15,319.00 $13,639.59 Dec-1995 $16,686.00 $14,355.04 Dec-1996 $20,170.00 $15,392.73 Dec-1997 $20,190.00 $13,946.49 Dec-1998 $23,305.00 $15,641.12 Jun-1999 $27,222.00 $16,839.00 Sep-1999 $29,486.00 $17,694.00 Dec-1999 $41,761.00 $19,320.00 Mar-2000 $46,808.00 $19,705.00 This graph compares the results of $10,000 invested in Acorn International on September 23, 1992 (the date Fund shares were first offered to the public), with all dividends and capital gains reinvested, with the EMI (World ex-U.S.). EMI (World ex-U.S.) is Salomon Brothers' index of the bottom 20% of institutionally investable capital of countries, as selected by Salomon, excluding the U.S. The index is unmanaged and returns include reinvested dividends. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. 7 Acorn USA >In a Nutshell [Photo here] Acorn USA slipped -1.2% in the first quarter lagging the Russell 2000 Index's 7.1% return. As with our other domestic funds, we trailed the index due to our lower weighting in technology stocks. We do own technology stocks but we steered clear of tech names that were selling based on hot stock stories rather than real earnings. Acorn USA's top two money-making stocks were Dynegy, an electricity and gas marketing revolutionary that nearly doubled in price, and Gadzooks, a popular teen clothing retailer. Of our technology names, MSI, a telecommunication-based Internet service provider, was a winner. More reasonably priced offshoot Internet plays like PRIMEDIA, a specialty magazine publisher and web site developer; Aztec, an e-business consulting company; and Advanced Lighting, a manufacturer of lighting products and fiber optics coatings, were up between 75% and 230%. Despite some nice wins in the Fund, two significant portfolio holdings disappointed last quarter. Sykes (help desk call centers for personal computer users) dropped on revenue concerns that we believe will be temporary. Galileo (telecommunication semiconductors) missed our revenue expectations. It was sold. Recent stock market cycles have become quite violent. We think a sensible response is to build a portfolio of dynamic companies with strong, multi-year growth prospects trading at good prices. Recent stock market cycles have become quite violent. We think a sensible response is to build a portfolio of dynamic companies with strong, multi-year growth prospects trading at good prices. Gadzooks Is "In" Gadzooks is a teenage clothing retailer. Its stock plunged in 1998 when teenagers suddenly deemed its duds uncool. Our retailing analyst, Ben Andrews, smelled potential as the company reinvented its product line, but held off buying until he was convinced the old, unpopular clothing lines were purged from inventory and replaced with cool new brand-name stuff. Last March, nine months after the stock's mini-crash, the Fund started buying shares, right at the cusp of a sales surge and a tripling of the stock price. A year ago, Gadzooks bombed out; today, as kids say, it's "da bomb." /s/ Robert A. Mohn Robert A. Mohn Lead Portfolio Manager Because of recent market volatility, short-term performance of the Fund or its portfolio holdings may be different than stated as of 3/31/00. 8 Acorn USA >At a Glance Ticker Symbol: AUSAX Pretax and After-tax Average Annual Total Returns - ------------------------------------------------- >Through March 31, 2000
1 Year 3 Year Pretax After-tax After-tax w/ Tax Pretax After-tax After-tax w/ Tax Redemption Efficiency Redemption Efficiency - ------------------------------------------------------------------------------------------------------------------------ ACORN USA 31.99% 29.82% 21.19% 93.23% 19.94% 18.28% 16.01% 91.66% - ------------------------------------------------------------------------------------------------------------------------ SMALL BLEND CATEGORY AVG.* 40.14% 37.98% NA 94.62%/+/ 16.42% 14.44% NA 87.94%/+/ - ------------------------------------------------------------------------------------------------------------------------ Life of Fund Pretax After-tax After-tax w/ Tax Redemption Efficiency - ------------------------------------------------------------------- ACORN USA 21.09% 19.65% 17.18% 93.18% - ------------------------------------------------------------------- SMALL BLEND CATEGORY AVG.* NA NA NA NA - -------------------------------------------------------------------
*Source: Morningstar, Inc. "NA" indicates information not available from Morningstar. Morningstar does not provide Life of Fund data or after-tax w/ redemption returns. /+/ Calculated by Wanger Asset Management from Morningstar data. If you own the Fund in a tax-deferred account such as an IRA or a 401(k), this information does not apply to you. Your actual after-tax returns depend on your tax situation and will differ from those shown. After-tax returns reflect past tax-effects and are not predictive of future tax effects. Acorn USA Portfolio Diversification - ---------------------------------------- >as a % of net assets, as of 03/31/00 [PIE CHART] Health Care 8.7% Consumer Goods/Services 5.2% Industrial Goods/Services 5.7% Finance 8.3% Other* 9.2% Energy/Minerals 7.9% Information 55% Media 2.5% Mobile Communications 8.4% Telecom 6.3% Computer Hardware 13.7% Instrumentation 3.3% Computer Services 5.1% Software & Services 15.7% *Other includes cash and other assets less liabilities of 8.9%. Fund Net Assets as of 3/31/00: $374.5 million - --------------------------------------------- >Acorn USA Top 10 Holdings Micros Systems 8.9% Information Systems for Restaurants & Hotels Telephone and Data Systems 5.5% Cellular & Telephone Services RCN 3.9% Metro Market CLEC: Voice, Video & Internet Services Dynegy 3.0% Natural Gas & Electric Processing & marketing First Health Group 2.9% PPO Network AmeriCredit 2.7% Auto Lending DSP Group 2.5% Telecom Semiconductors Lincare Holdings 2.4% Home Health Care Services JDA Software 2.3% Applications/Software & Services for Retailers Gadzooks 2.3% Teen Apparel Retailer 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. Acorn USA NAV as of 3/31/00: $16.55 - ----------------------------------- The Value of a $10,000 Investment in Acorn USA - ---------------------------------------------- >September 4, 1996 through March 31, 2000 Average Annual Total Return - --------------------------- 1 Year 3 Years Life of Fund 31.99% 19.94% 21.09% [GRAPH APPEARS HERE] Date Acorn USA Russell 2000 - -------------------------------------------------------- 9/4/96 $10,000 $10,000 9/96 $10,720 $10,360 12/96 $11,650 $10,899 3/97 $11,480 $10,335 6/97 $13,320 $12,011 9/97 $15,340 $13,798 12/97 $15,413 $13,335 3/98 $17,401 $14,678 6/98 $17,525 $13,993 9/98 $14,151 $11,174 12/98 $16,305 $12,997 6/99 $17,650 $14,203 9/99 $16,866 $13,305 12/99 $20,059 $15,759 3/00 $19,820 $16,876 This graph compares the results of $10,000 invested in Acorn USA on September 4, 1996 (the date Fund shares were first offered to the public), with all dividends and capital gains reinvested, to the Russell 2000 Index. The Russell 2000 is formed by taking the 3,000 largest U.S. companies and then eliminating the largest 1,000, leaving a market capitalization-weighted index of 2,000 small companies. The index is unmanaged and returns include reinvested dividends. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAT THEIR ORIGINAL COST. 9 Acorn Foreign Forty >In a Nutshell [Photos here] Acorn Foreign Forty had a strong first quarter, up more than 15%. Fund performance was well ahead of its benchmark indexes, which were down slightly over the three months (see Page 1 for performance data). Our competitors, as measured by Lipper, were also flat, up less than 1%. Strong stocks came from the media group. M6 Metropole TV, the French television broadcaster we highlighted in last quarter's report, rose another 38%. We also saw larger gains in Italian publishers SEAT and L'Espresso. Cartoon programmer Fox Kids Europe, and Luxembourg-based TV broadcaster Audiofina, were strong in the quarter. Two of our big winners outside the media area were telecommunication software companies: Amdocs in Israel and Comptel in Finland. There was no clear pattern to our losers, although both Peninsular & Oriental and Star Cruises fell after U.S. cruise line Carnival bookings increased less than analysts had hoped. We feel the cruise industry's truly global approach makes it a good growth industry and that the recent rough waters will soon calm. Acorn Foreign Forty, as well as the other Acorn funds, follows a buy and hold investment strategy but sometimes circumstances make us vary from this approach. For example, Softbank was expected to do well over a three- to five-year period but it rose so quickly - increasing 20 fold in roughly 12 months - that we elected to take our profits and say sayonara to this stellar performer. The proceeds from this sale were used to invest in technology stocks trading at lower prices. Acorn Foreign Forty had a strong first quarter, up more than 15%. Fund performance was well ahead of its benchmark indexes ... Italians just say no to "pay as you go" "Pay as you go" pension systems work well - provided you have more workers paying in than retirees taking money out. In the U.S., we recognized more than a decade ago that a critical imbalance would arise in our Social Security system when baby boomers switched from "paying in" to "taking out." As a result, Americans have been supplementing their social security by funding IRAs, 401(k)s and other investment vehicles. While the process is well underway in the U.S., Italy is just getting started. The state "pay as you go" system was the only game in town because private pensions were illegal until recently. With a green light for pension investing, Italians are now pouring money into mutual funds. Banca Fideuram, the leading Italian fund distributor and one of our top ten holdings, is a beneficiary of this seismic change. /s/ Marcel P. Houtzager Marcel P. Houtzager Co-Portfolio Manager /s/ Roger Edgley Roger Edgley Co-Portfolio Manager Because of recent market volatility, short-term performance of the Fund or its portfolio holdings may be different than stated as of 3/31/00. 10 Acorn Foreign Forty >At a Glance Ticker Symbol: ACFFX Pretax and After-tax Average Annual Total Returns - ------------------------------------------------- >Through March 31, 2000
1 Year Life of Fund Pretax After-tax After-tax w/ Tax Pretax After-tax After-tax w/ Tax Redemption Efficiency Redemption Efficiency - ---------------------------------------------------------------------------------------------------------------------------------- ACORN FOREIGN FORTY 92.76% 92.59% 55.98% 99.81% 85.36% 85.29% 69.56% 99.92% - ---------------------------------------------------------------------------------------------------------------------------------- FOREIGN STOCK CATEGORY AVG.* 44.59% 42.39% NA 95.07%/+/ NA NA NA NA - ----------------------------------------------------------------------------------------------------------------------------------
*Source: Morningstar, Inc. "NA" indicates information not available from Morningstar. Morningstar does not provide Life of Fund data or after-tax w/ redemption returns. /+/ Calculated by Wanger Asset Management from Morningstar data. If you own the Fund in a tax-deferred account such as an IRA or a 401(k), this information does not apply to you. Your actual after-tax returns depend on your tax situation and will differ from those shown. After-tax returns reflect past tax-effects and are not predictive of future tax effects. Acorn Foreign Forty Portfolio Diversification >as a % of net assets, as of 03/31/00 [PIE CHART] Health Care 2.4% Other* 0.3% Consumer Goods/Services 12.5% Industrial Goods/Services 8.4% Finance 16.4% Transportation 3.3% Information 56.7% TV Broadcasting 6.9% Media 3.8% Telephone Services 13.4% Telecom 4.1% Computer Related Hardware 8.8% Computer Services 8.0% Software & Services 11.7% *Cash and other assets less liabilities. Fund Net Assets as of 03/31/00: $157.4 million - ---------------------------------------------- >Acorn Foreign Forty Top 10 Holdings Star Cruises Singapore 5.4% Cruise Line Amdocs Israel 4.9% Telecommunications Billing & Customer Care Software Venture Manufacturing Singapore 4.4% Electronic Manufacturing Services Audiofina Belgium 3.9% TV & Radio Stations Peninsular & Oriental United Kingdom 3.3% Cruise Line NetCom Sweden 3.3% Telecommunication Services Getronics Netherlands 3.2% Computer Services Editoriale L'Espresso Italy 3.1% Newspaper & Magazine Publisher Banca Fideuram Italy 3.1% Life Insurance & Mutual Funds M6 Metropole TV France 3.0% Television Broadcaster 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. Acorn Foreign Forty NAV on 3/31/00: $23.04 - ------------------------------------------ The Value of a $10,000 Investment in Acorn Foreign Forty - -------------------------------------------------------- >November 23, 1998 through March 31, 2000 Average Annual Total Return - --------------------------- 1 Year Life of Fund 92.76% 85.36% [GRAPH APPEARS HERE] Acorn Foreign 40 EAFE 11/23/98 $10,000 $10,000 12/31/98 $11,000 $10,411 1/31/99 $11,790 $10,381 2/28/99 $11,590 $10,133 3/31/99 $11,980 $10,556 4/30/99 $12,240 $10,980 5/30/99 $12,170 $10,418 6/30/99 $13,110 $10,825 7/31/99 $13,511 $11,146 8/30/99 $13,771 $11,187 9/30/99 $13,621 $11,300 12/31/99 $19,975 $13,218 3/31/2000 $23,093 $13,205 This graph compares the results of $10,000 invested in Acorn Foreign Forty on November 23, 1998 (the date Fund shares were first offered to the public), with all dividends and capital gains reinvested, with EAFE. EAFE is Morgan Stanley's Europe, Australasia and Far East Index, an unmanaged, widely recognized international benchmark that comprises 20 major markets in Europe, Australia, and the Far East. The index is unmanaged and returns include reinvested dividends. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. 11 Acorn Twenty >In a Nutshell [PHOTO HERE] Acorn Twenty finished the quarter up 2.3%, behind the S&P 400's 12.7% gain and in-line with the S&P 500's 2.3% return. Midcap growth stocks, particularly in technology, had a very strong quarter and their contribution to the S&P 400 explains much of its outperformance. Investor enthusiasm for technology stocks sailed to high valuation levels in the first quarter leaving value-oriented stocks standing on the dock. We do hold technology names, but not as many as the index. When many of these high-flying tech stocks dropped in April, however, our Fund benefited from Acorn's more diversified investment approach. We had two stocks return more than 50% during the quarter. Dynegy rose following its merger with electric utility Illinova. American Power Conversion, dominant in the market for computer power systems, also saw strong gains. Other winners: McLeod (telecommunication service provider) and Tektronix (analytical instruments), now the fund's largest position, were up more than 40% for the quarter. Insurance stocks continued to be weak. Progressive and UICI were both off more than 20%. Comparing insurance stocks with other companies in our universe, we decided to move out of that sector and redeploy funds into other ideas. Effective March 31, 2000, Mark Yost resigned from Wanger Asset Management and no longer co-manages Acorn Twenty. Mark decided to start his own money management firm. Looking forward, we remain excited about Acorn Twenty's future as our team continues to look for great businesses selling at reasonable prices. Investor enthusiasm for technology stocks sailed to high valuation levels in the first quarter leaving value-oriented stocks standing on the dock. - -------------------------------------------------------------------------------- TEK: Selling the "bad" to increase value Tektronix (TEK) manufactures test and measurement equipment used by Lucent, Motorola, Rambus and others to design and test fiber optic systems, cell phones, and memory chips. We analyzed TEK last year and concluded it was an attractively valued, fast-growing, technology company. At that time, TEK's core business was masked by its subsidiaries. In September, TEK began to sell off some of its "bad" businesses to increase the value of its more profitable, core business. We believe fiscal May 2000 earnings per share (eps) will include losses and low profits from these sold businesses and we estimate eps to be between $1.20 and $1.25. Now, unburdened by its divested businesses, TEK may earn between $2.20 and $2.25 in fiscal 2001. By looking beyond reported estimates, we purchased the stock in October at a reasonable price. It has increased more than 40% since then. - -------------------------------------------------------------------------------- /S/ John H. Park John H. Park Lead Portfolio Manager Because of recent market volatility, short-term performance of the Fund or its portfolio holdings may be different than stated as of 3/31/00. 12 Acorn Twenty >At a Glance Ticker Symbol: ACTWX Pretax and After-tax Average Annual Total Returns - ---------------------------------------------------- >Through March 31, 2000
---------------------------------------------------------------------------------------------------------------- 1 Year Life of Fund ---------------------------------------------------------------------------------------------------------------- Pretax After-tax After-tax w/ Tax After-tax w/ Tax redemption Efficiency Pretax After-Tax redemption Efficiency - ------------------------------------------------------------------------------------------------------------------------------------ ACORN TWENTY 23.44% 22.92% 14.14% 97.79% 29.32% 28.93% 23.45% 98.66% - ------------------------------------------------------------------------------------------------------------------------------------ MID CAP BLEND CATEGORY AVG.* 27.56% 24.86% NA 90.20%/+/ NA NA NA NA - ------------------------------------------------------------------------------------------------------------------------------------
*Source: Morningstar, Inc. "NA" indicates information not available from Morningstar. Morningstar does not provide Life of Fund data or after-tax w/ redemption returns. /+/ Calculated by Wanger Asset Management from Morningstar data. If you own the Fund in a tax-deferred account such as an IRA or a 401(k), this information does not apply to you. Your actual after-tax returns depend on your tax situation and will differ from those shown. After-tax returns reflect past tax-effects and are not predictive of future tax effects. Acorn Twenty Portfolio Diversification - -------------------------------------------------------------------------------- >as a % of net assets, as of 3/31/00 [PIE CHART] Consumer Goods/Services 14.8% Health Care 10.7% Industrial Goods/Services 2.0% Energy/Minerals 6.5% Finance 8.5% Other* 4.5% Information Television Programming 4.0% Telecommunications/ Wireline Communications 10.7% Mobile Communications 4.3% Contract Manufacturing 5.2% Instrumentation 13.9% Computed Related Hardware 4.3% Business Information 10.6% *Cash and other assets less liabilities. Acorn Twenty NAV on 3/31/00: $14.02 - -------------------------------------- Fund Net Assets as of 3/31/00: $66.3 million - ------------------------------------------------------------------------------ >Acorn Twenty Top 10 Holdings Tektronix 8.5% Analytical Instruments Dynegy 6.5% Energy Marketing, Processing & Generation Reynolds & Reynolds 5.7% Business Forms & Computer Systems for Car Dealers First Health Group 5.6% PPO Network SEI Investments 5.4% Mutual Fund Administration McLeod USA 5.4% Super Regional CLEC: Local, Long Distance & Internet Services RCN 5.3% Metro Market CLEC: Voice, Video & Internet Services Herman Miller 5.3% Office Furniture Jabil Circuit 5.2% Electronic Manufacturing Services Jones Apparel 5.1% Women's Apparel 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. The Value of a $10,000 Investment in Acorn Twenty - --------------------------------------------------------------------------- >November 23, 1998 through March 31, 2000 Average Annual Total Return - --------------------------- 1 Year Life of Fund 23.44% 29.32% [GRAPH APPEARS HERE] ACORN 20 MidCap 400 - -------------------------------------------- 11/23/98 $10,000 $10,000 12/31/98 $10,710 $11,109 1/31/99 $11,000 $10,676 2/28/99 $10,710 $10,117 3/31/99 $11,480 $10,400 4/30/99 $12,710 $11,220 5/31/99 $12,730 $11,270 6/30/99 $13,040 $11,872 7/30/99 $13,190 $11,620 8/31/99 $12,060 $11,222 9/30/99 $12,110 $10,875 12/31/99 $13,850 $12,745 3/31/2000 $14,171 $14,361 This graph compares the results of $10,000 invested in Acorn Twenty on November 23, 1998 (the date Fund shares were first offered to the public), with all dividends and capital gains reinvested, to the S&P MidCap 400. The S&P MidCap 400 is a market value-weighted index of 400 stocks that are in the next tier down from the S&P 500. The Index is unmanaged and returns include reinvested dividends. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. 13 Acorn Fund >Major Portfolio Changes in the First Quarter Number of Shares ------------------------- 12/31/99 3/31/00 Additions - --------------------------------------------------------------------- Information American Management Systems 250,000 400,000 Anchor Gaming 450,000 500,000 Aristocrat Leisure (Australia) 1,000,000 1,400,000 Bell & Howell 0 200,000 Bellsystem24 (Japan) 0 5,000 Cinar (Canada) 300,000 700,000 Classic Communications 200,000 600,000 Concord EFS 380,000 1,211,000 Dimension Data (South Africa) 0 1,000,000 Dionex 98,000 282,000 Hyperion Solutions 200,000 280,000 Indus International 300,000 556,000 JDA Software Group 687,000 876,000 MasTec 0 147,000 Navigant Consulting 0 900,000 Playboy Enterprises 550,000 600,000 Plexus 35,000 77,000 Pomeroy Computer Resources 0 400,000 RCM Technologies 642,000 925,000 Salem Communications 137,000 500,000 Sykes Enterprises 650,000 850,000 TeleSpectrum Worldwide 0 765,000 THQ 245,000 312,000 Tidel Technologies 0 400,000 Varian 520,000 680,000 - --------------------------------------------------------------------- Consumer Goods/Services Bally Total Fitness 1,250,000 1,540,000 Borders Group 1,600,000 1,700,000 Calloway Golf 100,000 200,000 Carnival 1,100,000 1,500,000 Fairfield Communities 0 200,000 Helen of Troy 460,000 1,190,000 Herman Miller 520,000 660,000 Hon Industries 0 130,000 Isle of Capri Casino 650,000 934,000 ITT Educational Services 600,000 1,000,000 Jones Apparel 730,000 900,000 National RV Holdings 0 110,000 Pier 1 Imports 0 1,200,000 Quiksilver 200,000 325,000 Station Casinos 1,080,000 1,500,000 Number of Shares ------------------------- 12/31/99 3/31/00 - --------------------------------------------------------------------- Finance Ace Cash Express 570,000 1,000,000 Affiliated Managers Group 300,000 350,000 Commonwealth Bancorp 702,000 824,000 Neuberger Berman 650,000 742,000 Protective Life 600,000 765,000 SEI Investments 555,000 614,000 TCF Financial 799,000 974,000 Texas Regional Bancshares 672,000 730,000 - --------------------------------------------------------------------- Industrial Goods/Services Clarcor 1,000,000 1,108,000 Spartech 100,000 245,000 - --------------------------------------------------------------------- Energy/Minerals Newpark Resources 1,120,000 2,000,000 Penn West Petroleum 0 240,000 Pennaco Energy 0 450,000 Precision Drilling (Canada) 530,000 730,000 Saipem (Italy) 1,250,000 2,250,000 Ulster Petroleums (Canada) 400,000 550,000 US Aggregates 283,000 500,000 - --------------------------------------------------------------------- Other Industries Amli Residential 250,000 490,000 BRE Properties 250,000 450,000 Cornerstone Properties 820,000 1,145,000 First Industrial Realty Trust 500,000 675,000 HRPT Properties 0 1,000,000 LaSalle Hotel Properties 699,000 1,099,000 Macerich 400,000 625,000 Manufactured Home Communities 400,000 700,000 SL Green Realty 500,000 730,000 Summit Properties 250,000 520,000 Utilicorp United 200,000 500,000 14 Number of Shares ------------------------- 12/31/99 3/31/00 Sales - --------------------------------------------------------------------- Information 3DO Company 250,000 183,000 AC Nielsen 403,000 0 Activision 400,000 300,000 Aztec Technology Partners 1,616,000 1,210,000 Bisys 95,000 0 Comverse Technology 36,000 0 Fox Kids Europe (Netherlands) 9,000 0 Granite Broadcasting 250,000 0 Information Holdings 450,000 400,000 Liberty Media Group, AT&T 1,500,000 1,300,000 Musicmaker.com 250,000 0 National Data 1,874,000 1,812,000 NTL (United Kingdom) 250,000 300,000 (includes effect of 5 for 4 stock split) Oak Industries 200,000 0 Softbank (Japan) 235,000 132,000 Solectron 400,000 500,000 (includes effect of 2 for 1 stock split) Telephone and Data Systems 580,000 450,000 Thus (United Kingdom) 36,000 0 - --------------------------------------------------------------------- Health Care Corvas International 1,508,000 1,358,000 CuraGen 230,000 342,000 (includes effect of 2 for 1 stock split) Genome Therapeutics 664,000 380,000 Guilford Pharmaceutical 351,000 316,000 Incyte Pharmaceuticals 160,000 130,000 Inhale Therapeutic Systems 450,000 405,000 Lincare Holdings 2,038,000 2,000,000 Microcide Pharmaceuticals 915,000 823,000 Myriad Genetics 525,000 425,000 NPS Pharmaceuticals 529,000 476,000 Protein Design Labs 329,000 266,000 Wesley Jessen Vision 299,000 0 Number of Shares ------------------------- 12/31/99 3/31/00 - --------------------------------------------------------------------- Consumer Goods/Services Harley-Davidson 1,000,000 900,000 - --------------------------------------------------------------------- Finance Acceptance Insurance 612,000 0 Baldwin & Lyons, Cl. B 488,000 0 Peoples Bank Bridgeport 1,842,000 1,757,000 Pioneer Group 1,034,000 730,000 UICI 1,291,000 863,000 - --------------------------------------------------------------------- Industrial Goods/Services A M Castle 245,000 95,000 Advanced Lighting Technologies 550,000 350,000 C H Robinson 350,000 300,000 - --------------------------------------------------------------------- Energy/Minerals AES Corporation 1,164,000 450,000 Canadian Natural Resources (Canada) 385,000 95,000 Hanover Compressor 205,000 160,000 - --------------------------------------------------------------------- Other Industries Unisource Energy 865,000 665,000 At March 31, 2000 Acorn Fund's foreign portfolio of investments as a percent of net assets was diversified as follows: Value (000) Percent - ---------------------------------------------------------------------- Japan $122,001 3.1% United Kingdom 112,758 2.8 Singapore 84,233 2.1 Sweden 57,465 1.4 Canada 53,494 1.3 Italy 46,049 1.2 France 29,712 0.7 Netherlands 29,140 0.7 Australia 13,053 0.3 Value (000) Percent - ---------------------------------------------------------------------- Argentina $ 12,875 0.3% Mexico 9,042 0.2 South Africa 8,908 0.2 Germany 3,962 0.1 China 1,272 0.1 -------------------------- TOTAL FOREIGN PORTFOLIO 583,964 14.5 15 Acorn Fund >Statement of Investments (Unaudited) March 31, 2000 Number of Shares Value (000) - -------------------------------------------------------------------------------- Common Stocks and Other Equity-Like Securities: 89.4% - -------------------------------------------------------------------------------- Information: 33.6% Media >BROADCASTING: 1.2% 819,000 Data Transmission Network $ 23,290 Data Services for Farmers 772,000 Young Broadcasting 14,668 Television Stations 500,000 Salem Communications 5,969 Radio Stations for Religious Programming 300,000 Shop at Home 2,588 Television Home Shopping Network 100,000 Cumulus Media 1,437 Radio Stations in Small Cities - -------------------------------------------------------------------------------- 47,952 >TELEVISION PROGRAMMING/CATV: 2.6% 1,300,000 Liberty Media Group, AT&T 77,025 Cable & Satellite Programming 500,000 Corus Entertainment (Canada) 13,087 CATV Programming & Radio Stations 600,000 Playboy Enterprises 11,925 CATV & Satellite Programming, Publishing 700,000 Cinar (Canada) 4,900 Children's TV Programming - -------------------------------------------------------------------------------- 106,937 Telecommunications >TELECOMMUNICATIONS/WIRELINE COMMUNICATIONS: 2.2% 584,000 RCN 31,463 Metro Market CLEC: Voice, Video & Internet Services 300,000 NTL (United Kingdom) 27,844 Voice, Video & Data Services 354,000 Commonwealth Telephone 16,616 Rural Phone Franchises & CLEC 600,000 Classic Communications 9,450 Cable Television in Rural Areas 230,000 Startec Global Communications 4,830 International Telecommunications - -------------------------------------------------------------------------------- 90,203 >MOBILE COMMUNICATIONS: 2.3% 450,000 Telephone and Data Systems 49,950 Cellular & Telephone Services 350,000 Pinnacle Holdings 19,338 Towers for Cellular, PCS & Paging 355,000 COMARCO 12,114 Wireless Network Testing 420,000 Price Communications 9,660 Cellular Telephone Services - -------------------------------------------------------------------------------- 91,062 >TELECOMMUNICATIONS EQUIPMENT: 0.1% 400,000 Tidel Technologies 3,500 ATM Machines Principal Amount or Number of Shares Value (000) - -------------------------------------------------------------------------------- Computer Related Hardware >COMPUTER HARDWARE/RELATED SYSTEMS: 2.3% 765,000 Micros Systems $48,147 Information System for Restaurants & Hotels 550,000 American Power Conversion 23,581 Uninterruptable Power Systems 713,000 Kronos 21,123 Labor Management Solutions - -------------------------------------------------------------------------------- 92,851 >GAMING EQUIPMENT: 2.1% 2,342,000 International Game Technology 50,792 Slot Machines & Progressive Jackpots 500,000 Anchor Gaming 18,969 Slot Machines & Casinos 1,400,000 Aristocrat Leisure (Australia) 13,053 Slot Machines - -------------------------------------------------------------------------------- 82,814 >CONTRACT MANUFACTURING: 1.6% 500,000 Solectron 20,031 Electronic Manufacturing Services 400,000 Jabil Circuit 17,300 Electronic Manufacturing Services 2,000,000 Natsteel Electronics (Singapore) 13,096 Electronic Manufacturing Services 350,000 Applied Power 9,975 Electronic Enclosures & Industrial Products 77,000 Plexus 5,130 Electronic Manufacturing Services - -------------------------------------------------------------------------------- 65,532 >INSTRUMENTATION: 2.0% 680,000 Varian 26,095 Analytical Instruments 480,000 Mettler Toledo 19,650 Laboratory Products 613,000 Thermoquest 10,268 $ 1,500,000 Thermoquest, 5% Note Due 8/15/00 1,534 Mass Spectrometry & Chromatography 282,000 Dionex 9,288 Ion & Liquid Chromatography $ 5,000,000 Thermo Optek, 5% Note Due 10/15/00 5,350 265,000 Thermo Optek 3,942 Elemental & Molecular Spectroscopy 266,000 Onix Systems 2,377 Field Measurement & Sensor Equipment 232,000 Metrika Systems 2,074 Gamma Ray Instrumentation - -------------------------------------------------------------------------------- 80,578 Software/Services >BUSINESS SOFTWARE: 1.5% 1,075,000 Systems & Computer Technology 25,128 Enterprise Software & Services 876,000 JDA Software Group 12,811 Applications/Software & Services for Retailers 280,000 Hyperion Solutions 9,100 Analytical Application Software 16 Principal Amount or Number of Shares Value (000) - -------------------------------------------------------------------------------- 300,000 MAPICS $ 4,781 Mid Market ERP Systems 556,000 Indus International 4,656 Enterprise Asset Management Software 100,000 Entra Data (Sweden) 3,067 Business Software - -------------------------------------------------------------------------------- 59,543 >CONSUMER SOFTWARE: 0.4% $ 6,500,000 Activision, 6.75% Note Due 1/1/05 5,655 300,000 Activision 3,619 Entertainment Software 312,000 THQ 5,577 Entertainment Software 183,000 3DO Company 1,773 Entertainment Software - -------------------------------------------------------------------------------- 16,624 >COMPUTER SERVICES: 4.8% 1,000,000 WM Data Nordic (Sweden) 54,398 Computer Services/Consulting 230,000 Atos (France) 29,712 Computer Services/Transaction Processing 400,000 American Management Systems 17,525 Software Development Services 850,000 Sykes Enterprises 16,203 Call Center Services 171,084 Getronics (Netherlands) 13,080 Computer Services/Consulting 925,000 RCM Technologies 11,563 Technology Staffing Services 1,210,000 Aztec Technology Partners 9,642 Application Development & Maintenance Services 1,000,000 Dimension Data (South Africa) 8,908 Networks & Computer Services 790,000 Computer Task Group 8,690 Application Development & Staffing Services 400,000 Pomeroy Computer Resources 7,350 Network Integration Services 500,000 Cambridge Technology 6,781 Software Implementation Services 765,000 TeleSpectrum Worldwide 5,355 Call & Web Center Services 109,000 Meta Group 2,841 IT Publications & Consulting Services 214,000 Analysts International 2,113 Technology Staffing Services - -------------------------------------------------------------------------------- 194,161 >BUSINESS INFORMATION/ MARKETING SERVICES/PUBLISHING: 3.9% 1,100,000 PRIMEDIA 35,200 Specialty Magazines & Other Publications 800,000 Getty Images 28,750 Photographs for Publications & Electronic Media 2,400,000 InfoUSA 21,900 Business Data for Sales Leads Number of Shares Value (000) - -------------------------------------------------------------------------------- 356,000 Choicepoint $ 13,305 Fraud Protection Information 400,000 Information Holdings 12,525 Scientific & Medical Publications, Patent Information 350,000 Acxiom 11,637 Database Marketing Services 445,000 West Teleservices 11,459 Customer Care & Sales Support 900,000 Navigant Consulting 9,900 Consulting Firm 200,000 Bell & Howell 6,250 Information Services for Education & Automotive Markets 5,000 Bellsystem24 (Japan) 4,241 Call Centers - -------------------------------------------------------------------------------- 155,167 >INTERNET: 4.1% 132,000 Softbank (Japan) 117,759 Leading Internet Company in Japan 147,000 MasTec 13,083 Telecom Infrastructure Construction 496,000 Online Resources 8,525 Internet Banking Technology 197,725 Internet Commerce 8,502 E-Commerce Service Network 100,000 RSA Security 5,181 Enterprise Security Software 2,683 Bigfoot International 4,024 263,158 Bigfoot International, Series A 2,500 Internet Direct Marketing 303,376 NeoPlanet, Series A 2,641 Web Browser 61,000 Navidec 946 Internet Computer Services 47,855 GIGA 526 29,714 GIGA Warrants 32 Data on Information Technology - -------------------------------------------------------------------------------- 163,719 >ELECTRONICS DISTRIBUTION: 0.6% 890,000 Pioneer-Standard Electronics 14,018 Component & Computer Distribution 300,000 Kent Electronics 8,756 Component Distribution & Contract Assembly - -------------------------------------------------------------------------------- 22,774 >TRANSACTION PROCESSORS: 1.9% 1,812,000 National Data 47,112 Credit Card & Health Claims Processor 1,211,000 Concord EFS 27,777 Credit Card Processor - -------------------------------------------------------------------------------- 74,889 --------- INFORMATION: TOTAL 1,348,306 17 Acorn Fund >Statement of Investments, continued Number of Shares Value (000) - -------------------------------------------------------------------------------- Health Care: 7.8% >BIOTECHNOLOGY/DRUG DELIVERY: 4.3% 405,000 Inhale Therapeutic Systems $ 30,172 Pulmonary Drug Delivery 425,000 Myriad Genetics 25,606 Gene Discovery & Diagnostic Products 266,000 Protein Design Labs 21,147 Computer Designed Monoclonal Antibodies 342,000 CuraGen 15,988 Gene Based Drug Development 1,358,000 Corvas International 14,938 Rational Drug Design 130,000 Incyte Pharmaceutical 11,367 Gene Sequencing 823,000 Microcide Pharmaceuticals 10,699 Antibiotics 7,628,845 Nadro, Series L (Mexico) 9,042 Pharmaceutical Distributor 380,000 Genome Therapeutics 8,954 Gene Discovery Services 316,000 Guilford Pharmaceuticals 7,347 Drug Delivery & Neurology Drugs 476,000 NPS Pharmaceuticals 7,170 Small Molecule Drugs 707,000 Synaptic Pharmaceuticals 5,126 Receptor Targeted Drug Design 325,000 Genzyme Molecular Oncology Division 4,916 Gene Expression Technology & Cancer Drugs - -------------------------------------------------------------------------------- 172,472 >MEDICAL EQUIPMENT: 0.3% 407,000 Orthofix International 7,123 Bone Fixation & Stimulation Devices 443,000 Acuson 6,562 Ultrasound Devices - -------------------------------------------------------------------------------- 13,685 >HOSPITAL/LABORATORY SUPPLIES: 0.1% 27,000 Techne 1,863 Cytokines, Antibodies, Other Reagents for Life Sciences >SERVICES: 3.1% 1,952,000 First Health Group 61,732 PPO Network 2,000,000 Lincare Holdings 56,750 Home Health Care Services 1,280,000 Magellan Health Services 6,160 Mental Health Services - -------------------------------------------------------------------------------- 124,642 ------- HEALTH CARE: TOTAL 312,662 Number of Shares Value (000) - -------------------------------------------------------------------------------- Consumer Goods/Services: 12.8% Goods >LEISURE VEHICLES: 2.2% 900,000 Harley-Davidson $ 71,437 Motorcycles & Related Merchandise 341,000 Thor Industries 8,291 RV's & Busses 2,400,000 Ducati Motor (Italy) 6,534 Motorcycles & Related Merchandise 110,000 National RV Holdings 1,739 Recreational Vehicles - -------------------------------------------------------------------------------- 88,001 >FURNITURE: 0.5% 660,000 Herman Miller 18,480 Office Furniture 130,000 Hon Industries 3,347 Office Furniture & Fireplaces - -------------------------------------------------------------------------------- 21,827 >BEVERAGES: 0.1% 23,000 Binding Brauerei (Germany) 3,962 Brewery >NONDURABLES: 0.3% 1,190,000 Helen of Troy 8,181 Personal Care Products 401,000 First Years 2,782 Infant & Toddler Products - -------------------------------------------------------------------------------- 10,963 >DURABLE GOODS: 0.2% 312,439 Hunter Douglas (Netherlands) 7,983 Decorative Window Coverings >TEXTILES/APPAREL: 1.1% 900,000 Jones Apparel 28,687 Women's Apparel 750,000 Nautica Enterprises 8,813 Men's Casual Apparel 600,000 Unifi 5,363 Polyester & Nylon Fabrics 85,000 Gildan Activewear 2,773 Cotton T-Shirts - -------------------------------------------------------------------------------- 45,636 18 Number of Shares Value (000) - -------------------------------------------------------------------------------- Services >RETAIL: 2.6% 1,700,000 Borders Group $ 29,219 Bookstores 400,000 Whole Foods Market 16,575 Natural Food Supermarkets 750,000 Gadzooks 16,266 Teen Apparel Retailer 1,100,000 N. Brown Group (United Kingdom) 12,442 Mail Order Clothing in Large Sizes 1,200,000 Pier 1 Imports 12,300 Imported Furniture & Tchotchkes 325,000 Quiksilver 5,708 Gen Y Clothing 200,000 Calloway Golf 3,100 Premium Golf Clubs & Balls 400,000 Panera Bread 3,000 Bakery & Deli Restaurants 160,000 Gaiam 2,800 Healthy Living Catalog & E-Commerce 156,000 MotherNature.com 492 Healthy Living E-Commerce - ------------------------------------------------------------------------------- 101,902 >TRAVEL: 0.0% 200,000 Fairfield Communities 1,587 Time-Sharing Vacation Resorts >CONSUMER SERVICES: 1.7% 1,540,000 Bally Total Fitness 37,730 National Chain of Fitness Centers 1,000,000 ITT Educational Services 16,000 Technology Oriented Postsecondary Degree Programs 1,330,000 Airtours (United Kingdom) 7,145 Packaged Tour Vacations 270,000 Steiner Leisure 5,198 Spas & Hair/Skin Products on Cruise Ships 234,000 Education Management 3,379 Postsecondary Education - ------------------------------------------------------------------------------- 69,452 >CASINOS: 1.4% 1,500,000 Station Casinos 32,719 Casinos & Riverboats 934,000 Isle of Capri Casino 11,675 Five Casinos in Secondary Markets 360,000 Pinnacle Entertainment 7,313 Casinos in Secondary Markets & Card Clubs 535,000 Monarch Casino & Resort 1,873 Casino/Hotel in Reno 113,000 Lakes Gaming 897 Hotel & Casino in Biloxi & Gulfport - -------------------------------------------------------------------------------- 54,477 Number of Shares Value (000) - -------------------------------------------------------------------------------- >CRUISE LINES: 2.7% 8,130,000 Star Cruises (Singapore) $ 71,138 Cruising/Casino Operations 1,500,000 Carnival 37,219 Largest Cruise Line 410,000 Royal Olympic Cruise 1,128 Cruises in Mediterranean - -------------------------------------------------------------------------------- 109,485 --------- CONSUMER GOODS/SERVICES: TOTAL 515,275 - -------------------------------------------------------------------------------- Finance: 12.8% >BANKS: 1.6% 974,000 TCF Financial 23,193 Great Lakes Bank 730,000 Texas Regional Bancshares 18,569 TexMex Bank 414,000 Chittenden 12,291 Vermont & West Massachusetts Bank 198,000 CCB Financial 8,761 North Carolina Bank 400,000 Eldorado Bancshares 3,200 California Bank - -------------------------------------------------------------------------------- 66,014 >SAVINGS & LOANS: 1.2% 1,757,000 Peoples Bank Bridgeport 36,787 Connecticut Savings & Loan 824,000 Commonwealth Bancorp 10,454 Philadelphia Savings & Loan - -------------------------------------------------------------------------------- 47,241 >INSURANCE: 2.6% 765,000 Protective Life 24,289 Life/Dental Insurance 100,000 Markel 14,550 22,627 Markel CVR 136 Specialty Insurance 511,000 Leucadia National 12,136 Insurance Holding Company 820,000 HCC Insurance Holdings 10,865 Aviation Insurance 300,000 RLI 10,050 Specialty Insurance 675,000 Philadelphia Consolidated Holding 9,956 Specialty Insurance 154,308 ASR Verzekeringsgroep (Netherlands) 8,077 Auto/Life Insurance 210,000 StanCorp Financial 5,749 Group Life, Disability & 401K 863,000 UICI 5,717 Insurance/Specialty Insurance 266,000 United Fire & Casualty 5,121 Property & Casualty - -------------------------------------------------------------------------------- 106,646 19 Acorn Fund >Statement of Investments, continued Number of Shares Value (000) - ------------------------------------------------------------------------------- >MONEY MANAGEMENT: 4.7% 614,000 SEI Investments $ 69,651 Mutual Fund Administration 3,069,000 Phoenix Investment Partners 23,785 Mutual Fund & Pension Manager 1,500,000 Banca Fideuram (Italy) 21,932 Life Insurance & Mutual Funds 742,000 Neuberger Berman 20,915 Major Asset Management Company 730,000 Pioneer Group 16,973 Equity Mutual Funds 350,000 Affiliated Managers Group 16,625 Mutual Fund & Pension Manager 1,250,000 Edinburgh Fund Managers (United Kingdom) 13,161 Investment Management 240,000 Baker Fentress 2,895 Closed-End Investment Company 200,000 The Investment Company of China (China) 1,272 Closed-End Fund - ------------------------------------------------------------------------------- 187,209 >FINANCE COMPANIES: 2.7% 3,912,000 AmeriCredit 63,814 Auto Lending 1,000,000 Ace Cash Express 17,125 Check Cashing Stores 750,000 DVI Health Services 10,687 Leases for Big Medical Equipment 1,820,000 World Acceptance 9,214 Personal Loans 1,375,000 Capital Trust 5,500 Mortgage Loans 700,000 Creditrust 2,100 Buys Defaulted Credit Card Paper - ------------------------------------------------------------------------------- 108,440 -------- FINANCE: TOTAL 515,550 - ------------------------------------------------------------------------------- Industrial Goods/Services: 7.7% >STEEL: 0.6% 820,000 Gibraltar Steel 13,479 Steel Processing 650,000 AK Steel 6,744 Carbon & Stainless Steel Producer 420,000 Atchison Casting 2,914 Steel Foundries 95,000 A M Castle 1,187 Steel Distribution - ------------------------------------------------------------------------------- 24,324 >INDUSTRIAL GOODS: 0.9% 1,108,000 Clarcor 19,667 Engines, Mobile & Environmental Filtration 553,000 Applied Industrial Technologies 8,848 Industrial Components Distribution 350,000 Advanced Lighting Technologies 6,562 Metal Halide Lighting - ------------------------------------------------------------------------------- 35,077 >SPECIALTY CHEMICALS & INDUSTRIAL MATERIALS: 1.2% 346,111 SYMEX $ 14,329 Combinatorial Materials 1,145,000 Lilly Industries, Cl. A 14,169 Industrial Coatings 245,000 Spartech 8,422 Plastics Distribution & Compounding 732,000 RPM 8,052 Specialty Coatings & Paint 139,000 Brunswick Technologies 730 Fiberglass Fabric for Composites - ------------------------------------------------------------------------------- 45,702 >OUTSOURCING SERVICES & TRAINING: 0.7% 2,500,000 Labor Ready 24,688 Temporary Manual Labor 600,000 GP Strategies 2,475 Training Programs 500,000 International Total Services 828 Aviation Services - ------------------------------------------------------------------------------- 27,991 >LOGISTICS: 2.2% 1,400,000 Expeditors International of Washington 55,650 International Freight Forwarder 759,000 Hub Group 11,575 Truck & Rail Freight Forwarder 300,000 C H Robinson 11,175 Truck Freight Forwarder 300,000 Forward Air 7,106 Freight Transportation Between Airports 860,000 AirNet Systems 4,192 Check & Other Small Package Shipment - ------------------------------------------------------------------------------- 89,698 >OTHER INDUSTRIAL SERVICES: 2.1% 1,200,000 Serco Group (United Kingdom) 52,166 Facilities Management 1,526,000 Wackenhut, Cl. B 15,355 31,000 Wackenhut, Cl. A 432 Prison Management 520,000 Mobile Mini 10,140 Leases Portable Storage Units 1,000,000 Aeroporti di Roma (Italy) 6,603 Airport Management - ------------------------------------------------------------------------------- 84,696 -------- INDUSTRIAL GOODS/SERVICES: TOTAL 307,488 20 Number of Shares Value (000) - --------------------------------------------------------------------------- Energy/Minerals: 7.8% >INDEPENDENT POWER:0.9% 450,000 AES Corporation $ 35,437 1,852 AES Corporation Warrants 258 Global Electric Producer - --------------------------------------------------------------------------- 5,695 >OIL/GAS PRODUCERS: 3.3% 600,000 Devon Energy 29,137 Oil & Gas Producer 730,000 Precision Drilling (Canada) 24,412 Oil & Gas Well Driller 2,100,000 Tesoro Petroleum 24,150 Oil Refinery/Gas Producer 1,715,000 Cross Timbers Oil 22,402 Oil & Gas Producer 310,000 Evergreen Resources 7,498 Oil & Gas Producer 450,000 Pennaco Energy 6,159 Coal Seam Gas Producer 240,000 Penn West Petroleum 5,836 Oil & Gas Producer 380,000 Basin Exploration 5,676 Oil & Gas Producer 800,000 Tipperary 2,900 Coal Seam Gas Producer 550,000 Ulster Petroleums (Canada) 2,746 Oil & Gas Producer 95,000 Canadian Natural Resources (Canada) 2,513 Oil & Gas Producer - --------------------------------------------------------------------------- 133,429 >DISTRIBUTION/MARKETING/REFINING: 2.5% 828,000 Dynegy 51,957 Natural Gas & Electric Processing, Production & Marketing 900,000 Equitable Resources 40,331 Natural Gas Utility & Producer 600,000 Atmos Energy 9,825 Natural Gas Utility - --------------------------------------------------------------------------- 102,113 >MINING: 0.2% 500,000 US Aggregates 7,188 Aggregates, Ready Mix & Asphalt >OIL SERVICES: 0.9% 2,000,000 Newpark Resources 16,000 Oilfield Fluid Management & Equipment Rental 2,250,000 Saipem (Italy) 10,980 Offshore Construction 160,000 Hanover Compressor 9,100 Natural Gas Compressor Rental - --------------------------------------------------------------------------- 36,080 -------- ENERGY/MINERALS: TOTAL 314,505 - --------------------------------------------------------------------------- Other Industries : 6.9% >REAL ESTATE: 5.6% 968,000 The Rouse Company 20,449 Regional Shopping Malls 1,145,000 Cornerstone Properties 19,966 Downtown Office Buildings 675,000 First Industrial Realty Trust 18,394 Industrial Properties 903,125 Security Capital European Realty 18,063 Strategic Real Estate Investments 730,000 SL Green Realty 17,338 Downtown Office Buildings 700,000 Manufactured Home Communities 16,188 Manufactured Home Communities 466,000 Forest City Enterprises, Cl. B 15,844 Shopping Malls 1,099,000 LaSalle Hotel Properties 13,737 Upscale/Full Service Hotels 625,000 Macerich Company 12,891 Regional Shopping Malls 412,000 IRSA (Argentina) 12,875 Real Estate Management & Development 450,000 BRE Properties 11,616 Apartments 490,000 Amli Residential 10,045 Midwestern Apartments 520,000 Summit Properties 9,945 Southeastern Apartments 1,000,000 HRPT Properties 8,687 Suburban Office Buildings 385,000 First Washington Realty Trust 7,147 240,000 First Washington Realty Trust, Cv. Pfd. 5,895 Community Shopping Centers 200,000 General Growth Properties 6,087 Shopping Malls REIT 190,000 Consolidated Tomoka 2,102 16,000 Acres of Florida Land - --------------------------------------------------------------------------- 227,269 >WASTE MANAGEMENT: 0.2% 327,000 Stericycle 8,175 Medical Waste Disposal >REGULATED UTILITIES: 1.1% 600,000 Conectiv 10,500 Electric Utility in New Jersey, Delaware & Maryland 665,000 Unisource Energy 9,767 Electric Utility in Arizona 1,300,000 Azurix 9,750 Water Utility Holding Company 500,000 Utilicorp United 9,031 Global Utility Holding Company 130,000 CH Energy 3,949 Electric Utility in New York - --------------------------------------------------------------------------- 42,997 21 Acorn Fund >Statement of Investments, continued Value (000) ------------------------------------------------------------------------- OTHER INDUSTRIES: TOTAL $ 278,441 OTHER SECURITIES: 0.0% 19 ---------- TOTAL COMMON STOCKS AND OTHER EQUITY-LIKE SECURITIES: 89.4% 3,592,246 SHORT-TERM OBLIGATIONS: 10.1% 407,447 ---------- TOTAL INVESTMENTS: 99.5% 3,999,693 CASH AND OTHER ASSETS LESS LIABILITIES: 0.5% 21,270 ---------- TOTAL NET ASSETS: 100% $4,020,963 ========================================================================= >Squirrel Chatter (continued from page 3) on balance was neutral. Stockbrokers, pejoratively called "stock-jobbers", were considered dishonest, foreign and an unpleasantly novel element in English society. Not surprisingly, the collapse of 1720 made their reputation even worse. Venture capital dried up after the fall due to distrust of any speculative venture, as well as IPOs being illegal thanks to the Bubble Act. The lack of new capital may have set back the onset of the Industrial Revolution by a few years, but factories and railroads showed up eventually. Great Britain continued on its path to top-nation status for the next 150 years. Sir Isaac Newton's scientific fame was not diminished by his South Sea loss. /s/ Ralph Wanger Ralph Wanger Chief Investment Officer, Wanger Asset Management Lead Portfolio Manager, Acorn Fund Downwind From Technology High-tech companies of the early 1700s included the British East India Company, which had a trade monopoly with India, and a similarly named Dutch company trading exclusively in present-day Indonesia. These companies capitalized on a technological advantage of the time: naval superiority. Using this technology, the founders of the South Sea Company figured they could also profit from the overseas trading boom by incorporating a company to trade with Spanish America. Unfortunately, their business plan was seriously flawed. No one at the South Sea Company knew anything about America or trading, and Spanish authorities had no intention of letting Englishmen in on their trade monopoly. Only a few shiploads of English merchandise were sent to America and these items lost money. A stronger effort was made in the slave trade, with 45 shiploads of Africans carried between 1716 and 1718. This horrid scheme failed for a more horrid reason - too many slaves died in transit./4/ - -------------------------------------------------------------------------------- /1/ Wall Street Journal, April 14, 2000. None of our funds bought any of the stock at any time. /2/ This method was also enormously difficult to unravel after the fall. /3/ Most trading of the time was conducted in a coffeehouse that often saw a difference in stock price from one end of the room to the other. Because of this, it is difficult to nail down what the South Sea Company stock's high mark was but it is believed to have never traded above 1,000. /4/ The main source for this essay is John Carswell's The South Sea Bubble, 1993 revised edition, Alan Sutton, Dover, NH, 1993. 22 Acorn International >Major Portfolio Changes in the First Quarter Number of Shares -------------------- 12/31/99 3/31/00 Additions - ---------------------------------------------------------------- Europe >GERMANY Austria Technologies & Systemtechnik 0 100,000 Dialog Semiconductor 100,000 160,000 Fresenius, Pfd. 50,000 60,000 IFCO Systems 0 100,000 MobilCom 0 110,000 Pfeiffer Vacuum Technologies 150,000 200,000 Takkt 0 300,000 Telesens 0 115,000 >DENMARK ISS International Service Systems 0 125,000 >NORWAY Enitel 160,000 200,000 >SWEDEN Micronic Laser Systems 0 285,000 Modern Times Group 400,000 500,000 SwitchCore 0 75,000 Utfors 0 125,000 >FRANCE/BELGIUM Audiofina (Belgium) 0 185,000 Genset 0 250,000 Imerys 0 25,000 Telinfo (Belgium) 0 100,000 Ubizen (Belgium) 0 15,000 >UNITED KINGDOM/IRELAND Chloride Group 3,206,400 6,000,000 Expro International 0 1,000,000 Fairey Group 715,000 1,200,000 FKI 128,000 3,500,000 Hays 0 3,000,000 Incepta 0 5,000,000 Irish Life & Permanent (Ireland) 750,000 1,800,000 MG 0 1,600,000 NTL 450,000 580,000 (includes effect of 5 for 4 stock split) Oxford Asymmetry 0 1,130,000 Photobition Group 2,125,000 2,500,000 Rotork 1,700,000 2,000,000 SkyePharma 0 6,000,000 Smith & Nephew 3,000,000 3,500,000 SSL International 1,500,000 1,800,000 St James Capital 2,840,000 3,800,000 Taylor Nelson 3,500,000 5,000,000 Number of Shares -------------------- 12/31/99 3/31/00 >SWITZERLAND Bachem 5,000 7,000 Cie Fin Richemont 10,000 14,000 Julius Baer 1,600 6,000 Selecta Group 80,000 100,000 >ITALY Autogrill 3,000,000 3,750,000 Gruppo Coin 650,000 897,000 Saipem 1,250,000 2,000,000 >SPAIN Aguas de Barcelona 400,000 500,000 Cortefiel 450,000 500,000 Prosegur 650,000 750,000 Red Electrica 0 1,200,000 TPI 0 300,000 >NETHERLANDS ASR Verzekeringsgroep 0 95,000 Kempen 420,000 450,000 - ---------------------------------------------------------------- Asia >HONG KONG E-New Media 0 40,000,000 TVB 3,500,000 3,650,000 >JAPAN Avex 0 100,000 Bellsystem24 15,000 35,000 Benesse 40,000 100,000 Bodysonic 0 600,000 Densei Lambda 300,000 400,000 Fast Retailing 0 50,000 Future System 0 15 Hirose Electric 0 80,000 Konami 0 190,000 Misumi 75,000 110,000 (includes effect of 11 for 10 stock split) Nichii Gakkan 0 45,000 Orix 175,000 275,000 (includes effect of 6 for 5 stock split) Otsuka Kagu 40,000 55,000 Pasona Softbank 0 20,000 Ryohin Keikaku 180,000 200,000 Shobunsha 0 150,000 Stella Chemifa 0 55,000 Wilson Learning 24,400 165,000 >TAIWAN Advantech 0 2,000,000 Cosmo Electronics 0 750,000 Phoenixtec Power 4,000,000 6,000,000 Systex 3,000,000 3,500,000 23 Acorn International >Major Portfolio Changes in the First Quarter Number of Shares --------------------- 12/31/99 3/31/00 >SOUTH KOREA Cheil Jedang 100,000 150,000 (includes effect of a 20% stock dividend) Korea Technology Investments 1,000,000 2,500,000 S1 Corporation 1,000,000 1,200,000 (includes effect of a 4.1% stock dividend) Samsung 0 1,000,000 SK Corporation 0 400,000 - -------------------------------------------------------------------- Latin America >MEXICO Grupo Carso 0 1,500,000 Wal-Mart de Mexico 5,450,000 5,500,000 (formerly known as Cifra SA) >BRAZIL Embratel 750,000 800,000 - -------------------------------------------------------------------- Other Countries >AUSTRALIA Computershare 4,500,000 5,000,000 ERG 7,500,000 8,000,000 KeyCorp 2,000,000 2,500,000 >CANADA ATI Technologies 0 1,500,000 Clearnet Communications 0 150,000 Corus Entertainment 500,000 850,000 Creo Products 0 275,000 Mosaic 110,000 850,000 Power Financial 750,000 1,000,000 >ISRAEL Comverse Technology 0 85,000 DSP Group 0 250,000 (includes effect of 2 for 1 stock split) Gilat Satellite Network 170,000 200,000 Radware 75,000 100,000 >SOUTH AFRICA Dimension Data 6,000,000 6,500,000 >UNITED STATES Carnival 0 500,000 Global TeleSystems 475,000 750,000 24 Number of Shares --------------------------- 12/31/99 3/31/00 Sales - ---------------------------------------------------------------------- Europe >GERMANY/AUSTRIA Pixelpark 28,000 0 UnitedGlobalCom (Austria) 250,000 0 >FINLAND Helsinki Telephone 120,000 100,000 TietoEnator 1,200,000 1,000,000 >SWEDEN Information Highway 160,000 1,500,000 (includes effect of 10 for 1 stock split) Sigma 1,085,000 1,000,000 WM Data Nordic 950,000 850,000 >FRANCE Atos 375,000 250,000 NRJ 62,000 50,000 >UNITED KINGDOM/IRELAND Baltimore Technologies 500,000 250,000 Bodycote 2,250,000 0 Esat Telecom (Ireland) 150,000 0 Euro Money Publications 500,000 400,000 Exel 3,500,000 0 (formerly known as NFC) Flextech 500,000 0 HALMA 3,400,000 0 Hogg Robinson 1,500,000 0 ITNET 1,350,000 1,000,000 Logica 500,000 0 Ocean Group 290,000 0 >SWITZERLAND Societe Generale d'Affichage 5,000 0 Phoenix Mecano 30,000 10,000 >ITALY Class Editori 1,500,000 750,000 Editoriale L'Espresso 6,000,000 3,000,000 SEAT Pagine Gialle 4,000,000 0 >SPAIN Mapfre Vida 400,000 0 >NETHERLANDS Fox Kids Europe 65,000 0 Versatel 27,000 0 >HUNGARY Gedeon Richter 100,000 0 - ---------------------------------------------------------------------- Asia >HONG KONG SmarTone Telecom 3,000,000 0 Li & Fung 30,000,000 26,000,000 >INDIA Zurich India Quantum 1,998,000 0 >JAPAN Aiful 50,000 0 C Two-Network 35,000 0 Fuji Software 180,000 0 JAFCO 130,000 75,000 Kokuyo 400,000 0 Nichiei 175,000 0 Nidec 75,000 0 Nintendo 160,000 155,000 Taiyo Ink 77,000 0 Trans Cosmos 85,000 65,000 Yamaha 800,000 0 >PHILIPPINES Int'l Container Terminal Services 36,918,000 0 >SINGAPORE Datacraft Asia 8,000,000 6,000,000 Natsteel Electronics 7,500,000 5,500,000 Venture Manufacturing 6,500,000 6,000,000 - ---------------------------------------------------------------------- Latin America >MEXICO Grupo Continental 5,000,000 0 >BRAZIL TeleSudeste Celular 340,000 0 >ARGENTINA El Sitio 30,000 0 >PERU Enrique Ferreyros 7,000,000 0 - ---------------------------------------------------------------------- Other Countries >AUSTRALIA AAPT 5,000,000 4,500,000 >CANADA Celestica 1,200,000 1,000,000 LGS Group 600,000 0 Leitch Technology 400,000 0 >ISRAEL ECI Telecom 350,000 0 Galileo Technology 650,000 0 >UNITED STATES AES Corporation 300,000 0 Azurix 500,000 0 25 Acorn International >Statement of Investments (Unaudited) March 31, 2000 Number of Shares Value (000) - ----------------------------------------------------------- Common Stocks and Other Equity-Like Securities: 94.4% - ----------------------------------------------------------- Europe: 46.4% >GERMANY/AUSTRIA: 4.1% 600,000 Rhoen Klinikum Pfd. $ 27,157 500,000 Rhoen Klinikum 20,095 Hospital Management 240,000 EM.TV & Merchandising 19,704 Children's Media Production, Merchandising & Distribution 110,000 MobilCom 15,684 Telecommunication Services 60,000 Fresenius, Pfd. 13,320 Dialysis Equipment & Solutions 160,000 Dialog Semiconductor 12,555 Custom Semiconductors for Cell Phones 200,000 Pfeiffer Vacuum Technologies 7,808 Vacuum Pump Manufacturer 100,000 Austria Technologies & Systemtechnik 6,698 Printed Circuit Board Manufacturer 165,000 Flughafen Wien (Austria) 6,126 Vienna Airport Authority 115,000 Telesens 4,952 Telecommunications Billing Software 300,000 Takkt 2,842 Mail Order Retailer of Office & Warehouse Durables 100,000 IFCO Systems 2,368 Shipping Container Leasing/Logistics - ----------------------------------------------------------- 139,309 >DENMARK: 0.2% 125,000 ISS International Service Systems 8,194 Cleaning Services >FINLAND: 3.5% 1,000,000 TietoEnator 59,998 Computer Services/Consulting 1,500,000 Talentum 33,013 Trade Journals & Internet Services 100,000 Helsinki Telephone 9,665 Telecommunications Provider 100,000 F-Secure 7,169 Security Software 625,000 Fiskars, Series A 6,280 Scissors & Gardening Tools 95,400 Spar Finland 3,403 Grocery/Convenience Stores - ----------------------------------------------------------- 119,528 >NORWAY: 0.3% 200,000 Enitel 8,887 Telecommunications Provider >SWEDEN: 4.3% 850,000 WM Data Nordic 46,238 Computer Services/Consulting 1,000,000 Sigma 24,769 Technical Consulting 500,000 Modern Times Group $ 24,306 TV, Newspapers and Electronic Commerce 1,350,000 Mandator 23,438 Computer Services/Consulting 1,500,000 Information Highway 13,715 Internet Consulting 75,000 SwitchCore 5,599 Communication Semiconductors 285,000 Micronic Laser Systems 5,212 Video Display Manufacturing Equipment 125,000 Utfors 4,630 Scandinavian Alternative Telecom - ----------------------------------------------------------- 147,907 >FRANCE/BELGIUM: 4.3% 50,000 NRJ 37,080 Radio Network 250,000 Atos 32,295 Computer Services/Transaction Processing 185,000 Audiofina (Belgium) 22,748 TV & Radio Stations 50,000 Fininfo 15,645 Data Feeds for French Banks & Brokers 20,000 Penauille Polyservice 12,440 Industrial Cleaning/Airport Services 100,000 Telinfo (Belgium) 11,913 Network Integration Services 250,000 Genset 8,121 Gene Discovery, Pharmacogenomics, Gene Libraries 25,000 Imerys 3,045 Industrial Minerals Producer 15,000 Ubizen (Belgium) 2,698 Internet Security Services/Software - ----------------------------------------------------------- 145,985 >UNITED KINGDOM/IRELAND: 13.8% 2,000,000 Serco Group 86,944 Facilities Management 580,000 NTL 53,831 Voice, Video & Data Services Via Cable Networks 2,000,000 Capita Group 51,145 Outsourcing Services 250,000 Baltimore Technologies 34,299 Security Software 5,000,000 Taylor Nelson 22,055 Market Research Services 2,500,000 Photobition Group 20,938 Production of Graphics for Exhibits 3,000,000 Hays 19,634 Outsourcing Services 400,000 Euro Money Publications 19,144 Financial Publications 1,800,000 Irish Life & Permanent (Ireland) 16,363 Savings Products 1,800,000 SSL International 15,908 Medical & Footcare Products 26 Number of shares Value (000) - --------------------------------------------------------------------------- 3,800,000 St James Capital $ 15,398 Life Insurance 3,500,000 FKI 12,870 Autonomous Manufacturer 1,000,000 ITNET 12,563 Outsourcing Services 6,000,000 Chloride Group 11,869 Electrical Equipment Manufacturer/Retailer 6,000,000 SkyePharma 10,529 Drug Delivery 3,500,000 Smith & Nephew 10,092 Medical Equipment & Supplies 5,000,000 Incepta 9,572 Business Information & Marketing Services 2,000,000 Rotork 8,774 Valve Actuators for Oil & Water Pipelines 1,200,000 Fairey Group 8,375 Electronic Products 1,130,000 Oxford Asymmetry 7,842 Chemical Products & Services 1,000,000 Thus 7,474 Telecommunications Provider 1,600,000 MG 6,981 Metals Trading 1,000,000 Expro International 5,998 Offshore Oil Field Services - --------------------------------------------------------------------------- 468,598 >SWITZERLAND: 4.1% 14,000 Cie Fin Richemont 35,575 Luxury Goods 100,000 Selecta Group 33,199 Vending Machine Owner/Operator 6,000 Julius Baer 22,590 Private Banking, Brokerage & Mutual Funds 6,500 Sarasin & Cie Bank 17,983 Private Banking 7,000 Bachem 13,683 Peptides 15,000 Bon Appetit 12,621 Wholesale Food Distributor and Speciality Restaurant/Retailer 10,000 Phoenix Mecano 4,884 Electrical Components Manufacturer - --------------------------------------------------------------------------- 140,535 >ITALY: 6.4% 3,000,000 Editoriale L'Espresso 58,878 Newspaper & Magazine Publisher 4,000,000 Banca Fideuram 58,486 Life Insurance & Mutual Funds 3,750,000 Autogrill 34,807 Restaurants and Catering for Travelers 1,500,000 Mediolanum 26,511 Life Insurance & Mutual Funds 750,000 Class Editori 11,698 Newspapers & On-Line Financial Data 2,000,000 Saipem 9,760 Offshore Oil Services 1,400,000 Aeroporti di Roma $ 9,244 Airport Management 897,000 Gruppo Coin 9,236 Food & Clothing Retailer - --------------------------------------------------------------------------- 218,620 >SPAIN/PORTUGAL: 3.1% 425,000 Filmes Lusomundo (Portugal) 32,514 Newspapers, Radio, Video, Film Distribution 300,000 TPI 13,059 Spanish Telephone Directories 500,000 Indra Sistemas 12,009 Computer Services/Consulting 500,000 Cortefiel 11,842 Apparel Retailer 1,200,000 Red Electrica 11,804 Spanish Power Grid 750,000 Prosegur 9,035 Security Guards 100,000 PT Multimedia (Portugal) 8,899 Cable TV, Satellite Operator & Internet Service Provider 500,000 Aguas de Barcelona 7,870 Water Utility - --------------------------------------------------------------------------- 107,032 >NETHERLANDS: 1.9% 500,000 Getronics 38,228 Computer Services/Consulting 450,000 Kempen 20,454 Stock Brokerage/Investment Management 95,000 ASR Verzekeringsgroep 4,973 Auto/Life Insurance - --------------------------------------------------------------------------- 63,655 >HUNGARY: 0.4% 1,200,000 Matav 10,535 70,000 Matav ADR 3,124 Telecommunications Provider - --------------------------------------------------------------------------- 13,659 --------- EUROPE: TOTAL 1,581,909 - --------------------------------------------------------------------------- Asia: 28.7% >HONG KONG: 4.9% 26,000,000 Li & Fung 120,542 Sourcing of Consumer Goods 3,650,000 TVB 32,462 Television Broadcasting 40,000,000 E-New Media 12,971 Internet Billing Service - --------------------------------------------------------------------------- 165,975 >JAPAN: 10.4% 275,000 Orix 39,816 Finance Leasing 200,000 Ryohin Keikaku 36,270 Own Brand Specialty Retailer 27 Acorn International >Statement of Investments, continued Number of Shares Value (000) - --------------------------------------------------------------------------- 35,000 Bellsystem24 $ 29,688 Call Centers 155,000 Nintendo 27,278 Video Games 50,000 Fast Retailing 22,010 Apparel Retailer 30,000 OBIC 21,060 Computer Integrator 100,000 Avex 19,061 Music Content 65,000 Trans Cosmos 18,379 Information Technology Services & Investments 75,000 JAFCO 16,819 Venture Capital Fund 55,000 Otsuka Kagu 15,766 Furniture Retailer 600,000 Bodysonic 13,221 Media Content Provider 190,000 Konami 12,968 Video Game Software Developer 110,000 Misumi 12,334 Distributor of Capital Goods Components 80,000 Hirose Electric 11,302 Electrical Connectors 400,000 Densei Lambda 10,959 Power Supplies 165,000 Wilson Learning 10,457 Corporate Training 100,000 Benesse 10,432 Correspondence Education 150,000 Shobunsha 8,804 Map Publisher 45,000 Nichii Gakkan 6,107 Healthcare Personnel Outsourcing 15 Future Systems 5,338 IT Services 55,000 Stella Chemifa 4,724 Specialty Chemicals 20,000 Pasona Softbank 1,170 Temporary Employment - --------------------------------------------------------------------------- 353,963 >TAIWAN: 3.2% 3,500,000 Systex 33,815 Systems Integrator & Internet Services 3,000,000 Hitron Technology 27,506 Network Integration & Internet Services 2,000,000 Advantech 17,483 Computer Based Industrial Automation 6,000,000 Phoenixtec Power 13,802 Uninterruptable Power Supply Manufacturer 3,000,000 Chroma Ate 11,042 Test & Measurement Instruments 750,000 Cosmo Electronics 6,901 Relay & Opto-Coupler Manufacturer - --------------------------------------------------------------------------- 110,549 >MALAYSIA: 0.6% 2,000,000 Unisem $ 20,789 Semiconductor Assembly >SOUTH KOREA: 2.0% 1,200,000 S1 Corporation 18,349 Security Services 2,500,000 Korea Technology Investments 16,037 Venture Capital 1,000,000 Samsung 13,436 Trading Company 150,000 Cheil Jedang 9,866 Consumer Staples 400,000 SK Corporation 9,229 Oil Refining - --------------------------------------------------------------------------- 66,917 >SINGAPORE: 7.6% 9,500,000 Star Cruises 83,125 Cruise Line 6,000,000 Venture Manufacturing 82,432 Electronic Manufacturing Services 6,000,000 Datacraft Asia 56,100 Network Integrator 5,500,000 Natsteel Electronics 36,013 Electronic Manufacturing Services - --------------------------------------------------------------------------- 257,670 -------- ASIA: TOTAL 975,863 - --------------------------------------------------------------------------- Latin America: 3.0% >MEXICO: 2.1% 5,000,000 Corp Interamericana de Entretenimiento 25,186 Special Events & Live Entertainment 9,000,000 Grupo Industrial Bimbo 14,623 Bread, Baked Goods & Snacks 5,500,000 Wal-mart de Mexico 13,304 (formerly known as Cifra SA) Discount Stores 3,500,000 Kimberly Clark de Mexico 12,030 Paper Products 1,500,000 Grupo Carso 5,698 Conglomerate - --------------------------------------------------------------------------- 70,841 >BRAZIL 0.6% 800,000 Embratel 20,500 Long Distance Telecommunications Provider >ARGENTINA: 0.3% 400,000 IRSA GDS 12,500 Real Estate Management & Development ------- LATIN AMERICA: TOTAL 103,841 28 Number of Shares Value (000) - --------------------------------------------------------------------------- Other Countries: 16.3% >AUSTRALIA: 3.9% 8,000,000 ERG $ 55,116 Smart Card Systems for Public Transportation 4,500,000 AAPT 26,222 Telecommunications Provider 2,500,000 KeyCorp 25,722 Smart Card Technology 5,000,000 Computershare 23,703 Financial Software/Services - --------------------------------------------------------------------------- 130,763 >CANADA: 5.6% 1,000,000 Celestica 52,590 Electronic Manufacturing Services 1,500,000 ATI Technologies 26,605 Computer Graphics Chips & Boards 850,000 Corus Entertainment 22,248 CATV Programming & Radio Stations 720,000 Canadian Natural Resources 19,044 Oil & Gas Producer 1,000,000 Power Financial 14,809 Life Insurance & Mutual Funds 500,000 Penn West Petroleum 12,157 Oil & Gas Producer 275,000 Creo Products 11,997 Commercial Printing Machinery 850,000 Mosaic 11,417 Outsourcing Market Services 1,350,000 Bracknell 6,509 Electrical Contractor & Facilities Management 150,000 Clearnet Communications 6,199 Mobile Communications 500,000 Cinar 3,500 Children's TV Programming 4,000,000 Dundee Realty 2,893 Real Estate - --------------------------------------------------------------------------- 189,968 >ISRAEL: 3.6% 850,000 Amdocs 62,634 Telecommunications Billing & Customer Care Software 200,000 Gilat Satellite Network 23,450 Satellite Communications Equipment 250,000 DSP Group 16,500 DSP Based Semiconductors & Intellectual Property 85,000 Comverse Technology 16,065 Voicemail & Related Systems 100,000 Radware 3,875 Internet Infrastructure & Internet Traffic - --------------------------------------------------------------------------- 122,524 >SOUTH AFRICA: 1.7% 6,500,000 Dimension Data 57,899 Networks & Computer Services Principal Amount or Number of Shares Value (000) - --------------------------------------------------------------------------- >RUSSIA: 0.0% $1,500,000 Khanty Mansiysk 10% Notes Due 10/14/02 $ 750 4,085 Khanty Mansiysk 169 Oil Production in Russia - --------------------------------------------------------------------------- 919 >UNITED STATES: 1.5% 400,000 MIH 24,400 Pay-TV 750,000 Global TeleSystems 15,375 Telecommunications Provider 500,000 Carnival 12,406 Largest Cruise Line Operator - --------------------------------------------------------------------------- 52,181 ---------- OTHER: TOTAL 554,254 TOTAL COMMON STOCKS AND OTHER ---------- EQUITY-LIKE SECURITIES: 94.4% 3,215,867 SHORT-TERM OBLIGATIONS: 5.4% 184,099 ---------- TOTAL INVESTMENTS: 99.8% 3,399,966 CASH AND OTHER ASSETS LESS LIABILITIES: 0.2% 5,133 ---------- TOTAL NET ASSETS: 100% $3,405,099 =========================================================================== 29 Acorn International >Portfolio Diversification At March 31, 2000, the Fund's portfolio of investments as a percent of net assets was diversified as follows: Value (000) Percent - --------------------------------------------------------------------------- >INFORMATION Computer Services $ 316,432 9.3% Telephone Services 235,877 7.0 Publishing 211,848 6.2 Business Software 154,867 4.5 Contract Manufacturing 118,445 3.5 Transaction Processors 104,541 3.1 Business Information 90,676 2.7 Semiconductors 87,260 2.5 Telephone Equipment 67,021 2.0 Radio 63,958 1.9 Broadcasting 58,710 1.7 CATV 53,831 1.6 Instrumentation 48,741 1.4 Internet 26,489 0.8 Computer Hardware 25,671 0.8 Programming 19,704 0.6 Mobile Communications 19,420 0.5 Advertising 11,417 0.3 - -------------------------------------------------------------------------- 1,714,908 50.4 >HEALTH CARE Hospital Management 47,252 1.4 Pharmaceuticals 26,437 0.8 Medical Equipment 23,412 0.7 Biotechnology 15,963 0.4 Services 6,107 0.2 - -------------------------------------------------------------------------- 119,171 3.5 >CONSUMER GOODS/SERVICES Retail 112,049 3.3 Entertainment 110,736 3.3 Consumer Services 89,173 2.6 Travel 83,125 2.4 Restaurants 34,807 1.0 Consumer Software 27,278 0.8 Food 24,490 0.7 Nondurables 18,310 0.5 Cruise Lines 12,406 0.4 Consumer Goods Distribution 3,403 0.1 - -------------------------------------------------------------------------- 515,777 15.1 >FINANCE Money Management $ 101,034 3.0% Finance Companies 56,635 1.7 Insurance 51,542 1.5 Banks 40,573 1.1 Brokerage 27,435 0.8 - -------------------------------------------------------------------------- 277,219 8.1 >INDUSTRIAL GOODS/SERVICES Outsourcing Services 296,664 8.7 Electrical Components 93,334 2.7 Machinery Processing 29,453 0.9 Industrial Services 21,211 0.6 Conglomerates 19,133 0.6 Speciality Chemicals 18,407 0.5 Industrial Materials 3,045 0.1 - -------------------------------------------------------------------------- 481,247 14.1 >ENERGY/MINERALS Oil/Gas Producers 32,119 0.9 Oil Services 15,759 0.5 Oil Refining 9,229 0.3 - -------------------------------------------------------------------------- 57,107 1.7 >OTHER INDUSTRIES Regulated Utilities 19,675 0.5 Real Estate 15,393 0.5 Transportation 15,370 0.5 - -------------------------------------------------------------------------- 50,438 1.5 TOTAL COMMON STOCKS AND ---------------------- OTHER EQUITY-LIKE SECURITIES 3,215,867 94.4 SHORT-TERM OBLIGATIONS 184,099 5.4 ---------------------- TOTAL INVESTMENTS 3,399,966 99.8 CASH AND OTHER ASSETS LESS LIABILITIES 5,133 0.2 ---------------------- NET ASSETS $3,405,099 100% ========================================================================== 30 Acorn USA >Major Portfolio Changes in the First Quarter Number of Shares ------------------ 12/31/99 3/31/00 Additions - ------------------------------------------------------------------------ Information American Power Conversion 129,000 185,000 Cambridge Technologies 0 60,000 Classic Communications 37,100 65,000 Concord EFS 0 165,500 Diversinet 73,000 229,000 DSP Group 0 143,100 Ezenia 0 30,000 Getty Images 56,800 92,800 JDA Software 486,300 598,000 Kronos 0 35,000 MSI Holdings 0 350,000 Objective Systems 0 163,000 Online Resources 121,000 188,000 Perkin Elmer 0 65,000 Pomeroy Computer Resources 0 170,000 Project Software 119,000 132,000 RCM Technologies 0 173,000 RCN 207,800 272,800 Salem Communications 36,300 122,700 Sykes Enterprises 312,500 421,500 Tektronix 0 145,000 - ------------------------------------------------------------------------ Health Care Metabolex, Series F 0 363,636 - ------------------------------------------------------------------------ Consumer Goods/Services Gadzooks 375,000 395,000 ITT Educational Services 112,000 153,000 TeleSpectrum 122,500 507,000 - ------------------------------------------------------------------------ Energy/Minerals Conectiv 0 281,000 Newpark Resources 0 135,000 Number of Shares ------------------ 12/31/99 3/31/00 Sales - ------------------------------------------------------------------------ Information Activision 15,500 0 Applied Power 92,000 0 Aspect Communications 257,100 205,100 Aztec Technology Partners 820,000 635,000 CACI International 206,000 185,000 Computer Task Group 151,700 0 Galileo Technology 232,000 0 International Game Technology 146,000 0 Meta Group 16,700 0 National Data 298,300 268,300 Price Communications 131,400 106,400 TV Guide 68,000 21,000 - ------------------------------------------------------------------------ Health Care First Health 390,000 343,000 Lincare Holdings 341,400 315,400 - ------------------------------------------------------------------------ Finance Markel 13,800 2,100 (includes effect of merger with Terra Nova Bermuda) People's Bank Bridgeport 38,000 0 - ------------------------------------------------------------------------ Industrial Goods/Services Advanced Lighting Technologies 140,000 108,000 Atchison Casting 79,000 0 Labor Ready 210,000 150,000 - ------------------------------------------------------------------------ Energy/Minerals Atmos Energy 248,000 193,000 MidAmerican Energy 855,400 0 31 Acorn USA >Statement of Investments (Unaudited) March 31, 2000 Number of Shares Value (000) - ---------------------------------------------------------------------------- Common Stocks: 91.1% - ---------------------------------------------------------------------------- Information: 55.0% >BROADCASTING: 2.2% 209,100 Data Transmission Network $ 5,946 Data Services for Farmers 122,700 Salem Communications 1,465 Radio Stations for Religious Programming 39,500 Young Broadcasting 750 Television Stations - ---------------------------------------------------------------------------- 8,161 >TELEVISION PROGRAMMING: 0.3% 21,000 TV Guide 1,009 TV Program Guides & Programming >TELECOMMUNICATIONS/WIRELINE COMMUNICATIONS: 4.2% 272,800 RCN 14,697 Metro Market CLEC: Voice, Video & Internet Services 65,000 Classic Communications 1,024 Cable Television in Rural Areas - ---------------------------------------------------------------------------- 15,721 >MOBILE COMMUNICATIONS: 8.4% 186,000 Telephone and Data Systems 20,646 Cellular & Telephone Services 121,800 Comarco 4,156 Wireless Network Testing 229,000 Diversinet 4,094 Wireless PKI Security 106,400 Price Communications 2,447 Cellular Telephone Services - ---------------------------------------------------------------------------- 31,343 >TELECOMMUNICATIONS EQUIPMENT: 2.1% 205,100 Aspect Communications 7,602 Call Center Software 30,000 Ezenia 315 Multimedia Communications - ---------------------------------------------------------------------------- 7,917 >COMPUTER SERVICES: 5.1% 421,500 Sykes Enterprises 8,035 Call Center Services 635,000 Aztec Technology Partners 5,060 Technology Staffing Services 170,000 Pomeroy Computer Resources 3,124 Network Integration Services 173,000 RCM Technologies 2,162 Technology Staffing Services 60,000 Cambridge Technologies 814 Network Integration Services - ---------------------------------------------------------------------------- 19,195 >BUSINESS SOFTWARE: 5.0% 598,000 JDA Software 8,746 Applications/Software & Services for Retailers 132,000 Project Software 7,458 Enterprise Maintenance Software 163,000 Objective Systems 2,476 Telecom Network Management - ---------------------------------------------------------------------------- 18,680 Number of Shares Value (000) - ---------------------------------------------------------------------------- >TRANSACTION PROCESSORS: 2.9% 268,300 National Data $ 6,976 Credit Card & Health Claims Processor 165,500 Concord EFS 3,796 Credit Card Processor - --------------------------------------------------------------------------- 10,772 >INTERNET: 3.1% 350,000 MSI Holdings 6,484 Web Hosting 188,000 Online Resources 3,231 Internet Banking Technology 125,000 Navidec 1,937 Internet Computer Services - --------------------------------------------------------------------------- 11,652 >BUSINESS INFORMATION/ MARKETING SERVICES: 4.7% 185,000 CACI International 5,538 Technology Services for Government 169,000 PRIMEDIA 5,408 Specialty Magazines & Other Publications 130,000 West TeleServices 3,347 Customer Care & Sales Support 92,800 Getty Images 3,335 Photographs for Publications & Electronic Media - --------------------------------------------------------------------------- 17,628 >INSTRUMENTATION: 3.3% 145,000 Tektronix 8,120 Analytical Instruments 65,000 Perkin Elmer 4,322 Analytical Instruments for Biotech/Telecom - --------------------------------------------------------------------------- 12,442 >SEMICONDUCTORS/RELATED EQUIPMENT: 2.5% 143,100 DSP Group 9,445 Telecom Semiconductors >COMPUTER HARDWARE/ RELATED SYSTEMS: 11.2% 527,600 Micros Systems 33,206 Information Systems for Restaurants & Hotels 185,000 American Power Conversion 7,932 Uninterruptable Power Systems 35,000 Kronos 1,037 Labor Management Solutions - --------------------------------------------------------------------------- 42,175 -------- INFORMATION: TOTAL 206,140 - --------------------------------------------------------------------------- Health Care: 8.7% >BIOTECHNOLOGY/DRUG DELIVERY: 2.3% 33,100 Maxygen 2,158 Molecular Breeding 363,636 Metabolex, Series F 2,000 Drugs for Diabetes 26,700 Myriad Genetics 1,609 Gene Discovery & Diagnostic Products 32 Number of Shares Value (000) - ------------------------------------------------------------------ 44,900 Genome Therapeutics $ 1,058 Gene Discovery Services 26,000 Genset 845 Genomics 55,000 Genzyme Molecular Oncology Division 832 Gene Expression Technology & Cancer Drugs - ------------------------------------------------------------------ 8,502 >SERVICES: 6.4% 343,000 First Health Group 10,847 PPO Network 315,400 Lincare Holdings 8,949 Home Health Care Services 856,100 Magellan Health Services 4,120 Mental Health Services - ------------------------------------------------------------------ 23,916 -------- HEALTH CARE: TOTAL 32,418 - ------------------------------------------------------------------ Consumer Goods/Services: 5.2% >CONSUMER SERVICES: 2.2% 507,000 Telespectrum 3,549 Call Center Services 153,000 ITT Educational Services 2,448 Technology Oriented Postsecondary Degree Programs 157,600 NuSkin Enterprises 1,251 Personal Care/Herbal Products 43,000 Bally Total Fitness 1,053 Fitness Centers - ------------------------------------------------------------------ 8,301 >RETAIL: 3.0% 395,000 Gadzooks 8,567 Teen Apparel Retailer 58,500 Whole Foods Market 2,424 Natural Food Supermarkets - ------------------------------------------------------------------ 10,991 -------- CONSUMER GOODS/SERVICES: TOTAL 19,292 - ------------------------------------------------------------------ Finance: 8.3% >BANKS: 1.4% 93,500 Chittenden 2,776 Vermont & West Massachusetts Bank 59,000 TCF Financial 1,405 Great Lakes Bank 41,000 Texas Regional Bancshares 1,043 TexMex Bank - ------------------------------------------------------------------ 5,224 >FINANCE COMPANIES: 3.5% 613,500 AmeriCredit 10,008 Auto Lending 590,000 World Acceptance 2,987 Personal Loans - ------------------------------------------------------------------ 12,995 >MONEY MANAGEMENT: 0.6% 163,000 Phoenix Investment Partners $ 1,263 Mutual Fund & Pension Manager 36,800 Pioneer Group 856 Equity Mutual Funds - ------------------------------------------------------------------ 2,119 >INSURANCE: 2.8% 637,700 UICI 4,225 Insurance/Specialty Finance 332,100 Acceptance Insurance 1,806 Crop Insurance 93,000 Leucadia National 2,209 Insurance Holding Company 66,000 Protective Life 2,095 Life/Dental Insurance 2,100 Markel 306 2,108 Markel CVR 13 Specialty Insurance - ------------------------------------------------------------------ 10,654 -------- FINANCE: TOTAL 30,992 - ------------------------------------------------------------------ Industrial Goods/Services: 5.7% >INDUSTRIAL GOODS: 0.5% 108,000 Advanced Lighting Technologies 2,025 Metal Halide Lighting >SPECIALTY CHEMICALS: 0.7% 202,600 Lilly Industries, Cl. A 2,507 Industrial Coatings >OTHER INDUSTRIAL SERVICES: 4.5% 347,400 Insurance Auto Auctions 5,862 Auto Salvage Services 346,000 Hub Group 5,276 Truck & Rail Freight Forwarder 422,500 Wackenhut, Cl. B 4,251 Prison Management 150,000 Labor Ready 1,481 Temporary Manual Labor - ------------------------------------------------------------------ 16,870 -------- INDUSTRIAL GOODS/SERVICES: TOTAL 21,402 - ------------------------------------------------------------------ Energy/Minerals: 7.9% >INDEPENDENT POWER: 1.3% 281,000 Conectiv 4,917 Electric Utility >OIL SERVICES: 0.3% 135,000 Newpark Resources 1,080 Oilfield Fluid Management >OIL/GAS PRODUCERS: 1.4% 473,800 Tesoro Petroleum 5,449 Oil Refinery/Gas Reserves 33 Acorn USA >Statement of Investments, continued Number of Shares Value (000) - ------------------------------------------------------------------ >DISTRIBUTION/MARKETING/REFINING: 4.9% 181,700 Dynegy $ 11,402 Natural Gas & Electric Processing & Marketing 83,300 Equitable Resources 3,733 Natural Gas Utility & Producer 193,000 Atmos Energy 3,160 Natural Gas Utility - ------------------------------------------------------------------ 18,295 -------- ENERGY/MINERALS: TOTAL 29,741 - ------------------------------------------------------------------ Real Estate: 0.3% 47,000 The Rouse Company 993 Regional Shopping Malls -------- REAL ESTATE: TOTAL 993 -------- TOTAL COMMON STOCKS: 91.1% 340,978 SHORT-TERM OBLIGATIONS: 9.7% 36,475 -------- TOTAL INVESTMENTS: 100.8% 377,453 CASH AND OTHER ASSETS LESS LIABILITIES: (0.8%) (2,931) -------- TOTAL NET ASSETS: 100% $374,522 - ------------------------------------------------------------------ 34 Acorn Foreign Forty >Major Portfolio Changes in the First Quarter Number of Shares ---------------------- 12/31/99 3/31/00 Additions - -------------------------------------------------------------------------------- Europe >GERMANY Rhoen Klinikum 30,000 50,000 >FINLAND Comptel 21,200 33,000 >BELGIUM Audiofina 40,000 50,000 >UNITED KINGDOM/IRELAND Hays 120,000 600,000 (includes effect of a 2 for 1 stock split) Irish Life & Permanent 170,000 500,000 Peninsular & Oriental 0 500,000 SSL International 90,000 200,000 Thus 220,000 320,000 >SWITZERLAND Julius Baer Holding 0 1,000 >ITALY Editoriale L'Espresso 208,000 250,000 >NETHERLANDS ASR Verzekeringsgroep 0 78,900 Fox Kids Europe 5,000 165,000 Getronics 40,000 65,000 - -------------------------------------------------------------------------------- Asia >JAPAN Bellsystem24 0 5,000 Fast Retailing 0 10,000 Orix 0 24,000 (includes effect of a 6 for 5 stock split) >SINGAPORE Star Cruises 400,000 969,000 Venture Manufacturing 325,000 500,000 - -------------------------------------------------------------------------------- Other Countries >AUSTRALIA One.Tel Limited 0 1,290,000 >CANADA ATI Technologies 0 250,000 Clearnet Communications 0 90,600 >ISRAEL Amdocs 90,000 105,000 Comverse Technology 0 5,000 Gilat Satellite Network 0 14,500 >UNITED STATES Global Telesystems 2,568,000 2,988,000 Sales - -------------------------------------------------------------------------------- Europe >UNITED KINGDOM Airtours 85,000 0 Carlton Communications 250,000 0 Exel 300,000 0 (formerly known as NFC) Logica 150,000 100,000 Sema Group 120,000 100,000 >ITALY Mediolanum 70,000 0 Saipem SpA 300,000 0 >SPAIN Mapfre Vida 43,000 0 >NETHERLANDS Hunter Douglas 60,000 0 - -------------------------------------------------------------------------------- Asia >HONG KONG SmarTone Telecom 324,900 0 >JAPAN Shohkoh Fund 4,000 0 Softbank 7,000 0 - -------------------------------------------------------------------------------- Other Countries >CANADA Canadian Natural Resources 70,000 0 >UNITED STATES Azurix 100,000 0 35 Acorn Foreign Forty >Statement of Investments (Unaudited) March 31, 2000 Number of Shares Value (000) - -------------------------------------------------------------------------------- Common Stocks: 99.7% - -------------------------------------------------------------------------------- Europe: 63.1% >GERMANY: 1.3% 50,000 Rhoen Klinikum $ 2,010 Hospital Management >FINLAND: 2.3% 33,000 Comptel 3,650 Telephone Billing Software >SWEDEN: 3.3% 60,000 Netcom 5,174 Telecommunication Services >FRANCE/BELGIUM: 8.4% 50,000 Audiofina (Belgium) 6,148 TV & Radio Stations 7,000 M6 Metropole TV 4,783 Television Broadcaster 18,000 Atos 2,325 Computer Services/Transaction Processing - -------------------------------------------------------------------------------- 13,256 >UNITED KINGDOM/IRELAND: 25.4% 500,000 Peninsular & Oriental 5,197 Cruise Line 500,000 Irish Life & Permanent (Ireland) 4,545 Life Insurance 600,000 Hays 3,927 Outsourcing Services 82,000 Energis 3,824 Telecommunication Services 100,000 Logica 3,352 Computer Software & Services 170,000 WPP Group 2,989 Advertising 700,000 St James Capital 2,836 Life Insurance 100,000 Capita Group 2,557 Outsourcing Services 27,500 NTL 2,552 Voice, Video & Data Services 320,000 Thus 2,392 Telecommunication Services 100,000 Sema Group 1,997 Computer Software & Services 45,000 Serco Group 1,956 Facilities Management 200,000 SSL International 1,768 Medical & Footcare Products - -------------------------------------------------------------------------------- 39,892 >SWITZERLAND: 4.0% 1,000 Julius Baer Holding 3,765 Private Banking, Brokerage & Mutual Funds 800 Pargesa Holdings 1,541 Industrial & Media Conglomerate 390 Cie Fin Richemont 991 Luxury Goods, Tobacco & Pay TV - -------------------------------------------------------------------------------- 6,297 >ITALY: 8.7% 250,000 Editoriale L'Espresso $ 4,907 Newspaper & Magazine Publisher 330,000 Banca Fideuram 4,825 Life Insurance & Mutual Funds 800,000 SEAT Pagine Gialle 3,965 Yellow Pages - -------------------------------------------------------------------------------- 13,697 >SPAIN: 1.7% 110,000 Indra Sistemas 2,642 Computer Services >NETHERLANDS: 8.0% 65,000 Getronics 4,970 Computer Services 78,900 ASR Verzekeringsgroep 4,130 Auto/Life Insurance 165,000 Fox Kids Europe 3,474 Cartoons - -------------------------------------------------------------------------------- 12,574 -------- EUROPE: TOTAL 99,192 - -------------------------------------------------------------------------------- Asia: 18.8% >JAPAN: 9.0% 10,000 Fast Retailing 4,402 Apparel Retailer 5,000 Bellsytem24 4,241 Call Centers 24,000 Orix 3,475 Finance Leasing 12,000 Nintendo 2,112 Video Games - -------------------------------------------------------------------------------- 14,230 >SINGAPORE: 9.8% 969,000 Star Cruises 8,479 Cruise Line 500,000 Venture Manufacturing 6,869 Electronic Manufacturing Services - -------------------------------------------------------------------------------- 15,348 -------- ASIA: TOTAL 29,578 - -------------------------------------------------------------------------------- Other Countries: 17.8% >AUSTRALIA: 0.9% 1,290,000 One.Tel Limited 1,409 Telecommunication Services >CANADA: 8.7% 90,000 Celestica 4,733 Electronic Manufacturing Services 250,000 ATI Technologies 4,434 Computer Graphics Chips & Boards 90,600 Clearnet Communications 3,744 Telecommunications Services 50,000 Power Financial 740 Life Insurance & Mutual Funds - -------------------------------------------------------------------------------- 13,651 36 Number of Shares Value (000) - ------------------------------------------------------------------------------- >ISRAEL: 6.6% 105,000 Amdocs $ 7,737 Telecommunications Billing & Customer Care Software 14,500 Gilat Satellite Network 1,700 Satellite Communications Equipment & Services 5,000 Comverse Technology 945 Voicemail & Related Systems - ------------------------------------------------------------------------------- 10,382 >UNITED STATES: 1.6% 2,988,000 Global TeleSystems 2,615 Telecommunication Services OTHER: TOTAL $ 28,057 --------- TOTAL COMMON STOCKS: 99.7% 156,827 SHORT TERM OBLIGATIONS: 0.6% 1,001 --------- TOTAL INVESTMENTS: 100.3% 157,828 CASH AND OTHER ASSETS LESS LIABILITIES: (0.3%) (431) --------- TOTAL NET ASSETS: 100% $157,397 ================================================================================ >Portfolio Diversification At March 31, 2000 the Fund's portfolio of investments as a percent of net assets was diversified as follows: Value (000) Percent - ------------------------------------------------------------------------------- >INFORMATION Telephone Services $ 21,005 13.4% Computer Services 12,644 8.0 Broadcasting 10,931 6.9 Business Software 7,737 4.9 Contract Manufacturing 6,869 4.4 Publishing 4,907 3.1 Semiconductors 4,434 2.8 Mobile Communications 3,744 2.4 Television Programming 3,474 2.2 Advertising 2,989 1.9 Telephone Equipment 2,645 1.7 Business Information 2,642 1.7 Instrumentation 2,615 1.7 CATV 2,552 1.6 - ------------------------------------------------------------------------------- 89,188 56.7 >HEALTH CARE Hospital Management 2,010 1.3 Pharmaceuticals 1,768 1.1 - ------------------------------------------------------------------------------- 3,778 2.4 >CONSUMER GOODS/SERVICES Cruises 8,479 5.4 Retail 4,402 2.8 Leisure Products 3,650 2.3 Consumer Software 2,112 1.4 Entertainment 991 0.6 - ------------------------------------------------------------------------------- 19,634 12.5 >FINANCE Insurance $ 12,252 7.8% Money Management 4,825 3.1 Banks 3,765 2.4 Finance Companies 3,474 2.2 Closed End Funds 1,541 0.9 - ------------------------------------------------------------------------------- 25,857 16.4 >INDUSTRIAL GOODS/SERVICES Outsourcing Services 8,440 5.4 Electrical Components 4,733 3.0 - ------------------------------------------------------------------------------- 13,173 8.4 >OTHER INDUSTRIES Transportation 5,197 3.3 ------------------------ TOTAL COMMON STOCKS: 156,827 99.7% SHORT TERM OBLIGATIONS: 1,001 0.6% CASH AND OTHER ASSETS LESS LIABILITIES: (431) (0.3) ------------------------ NET ASSETS: $157,397 100.0% =============================================================================== 37 Acorn Twenty >Major Portfolio Changes in the First Quarter Number of Shares ------------------------ 12/31/99 3/31/00 Additions - -------------------------------------------------------------------------------- Information American Power Conversion 0 66,000 Jabil Circuit 0 79,000 Perkin Elmer 0 21,000 Pinnacle Holdings 0 52,000 Reynolds & Reynolds 0 140,000 Tektronix 41,000 100,000 Waters 0 23,000 - -------------------------------------------------------------------------------- Health Care Incyte Pharmaceutical 0 6,000 Techne 0 41,100 - -------------------------------------------------------------------------------- Consumer Goods/Services Harley-Davidson 0 37,000 - -------------------------------------------------------------------------------- Finance Comdisco 0 46,000 - -------------------------------------------------------------------------------- Energy/Minerals Dynegy 0 69,000 Sales - -------------------------------------------------------------------------------- Information Liberty Media Group, AT&T 82,000 45,000 McLeod USA 68,000 42,000 National Data 72,000 0 RCN 82,000 65,000 Telephone and Data Systems 30,000 0 - -------------------------------------------------------------------------------- Health Care First Health 75,000 118,700 Lincare Holdings 185,000 0 - -------------------------------------------------------------------------------- Consumer Goods/Services Harrah's Entertainmnt 105,000 0 Royal Caribbean Cruises 45,000 0 - -------------------------------------------------------------------------------- Finance AmeriCredit 255,000 0 Progressive 28,000 0 UICI 143,000 0 - -------------------------------------------------------------------------------- Industrial Goods/Services ServiceMaster 225,000 120,000 - -------------------------------------------------------------------------------- Energy/Minerals AES Corporation 56,000 0 MidAmerican Energy 95,000 0 - -------------------------------------------------------------------------------- 38 Acorn Twenty >Statement of Investments (Unaudited) March 31, 2000 Number of Shares Value (000) - ------------------------------------------------------------------------------- Common Stocks: 95.5% - ------------------------------------------------------------------------------- Information: 53.0% >TELEVISION PROGRAMMING: 4.0% 45,000 Liberty Media Group, AT&T $ 2,666 Cable & Satellite Programming >TELECOMMUNICATIONS/WIRELINE COMMUNICATIONS: 10.7% 42,000 McLeod USA 3,562 Super Regional CLEC: Local, Long Distance & Internet Services 65,000 RCN 3,502 Metro Market CLEC: Voice, Video & Internet Services - ------------------------------------------------------------------------------- 7,064 >INSTRUMENTATION: 13.9% 100,000 Tektronix 5,600 Analytical Instruments 23,000 Waters 2,191 Chromatography, Mass Spectrometry, Thermo Analysis 21,000 Perkin Elmer 1,396 Analytical Instruments for Biotech, Telecom - ------------------------------------------------------------------------------- 9,187 >MOBILE COMMUNICATIONS: 4.3% 52,000 Pinnacle Holdings 2,873 Towers for Cellular, PCS & Paging >CONTRACT MANUFACTURING: 5.2% 79,000 Jabil Circuit 3,417 Electronic Manufacturing Services >COMPUTER HARDWARE & RELATED EQUIPMENT: 4.3% 66,000 American Power Conversion 2,830 Uniterruptable Power Systems >BUSINESS INFORMATION: 10.6% 140,000 Reynolds & Reynolds 3,780 Business Forms & Computer Systems for Car Dealers 73,000 H & R Block 3,267 Tax Preparation - ------------------------------------------------------------------------------- 7,047 -------- INFORMATION: TOTAL 35,084 - ------------------------------------------------------------------------------- Health Care: 10.7% >BIOTECHNOLOGY/DRUG DELIVERY: 0.8% 6,000 Incyte Pharmaceutical 524 Gene Sequencing >HOSPITAL/LABORATORY SUPPLIES: 4.3% 41,100 Techne 2,836 Cytokines, Antibodies, Other Reagents for Life Sciences >SERVICES: 5.6% 118,700 First Health Group $ 3,754 PPO Network -------- HEALTH CARE: TOTAL 7,114 - ------------------------------------------------------------------------------- Consumer Goods/Services: 14.8% >LEISURE VEHICLES: 4.4% 37,000 Harley-Davidson 2,937 Motorcycles & Related Merchandise >FURNITURE & MANUFACTURERS: 10.4% 125,000 Herman Miller 3,500 Office Furniture 105,000 Jones Apparel 3,347 Women's Apparel - ------------------------------------------------------------------------------- 6,847 -------- CONSUMER GOODS/SERVICES: TOTAL 9,784 - ------------------------------------------------------------------------------- Finance: 8.5% >FINANCE COMPANIES: 3.1% 46,000 Comdisco 2,030 Computer Leasing, Venture Capital & CLEC Business >MONEY MANAGEMENT: 5.4% 31,500 SEI Investments 3,573 Mutual Fund Administration -------- FINANCE: TOTAL 5,603 - ------------------------------------------------------------------------------- Industrial Goods/Services: 2.0% >OTHER INDUSTRIAL SERVICES: 2.0% 120,000 ServiceMaster 1,350 Facilities Management -------- INDUSTRIAL GOODS/SERVICES: TOTAL 1,350 - ------------------------------------------------------------------------------- Energy/Minerals: 6.5% >OIL REFINING/MARKETING/DISTRIBUTION: 6.5% 69,000 Dynegy 4,330 Energy Marketing, Processing, & Generation -------- ENERGY/MINERALS: TOTAL 4,330 -------- TOTAL COMMON STOCKS: 95.5% 63,265 SHORT-TERM OBLIGATIONS: 1.7% 1,147 -------- TOTAL INVESTMENTS: 97.2% 64,412 CASH AND OTHER ASSETS LESS LIABILITIES: 2.8% 1,855 -------- TOTAL NET ASSETS: 100% $ 66,267 =============================================================================== 39 The Acorn - -------------------------- Family of Funds Trustees Irving B. Harris Chairman James H. Lorie Vice Chairman Leo A. Guthart Jerome Kahn, Jr. Steven N. Kaplan David C. Kleinman Charles P. McQuaid Roger S. Meier Allan B. Muchin Robert E. Nason Katherine Schipper Ralph Wanger Officers Ralph Wanger President Roger D. Edgley Vice President Margaret M. Forster Vice President Marcel P. Houtzager Vice President Kenneth A. Kalina Assistant Treasurer Bruce H. Lauer Vice President and Treasurer Charles P. McQuaid Senior Vice President Robert A. Mohn Vice President John H. Park Vice President Steven A. Radis Vice President and Secretary Leah J. Zell Vice President Investment Advisor Wanger Asset Management, L.P. 227 West Monroe Street, Suite 3000 Chicago, Illinois 60606 1-800-922-6769 Distributor WAM Brokerage Services, L.L.C. P.O. Box 8502 Boston, Massachusetts 02266-8502 Transfer Agent, Dividend Disbursing Agent and Custodian State Street Bank and Trust Company Attention: Acorn Family of Funds P.O. Box 8502 Boston, Massachusetts 02266-8502 1-800-962-1585 Legal Counsel Bell, Boyd & Lloyd LLC Chicago, Illinois This report, including the unaudited schedules of investments, is submitted for the general information of the shareholders of Acorn Investment Trust. This report is not authorized for distribution unless preceded or accompanied by a prospectus. Our e-mail address is: acorn@wanger.com Find out what's new - visit our web site at: www.acornfunds.com 40 Acorn Family of Funds Information MINIMUM INITIAL INVESTMENT FOR ALL FUNDS $1,000 $1,000 FOR AN IRA MINIMUM SUBSEQUENT INVESTMENT $100 EXCHANGE FEE NONE Acorn Fund ACRNX Management Fee 0.69% 12b-1 Fee None Other Expenses 0.16% ----- Expense Ratio 0.85% Acorn International ACINX Management Fee 0.81% 12b-1 Fee None Other Expenses 0.30% ----- Expense Ratio 1.11% Acorn USA AUSAX Management Fee 0.93% 12b-1 Fee None Other Expenses 0.22% ----- Expense Ratio 1.15% Acorn Foreign Forty ACFFX Management Fee 0.95% 12b-1 Fee None Other Expenses 0.62% Less Expense Reimbursement (0.09%) ----- Net Expense Ratio 1.48%* Acorn Twenty ACTWX Management Fee 0.90% 12b-1 Fee None Other Expenses 0.51% Less Expense Reimbursement (0.04%) ----- Net Expense Ratio 1.37%* Fees and expenses are for the fiscal year ended December 31, 1999 and for Acorn Twenty and Acorn Foreign Forty, include the effect of Wanger Asset Management's undertaking to reimburse those funds for any ordinary operating expenses, net of custodian fees paid indirectly, exceeding 1.35% and 1.45% of their average net assets, respectively. These expense limitations are voluntary and can be terminated by either the Funds or Wanger Asset Management on 30 days' notice to the other. *Includes custodian fees paid indirectly. Net of those fees, the Net Expense Ratios of Acorn Twenty and Acorn Foreign Forty would have been 1.35% and 1.45%, respectively. The Acorn -------------------- - ----------------------- Family of Funds FIRST CLASS PRE-SORT WAM Brokerage Services, L.L.C. U.S. POSTAGE P.O. Box 8502 PAID Boston, MA 02266-8502 CHICAGO, IL Member NASD PERMIT NO. 1200 -------------------- -----END PRIVACY-ENHANCED MESSAGE-----