N-30D 1 0001.txt ACORN FAMILY OF FUNDS SEMIANNUAL REPORT 6/30/00 From the Desk of Ralph Wanger Dear Shareholder: You should have received proxy materials in the mail recently asking you to vote on a new investment advisory agreement between Acorn and Liberty Wanger Asset Management in connection with the sale of Wanger Asset Management (WAM) to Liberty Financial Companies, Inc. (LFC). I want to assure you personally that I believe the sale will be positive for our shareholders and the company. A question that has come up regarding our decision to sell is whether or not I intend to retire. Considering my golf scores and my skiing abilities, I think it is best that I keep working. All of our portfolio managers, myself included, have signed agreements to stay with the firm for at least the next five years. So why are we selling? While I am not planning to retire any time soon, we recognized the need to address succession issues that would arise upon my eventual retirement. We have also found that our growth in recent years has increased the administrative responsibilities of our principals. Our partnership with LFC should allow us to shift administrative tasks to Liberty so that we can focus on what we do best: managing money. We feel confident that this decision will benefit shareholders in a number of ways. First, we believe our association with a large organization provides stability and clarifies the long-term status of WAM. This should enable us to attract new talent to the firm. This merger will also allow us to offer shareholders a broader range of investment products. Liberty's subsidiaries manage more than 90 mutual funds. Additionally, by utilizing Liberty's distribution and administrative resources, we believe we can enhance our shareholder services. I would like to stress that shareholders of record prior to the close of the merger will maintain their no-load status after the sale. You will also be able to invest without a load in many funds managed by Liberty's affiliates (these funds may be subject to a 12b-1 fee). With this in mind, if you know of friends who have been thinking about investing with us, you may want to encourage them to obtain a prospectus and purchase shares now so they can lock in their no-load status by becoming shareholders prior to the close of the sale. Your confidence in our products has made us successful. I thank you for your support over the years and look forward to our future together. I welcome the opportunity to meet you at our upcoming shareholder meeting on September 26 in Chicago (see back cover for more details). Sincerely, /s/ Ralph Wanger Ralph Wanger Chief Investment Officer, Wanger Asset Management Following are answers to some of the questions you may have regarding our plans to sell Wanger Asset Management (WAM) to Liberty Financial Companies. Q: Who is Liberty Financial? A: Boston-based Liberty Financial was founded in 1985 by Liberty Mutual Insurance Company. Liberty Financial has more than $67 billion in financial assets under management. Liberty Financial is a publicly traded company (NYSE: L) and is 71% owned by Liberty Mutual Insurance. Other Liberty Financial subsidiaries include Stein Roe & Farnham, Colonial Management Associates, Newport Pacific Management, Crabbe Huson, Keyport, Independent Financial, and Progress Investment Management Company. If the merger is approved, we will be associated with a large group of highly professional asset managers. Q: Why did WAM select Liberty Financial? A: We wanted a partner to provide substantial strategic benefits such as: . Knowledge of the mutual fund industry . Strong distribution . Solid management . Product line fit With $67 billion in assets under management, a sales force of more than 200 professionals, and 95 mutual fund products, Liberty Financial met our requirements. Q: What changes will I see as a shareholder? A: The fund names will adopt the Liberty prefix (Liberty Acorn Fund, for example) after the sale so be sure to look under "L", instead of "A", for daily price listings in the newspaper. Wanger Asset Management will operate under the name Liberty Wanger Asset Management after the closing. Following the sale, the funds will be offered through financial advisors with a sales charge applied. However, as a shareholder of record prior to the close, you will maintain your no-load status after the close. You will be able to continue to make additional investments into your account(s), as well as invest in certain funds distributed by Liberty Financial, without paying a sales charge (some of the funds offered through Liberty carry 12b-1 fees, however). Immediate family members of current shareholders will also enjoy no-load status should they choose to invest with us. September 26 is the deadline for voting your proxy. Turn to the back cover for information on our upcoming shareholder meeting. Acorn Family of Funds Semiannual Report June 30, 2000 Managed by Wanger Asset Management, L.P. 2 Acorn Family of Funds Semiannual Report 2000 Table of Contents The Acorn Family of Funds Performance At A Glance 1 Squirrel Chatter: When Railroads were the "New Economy" 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 22 Statement of Investments 24 Portfolio Diversification 28 Acorn USA In a Nutshell 8 At a Glance 9 Major Portfolio Changes 29 Statement of Investments 30 Acorn Foreign Forty In a Nutshell 10 At a Glance 11 Major Portfolio Changes 33 Statement of Investments 34 Portfolio Diversification 36 Acorn Twenty In a Nutshell 12 At a Glance 13 Major Portfolio Changes 37 Statement of Investments 38 Acorn Family of Funds Statements of Assets and Liabilities 41 Statements of Operations 42 Statements of Changes in Net Assets 44 Financial Highlights 46 Notes to Financial Statements 49 Trustees, Officers and Contact Information 52 >Mid-Year Distributions The following table details the funds' mid-year distributions. The record date was June 20, 2000, the ex-dividend date was June 21, 2000 and the payable date was June 26, 2000.
Acorn Fund Acorn International Acorn USA Acorn Foreign Forty Acorn Twenty ------------------------------------------------------------------------------------------------------------ Long-term Capital Gains $1.00 $0.28 $0.30 None $0.62 ------------------------------------------------------------------------------------------------------------ Short-term Capital Gains None $0.23 $0.02 $0.11 $0.27 ------------------------------------------------------------------------------------------------------------ Ordinary Income $0.05 $0.66 None $0.03 None ------------------------------------------------------------------------------------------------------------
Notes On After-tax Returns and Tax Efficiency Included on each individual fund's "At A Glance" page, after-tax returns show the fund's annualized after-tax total return for the time period specified. After tax returns with redemptions show the funds' annualized after-tax total return for the time period specified plus the tax-effects of selling your shares of the fund at the end of the period. To determine these figures, 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. Long-term capital gains are currently taxed at a 20% rate. The tax rate is applied to distributions prior to reinvestment and the after-tax portion is reinvested in the fund. State and local taxes are ignored. The returns provided by Morningstar, Inc. are calculated in a consistent manner. Tax Efficiency is derived by dividing after-tax returns by pretax returns. The highest possible score would be 100%, which would apply to a fund that had no taxable distributions. Because many interrelated factors effect tax efficiency, it is difficult to predict tax efficiency. Acorn Fund Turns 30! On June 10, 1970, Acorn Fund was launched with Ralph Wanger at the helm. During the last three decades, Ralph and Chuck McQuaid, who joined the fund in 1978, have stood nose-to-nose with bears and bulls, and watched gimmicks and fads come and go. In 1999, a group of academics set out to see if any active portfolio managers had beaten the market by skill rather than luck. Only five managers passed the test and of the five, the only team still managing portfolios was Ralph and Chuck./1/ They have the longest combined management tenure of any of the 735 small-company funds tracked by Morningstar./2/ Send your best wishes to Ralph and Chuck on their accomplishments of the last 30 years. Just write your message on the attached postcard. Congratulations on 30 Years Acorn Fund! You could win $1,000 worth of Acorn Fund shares! See reverse side for details. It's Acorn Fund's Birthday But You May Get The Presents! Test your knowledge of the events of the last 30 years by playing our on-line trivia game for your chance to win $1,000 worth of Acorn Fund shares. Visit www.acornfunds.com to enter./3/ Send Your Own 30th Anniversary Message To Ralph and Chuck! /1/ The study, titled "Should Investors Avoid All Actively Managed Mutual Funds? A Study in Bayesian Performance Evaluation," uses statistical probability pioneered by the Rev. Thomas Bayes, an 18th century mathematician. The researchers measured the probabilities that fund managers of 1,437 actively managed U.S. diversified equity funds would beat benchmarks in the future. The researchers used a range of extremely conservative assumptions-for example, that just 1 in 5000 portfolio mangers had the ability to outperform a benchmark. The initial assumption provides the base upon which the subsequent probability data rests. The study's data began with 1963 and ended with 1996. /2/ Data provided by Morningstar, Inc. through June 30, 2000. /3/ NO PURCHASE NECESSARY. Enter via the internet at www.acornfunds.com or call 1-800-9ACORN9 to receive a mail-in entry form. All entries must be received by 9/15/00. Void where prohibited. One prize will be awarded, shares valued at $1,000 in the Acorn Fund. Winner selected by random drawing by 9/22/00. Open to U.S. residents 18 years old or older. Subject to complete Official Rules, available by sending a stamped, self-addressed envelope to TRIVIA CONTEST, c/o Wanger Asset Management, 227 Monroe, Suite 3000, Chicago, IL 60606. Dear Ralph and Chuck: ----- PLACE STAMP HERE ----- TO: Ralph Wanger & Chuck McQuaid 227 West Monroe, Suite 3000 Chicago, Illinois 60606-5016 Acorn Family of Funds Performance At A Glance Average Annual Total Returns through 6/30/00
2nd* Year* 1 3 5 10 Life Quarter to Date year years years years of Fund ----------------------------------------------------------------------------------------------------- Acorn Fund (6/10/70) -1.83% -1.41% 17.77% 16.31% 18.26% 16.53% 16.78% ----------------------------------------------------------------------------------------------------- S&P 500 -2.66% -0.42% 7.25% 19.65% 23.77% 17.78% 14.43% ----------------------------------------------------------------------------------------------------- Russell 2000 -3.78% 3.04% 14.32% 10.56% 14.25% 13.56% NA ----------------------------------------------------------------------------------------------------- Lipper Small Cap Core Index -1.60% 8.55% 23.62% 11.58% 15.73% NA NA ----------------------------------------------------------------------------------------------------- S&P MidCap 400 -3.30% 8.97% 16.98% 20.32% 21.16% 18.01% NA ----------------------------------------------------------------------------------------------------- Acorn International (9/23/92) -14.18% -3.81% 47.57% 22.56% 20.61% -- 19.58% ----------------------------------------------------------------------------------------------------- EMI (World ex-U.S.) -1.74% 0.25% 14.98% 6.12% 7.39% -- 8.87% ----------------------------------------------------------------------------------------------------- EAFE -3.96% -4.06% 17.16% 10.17% 11.31% -- 11.98% ----------------------------------------------------------------------------------------------------- IFCI Composite -10.39% -9.04% 10.72% -4.51% 1.77% -- 7.33% ----------------------------------------------------------------------------------------------------- Lipper Int'l Small Cap Funds Index -9.79% -0.41% 37.74% 16.47% NA -- NA ----------------------------------------------------------------------------------------------------- Lipper Int'l Funds Index -4.70% -4.11% 23.63% 11.90% 14.41% -- 13.85% ----------------------------------------------------------------------------------------------------- Acorn USA (9/4/96) -15.06% -16.08% -4.62% 8.11% -- -- 14.59% ----------------------------------------------------------------------------------------------------- Russell 2000 -3.78% 3.04% 14.32% 10.56% -- -- 13.51% ----------------------------------------------------------------------------------------------------- Lipper Small Cap Value Index 1.31% 4.96% 1.05% 3.96% -- -- 9.71% ----------------------------------------------------------------------------------------------------- S&P MidCap 400 -3.30% 8.97% 16.98% 20.32% -- -- 22.59% ----------------------------------------------------------------------------------------------------- S&P 500 -2.66% -0.42% 7.25% 19.65% -- -- 25.05% ----------------------------------------------------------------------------------------------------- Acorn Foreign Forty (11/23/98) -14.03% -0.61% 51.43% -- -- -- 53.29% ----------------------------------------------------------------------------------------------------- EAFE -3.96% -4.06% 17.16% -- -- -- 15.95% ----------------------------------------------------------------------------------------------------- SSB World ex-US Cap Range $2-10B -0.54% -1.25% 15.14% -- -- -- 15.55% ----------------------------------------------------------------------------------------------------- Lipper International Funds Index -4.70% -4.11% 23.63% -- -- -- 20.54% ----------------------------------------------------------------------------------------------------- Acorn Twenty (11/23/98) 1.05% 3.41% 9.81% -- -- -- 25.06% ----------------------------------------------------------------------------------------------------- S&P MidCap 400 -3.30% 8.97% 16.98% -- -- -- 22.70% ----------------------------------------------------------------------------------------------------- Lipper Mid Cap Value Index -2.06% 1.96% 5.33% -- -- -- 10.93% ----------------------------------------------------------------------------------------------------- Russell 2000 -3.78% 3.04% 14.32% -- -- -- 19.92% ----------------------------------------------------------------------------------------------------- S&P 500 -2.66% -0.42% 7.25% -- -- -- 16.35% -----------------------------------------------------------------------------------------------------
*Quarterly and year-to-date 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: When Railroads were the "New Economy" [PHOTO HERE] Watching the boom and bust cycle of Internet stocks in recent months, I thought it might be interesting to review what happened when "New Economy" industries took over 150 years ago. The predecessor to today's Information Revolution (the Internet, the cell phone and the personal computer) was the Industrial Revolution. The steam locomotive, invented in 1829 in England, was the pivotal invention of the Industrial age. Soon after the first locomotive ran from Manchester to Liverpool, "dot.rr" ventures began to spring up. By the end of 1845, 1,428 railway ventures had been proposed and were waiting to receive Parliamentary permission to raise capital./1/ A great IPO boom occurred in Britain, with all the greed, hype, and chicanery we know and love today. As always, the bubble burst shortly thereafter, bringing the usual losses and complaints. Building the Union Pacific In America, railroads were built with equal enthusiasm. In 1830 there were only 32 miles of U.S. railroad track. By 1870 that number reached 125,000 miles. The need for a transcontinental railroad was visualized as early as 1840, at a time when railroads were primitive and the West was only inhabited by Indians, who were considered to be hostile savages. The discovery of gold in California in 1848, followed by additional gold and silver strikes in Colorado and Nevada, made a railroad more desirable, although it was clear that any construction still would have to be subsidized by the government. In the mid-1850s, Congress debated building a railroad from the Midwest to California, but the slavery issue blocked any decision. The Southern states wanted a route through Texas and Arizona. The North, intent on blocking the extension of slavery into the West, wanted a central route through Nebraska and Colorado. When the Civil War started, the Southerners left Congress, allowing the remaining Northern government to build the central route. The route was to be from the Missouri River (eventually Omaha) through Nebraska and Wyoming to Ogden, Utah. The Central Pacific Railroad was to build east from California through the Sierra Nevada Mountains and link up to the Union Pacific. The chief construction engineer of the Union Pacific was General Granville M. Dodge. He was experienced in railroad building and had also been a successful combat commander in the Union Army. Building a railroad through uninhabited areas, fighting Indians along the way, matched Dodge's abilities perfectly. The railroad "army" Dodge commanded was made up of 10,000 workmen plus 10,000 draft animals. Advance parties of surveyors located the route. Graders, who could grade three miles a day on level plains, followed them. The graders operated several hundred miles ahead of the tracklayers. Bridge building gangs could construct major bridges in 30 days or less. To accommodate the workers, a floating civilian population of gamblers, bartenders and prostitutes built temporary towns along the route. During 1867 and 1868, the Union Pacific had periods in which they laid four to seven miles of track per day!/2/ Opening The West Low freight rates transformed the country (cheap communication is doing the same thing today). In the 1850s it cost $0.30 per pound to ship goods from St. Joseph, Missouri to Ogden, Utah, a 1,000-mile trip ($0.60 per ton-mile). At this rate, only the most valuable and essential items were worth shipping. The Union Pacific was finished in 1869. By 1880, freight rates were down to $0.02 per ton- mile, one-thirtieth of pre-rail costs. A dozen years later, the rate was less than a penny as competition between railroads forced rates ever lower. New industries were created as the agricultural bounty of the Midwest was made accessible. The introduction of an inexpensive means to ship grain, cattle, coal and mineral ore to the East brought prosperity and wealth to the West. New cities sprung up and old ones withered./3/ Charles F. Adams, Jr., of the Massachusetts Adams', was a serious scholar of the railroads and later became president of the Union Pacific. He wrote in 1871: [The railroad] makes the grass grow in the once busy streets of small commercial centers like Nantucket, Salem and Charleston. ...It threatens 2 to make a solitude of the once busy wharves of Boston, and it fills New Hampshire with deserted farms. E Meanwhile San Francisco and Chicago spring up like a very palace of Aladdin. Adams was right about San Francisco and Chicago. In 1835, San Francisco was only one shanty. In 1869 it was a big city of 170,000 and booming. The statistics for Chicago are even more remarkable. In 1830 no more that 100 souls survived in "an uninviting swamp." By 1847, there was a town of 8,000; ten years later, 100,000; and in 1869 it was a major city of 300,000 and the fastest growing city in America. /4/ Investors "downstream from the railroads" -- those that used, rather than ran, the railroads -- made some impressive fortunes. But how successful were the mighty railway companies themselves? Not very. Over the 70 years that marked the strongest period in rail history (1860-1930), most railways went broke at least once because of fierce competition. The different rail companies tried to collude to keep rates up, but always one competitor would break ranks and re- ignite a rate war. Bankruptcies were frequent (as with the airlines today) but the railroads continued to operate in receivership. The Union Pacific itself went bust in 1893. /5/ Adams wrote the following about railroad investments. If you care to, read it twice replacing "railroad" with "Internet". Either way, it works. People continuously refer to the brilliant successes in railroad enterprises; they do not so often count the failures....The profits upon railroad enterprises, as a whole, are not excessive; the business is one which affords in this country even less than the average return upon the capital invested in it. [His estimate: no more than 6.8% return on assets, and this was before the depression of 1873.]/6/ Railroads were the dominant industry from 1860 to 1930, but have been displaced by truck lines. Today, the railroad industry makes up only 0.4% of the S&P 500. Pop quiz: Name one of the manufacturers of steam locomotives in 1900./7/ The Internet is promoting growth in much the same way the railroads did. Competition among Internet companies is preventing them from making substantial profits but companies that have learned how to use the Internet to improve their operations -- many of those stodgy "Old Economy" names -- are discovering new avenues for growth and profits. /s/ Ralph Wanger Ralph Wanger Chief Investment Officer, Wanger Asset Management, L.P. Lead Portfolio Manager, Acorn Fund -------------------------------------------------------------------------------- A.M. Kelly in New York has published a series of historic business books referenced in this essay. They include: /1/ The Commercial Crisis 1847-48 (1840), Evans, D. Morier, 1969, p. 23-38. /2/ History of the Union Pacific (1923), Trottman, Nelson, 1966, p. 7, 22, 61. /3/ History of the Union Pacific Railway (1895), White, Henry K, 1973, p. 71. /4/ Chapters of Erie (1871), Adams, Charles F. and Henry, 1967, p. 346-347. /5/ History of the Union Pacific Railway (1895), op. cit., p. 61. /6/ Chapters of Erie (1871), op. cit., p. 410. /7/ Locomotive manufacturers in 1900 included Baldwin and American Locomotive. Both still exist today as part of holding companies, but they are not major names. 3 In a Nutshell [photos here] Acorn Fund fell 1.8% in the second quarter. The Fund fared better than the small-and mid-cap indexes, which were down more than 3%, and performed in line with the Lipper Small Cap Core Index (see Page 1 for performance data). Biotech stocks posted strong returns again this quarter. Myriad Genetics jumped 146% while Protein Design Labs doubled in value. Inhale Therapeutics rose 36%. Takeovers also posted good results. Specialty chemical company Lilly Industries bloomed 144% as it agreed to be acquired by Valspar, a manufacturer and distributor of paint and coatings. Money manager Pioneer Group soared 81% on news that Unicredito, an Italian asset manager, plans to acquire its asset management business. Neuberger Berman and Phoenix Investment Partners, rose in sympathy, gaining 66% and 37%, respectively. Freight forwarders and logistics companies have been long-time favorites of the Fund as they benefit from ever-improving technology. The group delivered solid returns in the second quarter as Forward Air flew in a 70% return, C.H. Robinson increased 33%, and Expeditors International imported a 20% profit. Acorn's technology underweighting helped performance relative to our benchmarks but our tech stocks did hurt absolute returns. Technology stocks fell in the quarter. Acorn's technology underweighting helped performance relative to our benchmarks but our tech stocks did hurt absolute returns. Micros Systems became a micro stock, collapsing 70% on the announcement of an earnings shortfall. Aztec Consulting dropped 73%. Our foreign holdings declined 23%, giving up some of the magnificent 139% gain booked last year. Japan's Softbank -- Acorn's top holding at year-end 1999 -- fell 54%. Since January, we've sold half of our Softbank position at healthy prices, keeping much of last year's profit. Other difficult foreign holdings were WM Data, a Swedish computer services company, off 39%, and Star Cruises (Singapore), which plunged 38%. Taking advantage of a discount in the telecom and media sectors, we bought select cable television stocks that dipped into our buy target price range. We took positions in Mediacom Communications and Insight Communications and added to Classic Communications. Several Internet-related stocks also appeared attractive; we increased exposure to Getty Images, a license holder of photographs used in publications and electronic media, and Information Holdings, a publisher of information used in professional and academic settings. Like technology weightings today, in 1979 money managers traditionally held close to a 30% position in energy. In the early 1980s, however, low prices and abundant supply took oil and gas production and service companies out of the stock market limelight. Now, after a 20-year hiatus, we are reintroducing "energy matters" as a theme in the portfolio. Increased use of gas in electricity plants is driving natural gas prices upward and has improved the returns of North American natural gas companies. We hiked our existing energy positions and added new stocks including Canadian Hunter, a Canadian gas producer, Enerflex, a Canadian gas compressor company, and Carbo Ceramics, which sells productivity enhancing materials for gas wells. As a result of purchases and appreciation, our energy weighting doubled to 11%. Scouring the IPO Wreckage For decades companies went public after they posted profits or at least saw some positive cash flow. A few years ago, an initial public offering boom began, and more recently it got out of hand. Good companies went public at outrageous prices and lousy companies went public without even attempting to present viable business models. Predictably, the boom busted, and many 1999 and early 2000 IPO stocks collapsed. With their demise came opportunity. In scouring the wreckage for soundly structured businesses now selling at attractive stock prices, we unearthed Mediacom Communications, a suburban and rural cable TV company run by seasoned management and selling at below half of its takeover value. As of the end of the quarter, Mediacom was up 85% from our average cost. /s/ Ralph Wanger Ralph Wanger Lead Portfolio Manager /s/ Charles P. McQuaid Charles P. McQuaid 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 6/30/00. 4 Acorn Fund At a Glance Ticker Symbol: ACRNX Pretax and After-tax Average Annual Total Returns -------------------------------------------------------------------------------- Through June 30, 2000
1 Year 5 Years 10 Years After- After-tax W/ Tax After- After-tax W/ Tax After- After-tax W/ Tax Pretax tax redemption Efficiency Pretax tax redemption Efficiency Pretax tax redemption Efficiency Acorn Fund 17.77% 12.44% 15.35% 70.0% 18.26% 15.02% 14.30% 82.3% 16.53% 14.07% 13.32% 85.1% Small Blend Category Avg.* 17.77% 15.98% NA 89.9%+ 15.30% 12.74% NA 83.3%+ 13.03% 10.46% NA 80.3%+ Small Growth Category Avg.* 55.14% 51.90% NA 94.1%+ 20.86% 18.21% NA 87.3%+ 17.12% 14.79% NA 86.4%+
*Source: Morningstar, Inc. Morningstar listed the Fund in the Small Growth Category as of 6/30/00 but the Fund has also regularly appeared in the Small Blend Category so we are showing both. +Calculated by Wanger Asset Management using Morningstar data. "NA" indicates information not available from Morningstar. Morningstar does not provide after-tax w/ redemption returns. 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 6/30/00 [Pie chart] 13.6% Finance 24.6% Information Software & Services 11.2% Computer Related Hardware 6.9% 11.0% Consumer Telecom 3.3% Goods/Services Media 3.2% 8.8% Other* 6.0% Real Estate 11.7% Foreign Equities 7.6% Industrial Goods/Services 9.0% Energy/Minerals 7.7% Health Care *Other includes cash and other assets less liabilities of 7.2%. The Value of a $10,000 Investment in Acorn Fund June 10, 1970 through June 30, 2000 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) to the S&P 500 Stock Index. The S&P 500 provides a broad, market-weighted average of U.S. blue-chip company stock performance. The index is unmanaged and returns for both the index and the Fund include reinvested dividends and capital gains. 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. Small-cap stocks are often more volatile and less liquid than larger company stocks. Acorn Fund NAV on 06/30/00: $17.22 [GRAPH APPEARS HERE] Acorn Fund ($) S & P 500($) 6/10/70 $ 10,000.00 $ 10,000.00 6/30/70 $ 9,694.96 $ 9,819.82 $ 12,022.83 $ 11,481.19 12/31/70 $ 13,586.67 $ 12,676.21 $ 17,020.50 $ 13,905.67 $ 17,397.32 $ 13,928.19 $ 17,571.46 $ 13,846.05 12/31/71 $ 17,828.47 $ 14,489.93 $ 20,119.24 $ 15,323.26 $ 20,562.03 $ 15,425.28 $ 18,962.10 $ 16,029.41 12/31/72 $ 19,367.63 $ 17,241.65 $ 16,566.54 $ 16,399.05 $ 13,634.79 $ 15,453.10 $ 16,831.14 $ 16,196.34 12/31/73 $ 14,765.21 $ 14,708.53 $ 15,014.52 $ 14,293.85 $ 12,506.93 $ 13,212.77 $ 9,689.46 $ 9,888.71 12/31/74 $ 10,690.52 $ 10,816.11 $ 13,016.27 $ 13,298.89 $ 15,951.13 $ 15,341.81 $ 13,640.38 $ 13,660.57 12/31/75 $ 13,945.07 $ 14,842.34 $ 18,952.95 $ 17,065.45 $ 20,502.11 $ 17,486.75 $ 20,724.01 $ 17,819.29 12/31/76 $ 23,045.01 $ 18,394.28 $ 23,906.83 $ 17,024.38 $ 26,615.44 $ 17,587.44 $ 25,625.38 $ 17,097.24 12/31/77 $ 27,168.08 $ 17,077.37 $ 26,754.03 $ 16,234.76 $ 30,094.08 $ 17,616.59 $ 34,745.67 $ 19,142.82 12/31/78 $ 31,776.68 $ 18,199.52 $ 36,376.09 $ 19,492.58 $ 40,131.51 $ 20,023.85 $ 45,298.63 $ 21,555.38 12/31/79 $ 47,790.43 $ 21,585.85 $ 42,258.39 $ 20,696.87 $ 49,111.66 $ 23,489.67 $ 56,696.98 $ 26,124.80 12/31/80 $ 62,594.14 $ 28,602.28 $ 65,118.86 $ 28,997.09 $ 64,184.59 $ 28,330.68 $ 54,131.51 $ 25,431.90 12/31/81 $ 58,004.84 $ 27,195.28 $ 53,546.39 $ 25,206.68 $ 53,692.23 $ 25,066.24 $ 56,586.13 $ 27,953.10 12/31/82 $ 68,207.61 $ 33,053.79 $ 77,580.23 $ 36,364.60 $ 87,777.18 $ 40,401.43 $ 85,388.87 $ 40,347.11 12/31/83 $ 85,388.87 $ 40,510.07 $ 80,298.09 $ 39,538.95 $ 79,416.93 $ 38,524.11 $ 87,718.95 $ 42,257.55 12/31/84 $ 89,044.97 $ 43,051.14 $ 99,746.10 $ 47,004.50 $ 107,107.02 $ 50,451.78 $ 103,142.39 $ 48,386.33 12/31/85 $ 117,142.49 $ 56,710.39 $ 132,667.70 $ 64,708.53 $ 141,428.67 $ 68,522.79 $ 132,004.50 $ 63,742.71 12/31/86 $ 136,843.05 $ 67,294.65 $ 160,298.29 $ 81,664.02 $ 164,942.45 $ 85,763.12 $ 180,518.52 $ 91,420.24 12/31/87 $ 142,992.51 $ 70,828.03 $ 159,366.10 $ 74,860.89 $ 169,946.42 $ 79,847.64 $ 173,543.17 $ 80,117.91 12/31/88 $ 178,370.18 $ 82,591.41 $ 192,253.23 $ 88,447.27 $ 204,223.07 $ 96,254.64 $ 226,493.46 $106,562.00 12/31/89 $ 222,681.33 $108,761.26 $ 217,233.62 $105,490.20 $ 229,685.52 $112,125.07 $ 175,081.35 $ 96,715.69 12/31/90 $ 183,674.24 $105,385.53 $ 219,033.08 $120,692.90 $ 226,533.44 $120,416.00 $ 246,203.85 $126,856.12 12/31/91 $ 270,640.85 $137,492.05 $ 293,112.00 $134,018.28 $ 278,828.01 $136,567.30 $ 289,723.32 $140,877.05 12/31/92 $ 336,210.38 $147,927.93 $ 368,609.61 $154,428.99 $ 393,410.52 $155,181.51 $ 429,427.62 $159,193.16 12/31/93 $ 444,888.87 $162,881.56 $ 420,332.28 $156,703.76 $ 404,705.36 $157,363.54 $ 431,587.92 $165,056.97 12/31/94 $ 411,750.28 $165,031.80 $ 423,187.78 $181,100.95 $ 458,845.90 $198,387.65 $ 496,103.89 $214,154.74 12/31/95 $ 497,406.80 $227,046.90 $ 535,443.79 $239,231.58 $ 572,749.30 $249,969.53 $ 584,766.19 $257,697.40 12/31/96 $ 609,569.17 $279,177.27 $ 594,573.12 $286,661.37 $ 674,822.25 $336,707.74 $ 767,343.97 $361,926.34 12/31/97 $ 761,852.26 $372,319.82 $ 853,328.34 $424,256.76 $ 850,977.75 $438,265.77 $ 684,966.59 $394,671.44 12/31/98 $ 807,685.20 $478,724.17 $ 778,924.89 $502,575.52 $ 901,843.77 $537,999.47 $ 883,409.10 $504,403.82 12/31/99 $1,077,255.41 $579,455.48 $1,081,906.27 $592,744.17 6/30/2000 $1,062,104.69 $576,998.01 Fund Net Assets as of 6/30/00: $3,817.6 million Acorn Fund Top 10 Holdings SEI Investments 1.9% Mutual Fund Administration Harley-Davidson 1.8% Motorcycles & Related Merchandise AmeriCredit 1.7% Auto Lending Expeditors International of Washington 1.7% International Freight Forwarder Liberty Media Group, AT&T 1.7% Cable & Satellite Programming Myriad Genetics 1.6% Gene Discovery & Diagnostic Products International Game Technology 1.6% Slot Machines & Progressive Jackpots Serco Group (United Kingdom) 1.5% Facilities Management Dynegy 1.5% Natural Gas & Electric Processing, Production and Marketing First Health Group 1.4% PPO Network 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. 5 Acorn International >In a Nutshell [PHOTOS HERE] Acorn International had a rough second quarter, declining 14.2%. Year-to-date, we are down 3.8%, slightly behind the Lipper International Small Cap Funds Index and the EMI benchmark, but in line with the larger cap Lipper International Funds Index and the EAFE benchmark. The spring meltdown affected the portfolio particularly in Japan where many of our holdings had a higher correlation with the Nasdaq than we anticipated; and among the IT service stocks in Europe, where growth has slowed post-Y2K. A few Singapore names, Star Cruises in particular, returned to earth after remarkable runs last year. We did a lot of selling in March and April to lock in gains and reduce exposure to vulnerable sectors. On the other hand, our largest position in the Fund at quarter end, Li & Fung, doubled over the six months, giving us a welcome gain for the period of $70 million. We have given back some ground relative to the first quarter, but have preserved most of last year's 79.2% return. We are enjoying buying back positions at substantial discounts to where we sold them less than three months ago. While market corrections are unpleasant, they need to be seen in the context of what precedes them. The Fund enjoyed an exceptionally strong 1999, as evidenced by our trailing 12-month return of 47.6% through June 30, 2000. We have given back some ground relative to the first quarter, but have preserved most of last year's 79.2% return. We are enjoying buying back positions at substantial discounts to where we sold them less than three months ago (see box). Meanwhile, the world of equity investing outside the United States is changing faster than we ever imagined it would. In continental Europe alone, companies issued $153 billion worth of new equity last year, while the comparable figure for this year through June is $92 billion. A good chunk of this cash is funding young, fast-growing enterprises going public for the first time. Buyers of small-to mid-cap stocks, like Acorn International, should benefit from a larger pool of stocks from which to choose, and a growing interest by locals in owning stocks. As ever, we remain committed to finding the best companies in the world. Our philosophy is to own them through up and down market cycles, allowing value to build for shareholders over time (despite an occasional opportunistic trade!). Li & Fung first entered the Acorn International portfolio in 1994. Even before this year's 100% rise, we had made six times our original investment. No one can predict when any given stock will perform, but if our core holdings represent what we believe are high quality global companies with strong long- term prospects, the Fund should do just fine. /s/ Leah Joy Zell /s/ Margaret M. Forster Leah Joy Zell Margaret M. Forster Lead Portfolio Manager Co-Portfolio Manager U-Turn ------------------------------------------- UnitedGlobalCom owns cable television franchises in 23 countries, making it the largest broadband communication company outside the United States. It had been in the portfolio for more than five years until March, when we sold our stake because the valuation was too rich. In the "tech wreck" of April and May, we bought back more than we sold, at less than half the price. Since then, the company announced a deal with Liberty Media, involving the merger of cable assets in Europe and Latin America, leaving the combined entity with a stronger balance sheet and the ability to play a leading role in the ongoing consolidation of the cable industry overseas. Because of recent market volatility, short-term performance of the Fund or its portfolio holdings may be different than stated as of 6/30/00. 6 Acorn International >At a Glance Ticker Symbol: ACINX Pretax and After-tax Average Annual Total Returns >Through June 30, 2000
1 Year 5 Years -------------------------------------------- --------------------------------------------- After-tax w/ Tax After-tax w/ Tax Pretax After-tax redemption Efficiency Pretax After-tax redemption Efficiency -------------------------------------------------------------------------------------------------------------- Acorn International 47.57% 44.37% 30.20% 93.3% 20.61% 19.36% 16.94% 93.9% -------------------------------------------------------------------------------------------------------------- Foreign Stock Category Avg.* 27.08% 25.16% NA 92.9%+ 13.48% 11.84% NA 87.8%+ --------------------------------------------------------------------------------------------------------------
Life of Fund --------------------------------------------- After-tax w/ Tax Pretax After-tax redemption Efficiency ---------------------------------------------------------------- Acorn International 19.58% 18.74% 16.69% 95.7% ---------------------------------------------------------------- Foreign Stock Category Avg.* NA NA NA NA ----------------------------------------------------------------
*Source: Morningstar, Inc. +Calculated by Wanger Asset Management using Morningstar data. "NA" indicates information not available from Morningstar. Morningstar does not provide Life of Fund data or after-tax w/ redemption returns. 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 6/30/00 [PIE CHART] 19.0% Business Services 8.4% Financials 4.1% Health Care 10.7% Consumer Goods & Services 10.1% Broadcasting & Media Content 8.4% Industrials 5.5% Telecom 5.1% Other Industries 9.0% Technology Services 11.5% Other* 4.5% Computer Software 3.7% Computer Hardware *Other includes cash and other assets less liabilities. [GRAPH] The Value of a $10,000 Investment in Acorn International >September 23, 1992 through June 30, 2000 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 the EMI World ex-U.S. The EMI World ex-U.S. is Salomon Brothers' index of the bottom 20% of institutionally investable capital of non-U.S. countries. The index is unmanaged and returns for the index and Fund include reinvested dividends and capital gains. 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. Investments in foreign securities have special risks. Refer to your prospectus for details. Acorn International NAV as of 6/30/00: $32.82 Label Date Acorn International EMI (World ex-US) -------------------------------------------------------- 1 9/23/92 $10,000 $10,000 --------------------------------------------------- 2 9/30/92 $10,010 $10,053 --------------------------------------------------- 3 12/31/92 $10,690 $ 9,590 --------------------------------------------------- 4 3/31/93 $12,000 $11,027 --------------------------------------------------- 5 6/30/93 $12,920 $12,190 --------------------------------------------------- 6 9/30/93 $13,910 $12,938 --------------------------------------------------- 7 12/31/93 $15,940 $12,573 --------------------------------------------------- 8 3/31/94 $15,850 $13,698 --------------------------------------------------- 9 6/30/94 $15,550 $14,199 --------------------------------------------------- 10 9/30/94 $16,491 $14,099 --------------------------------------------------- 11 12/31/94 $15,334 $13,640 --------------------------------------------------- 12 3/31/95 $14,811 $13,556 --------------------------------------------------- 13 6/30/95 $15,727 $13,550 --------------------------------------------------- 14 9/30/95 $16,824 $14,086 --------------------------------------------------- 15 12/31/95 $16,703 $14,355 --------------------------------------------------- 16 3/31/96 $18,203 $15,179 --------------------------------------------------- 17 6/30/96 $19,593 $15,849 --------------------------------------------------- 18 9/30/96 $19,362 $15,491 --------------------------------------------------- 19 12/31/96 $20,153 $15,393 --------------------------------------------------- 20 3/31/97 $20,585 $15,111 --------------------------------------------------- 21 6/30/97 $21,808 $16,196 --------------------------------------------------- 22 9/30/97 $21,660 $15,542 --------------------------------------------------- 23 12/31/97 $20,190 $13,946 --------------------------------------------------- 24 3/31/98 $23,857 $16,345 --------------------------------------------------- 25 6/30/98 $24,335 $16,287 --------------------------------------------------- 26 9/30/98 $20,428 $13,822 --------------------------------------------------- 27 12/31/98 $23,305 $15,641 --------------------------------------------------- 28 3/31/99 $23,574 $15,864 --------------------------------------------------- 29 6/30/99 $27,222 $16,839 --------------------------------------------------- 30 9/30/99 $29,486 $17,694 --------------------------------------------------- 31 12/31/99 $41,761 $19,312 --------------------------------------------------- 32 3/31/2000 $46,808 $19,705 --------------------------------------------------- 33 6/30/2000 $40,171 $19,361 --------------------------------------------------- Fund Net Assets as of 6/30/00: $2,983.7 million >Acorn International Top 10 Holdings Li & Fung (Hong Kong) 3.7% Sourcing of Consumer Goods Serco Group (United Kingdom) 3.2% Facilities Management Amdocs (Israel) 2.5% Telecommunications Billing & Customer Care Software ERG (Australia) 2.1% Smart Card Systems for Public Transportation Venture Manufacturing (Singapore) 2.0% Electronic Manufacturing Services Banca Fideuram (Italy) 2.0% Life Insurance & Mutual Funds Capita Group (United Kingdom) 1.7% Outsourcing Services Star Cruises (Singapore) 1.7% Cruise Line Dimension Data (South Africa) 1.7% Networks & Computer Services Rhoen Klinikum (Germany) 1.6% Hospital Management The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings. 7 In a Nutshell [PHOTO APPEARS HERE] Hitting its first rough patch since its launch four years ago, Acorn USA fell 15.1% during the quarter vs. the Russell 2000, which dropped 3.8%. While short- term performance lagged, the Fund's 14.6% return outscores the Russell's 13.5% gain since its inception (9/4/96 - 6/30/00). What happened? As you might expect, the (mis)behavior of our technology holdings hurt the Fund's overall performance. In an unfortunate reversal, the tech names that have punished us so far in 2000 are the same stocks that pushed the Fund to the top of our peer group during the second half of last year. Despite the wrenching readjustment we've been through, many of our top holdings are strong growth companies trading at record-low valuations. When investors start looking for quality, we think these names should get attention, pushing valuations back upward. Internet businesses are difficult to value so most investors let the stock market dictate value and follow its lead. We know Internet stocks are worth something. Our goal is to buy them at reasonable values. We paid reasonable prices for the "real world" businesses of Micros Systems, Project Software and Aztec Technology, without having to pay much for the upside potential of their Internet ventures. During the Internet rally in the second half of 1999, these companies doubled or tripled as the market fell in love with every Internet possibility. Last quarter, however, the romance was over. These same businesses were hurt by their Internet association and are essentially back where they started. In addition, revenue shortfalls announced by Micros Systems, RCN and Sykes Enterprises crushed their stock prices. While our technology exposure has hurt Fund performance, we want to assure shareholders that we are not being overly aggressive in this area. As of June 30, 24% of the Fund's assets were invested in technology stocks, with an additional 12% in communications stocks, some of which mimic the techs (RCN, a new age fiber optics telecom network) and some of which act nothing like a tech stock (Commonwealth Telephone, a local phone company). Overall, our tech weighting has been, and remains, close to the small-cap benchmark weighing. Despite the wrenching readjustment we've been through, many of our top holdings are strong growth companies trading at record-low valuations. When investors start looking for quality, we think these names should get attention, pushing valuations back upward. /s/ Robert A. Mohn Robert A. Mohn Lead Portfolio Manager -------------------------------------------------------------------------------- It's Electric! ------------------ Dynegy was a thinly-traded natural gas processing company (going by the name of NGC Corp) when we started buying it in 1996. Already a force in the gas trading business, Dynegy had grand designs on the much larger and newly deregulated electricity industry. Dynegy had the trading smarts to tackle the complexities of the U.S. electricity market but needed its own source of electricity. It got that last year by acquiring Illinova, an Illinois electric utility. Wall Street ignored Dynegy's deft strategic move, allowing our energy analyst, Jason Selch, to buy more of the undervalued stock late in 1999. The market finally saw the light this year and recognized Dynegy as a true electric powerhouse, doubling the stock price. -------------------------------------------------------------------------------- Because of recent market volatility, short-term performance of the Fund or its portfolio holdings may be different than stated as of 6/30/00. 8 At a Glance Ticker Symbol: AUSAX Pretax and After-tax Average Annual Total Returns -------------------------------------------------------------------------------- Through June 30, 2000
----------------------------------------------------------------------------------------------------------------------- 1 Year 3 Years Life of Fund ----------------------------------------------------------------------------------------------------------------------- After- After-tax Tax After- After-tax Tax After- After-tax Tax Pretax tax redemption Efficiency Pretax tax redemption Efficiency Pretax tax redemption Efficiency ------------------------------------------------------------------------------------------------------------------------------------ Acorn USA -4.62% -6.57% -0.67% NM 8.11% 6.43% 6.39% 79.3% 14.59% 13.19% 11.90% 90.4% ------------------------------------------------------------------------------------------------------------------------------------ Small Blend Category Avg.* 17.77% 15.98% NA 89.9%+ 10.08% 8.20% NA 81.3%+ NA NA NA NA ------------------------------------------------------------------------------------------------------------------------------------
*Source: Morningstar, Inc. +Calculated by Wanger Asset Management using Morningstar data. "NM" indicates data is not meaningful because returns were negative. "NA" indicates information not available from Morningstar. Morningstar does not provide Life of Fund data or after-tax w/ redemption returns. 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 6/30/00 [Pie Chart Appears Here] 48.0% Information Software & Services 9.2% Mobile Communications 9.2% Instrumentation 6.8% Computer Related Hardware 7.5% Business Info & Marketing Services 5.7% Computer Services 3.9% Telecom 3.4% Media 2.3% 11.0% Other* 4.9% Consumer Goods/Services 10.8% Finance 9.5% Energy/Minerals 8.1% Industrial Goods/Services 7.7% Health Care *Other includes cash and other assets less liabilities of 7.9%. -------------------------------------------------------------------------------- [GRAPH] The Value of a $10,000 Investment in Acorn USA -------------------------------------------------------------------------------- >September 4, 1996 through June 30, 2000 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) to the Russell 2000 Index. The Russell 2000 is formed by taking the 3,000 largest U.S. companies and eliminating the largest 1,000, leaving a market capitalization- weighted index of 2,000 small companies. The index is unmanaged and returns for both the index and the Fund include reinvested dividends and capital gains. 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. Small-cap stocks are often more volatile and less liquid than larger company stocks. Acorn USA NAV as of 6/30/00: $13.74 Lable A B ------------------------------------------------------- Date Acorn USA ($) Russell 2000 ($) 9/4/96 $ 10,000 $ 10,000 9/30/96 $ 10,720 $ 10,360 12/31/96 $ 11,650 $ 10,899 3/31/97 $ 11,480 $ 10,335 6/30/97 $ 13,320 $ 12,011 9/30/97 $ 15,340 $ 13,798 12/31/97 $ 15,413 $ 13,335 3/31/98 $ 17,401 $ 14,678 6/30/98 $ 17,525 $ 13,993 9/30/98 $ 14,151 $ 11,174 12/31/98 $ 16,305 $ 12,997 3/31/99 $ 15,016 $ 12,292 6/30/99 $ 17,650 $ 14,203 9/30/99 $ 16,866 $ 13,305 12/31/99 $ 20,059 $ 15,759 3/31/2000 $ 19,820 $ 16,876 4/30/2000 $ 17,568 $ 15,860 5/31/2000 $ 16,526 $ 14,936 6/30/2000 $ 16,834 $ 16,238 ------------------------------------------------------- -------------------------------------------------------------------------------- Fund Net Assets as of 6/30/00: $305.0 million -------------------------------------------------------------------------------- >Acorn USA Top 10 Holdings Telephone and Data Systems 6.1% Cellular & Telephone Services Dynegy 4.0% Natural Gas & Electric Processing, Production and Marketing JDA Software 3.8% Applications/Software & Services for Retailers First Health 3.7% PPO Network Perkin Elmer 3.4% Analytical Instruments for Biotech/Telecom AmeriCredit 3.4% Auto Lending Tektronix 3.4% Analytical Instruments Micros Systems 3.2% Information Systems for Restaurants & Hotels Conectiv 2.7% Electric Utility Lincare Holdings 2.3% Home Health Care Services The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings. -------------------------------------------------------------------------------- 9 Acorn Foreign Forty >In a Nutshell [PHOTO APPEARS HERE] U.S. technology market volatility caused tremors around the globe during the second quarter creating a challenging investment environment for Acorn Foreign Forty. The Fund dropped 14.0% vs. the EAFE Index, off 4.0%, and the SSB World ex U.S. Cap Range Index, down 0.5%. While the Fund's quarterly performance lagged its benchmarks, one-year and life-of-fund returns were still well ahead of comparative indexes (see Page 1 for additional performance information). Recent additions to Acorn Foreign Forty served the Fund well during the quarter. ERG Limited, an Australian producer of smart cards used in public transportation and telecommunications, was up nearly 74%. Newcomer Saipem, an Italian provider of offshore oil services, was up 31%, and Computershare, an Australian financial software company, saw a 30% gain. Among our veteran holdings, SSL International, a UK health care provider, rose 23% and Pargesa, a Swiss conglomerate, gained nearly 21%. Meanwhile, strong long-term performers gave back some ground over the three months. Canada's ATI Technologies, a manufacturer of graphic chips, plummeted nearly 52% after announcing component shortages that would keep it from meeting earnings estimates. Telecommunication stocks also declined, hurting UK telecom company Thus, off 46%, and Japanese call center operator Bellsystem24, down 42%. Singapore-based Star Cruises hit choppy water, sinking nearly 40% on news of slowing demand across the cruise industry. However, we remain optimistic about Star's Asian prospects. While this was a tough quarter for the Fund, we are heartened by the rapid expansion taking place in international equity markets and by the Fund's strong finish (up 4.9% in June). We believe the quarter's corrections were overdue and that a renewed emphasis on valuation will become increasingly important. While this was a tough quarter for the Fund, we are heartened by the rapid expansion taking place in international equity markets and by the Fund's strong finish (up 4.9% in June). Making the Internet As an Internet infrastructure company like Cisco, Sun or Nortel, how do you grow when your manufacturing plants aren't keeping pace with demand? You form partnerships with companies that are focused on electronics manufacturing and outsource production to them. One of our favorite names in this business is Canada's Celestica. The third largest EMS (Electronic Manufacturing Services) company in the world, its revenues are expected to exceed $7 billion this year. The EMS industry is changing the landscape for technology and telecommunications manufacturing, allowing companies like Cisco to focus on what they do best: research and development, acquiring new technologies and marketing. Celestica has the opportunity to provide manufacturing services to a wide range of great companies, growing with these companies and their products. Recently, large telecom firms (Lucent, Nortel) have begun to outsource production to EMS companies, providing a major source of new growth. /s/ Marcel P. Houtzager /s/ Roger Edgley ------------------------ ------------------------------ Marcel P. Houtzager Roger Edgley Co-Portfolio Manager Co-Portfolio Manager Acorn Foreign Forty is a non-diversified fund. This may make the fund's returns more volatile than a more diversified fund. Because of recent market volatility, short-term performance of the Fund or its portfolio holdings may be different than stated as of 6/30/00. 10 Acorn Foreign Forty >At a Glance Ticker Symbol: ACFFX Pretax and After-tax Average Annual Total Returns -------------------------------------------------------------------------------- >Through June 30, 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 51.43% 51.02% 31.25% 99.2% 53.29% 52.94% 43.43% 99.3% --------------------------------------------------------------------------------------------------------------------------- Foreign Stock Category Avg.* 27.08% 25.16% NA 92.9%+ NA NA NA NA ----------------------------------------------------------------------------------------------------------------------------
*Source: Morningstar, Inc. +Calculated by Wanger Asset Management using Morningstar data. "NA" indicates information not available from Morningstar. Morningstar does not provide Life of Fund data or after-tax w/ redemption returns. 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 6/30/00 [PIE CHART] 0.9% Energy & Minerals 16.1% Finance 2.3% Other* 10.3% Consumer Goods/Services 58.9% Information 8.6% Industrial Telephone Services 10.8% Goods/Services Computer Services 7.3% Software & Services 5.0% TV Broadcasting 11.7% 2.9% Health Care Transaction Processors 6.7% Business Software 7.9% Telecom 5.5% Computer Related Hardware 4.0% *Other includes cash and other assets less liabilities. -------------------------------------------------------------------------------- The Value of a $10,000 Investment in Acorn Foreign Forty >November 23, 1998 through June 30, 2000 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) to the EAFE Index. 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 and Fund returns include reinvested dividends and capital gains. 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. Investments in foreign securities have special risks. Refer to your prospectus for details. Acorn Foreign Forty NAV on 6/30/00: $19.67 [GRAPH APPEARS HERE] Label A B ------------------------------------------------------------------ Label Date Acorn Foreign Forty($) EAFE ($) ------------------------------------------------------------------ 1 Nov 23, 98 $10,000 $10,000 2 Dec 31, 98 $11,000 $10,411 3 Jan 31, 99 $11,790 $10,381 4 Feb 28, 99 $11,590 $10,133 5 Mar 31, 99 $11,980 $10,556 6 Apr 30, 99 $12,240 $10,980 7 May 30, 99 $12,170 $10,418 8 Jun 30, 99 $13,110 $10,825 9 Jul 31, 99 $13,511 $11,146 10 Aug 30, 99 $13,771 $11,187 11 Sep 30, 99 $13,621 $11,300 12 Oct 31, 99 $14,132 $11,723 13 Nov 30, 99 $16,999 $12,130 14 Dec 31, 99 $19,975 $13,219 15 Jan 31, 2000 $19,665 $12,379 16 Feb 29, 2000 $24,245 $12,712 17 Mar 31, 2000 $23,093 $13,205 18 Apr 30, 2000 $21,258 $12,510 19 May 31, 2000 $18,923 $12,204 20 Jun 30, 2000 $19,853 $12,682 ------------------------------------------------------------------ Fund Net Assets as of 6/30/00: $143.8 million >Acorn Foreign Forty Top 10 Holdings Amdocs (Israel) 5.6% Telecommunications Billing & Customer Care Software ERG (Australia) 4.3% Smart Card Systems for Public Transportation Venture Manufacturing (Singapore) 4.0% Electronic Manufacturing Services Audiofina (Belgium) 3.7% TV & Radio Stations Star Cruises (Singapore) 3.6% Cruise Line Comverse Technology (Israel) 3.6% Voicemail & Related Systems Banca Fideuram (Italy) 3.5% Life Insurance & Mutual Funds Irish Life & Permanent (Ireland) 3.2% Life Insurance Netcom (Sweden) 3.1% Telecommunication Services Celestica (Canada) 3.0% Electronic Manufacturing Services The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings. 11 Acorn Twenty >In a Nutshell [PHOTO APPEARS HERE] Acorn Twenty finished the second quarter up 1.1%, ahead of the S&P MidCap 400's 3.3% loss and the S&P 500's 2.7% drop. The Fund's concentrated strategy drove the quarter's outperformance with four stocks posting gains of 30% or better. Several of the Fund's winners shared a common theme: They provide tools to high- growth industries like technology, telecommunications, and the life sciences. Several of the Fund's winners shared a common theme: They provide tools to high-growth industries like technology, telecommunications, and the life sciences. Techne, for example, rose 88% during the quarter as investors realized biotech and drug companies will likely increase spending on the company's cytokines (cellular proteins used to test drug/cell interaction) and reagents (enzymes used in chemical reactions as catalysts) now that the human genome has been sequenced. Similarly, Waters gained 31% as growth accelerated in its mass spectrometry (a devise used to measure the molecular weight of a substance using light) business due to increased protein analysis following the gene sequencing breakthrough. Tektronix, a winner last quarter, rose 32% after reporting strong results in its test and measurement instrument business, which sells products to the high-growth technology and telecommunications industries. Two significant losers during the quarter were Reynolds & Reynolds, a manufacturer of business forms and computer systems used by car dealers, and H&R Block, a familiar name in tax preparation services. Reynolds & Reynolds lost 32% after announcing a dilutive equity transaction with partner General Motors. H&R Block fell 27% on disappointing earnings news that followed this year's tax season. Both of these names have strong franchises in growing industries and generate significant cash flow. Therefore, we are willing to be patient until the market comes to appreciate the value of their businesses. While the overall market was shaken by volatility in the technology sector during the quarter, Acorn Twenty continues to follow the "downstream from technology" approach. This theme is not only prevalent in stocks mentioned previously, but also in more prosaic industries. Herman Miller, for example, manufactures office furniture, hardly a high-tech industry. Miller does, however, use technology extensively to provide customers with three-dimensional product models on its web page. By taking advantage of technology's increasing power and decreasing price, Miller has become the premier company within its industry. Ending the quarter on a high note, Acorn Twenty was up 9.3% in June. The market appears to be favoring mid-cap stocks, as this group has outperformed large- and small-cap stocks so far this year.* This environment should prove favorable to the Fund's concentrated, mid-cap approach going forward. /s/ John H. Park John H. Park Lead Portfolio Manager -------------------------------------------------------------------------------- Hidden Earnings ------------------------ Uncovered Techne is the leading manufacturer of cytokines (cellular proteins used to test drug/cell interaction) and reagents (enzymes used in chemical reactions as catalysts) used by biotechnology and pharmaceutical companies to run tests in drug manufacturing. Techne is highly profitable with 76% gross margins, lots of free cash and sales growth of 16% per year. In 1998, Techne bought the research products business of Genzyme for $42 million. While most companies amortize goodwill over 20 or more years, Techne's conservative management amortizes goodwill over six years. Thus, earnings per share were reduced by 30 cents. We added back the amortization expense in our analysis and concluded that Techne was reasonably priced given its strong growth prospects. The stock has more than doubled since our initial purchase and is the Fund's second largest position. -------------------------------------------------------------------------------- *As of June 30, 2000, the S&P MidCap 400 was up 8.97% while the large-cap focused S&P 500 was down 0.42% and the small-cap Russell 2000 Index posted a 3.04% return. Because of recent market volatility, short-term performance of the Fund or its portfolio holdings may be different than stated as of 6/30/00. 12 Acorn Twenty >At a Glance Ticker Symbol:ACTWX
Pretax and After-tax Average Annual Total Returns -------------------------------------------------------------------------------------------------------------------------- >Through June 30, 2000 1 Year Life of Fund After- After-tax w/ Tax After- After-tax w/ Tax Pretax Tax redemption Efficiency Pretax Tax redemption Efficiency --------------------------------------------------------------------------------------------------------------------------- Acorn Twenty 9.81% 7.55% 6.83% 77.0% 25.06% 23.45% 19.82% 93.6% --------------------------------------------------------------------------------------------------------------------------- Mid Cap Blend Category Avg.* 11.87% 9.48% NA 79.9%(+) NA NA NA NA ---------------------------------------------------------------------------------------------------------------------------
*Source: Morningstar, Inc. +Calculated by Wanger Asset Management using Morningstar data. "NA" indicates information not available from Morningstar. Morningstar does not provide Life of Fund data or after-tax w/ redemption returns. 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 6/30/00 [Pie Chart appears here] 5.6% Energy/Minerals 5.7% Industrial Goods/Services 6.1% Finance 13.9% Consumer Goods/Services 14.8% Health Care 2.3% Other* 51.6% Information Instrumentation 19.0% Business Info. & Marketing Services 11.7% Telecom 7.4% Contract Manufacturing 6.4% Television Programming 3.5% Computer Related Hardware 3.6% *Cash and other assets less liabilities. -------------------------------------------------------------------------------- The Value of a $10,000 Investment in Acorn Twenty >November 23, 1998 through June 30, 2000 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) 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 for the index and the Fund include reinvested dividends and capital gains. 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. Acorn Twenty is a non-diversified fund. This may make fund returns more volatile than a more diversified fund. Acorn Twenty NAV on 6/30/00: $13.27 [Graph appears here]
---------------------------------------------------------- ---------------------------------------------------------- Date Acorn Twenty($) S&P MidCap 400 ($) ---------------------------------------------------------- Nov 23, 98 $10,000 $10,000 ---------------------------------------------------------- Dec 31, 98 $10,710 $11,109 ---------------------------------------------------------- Jan 31, 99 $11,000 $10,676 ---------------------------------------------------------- Feb 28, 99 $10,710 $10,117 ---------------------------------------------------------- Mar 31, 99 $11,480 $10,400 ---------------------------------------------------------- Apr 30, 99 $12,710 $11,220 ---------------------------------------------------------- May 31, 99 $12,730 $11,270 ---------------------------------------------------------- Jun 30, 99 $13,040 $11,872 ---------------------------------------------------------- Jul 30, 99 $13,190 $11,620 ---------------------------------------------------------- Aug 31, 99 $12,060 $11,222 ---------------------------------------------------------- Sep 30, 99 $12,110 $10,875 ---------------------------------------------------------- Oct 31, 99 $12,970 $11,429 ---------------------------------------------------------- Nov 30, 99 $13,250 $12,029 ---------------------------------------------------------- Dec 31, 99 $13,700 $12,744 ---------------------------------------------------------- Jan 31, 2000 $13,474 $12,385 ---------------------------------------------------------- Feb 29, 2000 $13,555 $13,252 ---------------------------------------------------------- Mar 31, 2000 $14,171 $14,361 ---------------------------------------------------------- Apr 30, 2000 $13,464 $13,860 ---------------------------------------------------------- May 31, 2000 $13,100 $13,687 ---------------------------------------------------------- Jun 30, 2000 $14,320 $13,888 ----------------------------------------------------------
Fund Net Assets as of 6/30/00: $61.5 million >Acorn Twenty Top 10 Holdings Tektronix 10.8% Analytical Instruments Techne 8.7% Cytokines, Antibodies, other Reagents for Life Sciences Jabil Circuit 6.4% Electronic Manufacturing Services SEI Investments 6.1% Mutual Fund Administration Dynegy 5.6% Natural Gas & Electric Processing, Production and Marketing First Health 5.3% PPO Network Herman Miller 5.3% Office Furniture Waters 4.7% Chromatography, Mass Spectrometry, Thermo Analysis Harley-Davidson 4.6% Motorcycles & Related Merchandise Pinnacle Holdings 4.6% Towers for Cellular, PCS & Paging 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 FundOs holdings. 13 Acorn Fund >Major Portfolio Changes in the Second Quarter Number of Shares 3/31/00 6/30/00 Additions ---------------------------------------------------------- Information Acxiom 350,000 550,000 Choicepoint 356,000 416,000 Classic Communications 600,000 800,000 ClickSoftware Technologies 0 846,000 Commonwealth Telephone 354,000 520,000 Dionex 282,000 342,000 Getty Images 800,000 1,010,000 Infomedia (Australia) 0 202,000 Information Holdings 400,000 475,000 Insight Communications 0 200,000 JD Edwards 0 535,000 Kronos 713,000 750,000 MAPICS 300,000 1,450,000 MDSI Mobil Data Solutions (Canada) 0 140,000 Mediacom Communications 0 1,000,000 Micros Systems 765,000 895,000 Navigant Consulting 900,000 1,350,000 Nelvana (Canada) 0 360,000 Objective System Integrators 0 45,000 Price Communications 420,000 470,000 Salem Communications 500,000 750,000 Startec Global Communications 230,000 430,000 TeleSpectrum Worldwide 765,000 1,000,000 THQ 312,000 876,000 Tidel Technologies 400,000 658,000 Health Care ---------------------------------------------------------- Syncor International 0 60,000 ---------------------------------------------------------- Consumer Goods/Services Airtours (United Kingdom) 1,330,000 1,700,000 Calloway Golf 200,000 400,000 Carnival 1,500,000 1,600,000 Gadzooks 750,000 875,000 Hunter Douglas (Netherlands) 312,439 365,000 Isle of Capri Casino 934,000 1,140,000 ITT Educational Services 1,000,000 1,175,000 Jones Apparel 900,000 1,020,000 Helen of Troy 1,190,000 2,126,000 Hon Industries 130,000 500,000 Michaels Stores 0 110,000 Pinnacle Entertainment 360,000 420,000 Royal Caribbean Cruises 0 500,000 ---------------------------------------------------------- Finance Affiliated Managers Group 350,000 800,000 CCB Financial 198,000 248,000 Chittenden 414,000 484,000 Neuberger Berman 742,000 800,000 TCF Financial 974,000 1,026,000 ---------------------------------------------------------- Industrial Goods/Services Advanced Lighting Technologies 350,000 435,000 EGL 0 100,000 Forward Air 300,000 355,000 Spartech 245,000 476,000 ---------------------------------------------------------- Energy/Minerals Atmos Energy 600,000 700,000 Basin Exploration 380,000 460,000 Canadian Hunter Exploration (Canada) 0 500,000 Carbo Ceramics 0 180,000 Cross Timbers Oil 1,715,000 2,363,000 Enerflex Systems (Canada) 0 430,000 Evergreen Resources 310,000 620,000 Newpark Resources 2,000,000 2,730,000 Pennaco Energy 450,000 876,000 Precision Drilling (Canada) 730,000 800,000 Saipem (Italy) 2,250,000 3,310,000 US Aggregates 500,000 600,000 ----------------------------------------------------------- Other Industries CH Energy 130,000 200,000 General Growth Properties 200,000 300,000 SL Green Realty 730,000 775,000 Utilicorp United 500,000 875,000 14 Principal Amount or Number of Shares 3/31/00 6/30/00 Sales -------------------------------------------------------------------------- Information Activision 300,000 150,000 Atos (France) 230,000 180,000 Bellsystem24 (Japan) 5,000 0 Data Transmission Network 819,000 0 Entra Data (Sweden) 100,000 0 Getronics (Netherlands) 171,084 425,000 (includes effect of 3 for 1 stock split) Metrika Systems 232,000 0 Natsteel Electronics (Singapore) 2,000,000 1,000,000 Onix Systems 266,000 0 Pinnacle Holdings 350,000 300,000 RCN 584,000 250,000 Softbank (Japan) 132,000 360,000 (includes effect of 200% stock dividend) Thermo Optek 265,000 0 Thermo Optek, 5% Note Due 10/15/00 $5,000,000 0 Thermo Quest 613,000 0 Thermoquest, 5% Note Due 8/15/00 $1,500,000 0 WM Data Nordic (Sweden) 1,000,000 4,500,000 (includes effect of 5 for 1 stock split) Young Broadcasting 772,000 650,000 -------------------------------------------------------------------------- Health Care Acuson 443,000 0 CuraGen 342,000 0 First Health 1,952,000 1,668,000 Genome Therapeutics 380,000 0 Lincare Holdings 2,000,000 730,000 -------------------------------------------------------------------------- Consumer Goods/Services Borders Group 1,700,000 1,561,000 MotherNature.com 156,000 0 National RV Holdings 110,000 0 Panera Bread 400,000 0 Quiksilver 325,000 50,000 Unifi 600,000 450,000 -------------------------------------------------------------------------- Finance Creditrust 700,000 0 Pioneer Group 730,000 624,000 UICI 863,000 558,000 United Fire & Casualty 266,000 0 -------------------------------------------------------------------------- Industrial Goods A M Castle 95,000 0 Aeroporti di Roma (Italy) 1,000,000 0 -------------------------------------------------------------------------- Energy/Minerals Canadian Natural Resources (Canada) 95,000 0 Devon Energy 600,000 550,000 Equitable Resources 900,000 754,000 Hanover Compressor 160,000 150,000 (includes effect of 2 for 1 stock split) Ulster Petroleums (Canada) 550,000 0 15 >Statement of Investments (unaudited) June 30, 2000 Number of Shares Value (000) ------------------------------------------------------------------------ Number of Shares Value (000) ------------------------------------------------------------------------ Common Stocks and Other Equity-Like Securities: 92.8% Information: 29.1% Media >Broadcasting: 0.7% 650,000 Young Broadcasting (b) $ 16,697 Television Stations 750,000 Salem Communications (b) 6,961 Radio Stations for Religious Programming 400,000 Shop at Home (b) 1,869 Television Home Shopping Network 100,000 Cumulus Media (b) 912 Radio Stations in Small Cities ------------------------------------------------------------------------ 26,439 >Television Programming/CATV: 3.1% 2,600,000 Liberty Media Group, AT&T 63,050 Cable & Satellite Programming 1,000,000 Mediacom Communications (b) 15,375 Cable Television Franchises 500,000 Corus Entertainment (Canada) (b) 13,329 CATV Programming & Radio Stations 600,000 Playboy Enterprises (b) 7,725 CATV & Satellite Programming, Publishing 800,000 Classic Communications (b) 7,150 Cable Television in Rural Areas 360,000 Nelvana (Canada) (b) 5,979 Cartoons & Children's Books 200,000 Insight Communications (b) 3,125 CATV Franchises in MidWest 700,000 Cinar (Canada) (b) 2,450 Children's TV Programming ------------------------------------------------------------------------ 118,183 Telecommunications >Telecommunications/Wireline Communications: 1.4% 520,000 Commonwealth Telephone (b) 24,472 Rural Phone Franchises & CLEC 300,000 NTL (United Kingdom) (b) 17,963 Voice, Video & Data Services 250,000 RCN (b) 6,344 Metro Market CLEC: Voice, Video & Internet Services 430,000 Startec Global Communications (b) 4,425 International Telecommunications ------------------------------------------------------------------------ 53,204 >Mobile Communications: 2.2% 450,000 Telephone and Data Systems 45,113 Cellular & Telephone Services 300,000 Pinnacle Holdings (b) 16,200 Towers for Cellular, PCS & Paging 355,000 COMARCO (b) (c) 11,537 Wireless Network Testing 470,000 Price Communications (b) 11,074 Cellular Telephone Services ------------------------------------------------------------------------ 83,924 >Telecommunications Equipment: 0.2% 658,000 Tidel Technologies (b) 6,539 ATM Machines ------------------------------------------------------------------------ Computer Related Hardware >Computer Hardware/Related Systems: 1.5% 550,000 American Power Conversion (b) $ 22,447 Uninterruptable Power Systems 750,000 Kronos (b) (c) 19,500 Labor Management Solutions 895,000 Micros Systems (b) (c) 16,613 Information System for Restaurants & Hotels ------------------------------------------------------------------------ 58,560 >Gaming Equipment: 2.8% 2,342,000 International Game Technology (b) 62,063 Slot Machines & Progressive Jackpots 500,000 Anchor Gaming (b) 23,969 Slot Machines & Casinos 5,800,000 Aristocrat Leisure (Australia) 19,675 Slot Machines ------------------------------------------------------------------------ 105,707 >Contract Manufacturing: 1.7% 500,000 Solectron (b) 20,938 Electronic Manufacturing Services 400,000 Jabil Circuit (b) 19,850 Electronic Manufacturing Services 350,000 Applied Power 11,725 Electronic Enclosures & Industrial Products 70,000 Plexus (b) 7,910 Electronic Manufacturing Services 1,000,000 Natsteel Electronics (Singapore) 3,065 Electronic Manufacturing Services ------------------------------------------------------------------------ 63,488 >Instrumentation: 1.5% 680,000 Varian (b) 31,365 Analytical Instruments 480,000 Mettler Toledo (b) 19,200 Laboratory Equipment 342,000 Dionex (b) 9,148 Ion & Liquid Chromatography ------------------------------------------------------------------------ 59,713 Software/Services >Business Software: 2.0% 1,075,000 Systems & Computer Technology (b) 21,500 Enterprise Software & Services 876,000 JDA Software Group (b) 16,808 Applications/Software & Services for Retailers 295,000 Hyperion Solutions (b) 9,569 Analytical Application Software 1,450,000 MAPICS (b) (c) 8,338 Mid Market ERP Systems 535,000 JD Edwards (b) 8,058 Mid Market ERP Software 846,000 ClickSoftware Technologies (b) 5,922 Service Chain Optimization Software 556,000 Indus International (b) 4,761 Enterprise Asset Management Software 45,000 Objective System Integrators (b) 481 Telecom Network Management ------------------------------------------------------------------------ 75,437 16 Principal Amount or Number of Shares Value (000) ------------------------------------------------------------------------ Number of Shares Value (000) >Consumer Software: 0.4% 876,000 THQ (b) $ 10,676 Entertainment Software $ 6,500,000 Activision, 6.75% Note Due 1/1/05 4,290 150,000 Activision (b) 975 Entertainment Software 200,000 3DO Company (b) 1,569 Entertainment Software ------------------------------------------------------------------------ 17,510 >Computer Services: 3.0% 4,500,000 WM Data Nordic (Sweden) 24,883 Computer Services/Consulting 180,000 Atos (France) (b) 16,910 Computer Services/Transaction Processing 400,000 American Management Systems (b) 13,131 Software Development Services 800,000 Sykes Enterprises (b) 10,300 Call Center Services 1,000,000 Dimension Data (South Africa) (b) 8,274 Networks & Computer Services 950,000 RCM Technologies (b) (c) 7,006 Technology Staffing Services 425,000 Getronics (Netherlands) 6,580 Computer Services/Consulting 400,000 Pomeroy Computer Resources (b) 5,900 Network Integration Services 1,000,000 TeleSpectrum Worldwide (b) 4,563 Call & Web Center Services 500,000 Cambridge Technology (b) 4,359 Software Implementation Services 1,500,000 Aztec Technology Partners (b) (c) 3,281 Application Development & Maintenance Services 640,000 Computer Task Group 3,240 Application Development & Staffing Services 140,000 MDSI Mobile Data Solutions (Canada) (b) 3,220 Mobile Workforce Management Software 109,000 Meta Group (b) 2,098 IT Publications & Consulting Services 214,000 Analysts International 1,993 Technology Staffing Services ------------------------------------------------------------------------ 115,738 >Business Information/Marketing Services/Publishing: 4.0% 1,010,000 Getty Images (b) 37,433 Photographs for Publications & Electronic Media 1,100,000 PRIMEDIA (b) 25,025 Specialty Magazines & Other Publications 416,000 Choicepoint (b) 18,512 Fraud Protection Information 475,000 Information Holdings (b) 17,575 Scientific & Medical Publications, Patent Information 2,500,000 InfoUSA (b) 16,250 Business Data for Sales Leads 550,000 Acxiom (b) 14,987 Database Marketing Services 445,000 West Teleservices (b) 11,264 Customer Care & Sales Support 1,350,000 Navigant Consulting (b) $ 5,738 Consulting Firm 200,000 Bell & Howell (b) 4,850 Information Services for Education & Automotive Markets 202,000 Infomedia (Australia) (b) 121 Publisher of Electronic Catalog for Auto Parts ------------------------------------------------------------------------ 151,755 >Internet: 2.1% 360,000 Softbank (Japan) 48,996 Leading Internet Company in Japan 225,000 MasTec (b) 8,592 Telecom Infrastructure Construction 100,000 RSA Security (b) 6,925 Enterprise Security Software 2,683 Bigfoot International (b) (c) 4,024 263,158 Bigfoot International, Series A (b) (c) 2,500 Internet Direct Marketing 496,000 Online Resources (b) 3,193 Internet Banking Technology 197,725 Internet Commerce (b) 2,695 E-Commerce Service Network 303,376 NeoPlanet, Series A (b) 2,641 Web Browser 47,855 GIGA (b) 263 29,714 GIGA Warrants (b) 10 Data on Information Technology 20,000 Navidec (b) 178 Internet Computer Services ------------------------------------------------------------------------ 80,017 >Electronics Distribution: 0.6% 890,000 Pioneer-Standard Electronics 13,128 Component & Computer Distribution 300,000 Kent Electronics (b) 8,944 Component Distribution & Contract Assembly ------------------------------------------------------------------------ 22,072 >Transaction Processors: 1.9% 1,812,000 National Data (c) 41,676 Credit Card & Health Claims Processor 1,211,000 Concord EFS (b) 31,486 Credit Card Processor ------------------------------------------------------------------------ 73,162 ---------- Information: Total 1,111,448 ------------------------------------------------------------------------ Health Care: 7.9% >Biotechnology/Drug Delivery: 5.6% 425,000 Myriad Genetics (b) 62,933 Gene Discovery & Diagnostic Products 266,000 Protein Design Labs (b) 43,878 Computer Designed Monoclonal Antibodies 405,000 Inhale Therapeutic Systems (b) 41,095 Pulmonary Drug Delivery 1,358,000 Corvas International (b) (c) 16,296 Rational Drug Design 476,000 NPS Pharmaceuticals (b) 12,733 Small Molecule Drugs 130,000 Incyte Pharmaceutical (b) 10,684 Gene Sequencing 17 Acorn Fund >Statement of Investments, continued Number of Shares Value (000) Number of Shares Value (000) 823,000 Microcide Pharmaceuticals (b) (c) $ 7,098 Antibiotics 7,628,845 Nadro, Series L (Mexico) 5,813 Pharmaceutical Distributor 316,000 Guilford Pharmaceuticals (b) 4,760 Drug Delivery & Neurology Drugs 325,000 Genzyme Molecular Oncology Division (b) 4,509 Gene Expression Technology & Cancer Drugs 707,000 Synaptic Pharmaceuticals (b) (c) 3,623 Receptor Targeted Drug Design ------------------------------------------------------------- 213,422 >Medical Equipment: 0.2% 411,000 Orthofix International (b) 7,347 Bone Fixation & Stimulation Devices >Hospital/Laboratory Supplies: 0.1% 27,000 Techne (b) 3,510 Cytokines, Antibodies, Other Reagents for Life Sciences >Services: 2.0% 1,668,000 First Health (b) 54,731 PPO Network 730,000 Lincare Holdings (b) 17,976 Home Health Care Services 60,000 Syncor International (b) 4,320 Nuclear Pharmacy for Radiopharmaceuticals 962,000 Magellan Health Services (b) 1,203 Mental Health Services ------------------------------------------------------------- 78,230 -------- Health Care: Total 302,509 ------------------------------------------------------------- Consumer Goods/Services: 13.1% Goods >Leisure Vehicles: 2.1% 1,800,000 Harley-Davidson 69,300 Motorcycles & Related Merchandise 2,470,000 Ducati Motor (Italy) (b) 6,357 Motorcycles & Related Merchandise 300,000 Thor Industries 6,300 RV's & Busses ------------------------------------------------------------- 81,957 >Furniture: 0.7% 660,000 Herman Miller 17,078 Office Furniture 500,000 Hon Industries 11,750 Office Furniture & Fireplaces ------------------------------------------------------------- 28,828 >Beverages: 0.1% 23,000 Binding-Brauerei (Germany) 4,299 Brewery >Nondurables: 0.4% 2,126,000 Helen of Troy (b) (c) 11,892 Personal Care Products 440,000 First Years 4,895 Infant & Toddler Products ------------------------------------------------------------- 16,787 >Durable Goods: 0.3% 365,000 Hunter Douglas (Netherlands) 9,919 Decorative Window Coverings >Textiles/Apparel: 1.1% 1,020,000 Jones Apparel (b) $ 23,970 Women's Apparel 775,000 Nautica Enterprises (b) 8,283 Men's Casual Apparel 450,000 Unifi (b) 5,569 Polyester & Nylon Fabrics 85,000 Gildan Activewear (b) 3,124 Cotton T-Shirts ------------------------------------------------------------- 40,946 Services >Retail: 2.3% 1,561,000 Borders Group (b) 24,293 Bookstores 405,000 Whole Foods Market (b) 16,732 Natural Food Supermarkets 1,250,000 Pier 1 Imports 12,188 Imported Furniture & Tchotchkes 875,000 Gadzooks (b) (c) 10,158 Teen Apparel Retailer 1,050,000 N. Brown Group (United Kingdom) 8,226 Mail Order Clothing in Large Sizes 400,000 Calloway Golf 6,525 Premium Golf Clubs & Balls 110,000 Michaels Stores (b) 5,039 Craft & Hobby Specialty Retailer 153,000 Gaiam (b) 2,831 Healthy Living Catalog & E-Commerce 50,000 Quiksilver (b) 778 Gen Y Clothing ------------------------------------------------------------- 86,770 >Travel: 0.1% 300,000 Fairfield Communities (b) 2,363 Time-Sharing Vacation Resorts >Consumer Services: 2.1% 1,540,000 Bally Total Fitness (b) (c) 39,077 National Chain of Fitness Centers 1,175,000 ITT Educational Services (b) 20,636 Technology Oriented Postsecondary Degree Programs 1,700,000 Airtours (United Kingdom) 8,930 Packaged Tour Vacations 270,000 Steiner Leisure (b) 6,109 Spas & Hair/Skin Products on Cruise Ships 234,000 Education Management (b) 4,227 Postsecondary Education ------------------------------------------------------------- 78,979 >Casinos: 1.7% 1,500,000 Station Casinos (b) 37,500 Casinos & Riverboats 1,140,000 Isle of Capri Casino (b) 15,461 Five Casinos in Secondary Markets 420,000 Pinnacle Entertainment (b) 8,164 Casinos in Secondary Markets & Card Clubs 535,000 Monarch Casino & Resort (b) (c) 3,076 Casino/Hotel in Reno 113,000 Lakes Gaming (b) 1,003 Hotel & Casino in Biloxi & Gulfport ------------------------------------------------------------- 65,204 18 Number of Shares Value (000) Number of Shares Value (000) >Cruise Lines: 2.2% 7,999,000 Star Cruises (Singapore) (b) $ 43,195 Cruising/Casino Operations 1,600,000 Carnival 31,200 Largest Cruise Line 500,000 Royal Caribbean Cruises 9,250 Major Cruise Line 410,000 Royal Olympic Cruise (b) 1,435 Cruises in Mediterranean ------------------------------------------------------------- 85,080 --------- Consumer Goods/Services: Total 501,132 Finance: 14.7% >Banks: 1.8% 1,026,000 TCF Financial 26,355 Great Lakes Bank 730,000 Texas Regional Bancshares 18,524 TexMex Bank 484,000 Chittenden 11,828 Vermont & Western Massachusetts Bank 248,000 CCB Financial 9,176 North Carolina Bank 400,000 Eldorado Bancshares (b) 2,900 California Bank ------------------------------------------------------------- 68,783 >Savings & Loans: 1.1% 1,757,000 Peoples Bank Bridgeport 32,285 Connecticut Savings & Loan 824,000 Commonwealth Bancorp (c) 9,785 Philadelphia Savings & Loan ------------------------------------------------------------- 42,070 >Insurance: 2.7% 765,000 Protective Life 20,368 Life/Dental Insurance 820,000 HCC Insurance Holdings 15,478 Aviation Insurance 100,000 Markel (b) 14,163 22,627 Markel CVR (b) 165 Specialty Insurance 511,000 Leucadia National 11,657 Insurance Holding Company 675,000 Philadelphia Consolidated Holding (b) (c) 11,348 Specialty Insurance 300,000 RLI 10,425 Specialty Insurance 158,000 ASR Verzekeringsgroep (Netherlands) 8,224 Auto/Life Insurance 210,000 StanCorp Financial 6,746 Group Life, Disability & 401K 558,000 UICI (b) 3,662 Insurance/Specialty Insurance ------------------------------------------------------------- 102,236 >Money Management: 6.4% 1,842,000 SEI Investments 73,335 Mutual Fund Administration 800,000 Neuberger Berman 37,200 Major Asset Management Company 800,000 Affiliated Managers Group (b) 36,400 Mutual Fund & Pension Manager 3,099,000 Phoenix Investment Partners (c) $ 32,539 Mutual Fund & Pension Manager 624,000 Pioneer Group (b) 26,442 Equity Mutual Funds 1,500,000 Banca Fideuram (Italy) 22,719 Life Insurance & Mutual Funds 1,250,000 Edinburgh Fund Managers (United Kingdom) 10,436 Investment Management 240,000 BKF Capital Group 3,810 Institutional Money Manager 200,000 The Investment Company of China (China) 1,216 Closed-End Fund ------------------------------------------------------------- 244,097 >Finance Companies: 2.7% 3,912,000 AmeriCredit (b) (c) 66,504 Auto Lending 750,000 DVI Health Services (b) (c) 12,000 Leases for Big Medical Equipment 965,000 Ace Cash Express (b) (c) 11,459 Check Cashing Stores 1,820,000 World Acceptance (b) (c) 9,555 Personal Loans 1,375,000 Capital Trust (b) (c) 5,500 Mortgage Loans ------------------------------------------------------------- 105,018 Finance: Total 562,204 ------------------------------------------------------------- Industrial Goods/Services: 9.1% >Steel: 0.5% 820,000 Gibraltar Steel (c) 11,480 Steel Processing 650,000 AK Steel 5,200 Carbon & Stainless Steel Producer 420,000 Atchison Casting (b) (c) 2,415 Steel Foundries ------------------------------------------------------------- 19,095 >Industrial Goods: 1.1% 1,150,000 Clarcor 22,856 Engines, Mobile & Environmental Filtration 560,000 Applied Industrial Technologies 9,170 Industrial Components Distribution 435,000 Advanced Lighting Technologies (b) 8,047 Metal Halide Lighting ------------------------------------------------------------- 40,073 >Specialty Chemicals & Industrial Materials: 1.8% 1,145,000 Lilly Industries, Cl. A 34,422 Industrial Coatings 346,111 SYMEX (b) 14,748 Combinatorial Materials 476,000 Spartech 12,852 Plastics Distribution & Compounding 732,000 RPM 7,412 Specialty Coatings & Paint 139,000 Brunswick Technologies (b) 1,168 Fiberglass Fabric for Composites -------------------------------------------------------------- 70,602 19 >Statement of Investments, continued ------------------------------------------------------------------------------- >Outsourcing Services & Training: 0.5% 2,600,000 Labor Ready (b) (c) $ 17,225 Temporary Manual Labor 600,000 GP Strategies (b) (c) 2,850 Training Programs 500,000 International Total Services (b) (c) 531 Aviation Services ------------------------------------------------------------------------------- 20,606 >Logistics: 2.9% 1,400,000 Expeditors International of Washington 66,500 International Freight Forwarder 300,000 C H Robinson 14,850 Truck Freight Forwarder 355,000 Forward Air (b) 14,200 Freight Transportation Between Airports 759,000 Hub Group (b) 11,338 Truck & Rail Freight Forwarder 700,000 Airnet Systems (b) (c) 3,194 Check & Other Small Package Shipment ------------------------------------------------------------------------------- 110,082 >Other Industrial Services: 2.3% 7,200,000 Serco Group (United Kingdom) 56,953 Facilities Management 1,526,000 Wackenhut, Cl. B (b) 14,306 31,000 Wackenhut, Cl. A (b) 401 Prison Management 520,000 Mobile Mini (b) 11,473 Leases Portable Storage Units 100,000 EGL (b) 3,075 Domestic Freight Forwarder ------------------------------------------------------------------------------- 86,208 ---------- Industrial Goods/Services: Total 346,666 ------------------------------------------------------------------------------- Energy/Minerals: 11.1% >Independent Power: 1.1% 900,000 AES Corporation (b) 41,062 Global Electric Producer >Oil/Gas Producers: 5.1% 2,363,000 Cross Timbers Oil (c) 52,281 Natural Gas Producer 550,000 Devon Energy 30,903 Oil & Gas Producer 800,000 Precision Drilling (Canada) (b) 30,883 Oil & Gas Well Driller 2,100,000 Tesoro Petroleum (b) (c) 21,263 Oil Refinery/Gas Producer 620,000 Evergreen Resources (b) 18,368 Coal Seam Gas Producer 876,000 Pennaco Energy (b) 14,345 Coal Seam Gas Producer 500,000 Canadian Hunter Exploration (Canada) (b) 10,613 Natural Gas Producer 460,000 Basin Exploration (b) 8,223 Oil & Gas Producer 240,000 Penn West Petroleum (Canada) (b) 5,928 Oil & Gas Producer 845,000 Tipperary (b) (c) 2,905 Coal Seam Gas Producer ------------------------------------------------------------------------------- 195,712 ------------------------------------------------------------------------------- >Distribution/Marketing/Refining: 2.8% 828,000 Dynegy $ 56,563 Natural Gas & Electric Processing, Production & Marketing 754,000 Equitable Resources 36,380 Natural Gas Utility & Producer 700,000 Atmos Energy 12,250 Natural Gas Utility ------------------------------------------------------------------------------- 105,193 >Mining: 0.3% 600,000 US Aggregates 10,875 Aggregrates, Ready Mix & Asphalt >Oil Services: 1.8% 2,730,000 Newpark Resources (b) 25,764 Oilfield Fluid Management & Equipment Rental 3,310,000 Saipem (Italy) 19,672 Offshore Construction & Drilling 430,000 Enerflex Systems (Canada) 11,173 Natural Gas Compressor Manufacturer 180,000 Carbo Ceramics 6,322 Manufacturer of Ceramic Pellets for Gas Wells 150,000 Hanover Compressor (b) 5,700 Natural Gas Compressor Rental ------------------------------------------------------------------------------- 68,631 ---------- Energy/Minerals: Total 421,473 ------------------------------------------------------------------------------- Other Industries: 7.8% >Real Estate: 6.2% 968,000 The Rouse Company 23,958 Regional Shopping Malls 775,000 SL Green Realty 20,731 Downtown Office Buildings 675,000 First Industrial Realty Trust 19,913 Industrial Properties 903,125 Security Capital European Realty (b) 18,063 Strategic Real Estate Investments 700,000 Manufactured Home Communities 16,756 Manufactured Home Communities 466,000 Forest City Enterprises, Cl. B 16,572 Shopping Malls 1,099,000 LaSalle Hotel Properties (c) 15,798 Upscale/Full Service Hotels 625,000 Macerich Company 13,789 Regional Shopping Malls 488,000 Equity Office Properties 13,450 Largest Owner of Office Buildings 450,000 BRE Properties 12,994 Apartments 490,000 Amli Residential 11,546 Midwestern Apartments 520,000 Summit Properties 10,920 Southeastern Apartments 300,000 General Growth Properties 9,525 Shopping Malls REIT 412,000 IRSA (Argentina) 9,425 Real Estate Management & Development 385,000 First Washington Realty Trust (c) 8,494 240,000 First Washington Realty Trust, Cv. Pfd. (c) 6,690 Community Shopping Centers 20 ------------------------------------------------------------------------------- 1,000,000 HRPT Properties $ 6,125 Suburban Office Buildings 190,000 Consolidated Tomoka 2,304 16,000 Acres of Florida Land ------------------------------------------------------------------------------- 237,053 >Waste Management: 0.2% 327,000 Stericycle (b) 7,848 Medical Waste Disposal >Regulated Utilities: 1.4% 875,000 Utilicorp United 17,391 Global Utility Holding Company 665,000 Unisource Energy 9,975 Electric Utility in Arizona 600,000 Conectiv 9,337 Electric Utility in New Jersey, Delaware & Maryland 1,245,000 Azurix (b) 8,715 Global Water Utility 200,000 CH Energy 6,787 Electric Utility in New York ------------------------------------------------------------------------------- 52,205 ---------- Other Industries: Total 297,106 ---------- Other Securities: 0.0% 27 ------------------------------------------------------------------------------- Total Common Stocks and Other ---------- Equity-Like Securities: 92.8% $3,542,565 (Cost: $2,363,410) Short-Term Obligations: 8.2% Yield 6.50%-7.15% Due 7/5-8/17/00 $ 162,549 Xerox $ 162,281 69,881 Sears Roebuck 69,815 27,408 Equilon 27,328 21,058 GE Capital 21,007 20,832 US West 20,786 12,000 US Treasury Bill 11,915 ---------- (Amortized Cost: $312,132) 313,132 ---------- Total Investments: 101.0% 3,855,697 (Cost: $2,676,542) Cash and Other Assets Less Liabilities: (1.0%) (38,127) ---------- Total Net Assets: 100% $3,817,570 ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- >Notes to Statement of Investments: (a) At June 30, 2000, for federal income tax purposes cost of investments was $2,677,278,000 and net unrealized appreciation was $1,178,419,000, consisting of gross unrealized appreciation of $1,509,140,000 and gross unrealized depreciation of $330,721,000. (b) Non-income producing security. (c) On June 30, 2000, the Fund held the following percentages of the outstanding voting shares of the companies listed below: Sirena Apparel..................................................... 9.92% Gadzooks........................................................... 9.78% World Acceptance................................................... 9.77% Ace Cash Express................................................... 9.50% RCM Technologies................................................... 9.05% First Washington Realty Trust...................................... 8.65% COMARCO............................................................ 8.11% MAPICS............................................................. 8.03% Helen of Troy...................................................... 7.47% International Total Services....................................... 7.31% Microcide Pharmaceuticals.......................................... 7.29% Commonwealth Bancorp............................................... 7.12% Phoenix Investment Partners........................................ 7.00% Tesoro Petroleum................................................... 6.76% Aztec Technology Partners.......................................... 6.64% Bigfoot International.............................................. 6.54% Capital Trust...................................................... 6.53% Gibraltar Steel.................................................... 6.52% Synaptic Pharmaceuticals........................................... 6.52% LaSalle Hotel Properties........................................... 6.50% Bally Total Fitness................................................ 6.46% Airnet Systems..................................................... 6.43% Corvas International............................................... 6.43% Labor Ready........................................................ 6.08% Kronos............................................................. 6.03% Monarch Casino & Resort............................................ 5.67% Philadelphia Consolidated Holding.................................. 5.57% National Data...................................................... 5.53% Atchison Casting................................................... 5.48% GP Strategies...................................................... 5.31% DVI Health Services................................................ 5.28% Micros Systems..................................................... 5.19% Americredit........................................................ 5.16% Cross Timbers Oil.................................................. 5.13% Tipperary.......................................................... 5.03% The aggregate cost and value of investments in these companies at June 30, 2000, was $506,711,000 and $507,031,000, respectively. The market value of these securities represents 13.28% of the total net assets at June 30, 2000. During the six months ended June 30, 2000, cost of purchases and proceeds from sales in affiliated companies was $64,970,000 and $44,867,000, respectively. Dividends received from these companies amounted to $1,692,000 and net realized gain on sales of investments in such companies amounted to $5,460,000. (d) On June 30, 2000, the market value of foreign securities amounted to $445,426,000 and represented 11.67% of total net assets. The Fund's foreign portfolio was diversified as follows: United Kingdom $102,508 2.69% Canada 83,575 2.19% Japan 48,996 1.28% Italy 48,748 1.28% Singapore 46,260 1.21% Sweden 24,883 .65% Netherlands 24,723 .65% Australia $ 19,796 .52% France 16,910 .44% Argentina 9,425 .25% South Africa 8,274 .22% Mexico 5,813 .15% Germany 4,299 .11% China 1,216 .03% 21 Acorn International >Major Portfolio Changes in the Second Quarter Number of Shares --------------------- 3/31/00 6/30/00 Additions ---------------------------------------------------------------- Europe >Germany/Austria Flughafen Wien (Austria) 165,000 235,000 IFCO Systems 100,000 225,000 MobilCom 110,000 175,000 Stinnes 0 395,000 Teleplan International 0 50,000 United GlobalCom (Austria) 0 350,000 >Denmark ISS International Service Systems 125,000 200,000 >Finland Helsinki Telephone 100,000 150,000 >Sweden Autoliv 0 350,000 Icon Medialab 0 50,000 Mandator 1,350,000 1,500,000 Modern Times Group 500,000 525,000 >Belgium Audiofina 185,000 250,000 Telindus Group 100,000 130,000 (formerly known as Telinfo) Ubizen 15,000 100,000 (includes effect of 4 for 1 stock split) >United Kingdom/Ireland Capita Group 2,000,000 2,100,000 Hays 3,000,000 3,500,000 Holmes Place 0 1,400,000 Incepta 5,000,000 6,500,000 Irish Life & Permanent (Ireland) 1,800,000 2,000,000 Orchestream Holdings 0 750,000 SSL International 1,800,000 2,000,000 >Switzerland Bachem 7,000 8,500 Cie Fin Richemont 14,000 15,000 Givaudan 0 15,000 Kuoni Reisen 0 25,000 Pargesa 0 4,000 >Italy Class Editori 750,000 850,000 Saipem 2,000,000 2,250,000 >Spain Red Electrica 1,200,000 1,500,000 TPI 300,000 1,200,000 (includes effect of 3 for 1 stock split) >Netherlands ASR Verzekeringsgroep 95,000 150,000 Hunter Douglas 0 310,000 Kempen 450,000 475,000 ---------------------------------------------------------------- Asia >Hong Kong TVB 3,650,000 4,250,000 >Japan Hirose Electric 80,000 100,000 Orix 275,000 285,000 Ryohin Keikaku 200,000 240,000 Shobunsha 150,000 200,000 >Taiwan Advantech 2,000,000 3,000,000 (includes effect of 2 for 1 stock split) Chroma Ate 3,000,000 4,550,000 (includes effect of 30% stock dividend) >South Korea Cheil Jedang 150,000 175,000 S1 Corporation 1,200,000 1,400,000 Samsung 1,000,000 1,700,000 ---------------------------------------------------------------- Latin America >Mexico Wal-Mart de Mexico 5,500,000 6,500,000 >Brazil Embratel 800,000 1,000,000 ---------------------------------------------------------------- Other Countries >Australia Computershare 5,000,000 6,000,000 Infomedia 0 1,508,000 >Canada Canadian Hunter 0 300,000 Corus Entertainment 850,000 1,000,000 Mosaic 850,000 1,375,000 >Israel Amdocs 850,000 965,000 Comverse Technology 85,000 325,000 (includes effect of 2 for 1 stock split) DSP Group 250,000 300,000 Gilat Satellite Network 200,000 240,000 >United States MIH 400,000 500,000 22 Number of Shares --------------------- 3/31/00 6/30/00 Sales ---------------------------------------------------------------------------- Europe >Germany/Austria Dialog Semiconductor 160,000 300,000 (includes effect of 2 for 1 stock split) EM.TV & Merchandising 240,000 0 Telesens 115,000 0 >Finland F-Secure 100,000 0 TietoEnator 1,000,000 950,000 >Norway Enitel 200,000 160,000 >Sweden Utfors 125,000 0 WM Data Nordic 850,000 3,750,000 (includes effect of 5 for 1 stock split) >France Atos 250,000 200,000 Genset 250,000 0 Imerys 25,000 0 >United Kingdom Baltimore Technologies 250,000 2,000,000 (includes effect of 10 for 1 stock split) Fairey Group 1,200,000 1,000,000 MG 1,600,000 0 SkyePharma 6,000,000 0 St. James Capital 3,800,000 1,400,000 Thus 1,000,000 0 >Italy Editoriale L'Espresso 3,000,000 2,500,000 >Spain/Portugal Indra Sistemas 500,000 0 Filmes Lusomundo (Portugal) 425,000 0 PT Multimedia (Portugal) 100,000 0 >Netherlands Getronics 500,000 1,200,000 (includes effect of 3 for 1 stock split) ---------------------------------------------------------------------------- Asia >Hong Kong E-New Media 40,000,000 0 Li & Fung 26,000,000 22,200,000 >Japan Avex 100,000 0 Densei Lambda 400,000 270,000 Fast Retailing 50,000 40,000 Future Systems 15 0 JAFCO 75,000 0 Nichii Gakkan 45,000 0 OBIC 30,000 20,000 Omega Project 600,000 0 (formerly known as Bodysonic) Pasona Softbank 20,000 0 Trans Cosmos 65,000 55,000 >Taiwan Cosmo Electronics 750,000 218,000 (includes effect of 21.8% stock dividend) (includes effect of 4 for 1 rights distribution) Hitron Technology 3,000,000 2,750,000 Systex 3,500,000 3,500,000 (includes effect of 7 for 5 stock split) >Singapore Datacraft Asia 6,000,000 4,000,000 Natsteel Electronics 5,500,000 2,750,000 ---------------------------------------------------------------------------- Latin America >Mexico Grupo Carso 1,500,000 0 Kimberly Clark de Mexico 3,500,000 0 ---------------------------------------------------------------------------- Other Countries >Australia AAPT 4,500,000 3,100,000 >Canada ATI Technologies 1,500,000 0 Celestica 1,000,000 900,000 Dundee Realty 4,000,000 0 Clearnet Communications 150,000 0 Creo Products 275,000 150,000 >Israel Radware 100,000 0 >South Africa Dimension Data 6,500,000 6,000,000 >United States Global TeleSystems 750,000 0 23 Acorn International >Statement of Investments (unaudited) June 30, 2000 Number of Shares Value (000) --------------------------------------------------------------------------- Common Stocks and Other Equity-Like Securities: 88.5% --------------------------------------------------------------------------- Europe: 47.1% >Germany/Austria: 5.3% 600,000 Rhoen Klinikum Pfd. $ 26,745 500,000 Rhoen Klinikum 19,891 Hospital Management 175,000 MobilCom 17,564 Telecommunication Services 350,000 United GlobalCom (Austria) (b) 16,362 Voice, Video & Data Services 300,000 Dialog Semiconductor (b) 15,242 Custom Semiconductors for Cell Phones 60,000 Fresenius, Pfd. 13,746 Dialysis Equipment & Solutions 235,000 Flughafen Wien (Austria) 8,400 Vienna Airport Authority 395,000 Stinnes 7,952 Logistics 200,000 Pfeiffer Vacuum Technologies 7,765 Vacuum Pump Manufacturer 100,000 Austria Technologies & Systemtechnik (b) 7,669 Printed Circuit Board Manufacturer 50,000 Teleplan International (b) 7,621 After-Sale Warranty Repair Services 225,000 IFCO Systems (b) 6,018 Shipping Container Leasing/Logistics 315,000 Takkt 2,959 Mail Order Retailer of Office & Warehouse Durables --------------------------------------------------------------------------- 157,934 >Denmark: 0.5% 200,000 ISS International Service Systems (b) 15,291 Cleaning Services >Finland: 2.3% 950,000 TietoEnator 31,828 Computer Services/Consulting 150,000 Helsinki Telephone 14,753 Telecommunications Provider 1,500,000 Talentum (c) 13,876 Trade Journals & Internet Services 625,000 Fiskars, Series A 6,195 Scissors & Gardening Tools 95,400 Spar Finland 3,155 Grocery/Convenience Stores --------------------------------------------------------------------------- 69,807 >Norway: 0.2% 160,000 Enitel (b) 6,233 Telecommunications Provider >Sweden: 3.8% 1,000,000 Sigma $ 27,135 Technical Consulting 525,000 Modern Times Group (b) 25,140 TV, Newspapers and Electronic Commerce 3,750,000 WM Data Nordic 20,736 Computer Services/Consulting 1,500,000 Adcore (b) 11,629 (formerly known as Information Highway) Internet Consulting 1,500,000 Mandator 9,834 Computer & Internet Consulting 350,000 Autoliv 8,422 Seatbelts & Airbags 300,000 Micronic Laser Systems (b) 6,122 Video Display Manufacturing Equipment 375,000 SwitchCore (b) 3,933 Communication Semiconductors 50,000 Icon Medialab (b) 633 Internet Consulting --------------------------------------------------------------------------- 113,584 >France/Belgium: 4.5% 775,000 NRJ 37,889 Radio Network 250,000 Audiofina (Belgium) 32,353 TV & Radio Broadcaster 200,000 Atos (b) 18,788 Computer Services/Transaction Processing 130,000 Telindus Group (Belgium) 15,739 (formerly known as Telinfo) Network Integration Services 500,000 Fininfo 15,577 Data Feeds for French Banks & Brokers 20,000 Penauille Polyservice 9,653 Industrial Cleaning/Airport Services 100,000 Ubizen (Belgium) (b) 3,547 Internet Security Services/Software --------------------------------------------------------------------------- 133,546 >United Kingdom/Ireland: 13.7% 12,000,000 Serco Group 94,921 Facilities Management 2,100,000 Capita Group 51,407 Outsourcing Services 575,000 NTL (b) 34,428 Voice, Video & Data Services Via Cable Networks 2,000,000 SSL International 21,573 Medical & Footcare Products 5,000,000 Taylor Nelson 19,946 Market Research Services 3,500,000 Hays 19,525 Outsourcing Services Conglomerate 24 Number of Shares Value (000) ---------------------------------------------------------------------------- 6,100,000 Chloride Group $ 17,638 Electrical Equipment Manufacturer/Retailer 2,000,000 Irish Life & Permanent (Ireland) 16,929 Savings Products 2,000,000 Baltimore Technologies (b) 15,139 Security Software 400,000 Euro Money Publications 14,685 Financial Publications 3,750,000 FKI 13,341 Materials Handling Equipment 6,500,000 Incepta 13,088 Business Information & Marketing Services 3,500,000 Smith & Nephew 12,929 Medical Equipment & Supplies 2,500,000 Photobition Group 10,843 Production of Graphics for Exhibits 1,000,000 ITNET 9,954 Outsourcing Services 1,130,000 Oxford Asymmetry (b) 8,417 Chemical Products & Services 2,000,000 Rotork 7,479 Valve Actuators for Oil & Water Pipelines 1,000,000 Fairey Group 7,024 Electronic Products 1,000,000 Expro International 6,260 Offshore Oil Field Services 1,400,000 Holmes Place 5,426 Health Clubs 1,400,000 St. James Capital 5,277 Life Insurance 750,000 Orchestream Holdings (b) 3,588 Network Management Software ---------------------------------------------------------------------------- 409,817 >Switzerland: 5.7% 15,000 Cie Fin Richemont 40,542 Luxury Goods 100,000 Selecta Group 31,117 Vending Machine Owner/Operator 6,000 Julius Baer 23,799 Private Banking, Brokerage & Mutual Funds 8,500 Bachem 18,086 Peptides 6,500 Sarasin & Cie Bank 16,789 Private Banking 25,000 Kuoni Reisen 11,607 Tour Operator 15,000 Bon Appetit 9,686 Wholesale Food Distributor and Speciality Restaurant/Retailer 4,000 Pargesa 9,151 Industrial & Media Conglomerate 10,000 Phoenix Mecano 5,719 Electrical Components Manufacturer 15,000 Givaudan (b) 4,580 Industrial Fragrances & Flavors ---------------------------------------------------------------------------- 171,076 >Italy: 6.8% 4,000,000 Banca Fideuram $ 60,583 Life Insurance & Mutual Funds 3,850,000 Autogrill 41,224 Restaurants & Catering for Travelers 2,500,000 Editoriale L'Espresso 29,717 Newspaper & Magazine Publisher 1,500,000 Mediolanum 24,502 Life Insurance & Mutual Funds 2,250,000 Saipem 13,372 Offshore Construction & Drilling 850,000 Class Editori 12,499 Newspapers & On-Line Financial Data 1,400,000 Aeroporti di Roma 11,931 Airport Management 910,000 Gruppo Coin (b) 9,683 Food & Clothing Retailer ---------------------------------------------------------------------------- 203,511 >Spain: 1.9% 1,500,000 Red Electrica 17,255 Spanish Power Grid 1,200,000 TPI 11,377 Spanish Telephone Directories 500,000 Cortefiel 10,890 Apparel Retailer 750,000 Prosegur 8,807 Security Guards 500,000 Aguas de Barcelona 6,710 Water Utility ---------------------------------------------------------------------------- 55,039 >Netherlands: 2.0% 475,000 Kempen 23,905 Stock Brokerage/Investment Management 1,200,000 Getronics 18,578 Computer Services/Consulting 310,000 Hunter Douglas 8,425 Decorative Window Coverings 150,000 ASR Verzekeringsgroep 7,808 Auto/Life Insurance ---------------------------------------------------------------------------- 58,716 >Hungary: 0.4% 1,200,000 Matav 8,382 70,000 Matav ADR 2,411 Telecommunications Provider ---------------------------------------------------------------------------- 10,793 --------- Europe: Total 1,405,347 ---------------------------------------------------------------------------- Asia: 22.2% >Hong Kong: 4.5% 22,200,000 Li & Fung 111,067 Sourcing of Consumer Goods 4,250,000 TVB 28,350 Television Broadcasting ---------------------------------------------------------------------------- 139,417 25 Acorn International Statement of Investments, continued Number of Shares Value (000) --------------------------------------------------------------------------- >Japan: 7.8% 285,000 Orix $ 42,155 Finance Leasing 240,000 Ryohin Keikaku 30,622 Own Brand Specialty Retailer 150,000 Nintendo 26,256 Video Games 35,000 Bellsystem24 17,201 Call Centers 40,000 Fast Retailing 16,786 Discount Apparel Retailer 100,000 Hirose Electric 15,604 Electrical Connectors 200,000 Konami 12,665 Video Game Software Developer 110,000 Otsuka Kagu 11,332 Furniture Retailer 110,000 Misumi 11,280 Distributor of Capital Goods Components 20,000 OBIC 9,073 Computer Integrator 55,000 Trans Cosmos 8,276 Information Technology Services & Investments 200,000 Shobunsha 7,013 Map Publisher 100,000 Benesse 6,947 Correspondence Education 180,000 Wilson Learning 6,805 Corporate Training 270,000 Densei Lambda 5,576 Power Supplies 55,000 Stella Chemifa 4,262 Specialty Chemicals --------------------------------------------------------------------------- 231,853 >Taiwan: 2.2% 3,000,000 Advantech 15,877 Computer Based Industrial Automation 7,500,000 Phoenixtec Power 13,636 Uninterruptable Power Supply Manufacturer 3,500,000 Systex (b) 12,273 Systems Integrator & Internet Services 2,750,000 Hitron Technology 10,938 Network Integration & Internet Services 4,550,000 Chroma Ate 10,193 Test & Measurement Instruments 218,000 Cosmo Electronics (b) 545 Relay & Opto-Coupler Manufacturer --------------------------------------------------------------------------- 63,462 >Malaysia: 0.5% 2,000,000 Unisem 14,211 Semiconductor Assembly >South Korea: 2.0% 1,400,000 S1 Corporation $ 20,717 Security Services 1,700,000 Samsung 14,652 Trading Company 2,500,000 Korea Technology Investments 8,968 Venture Capital 175,000 Cheil Jedang 8,020 Consumer Staples 400,000 SK Corporation 7,336 Oil Refining --------------------------------------------------------------------------- 59,693 >Singapore: 5.2% 6,000,000 Venture Manufacturing 61,076 Electronic Manufacturing Services 9,350,000 Star Cruises (b) 50,490 Cruise Line 4,000,000 Datacraft Asia 35,200 Network Integrator 2,750,000 Natsteel Electronics 8,430 Electronic Manufacturing Services --------------------------------------------------------------------------- 155,196 -------- Asia: Total 663,832 --------------------------------------------------------------------------- Latin America: 2.8% >Mexico: 1.7% 5,000,000 Corp Interamericana de Entretenimiento (b) 19,708 Special Events & Live Entertainment 6,500,000 Wal-Mart de Mexico (b) 15,155 Discount Stores 9,000,000 Grupo Industrial Bimbo 14,208 Bread, Baked Goods & Snacks --------------------------------------------------------------------------- 49,071 >Brazil: 0.8% 1,000,000 Embratel 23,625 Long Distance Telecommunications Provider >Argentina: 0.3% 400,000 IRSA GDS 9,150 Real Estate Management & Development -------- Latin America: Total 81,846 26 Number of Shares Value (000) --------------------------------------------------------------------------- --------------------------------------------------------------------------- Other Countries: 16.4% >Australia: 4.0% 8,000,000 ERG $ 62,297 Smart Card Systems for Public Transportation 6,000,000 Computershare 30,945 Financial Software/Services 2,500,000 KeyCorp (b) (c) 14,064 Smart Card Technology 3,100,000 AAPT (b) 10,200 Telecommunications Provider 1,508,000 Infomedia (b) 905 Publisher of Electronic Catalog for Auto Parts ---------------------------------------------------------------------------- 118,411 >Canada: 5.3% 900,000 Celestica (b) 43,794 Electronic Manufacturing Services 1,000,000 Corus Entertainment (b) 26,659 CATV Programming & Radio Stations 720,000 Canadian Natural Resources (b) 20,895 Oil & Gas Producer 1,000,000 Power Financial 19,876 Life Insurance & Mutual Funds 1,375,000 Mosaic (b) 16,704 Outsourcing Market Services 500,000 Penn West Petroleum (b) 12,351 Oil & Gas Producer 1,350,000 Bracknell (b) 6,742 Electrical Contractor & Facilities Management 300,000 Canadian Hunter (b) 6,368 Natural Gas Producer 150,000 Creo Products (b) 3,412 Commercial Printing Machinery 500,000 Cinar (b) 1,750 Children's TV Programming ---------------------------------------------------------------------------- 158,551 >Israel: 4.6% 965,000 Amdocs (b) 74,064 Telecommunications Billing & Customer Care Software 325,000 Comverse Technology (b) 30,225 Voicemail & Related Systems 300,000 DSP Group (b) 16,800 DSP Based Semiconductors & Intellectual Property 240,000 Gilat Satellite Network (b) 16,650 Satellite Communications Equipment ---------------------------------------------------------------------------- 137,739 >South Africa: 1.7% 6,000,000 Dimension Data (b) $ 49,646 Networks & Computer Services >Russia: 0.0% $1,500,000 Khanty Mansiysk 10% Notes Due 10/14/02 750 4,129 Khanty Mansiysk (b) 179 Oil Production in Russia ---------------------------------------------------------------------------- 929 >United States: 0.8% 500,000 MIH (b) 15,016 Pay-TV & Interactive TV Technology 500,000 Carnival 9,750 Largest Cruise Line Operator ---------------------------------------------------------------------------- 24,766 ----------- Other: Total 490,042 Total Common Stocks and Other ----------- Equity-Like Securities: 88.5% 2,641,067 (Cost: $1,580,548) Short-Term Obligations: 10.7% Yield 6.45-6.75% Due 7/3-7/17/00 $123,071 Sears Roebuck 122,810 110,238 Xerox 110,048 30,927 US West 30,893 30,427 Equilon 30,377 26,443 American Express 26,434 ----------- (Amortized Cost: $320,562) 320,562 ----------- Total Investments: 99.2% 2,961,629 (Cost: $1,901,110) Cash and Other Assets less Liabilities: 0.8% 22,093 ----------- Total Net Assets: 100% $ 2,983,722 ============================================================================ -------------------------------------------------------------------------------- >Notes to Statement of Investments (a) At June 30, 2000, for federal income tax purposes cost of investments was $1,957,959,000 and net unrealized appreciation was $1,003,670,000 consisting of gross unrealized appreciation of $1,123,081,000 and gross unrealized depreciation of $119,411,000. (b) Non-income producing security. (c) On June 30, 2000, the Fund held the following percentages of the outstanding voting shares of the affiliated companies (ownership of at least 5%) listed below: Talentum (Finland).................................... 9.19% Key Corp (Australia).................................. 6.92% The aggregate cost and value of investments in these companies at June 30, 2000, was $18,864,000 and $27,940,000 respectively. The market value of these securities represents .94% of the total net assets at June 30, 2000. During the six months ended June 30, 2000, the cost of purchases and proceeds from sales in affiliated companies was $2,943,000 and $32,963,000 respectively. Net realized gain on sales of investments in such companies amounted to $27,934,000. There were no dividends received from these companies during the six months ended June 30, 2000. (d) At June 30, 2000, $792,135,000 or 26.55% of the Fund's net assets were denominated in the Euro currency. 27 Acorn International >Portfolio Diversification At June 30, 2000, the Fund's portfolio of investments as a percent of net assets was diversified as follows: Value (000) Percent --------------------------------------------------------------- >Computer Hardware Semiconductors $ 56,308 1.9% Telephone Equipment 39,923 1.3 PCs and Peripherals 14,064 0.5 --------------------------------------------------------------- 110,295 3.7 >Computer Software Telephone Related 104,289 3.5 Internet 22,274 0.7 Enterprise Resource Planning (ERP) 9,073 0.3 --------------------------------------------------------------- 135,636 4.5 >Technology Services Network/SI 117,891 4.0 Full Service 89,931 3.0 Internet/Web Consulting 34,414 1.1 Embedded Systems 27,135 0.9 --------------------------------------------------------------- 269,371 9.0 >Telecom Incumbent 66,735 2.2 Cable 50,791 1.7 Alternative Provider 32,172 1.1 Internet Service Providers (ISP) 15,016 0.5 --------------------------------------------------------------- 164,714 5.5 >Broadcasting & Media Content Hybrid Internet 108,995 3.7 Radio & TV Broadcasting 98,592 3.3 Media Content Providers 74,343 2.5 Market Research 19,946 0.6 --------------------------------------------------------------- 301,876 10.1 >Health Care Services 55,053 1.9 Devices & Consumables 48,248 1.6 Biotechnology 18,086 0.6 --------------------------------------------------------------- 121,387 4.1 >Business Services Business Process Outsourcing 266,726 8.9 Business Services 263,555 8.9 Logistics 21,591 0.7 Consumer Services 13,752 0.5 --------------------------------------------------------------- 565,624 19.0 >Financials Asset Management 149,579 5.0 Insurance 49,890 1.7 Lending Institutions 42,155 1.4 Venture Capital 8,968 0.3 --------------------------------------------------------------- 250,592 8.4 >Consumer Goods & Services Retail Outlets $ 148,533 5.0% Leisure 96,982 3.3 Branded Goods 69,370 2.3 Distribution/E-Commerce 2,959 0.1 --------------------------------------------------------------- 317,844 10.7 >Industrials Electronic Manufacturing Services 113,300 3.8 Electronic Manufacturing 48,695 1.6 Goods 44,635 1.5 R&D Design Firms 32,141 1.1 Distribution 11,280 0.4 --------------------------------------------------------------- 250,051 8.4 >Other Industries Energy 60,175 2.0 Utilities 44,296 1.5 Conglomerates 40,056 1.3 Real Estate 9,150 0.3 --------------------------------------------------------------- 153,677 5.1 Total Common Stocks and -------------------------- Other Equity-Like Securities: 2,641,067 88.5 Short-Term Obligations: 320,562 10.7 -------------------------- Total Investments: 2,961,629 99.2 Cash and Other Assets less Liabilities: 22,093 0.8 -------------------------- Net Assets: $2,983,722 100.0% 28 Acorn USA >Major Portfolio Changes in the Second Quarter Number of Shares ---------------- Additions 3/31/00 6/30/00 ---------------------------------------------------------------------------- Information Commonwealth Telephone 0 66,000 Ezenia 30,000 168,400 Information Holdings 0 48,600 Kronos 35,000 100,300 Mediacom Communications 0 305,000 Perkin Elmer 65,000 158,000 RCM Technologies 173,000 301,000 Reynolds & Reynolds 0 142,600 Salem Communications 122,700 270,700 Sykes Enterprises 421,500 450,500 ---------------------------------------------------------------------------- Consumer Goods/Services ITT Educational Services 153,000 245,000 ---------------------------------------------------------------------------- Finance Chittenden 93,500 126,500 Neuberger Berman 0 74,700 TCF Financial 59,000 79,000 ---------------------------------------------------------------------------- Industrial Goods/Services EGL 0 19,800 ---------------------------------------------------------------------------- Energy/Minerals Carbo Ceramics 0 31,300 Newpark Resources 135,000 371,000 ---------------------------------------------------------------------------- Other Industries Conectiv 281,000 523,000 ---------------------------------------------------------------------------- Sales Information American Power Conversion 185,000 131,000 Aspect Communications 205,100 114,200 CACI International 185,000 159,700 Cambridge Technologies 60,000 0 Classic Communications 65,000 0 Data Transmission Network 209,100 0 DSP Group 143,100 92,100 Navidec 125,000 0 Objective Systems 163,000 0 RCN 272,800 80,000 TV Guide 21,000 0 West TeleServices 130,000 89,000 Young Broadcasting 39,500 0 ---------------------------------------------------------------------------- Health Care Genome Therapeutics 44,900 0 Genset 26,000 0 Genzyme Molecular Onocology Division 55,000 0 Lincare Holdings 315,400 285,400 Maxygen 33,100 13,100 Myriad Genetics 26,700 10,000 ---------------------------------------------------------------------------- Consumer Goods/Services NuSkin Enterprises 157,600 0 ---------------------------------------------------------------------------- Finance Markel 2,100 0 Markel CVR 2,108 0 Pioneer Group 36,800 0 Protective Life 66,000 0 ---------------------------------------------------------------------------- Industrial Goods/Services Insurance Auto Auctions 347,400 319,400 Labor Ready 150,000 0 29 Acorn USA >Statement of Investments (unaudited) June 30, 2000 Number of Shares Value (000) ------------------------------------------------------------------------- Common Stocks: 92.1% ------------------------------------------------------------------------- Information: 48.0% >Broadcasting: 0.8% 270,700 Salem Communications (b) $ 2,512 Radio Stations for Religious Programming >Television Programming: 1.5% 305,000 Mediacom Communications (b) 4,689 Cable Television Franchises >Telecommunications/Wireline Communications: 1.7% 66,000 Commonwealth Telephone (b) 3,106 Rural Phone Franchises & CLEC 80,000 RCN (b) 2,030 Metro Market CLEC: Voice, Video & Internet Services ------------------------------------------------------------------------- 5,136 >Mobile Communications: 9.2% 186,000 Telephone and Data Systems (b) 18,647 Cellular & Telephone Services 121,800 Comarco (b) 3,959 Wireless Network Testing 229,000 Diversinet (b) 2,719 Wireless PKI Security 112,400 Price Communications (b) 2,648 Cellular Telephone Services ------------------------------------------------------------------------- 27,973 >Telecommunications Equipment: 1.7% 114,200 Aspect Telecommunications (b) 4,489 Call Center Software 168,400 Ezenia (b) 747 Multimedia Communications ------------------------------------------------------------------------- 5,236 >Computer Services: 3.9% 450,500 Sykes Enterprises (b) 5,800 Call Center Services 170,000 Pomeroy Computer Resources (b) 2,508 Network Integration Services 301,000 RCM Technologies (b) 2,220 Technology Staffing Services 635,000 Aztec Technology Partners (b) 1,389 Technology Staffing Services ------------------------------------------------------------------------- 11,917 >Business Software: 4.6% 598,000 JDA Software (b) 11,474 Applications/Software & Services for Retailers 132,000 Project Software (b) 2,376 Enterprise Maintenance Software ------------------------------------------------------------------------- 13,850 >Transaction Processors: 3.4% 268,300 National Data 6,171 Credit Card & Health Claims Processor 165,500 Concord EFS (b) 4,303 Credit Card Processor ------------------------------------------------------------------------- 10,474 >Internet: 1.2% 350,000 MSI Holdings (b) $ 2,538 Web Hosting 188,000 Online Resources (b) 1,210 Internet Banking Technology ------------------------------------------------------------------------- 3,748 >Business Information/ Marketing Services: 5.7% 169,000 PRIMEDIA (b) 3,845 Specialty Magazines & Other Publications 102,800 Getty Images (b) 3,810 Photographs for Publications & Electronic Media 159,700 CACI International (b) 3,114 Technology Services for Government 142,600 Reynolds & Reynolds 2,602 Computer Systems for Car Dealers 89,000 West TeleServices (b) 2,253 Customer Care & Sales Support 48,600 Information Holdings (b) 1,798 Scientific & Medical Publications, Patent Information ------------------------------------------------------------------------- 17,422 >Instrumentation: 6.8% 158,000 Perkin Elmer 10,448 Analytical Instruments for Biotech/Telecom 140,000 Tektronix 10,360 Analytical Instruments ------------------------------------------------------------------------- 20,808 >Semiconductors/Related Equipment: 1.7% 92,100 DSP Group (b) 5,158 Telecom Semiconductors >Computer Hardware/Related Systems: 5.8% 527,600 Micros Systems (b) 9,794 Information Systems for Restaurants & Hotels 131,000 American Power Conversion (b) 5,346 Uninterruptable Power Systems 100,300 Kronos (b) 2,608 Labor Management Solutions ------------------------------------------------------------------------- 17,748 -------- Information: Total 146,671 ------------------------------------------------------------------------- Health Care: 7.7% >Biotechnology/Drug Delivery: 1.4% 363,636 Metabolex, Series F (b) 2,000 Drugs for Diabetes 10,000 Myriad Genetics (b) 1,481 Gene Discovery & Diagnostic Products 13,100 Maxygen (b) 744 Molecular Breeding ------------------------------------------------------------------------- 4,225 30 Acorn USA >Statement of Investments, continued Principle Amount or Number of Shares Value (000) Number of Shares Value (000) ------------------------------------------------------------------------- >Services: 6.3% 343,000 First Health (b) $ 11,255 PPO Network 285,400 Lincare Holdings (b) 7,028 Home Health Care Services 856,100 Magellan Health Services (b) 1,070 Mental Health Services ------------------------------------------------------------------------- 19,353 -------- Health Care: Total 23,578 ------------------------------------------------------------------------- Consumer Goods/Services: 4.9% >Consumer Services: 2.6% 245,000 ITT Educational Services (b) 4,303 Technology Oriented Postsecondary Degree Programs 547,000 Telespectrum (b) 2,496 Call Center Services 43,000 Bally Total Fitness (b) 1,091 National Chain of Fitness Centers ------------------------------------------------------------------------- 7,890 >Retail: 2.3% 395,000 Gadzooks (b) 4,586 Teen Apparel Retailer 58,500 Whole Foods Market (b) 2,417 Natural Food Supermarkets ------------------------------------------------------------------------- 7,003 -------- Consumer Goods/Services: Total 14,893 ------------------------------------------------------------------------- Finance: 10.8% >Banks: 2.1% 126,500 Chittenden 3,091 Vermont & West Massachusetts Bank 79,000 TCF Financial 2,029 Great Lakes Bank 41,000 Texas Regional Bancshares 1,040 TexMex Bank ------------------------------------------------------------------------- 6,160 >Finance Companies: 4.4% 613,500 AmeriCredit (b) 10,429 Auto Lending 590,000 World Acceptance (b) 3,098 Personal Loans ------------------------------------------------------------------------- 13,527 >Money Management: 1.7% 74,700 Neuberger Berman 3,474 Major Asset Management Company 163,000 Phoenix Investment Partners 1,712 Mutual Fund & Pension Manager ------------------------------------------------------------------------- 5,186 ------------------------------------------------------------------------- >Insurance: 2.6% 637,700 UICI (b) $ 4,185 Insurance/Specialty Finance 93,000 Leucadia National 2,122 Insurance Holding Company 332,100 Acceptance Insurance (b) 1,660 Crop Insurance ------------------------------------------------------------------------- 7,967 -------- Finance: Total 32,840 ------------------------------------------------------------------------- Industrial Goods/Services: 8.1% >Industrial Goods: 0.7% 111,400 Advanced Lighting Technologies (b) 2,061 Metal Halide Lighting Specialty Chemicals: 2.0% 202,600 Lilly Industries, Cl. A 6,091 Industrial Coatings >Other Industrial Services: 5.4% 319,400 Insurance Auto Auctions (b) 6,747 Auto Salvage Services 346,000 Hub Group (b) 5,168 Truck & Rail Freight Forwarder 422,500 Wackenhut, Cl. B (b) 3,961 Prison Management 19,800 EGL (b) 609 Domestic Freight Forwarder ------------------------------------------------------------------------- 16,485 -------- Industrial Goods/Services: Total 24,637 ------------------------------------------------------------------------- Energy/Minerals: 9.5% >Oil Services: 1.5% 371,000 Newpark Resources (b) 3,501 Oilfield Fluid Management 31,300 Carbo Ceramics 1,099 Manufacturer of Ceramic Pellets for Gas Wells ------------------------------------------------------------------------- 4,600 >Oil/Gas Producers: 1.6% 485,800 Tesoro Petroleum (b) 4,919 Oil Refinery/Gas Reserves >Distribution/Marketing/Refining: 6.4% 176,700 Dynegy 12,071 Natural Gas & Electric Processing, Production & Marketing 83,300 Equitable Resources 4,019 Natural Gas Utility & Producer 193,000 Atmos Energy 3,377 Natural Gas Utility ------------------------------------------------------------------------- 19,467 -------- Energy/Minerals: Total 28,986 31 Principle Amount or Number of Shares Value (000) Principal Amount Value (000) ------------------------------------------------------------------------- Other Industries: 3.1% >Real Estate: 0.4% 47,000 The Rouse Company $ 1,163 Regional Shopping Malls >Regulated Utilities: 2.7% 523,000 Conectiv 8,139 Electric Utility in New Jersey, Delaware & Maryland -------- Other Industries: Total 9,302 Total Common Stocks: 92.1% 280,907 (Cost: $296,427) ------------------------------------------------------------------------- Short-Term Obligations: 7.1% Yield 6.70%-6.85% Due 7/3-7/6/00 $ 7,891 Citigroup $ 7,885 7,542 GE International 7,535 6,312 Ford Motor Puerto Rico 6,310 ------------------------------------------------------------------------- (Amortized Cost: $21,730) 21,730 -------- Total Investments: 99.2% 302,637 (Cost: $318,157) Cash and Other Assets Less Liabilities: 0.8% 2,353 -------- Total Net Assets: 100% $304,990 ========================================================================= Notes to Statement of Investments (a) At June 30, 2000, for federal income tax purposes cost of investments was $318,547,000 and net unrealized depreciation was $15,910,000, consisting of gross unrealized appreciation of $60,321,000 and gross unrealized depreciation of $76,231,000. (b) Non-income producing security. 32 Acorn Foreign Forty >Major Portfolio Changes in the Second Quarter Number of Shares ------------------------ 3/31/00 6/30/00 Additions -------------------------------------------------------------------------- Europe >Germany MobilCom 0 19,600 >Sweden Modern Times Group 0 65,000 >United Kingdom/Ireland Irish Life & Permanent (Ireland) 500,000 550,000 Sema Group 100,000 178,666 >Italy Saipem 0 225,000 >Netherlands Getronics 65,000 254,000 (includes effect of 3 for 1 stock split) -------------------------------------------------------------------------- Asia >Singapore Venture Manufacturing 500,000 560,000 -------------------------------------------------------------------------- Other Countries >Australia Computershare 0 650,000 ERG 0 800,000 Infomedia 0 113,000 >Israel Comverse Technology 5,000 55,000 (includes effect of 2 for 1 stock split) >United States Global TeleSystems 0 200,000 Number of Shares ------------------------ 3/31/00 6/30/00 Sales -------------------------------------------------------------------------- Europe >Belgium Audiofina 50,000 41,000 >United Kingdom St. James Capital 700,000 0 >Italy Editoriale L'Espresso 250,000 180,000 SEAT Pagine Gialle 800,000 0 -------------------------------------------------------------------------- Asia >Japan Nintendo 12,000 0 -------------------------------------------------------------------------- Other Countries >Australia One.Tel Limited 1,290,000 0 >Canada ATI Technologies 250,000 0 Power Financial 50,000 0 >Israel Gilat Satellite Network 14,500 0 >United States Global Telesystems 2,988,000 0 33 Acorn Foreign Forty >Statement of Investments (unaudited) June 30, 2000 Number of Shares Value (000) ---------------------------------------------------------------------------- Common Stocks: 97.7% ---------------------------------------------------------------------------- Europe: 60.5% >Germany: 2.8% 50,000 Rhoen Klinikum $ 1,989 Hospital Management 19,600 MobilCom 1,967 Telecommunication Services ---------------------------------------------------------------------------- 3,956 >Finland: 2.3% 165,000 Comptel 3,337 Telephone Billing Software >Sweden: 5.3% 60,000 Netcom (b) 4,453 Telecommunication Services 65,000 Modern Times Group (b) 3,113 TV, Newspapers and Electronic Commerce ---------------------------------------------------------------------------- 7,566 >France/Belgium: 7.8% 41,000 Audiofina (Belgium) 5,306 TV & Radio Broadcaster 70,000 M6 Metropole TV 4,268 Television Broadcaster 18,000 Atos (b) 1,691 Computer Services/Transaction Processing ---------------------------------------------------------------------------- 11,265 >United Kingdom/Ireland: 22.4% 550,000 Irish Life & Permanent (Ireland) 4,655 Life Insurance 500,000 Peninsular & Oriental (b) 4,284 Cruise Line 600,000 Hays 3,347 Outsourcing Services 71,000 Energis (b) 2,664 Telecommunication Services 178,666 Sema Group (b) 2,543 Computer Software & Services 170,000 WPP Group (b) 2,484 Advertising 100,000 Capita Group (b) 2,448 Outsourcing Services 100,000 Logica 2,368 Computer Software & Services 200,000 SSL International 2,157 Medical & Footcare Products 270,000 Serco Group 2,136 Facilities Management 27,500 NTL (b) 1,647 Voice, Video & Data Services 363,100 Thus (b) 1,523 Telecommunication Services ---------------------------------------------------------------------------- 32,256 Number of Shares Value (000) ---------------------------------------------------------------------------- >Switzerland: 4.8% 1,000 Julius Baer Holding $ 3,967 Private Banking, Brokerage & Mutual Funds 800 Pargesa Holdings 1,830 Industrial & Media Conglomerate 390 Cie Fin Richemont 1,054 Luxury Goods, Tobacco & Pay TV ---------------------------------------------------------------------------- 6,851 >Italy: 5.9% 330,000 Banca Fideuram 4,998 Life Insurance & Mutual Funds 180,000 Editoriale L'Espresso 2,139 Newspapers & Magazines Publisher 225,000 Saipem 1,337 Offshore Construction & Drilling ---------------------------------------------------------------------------- 8,474 >Spain: 1.7% 110,000 Indra Sistemas 2,526 Computer Services >Netherlands: 7.5% 80,693 ASR Verzekeringsgroep 4,200 Auto/Life Insurance 254,000 Getronics 3,932 Computer Services 165,000 Fox Kids Europe (b) 2,610 Cartoons ---------------------------------------------------------------------------- 10,742 ------- Europe: Total 86,973 ---------------------------------------------------------------------------- Asia: 14.7% >Japan: 7.1% 10,000 Fast Retailing 4,196 Discount Apparel Retailer 24,000 Orix 3,550 Finance Leasing 5,000 Bellsystem24 2,457 Call Centers ---------------------------------------------------------------------------- 10,203 >Singapore: 7.6% 560,000 Venture Manufacturing 5,700 Electronic Manufacturing Services 969,000 Star Cruises (b) 5,233 Cruise Line ---------------------------------------------------------------------------- 10,933 ------- Asia: Total 21,136 34 Acorn Foreign Forty >Statement of Investments, continued Number of Shares Value (000) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Other Countries: 22.5% >Australia: 6.7% 800,000 ERG $ 6,230 Smart Card Systems for Public Transportation 650,000 Computershare 3,352 Financial Software/Services 113,000 Infomedia (b) 68 Publisher of Electronic Catalog for Auto Parts ---------------------------------------------------------------------------- 9,650 >Canada: 5.0% 90,000 Celestica (b) 4,379 Electronic Manufacturing Services 100,000 Clearnet Communications (b) 2,767 Telecommunications Services ---------------------------------------------------------------------------- 7,146 >Israel: 9.1% 105,000 Amdocs (b) 8,059 Telecommunications Billing & Customer Care Software 55,000 Comverse Technology (b) 5,115 Voicemail & Related Systems ---------------------------------------------------------------------------- 13,174 Principle Amount or Number of Shares Value (000) ---------------------------------------------------------------------------- >United States: 1.7% 200,000 Global TeleSystems (b) $ 2,413 Telecommunication Services -------- Other: Total 32,383 -------- Total Common Stocks: 97.7% 140,492 (Cost: $119,238) Short Term Obligations: 2.1% $ 3,051 First Capital 6.90% Due 7/3/00 3,050 (Amortized Cost: $3,050) -------- Total Investments: 99.8% 143,542 (Cost: $122,288) Cash and Other Assets Less Liabilities: 0.2% 297 -------- Total Net Assets: 100% $143,839 ============================================================================ ------------------------------------------------------------------------------ Notes to Statement of Investments (a) At June 30, 2000, for federal income tax purposes cost of investments was $122,593,000 and net unrealized appreciation was $20,949,000, consisting of gross unrealized appreciation of $36,234,000 and gross unrealized depreciation of $15,285,000. (b) Non-income producing security. (c) At June 30, 2000, $47,866,000 or 33.28% of the Fund's net assets were denominated in the Euro currency. 35 Acorn Foreign Forty >Portfolio Diversification At June 30, 2000, the Fund's portfolio of investments as a parent of net assets was diversified as follows: Value (000) Percent ---------------------------------------------------------------------------- >Information Telephone Services $ 15,477 10.8% Broadcasting 15,297 10.6 Business Software 11,396 7.9 Computer Services 10,534 7.3 Transaction Processors 9,582 6.7 Contract Manufacturing 5,700 4.0 Telephone Equipment 5,115 3.6 Mobile Communications 2,767 1.9 Business Information 2,526 1.8 Advertising 2,484 1.7 Publishing 2,207 1.5 CATV 1,647 1.1 ---------------------------------------------------------------------------- 84,732 58.9 >Health Care Pharmaceuticals 2,157 1.5 Hospital Management 1,989 1.4 ---------------------------------------------------------------------------- 4,146 2.9 >Consumer Goods/Services Cruises 9,517 6.6 Retail 4,196 2.9 Entertainment 1,054 0.8 ---------------------------------------------------------------------------- 14,767 10.3 >Finance Finance Companies $ 7,517 5.2% Money Management 4,998 3.5 Savings & Loans 4,655 3.2 Insurance 4,200 2.9 Closed End Funds 1,830 1.3 ---------------------------------------------------------------------------- 23,200 16.1 >Industrial Goods/Services Outsourcing Services 7,931 5.5 Electrical Components 4,379 3.1 ---------------------------------------------------------------------------- 12,310 8.6 >Energy/Minerals Oil Services 1,337 0.9 ---------------------------------------------------------------------------- 1,337 0.9 Total Common Stocks: 140,492 97.7 Short Term Obligations: 3,050 2.1 -------------------------- Total Investments: 143,542 99.8 Cash and Other Assets Less Liabilities: 297 0.2 -------------------------- Net Assets $143,839 100.0% ---------------------------------------------------------------------------- 36 Acorn Twenty >Major Portfolio Changes in the Second Quarter Number of Shares Held --------------------- Additions 3/31/00 6/30/00 ------------------------------------------------------------------------- Information Getty Images 0 65,000 Perkin Elmer 21,000 32,000 ------------------------------------------------------------------------- Industrial Goods/Services Expeditors International of Washington 0 45,000 ------------------------------------------------------------------------- Sales Information McLeod USA 42,000 84,000 (includes effect of 3 for 1 stock split) RCN 65,000 0 Tektronix 100,000 90,000 ------------------------------------------------------------------------- Health Care First Health 118,700 100,000 ------------------------------------------------------------------------- Finance Comdisco 46,000 0 ------------------------------------------------------------------------- Energy/Minerals Dynegy 69,000 50,000 37 Acorn Twenty >Statement of Investments (unaudited) June 30, 2000 Principal Amount or Number of Shares Value (000) Number of Shares Value (000) Common Stocks: 97.7% Information: 51.6% ------------------------------------------------------------------------------- >Television Programmimg: 3.5% 90,000 Liberty Media Group, AT&T $ 2,182 Cable & Satellite Programming >Telecommunications/Wireline Communications: 2.8% 84,000 McLeod USA (b) 1,738 Super Regional CLEC: Local, Long Distance & Internet Services >Instrumentation: 19.0% 90,000 Tektronix 6,660 Analytical Instruments 23,000 Waters 2,871 Chromatography, Mass Spectrometry, Thermal Analysis 32,000 Perkin Elmer 2,116 Analytical Instruments for Biotech, Telecom ------------------------------------------------------------------------------- 11,647 >Mobile Communications: 4.6% 52,000 Pinnacle Holdings (b) 2,808 Towers for Cellular, PCS & Paging >Contract Manufacturing: 6.4% 79,000 Jabil Circuit 3,920 Electronic Manufacturing Services >Computer Hardware & Related Equipment: 3.6% 54,000 American Power Conversion (b) 2,204 Uninterruptable Power Systems >Business Information: 11.7% 132,600 Reynolds & Reynolds 2,420 Business Forms & Computer Systems for Car Dealers 65,000 Getty Images (b) 2,409 Photographs for Publications & Electronic Media 73,000 H & R Block 2,363 Tax Preparation ------------------------------------------------------------------------------- 7,192 -------- Information: Total 31,691 ------------------------------------------------------------------------------- Health Care: 14.8% >Biotechnology/Drug Delivery: 0.8% 6,000 Incyte Pharmaceutical (b) $ 493 Gene Sequencing >Hospital/Laboratory Supplies: 8.7% 41,100 Techne (b) 5,343 Cytokines, Antibodies, Other Reagents for Life Sciences >Services: 5.3% 100,000 First Health (b) 3,281 PPO Network ------- Health Care: Total 9,117 ------------------------------------------------------------------------------- Consumer Goods/Services: 13.9% >Leisure Vehicles: 4.6% 74,000 Harley-Davidson 2,849 Motorcycles & Related Merchandise >Furniture & Manufacturers: 9.3% 125,000 Herman Miller 3,234 Office Furniture 105,000 Jones Apparel (b) 2,468 Women's Apparel ------------------------------------------------------------------------------- 5,702 ------- Consumer Goods/Services: Total 8,551 ------------------------------------------------------------------------------- Finance: 6.1% >Money Management: 6.1% 94,500 SEI Investments 3,762 Mutual Fund Administration Finance: Total 3,762 ------------------------------------------------------------------------------- Industrial Goods/Services: 5.7% >Logistics: 3.5% 45,000 Expeditors International of Washington 2,138 International Freight Forwarder >Other Industrial Services: 2.2% 120,000 ServiceMaster 1,365 Facilities Management ------- Industrial Goods/Services: Total 3,503 38 Acorn Twenty >Statement of Investments, continued Number of Shares Value (000) Principal Amount Value (000) ------------------------------------------------------------------------------- Energy/Minerals: 5.6% >Oil Refining/Marketing/Distribution: 5.6% 50,000 Dynegy 3,416 Natural Gas & Electric Processing, Production & Marketing Energy/Minerals: Total 3,416 Total Common Stocks: 97.7% 60,040 (Cost: $47,454) ------------------------------------------------------------------------------- Short-Term Obligations: 2.3% $ 1,441 First Capital 6.90% Due 7/3/00 $ 1,441 (Amortized Cost: $1,441) -------- Total Investments: 100% 61,481 (Cost: $48,895) Cash and Other Assets Less Liabilities: 0.0% (10) -------- Total Net Assets: 100% $ 61,471 ------------------------------------------------------------------------------- Notes to Statement of Investments (a) At June 30, 2000, for federal income tax purposes cost of investments was $48,897,000 and net unrealized appreciation was $12,584,000, consisting of gross unrealized appreciation of $15,330,000 and gross unrealized depreciation of $2,746,000. (b) Non-income producing security. 39 Acorn Family of Funds >Statements of Assets and Liabilities >Statements of Operations >Statements of Changes in Net Assets >Financial Highlights >Notes to Financial Statements 40
Acorn Family of Funds >Statements of Assets and Liabilities (unaudited) Acorn Acorn Acorn Acorn Acorn (in thousands) Fund International USA Foreign Forty Twenty ---------------------------------------------------------------------------------------------------------------------------------- 6/30/00 Assets Investments, at value (cost: Acorn Fund $2,676,542; Acorn International $1,901,110; Acorn USA $318,157; Acorn Foreign Forty $122,288; Acorn Twenty $48,895) $ 3,855,697 $ 2,961,629 $ 302,637 $143,542 $ 61,481 Cash 87 21,052 1 - - Organization costs - - 25 - - Net unrealized appreciation on foreign forward currency contracts - 89 - - - Receivable for: Securities sold 22,582 19,256 2,723 1,010 - Fund shares sold 1,832 6,896 118 46 7 Dividends and interest 2,422 3,225 22 143 24 Other assets 502 268 36 - - ---------------------------------------------------------------------------------------------------------------------------------- Total assets 3,883,122 3,012,415 305,562 144,741 61,512 Liabilities and Net Assets Payable for: Securities purchased 17,810 25,909 347 68 - Fund shares redeemed 46,689 1,669 73 759 - Organization costs - - 26 - - ---------------------------------------------------------------------------------------------------------------------------------- Other 1,053 1,115 126 75 41 ---------------------------------------------------------------------------------------------------------------------------------- Total liabilities 65,552 28,693 572 902 41 Net assets applicable to Fund shares outstanding $ 3,817,570 $ 2,983,722 $ 304,990 $143,839 $ 61,471 ---------------------------------------------------------------------------------------------------------------------------------- Fund shares outstanding 221,654 90,901 22,192 7,313 4,632 ---------------------------------------------------------------------------------------------------------------------------------- Pricing of Shares Net asset value, offering price and redemption price per share $ 17.22 $ 32.82 $ 13.74 $ 19.67 $ 13.27 ---------------------------------------------------------------------------------------------------------------------------------- Analysis of Net Assets Paid-in capital $ 2,354,404 $ 1,596,370 $ 319,438 $113,032 $ 48,733 Accumulated net realized gain on sales of investments, futures and foreign currency transactions 280,123 395,993 1,514 9,882 333 Net unrealized appreciation (depreciation) of investments and and other assets (net of unrealized PFIC gains of $65,710 for Acorn International and $305 for Acorn Foreign Forty) 1,179,150 994,764 (15,520) 20,947 12,586 Undistributed net investment income (loss) 3,893 (3,405) (442) (22) (181) ---------------------------------------------------------------------------------------------------------------------------------- Net assets applicable to Fund shares outstanding $ 3,817,570 $ 2,983,722 $ 304,990 $143,839 $ 61,471 ----------------------------------------------------------------------------------------------------------------------------------
41 Acorn Family of Funds >Statements of Operations (unaudited)
Acorn International Six months Year Six months Year (in thousands) ended 6/30, ended 12/31, ended 6/30, ended 12/31, ------------------------------------------------------------------------------------------------------------------- 2000 1999 2000 1999 Investment Income: Dividends $17,871 $ 34,159 $ 12,152 $ 20,878 Interest 10,729 11,416 5,909 4,883 ------------------------------------------------------------------------------------------------------------------- 28,600 45,575 18,061 25,761 Foreign taxes withheld (179) (330) (1,532) (2,094) ------------------------------------------------------------------------------------------------------------------- Total investment income 28,421 45,245 16,529 23,667 Expenses: Investment advisory 13,360 23,437 12,225 15,668 Administration 976 1,699 774 961 Custodian 608 875 2,022 2,321 Transfer and dividend disbursing agent 688 1,312 712 1,380 Reports to shareholders 233 448 234 446 Legal and audit 145 229 87 136 Registration and blue sky 36 64 66 58 Trustees' and other 359 683 255 399 ------------------------------------------------------------------------------------------------------------------- Total expenses 16,405 28,747 16,375 21,369 Less custodian fees paid indirectly -- -- -- -- Less reimbursement of expenses by advisor -- -- -- -- ------------------------------------------------------------------------------------------------------------------- Net expenses 16,405 28,747 16,375 21,369 ------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 12,016 16,498 154 2,298 Net Realized and Unrealized Gain (Loss) on Investments, Futures and Foreign Currency Transactions: Net realized gain on sales of investments 287,373 915,362 390,709 205,354 Net realized gain (loss) on foreign currency transactions -- (110) 1,135 1,133 Net realized loss on futures (2,727) (6,918) -- (403) Change in net unrealized appreciation of investments and foreign currency transactions (358,941) 92,272 (522,912) 1,054,166 ------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments, futures and foreign currency transactions (74,295) 1,000,606 (131,068) 1,260,250 ------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(62,279) $1,017,104 $(130,914) $1,262,548 ===================================================================================================================
See accompanying notes to financial statements 42
Acorn Acorn USA Foreign Forty Acorn Twenty Six months Year Six months Year Six months Year ended 6/30, ended 12/31, ended 6/30, ended 12/31, ended 6/30, ended 12/31, -------------------------------------------------------------------------------------------------------------------------- 2000 1999 2000 1999 2000 1999 $603 $2,223 $831 $459 $167 $280 914 1,259 206 158 79 130 -------------------------------------------------------------------------------------------------------------------------- 1,517 3,482 1,037 617 246 410 -- -- (94) (42) -- -- -------------------------------------------------------------------------------------------------------------------------- 1,517 3,482 943 575 246 410 1,631 2,805 664 426 285 503 88 150 35 22 16 28 26 43 117 85 7 12 102 218 62 60 63 105 39 95 41 53 40 75 28 41 17 29 14 29 26 26 18 25 11 20 48 85 10 6 7 17 -------------------------------------------------------------------------------------------------------------------------- 1,988 3,463 964 706 443 789 (4) (6) (1) (13) (6) (11) -- -- -- (42) (10) (23) -------------------------------------------------------------------------------------------------------------------------- 1,984 3,457 963 651 427 755 -------------------------------------------------------------------------------------------------------------------------- (467) 25 (20) (76) (181) (345) 2,063 38,768 9,924 792 496 5,015 -- -- -- -- -- -- -- -- -- -- -- -- (63,202) 30,941 (16,843) 36,932 1,148 8,906 -------------------------------------------------------------------------------------------------------------------------- (61,139) 69,709 (6,919) 37,724 1,644 13,921 -------------------------------------------------------------------------------------------------------------------------- $(61,606) $69,734 $(6,939) $37,648 $1,463 $13,576 ==========================================================================================================================
43 Acorn Family of Funds >Statements of Changes in Net Assets (unaudited)
Acorn International Six months Year Six months Year (in thousands) ended 6/30, ended 12/31, ended 6/30, ended 12/31, ------------------------------------------------------------------------------------------------------------------------------ 2000 1999 2000 1999 From Operations: Net investment income (loss) $ 12,016 $ 16,498 $ 154 $ 2,298 Net realized gain on sales of investments, futures and foreign currency transactions 284,646 908,334 391,844 206,084 Change in net unrealized appreciation of investments and foreign currency transactions (358,941) 92,272 (522,912) 1,054,166 ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (62,279) 1,017,104 (130,914) 1,262,548 Distributions to Shareholders From: Net investment income (10,651) (16,501) (58,157) (16,992) Net realized gain (213,028) (638,460) (44,940) (119,344) ------------------------------------------------------------------------------------------------------------------------------ Total distributions to shareholders (223,679) (654,961) (103,097) (136,336) From Fund Share Transactions: Reinvestment of dividend and capital gain distributions 205,092 586,161 96,097 128,048 Proceeds from other shares sold 426,888 346,317 928,463 648,562 ------------------------------------------------------------------------------------------------------------------------------ 631,980 932,478 1,024,560 776,610 Payments for shares redeemed (449,291) (923,243) (675,030) (760,116) ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from Fund share transactions 182,689 9,235 349,530 16,494 ------------------------------------------------------------------------------------------------------------------------------ Total increase (decrease) in net assets (103,269) 371,378 115,519 1,142,706 Net Assets: Beginning of period 3,920,839 3,549,461 2,868,203 1,725,497 ------------------------------------------------------------------------------------------------------------------------------ End of period $3,817,570 $3,920,839 $2,983,722 $2,868,203 ============================================================================================================================== Undistributed Net Investment Income (Loss) $ 3,893 $ 2,528 ($3,405) $ 54,598 =============================================================================================================================
See accompanying notes to financial statements 44
Acorn Foreign Forty Six months Year Six months Year Six months Year ended 6/30, ended 12/31, ended 6/30, ended 12/31, ended 6/30, ended 12/31, ------------------------------------------------------------------------------------------------------------------------------ 2000 1999 2000 1999 2000 1999 $(467) $25 $(20) $(76) $(181) $(345) 2,063 38,768 9,924 792 496 5,015 (63,202) 30,941 (16,843) 36,932 1,148 8,906 ------------------------------------------------------------------------------------------------------------------------------- (61,606) 69,734 (6,939) 37,648 1,463 13,576 -- -- (221) -- -- -- (7,217) (28,268) (809) (99) (3,897) (705) ------------------------------------------------------------------------------------------------------------------------------- (7,217) (28,268) (1,030) (99) (3,897) (705) 7,066 25,972 971 94 3,728 658 66,434 118,916 126,311 66,325 10,193 34,563 ------------------------------------------------------------------------------------------------------------------------------- 73,500 144,888 127,282 66,419 13,921 35,221 (71,115) (95,877) (82,825) (12,402) (18,486) (13,346) ------------------------------------------------------------------------------------------------------------------------------- 2,385 49,011 44,457 54,017 (4,565) 21,875 ------------------------------------------------------------------------------------------------------------------------------- (66,438) 90,477 36,488 91,566 (6,999) 34,746 371,428 280,951 107,351 15,785 68,470 33,724 ------------------------------------------------------------------------------------------------------------------------------- $ 304,990 $371,428 $143,839 $107,351 $61,471 $ 68,470 =============================================================================================================================== ($442) $25 ($22) $219 ($181) -- ===============================================================================================================================
45 Acorn Family of Funds >Financial Highlights (unaudited)
Six months Year ended 6/30, ended 12/31, --------------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period 2000 1999 Net Asset Value, beginning of period $18.53 $16.85 Income From Investment Operations Net investment income .06 .09 Net realized and unrealized gain (loss) on investments, foreign currency and futures (.32) 5.22 --------------------------------------------------------------------------------------------------------------------- Total from investment operations (.26) 5.31 Less Distributions Dividends from net investment income (0.05) (0.09) Distributions from net realized and unrealized gains reportable for federal income taxes (1.00) (3.54) --------------------------------------------------------------------------------------------------------------------- Total distributions (1.05) (3.63) --------------------------------------------------------------------------------------------------------------------- Net Asset Value, end of period $17.22 $18.53 ===================================================================================================================== Total Return (a) (1.41%) 33.4% Ratios/Supplemental Data Ratio of expenses to average net assets .84%* .85% Ratio of net investment income to average net assets .62%* .49% Portfolio turnover rate 35%* 34% Net assets at end of period (in millions) $3,818 $3,921
(a) Total return is not annualized for periods less than one year. * Annualized
Six months Year Acorn International ended 6/30, ended 12/31, --------------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period 2000 1999 Annualized Net Asset Value, beginning of period $35.33 $20.82 Income From Investment Operations Net investment income (loss) - .83 Net realized and unrealized gain (loss) on investments, foreign currency and futures (1.34) 15.45 --------------------------------------------------------------------------------------------------------------------- Total from investment operations (1.34) 16.28 Less Distributions Dividends from net investment income (.66) (.22) Distributions from net realized and unrealized gains reportable for federal income taxes (.51) (1.55) --------------------------------------------------------------------------------------------------------------------- Total distributions (1.17) (1.77) --------------------------------------------------------------------------------------------------------------------- Net Asset Value, end of period $32.82 $35.33 ===================================================================================================================== Total Return (a) Ratios/Supplemental Data (3.8)% 79.2% Ratio of expenses to average net assets 1.06%* 1.11% Ratio of net investment income (loss) to average net assets .01%* .12% Portfolio turnover rate 76%* 46% Net assets at end of period (in millions) $2,984 $2,868
(a) Total return is not annualized for periods less than one year. * Annualized
Six months Year Acorn USA ended 6/30, ended 12/31, --------------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period 2000 1999 Net Asset Value, beginning of period $16.75 $14.80 Income From Investment Operations Net investment income (loss) (b) (.02) - Net realized and unrealized gain (loss) on investments, foreign currency and futures (2.67) 3.32 -------------------------------------------------------------------------------------------------------------------- Total from investment operations (2.69) 3.32 -------------------------------------------------------------------------------------------------------------------- Less Distributions Dividends from net investment income - - Distributions from net realized and unrealized gains reportable for federal income taxes (.32) (1.37) -------------------------------------------------------------------------------------------------------------------- Total distributions (.32) (1.37) -------------------------------------------------------------------------------------------------------------------- Net Asset Value, end of period $13.74 $16.75 ==================================================================================================================== Total Return (c) (16.1%) 23.0% Ratios/Supplemental Data Ratio of expenses to average net assets (a) 1.13% 1.15% Ratio of net investment income (loss) to average net assets (.27%)* 0.00% Portfolio turnover rate 65%* 49% Net assets at end of period (in millions) $ 305 $ 371
(a) In accordance with a requirement by the Securities and Exchange Commission, the Acorn USA ratio reflects gross custodian fees. This ratio net of custodian fees paid indirectly would have been 1.79% for the year ended December 31, 1996. (b) Net investment income (loss) per share was based upon the average shares outstanding during each period. (c) Total return is not annualized for periods less than one year. * Annualized See accompanying notes to financial statements 46
-------------------------------------------------------------------- 1998 1997 1996 1995 1994 1993 1992 1991 $16.99 $15.04 $13.60 $12.24 $13.95 $11.06 $ 9.32 $ 6.51 .04 .15 .09 .11 .06 .04 .07 .11 .91 3.57 2.93 2.42 (1.10) 3.50 2.16 2.95 -------------------------------------------------------------------- .95 3.72 3.02 2.53 (1.04) 3.54 2.23 3.06 (0.03) (0.16) (.11) (.09) (.11) (.06) (.08) (.10) (1.06) (1.61) (1.47) (1.08) (.56) (.59) (.41) (.15) -------------------------------------------------------------------- (1.09) (1.77) (1.58) (1.17) (.67) (.65) (.49) (.25) -------------------------------------------------------------------- $16.85 $16.99 $15.04 $13.60 $12.24 $13.95 $11.06 $ 9.32 ==================================================================== 6.0% 25.0% 22.6% 20.8% (7.4%) 32.3% 24.2% 47.3% .84% .56% .57% .57% .62% .65% .67% .72% .30% .75% .53% .89% .55% .30% .72% 1.30% 24% 32% 33% 29% 18% 20% 25% 25% $3,549 $3,681 $2,842 $2,399 $1,983 $2,035 $1,449 $1,150
Inception 9/23 through 12/31, ------------------------------------------------------------------- 1998 1997 1996 1995 1994 1993 1992 $18.39 $19.61 $16.59 $15.24 $15.94 $10.69 $10.00 .17 .40 .13 .16 .07 - (.03) 2.68 (.34) 3.29 1.20 (.67) 5.25 .72 ------------------------------------------------------------------- 2.85 .06 3.42 1.36 (.60) 5.25 .69 (.15) (.38) (.12) - - - - (.27) (.90) (.28) (.01) (.10) - - ------------------------------------------------------------------- (.42) (1.28) (.40) (.01) (.10) - - ------------------------------------------------------------------- $20.82 $18.39 $19.61 $16.59 $15.24 $15.94 $10.69 =================================================================== 15.4% 0.2% 20.7% 8.9% (3.8%) 49.1% 6.9% 1.12% 1.19% 1.17% 1.22% 1.24% 1.21% 2.35%* .86% .58% .51% .90% 0.48% 0.06% (1.37%)* 37% 39% 34% 26% 20% 19% 20%* $1,725 $1,623 $1,773 $1,276 $1,363 $ 907 $ 30
Year Year Inception 9/4 ended 12/31 ended 12/31 through 12/31 ----------------------------------------- 1998 1997 1996 $15.12 $11.65 $10.00 (.07) (.07) (.02) .87 3.83 1.67 ----------------------------------------- .80 3.76 1.65 ----------------------------------------- - - (1.12) (.29) - ----------------------------------------- (1.12) (.29) - ----------------------------------------- $14.80 $15.12 $11.65 ========================================= 5.8% 32.3% 16.5% 1.20% 1.35% 1.85%* (0.42%) (.49%) (.99%)* 42% 33% 20%* $ 281 $ 185 $ 53
47
6 months Year Inception 11/23 Acorn Foreign Forty ended 6/30, ended 12/31, through 12/31, ---------------------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period 2000 1999 1998 Net Asset Value, beginning of period $ 19.93 $ 11.00 $ 10.00 Income From Investment Operations Net investment loss (c) - (.02) (.01) Net realized and unrealized gain (loss) on investments (.12) 8.98 1.01 --------------------------------------------------------------------------------------------------------------------------- Total from investment operations (.12) 8.96 1.00 --------------------------------------------------------------------------------------------------------------------------- Less Distributions Dividends from net investment income (.03) - - Distributions from net realized and unrealized gains reportable for federal income taxes (.11) (.03) - --------------------------------------------------------------------------------------------------------------------------- Total distributions (.14) (.03) - --------------------------------------------------------------------------------------------------------------------------- Net Asset Value, end of period $ 19.67 $ 19.93 $ 11.00 =========================================================================================================================== Total Return (d) (0.6%) 81.6% 10.0% Ratios/Supplemental Data Ratio of expenses to average net assets (a) (c) 1.37%* 1.48% 1.73% Ratio of net investment loss to average net assets (c) (.03%)* (.17%) (.78%) Portfolio turnover rate 74%* 60% 90% Net assets at end of period (in millions) $ 144 $ 107 $ 16
(a) In accordance with a requirement by the Securities and Exchange Commission, the Acorn Foreign Forty ratio reflects total expenses prior to the reduction of custodian fees for cash balances it maintains with the custodian ("custodian fees paid indirectly"). This ratio net of custodian fees paid indirectly would have been 1.45% for the period ended December 31, 1998 and the year ended December 31, 1999. (b) Net investment loss per share was based upon the average shares outstanding during the period. (c) Acorn Foreign Forty was reimbursed by the Advisor for certain net expenses from November 23, 1998 through December 31, 1999. Without the reimbursement, the ratio of expenses (prior to custodian fees paid indirectly) to average net assets and the ratio of net investment income to average net assets would have been 2.70% and (1.75%), respectively, for the period ended 12/31/98 and 1.57% and (.26%), respectively, for the year ended 12/31/99. (d) Total return is not annualized for periods less than one year. * Annualized
6 months Year Inception 11/23 Acorn Twenty ended 6/30, ended 12/31, through 12/31, ------------------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period 2000 1999 1998 Net Asset Value, beginning of period $ 13.70 $ 10.71 $ 10.00 Income From Investment Operations Net investment loss (b) (.04) (.08) - Net realized and unrealized gain on investments .50 3.21 .71 ------------------------------------------------------------------------------------------------------------------------ Total from investment operations .46 3.13 .71 ======================================================================================================================== Less Distributions Dividends from net investment income - - - Distributions from net realized and unrealized gains reportable for federal income taxes (.89) (.14) - ------------------------------------------------------------------------------------------------------------------------ Total distributions (.89) (.14) - ======================================================================================================================== Net Asset Value, end of period $ 13.27 $ 13.70 $ 10.71 Total Return (d) 3.4% 29.3% 7.1% Ratios/Supplemental Data Ratio of expenses to average net assets (a) (c) 1.37%* 1.37% 1.41%* Ratio of net investment income (loss) to average net assets (c) (.57%)* (.62%) 0.22%* Portfolio turnover rate 170%* 101% 173%* Net assets at end of period (in millions) $ 61 $ 68 $ 34
(a) In accordance with a requirement by the Security and Exchange Commission, the Acorn Twenty ratio reflects total expenses prior to the reduction of custodian fees for cash balances it maintains with the custodian ("custodian fees paid indirectly"). This ratio net of custodian fees paid indirectly would have been 1.35% for the period ended December 31, 1998, the year ended December 31, 1999 and the six months ended June 30, 2000. (b) Net investment income per share was based upon the average shares outstanding during the period. (c) Acorn Twenty was reimbursed by the Advisor for certain net expenses from November 23, 1998 through June 30, 2000. Without the reimbursement, the ratio of expenses to average net assets and the ratio of net investment income to average net assets would have been 1.83% and (.21%), respectively, for the period ended 12/31/98, 1.41% and (.66%), respectively, for the year ended 12/31/99 and 1.40% and (.60%), respectively, for the six months ended June 30, 2000. (d) Total return is not annualized for periods less than one year. * Annualized See accompanying notes to financial statements 48 Acorn Family of Funds >Notes to Financial Statements (unaudited) 1. Nature of Operations Acorn Fund, Acorn International, Acorn USA, Acorn Foreign Forty and Acorn Twenty (the "Funds") are series of Acorn Investment Trust (the "Trust"), an open-end management investment company organized as a Massachusetts business trust. The investment objective of each Fund is to seek long-term growth of capital. 2. Significant Accounting Policies >Security valuation Investments are stated at current value. Securities traded on securities exchanges or in over-the-counter markets in which transaction prices are reported are valued at the last sales price at the time of valuation. Securities for which there are no reported sales on the valuation date are valued at the mean of the latest bid and ask quotation or, if there is no ask quotation, at the most recent bid quotation. Money market instruments having a maturity of 60 days or less from the valuation date are valued on an amortized cost basis. Securities for which quotations are not available and any other assets are valued at a fair value as determined in good faith by the Board of Trustees. >Foreign currency translations Values of investments denominated in foreign currencies are converted into U.S. dollars using the spot market rate of exchange at the time of valuation. Purchases and sales of investments and dividend and interest income are translated into U.S. dollars using the spot market rate of exchange prevailing on the respective dates of such transactions. The gain or loss resulting from changes in foreign exchange rates is included with net realized and unrealized gain or loss from investments, as appropriate. >Security transactions and investment income Security transactions are accounted for on the trade date (date the order to buy or sell is executed) and dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as soon as the information is available to the Funds. Interest income is recorded on the accrual basis and includes amortization of discounts on money market instruments and long-term debt instruments when required for federal income tax purposes. Realized gains and losses from security transactions are reported on an identified cost basis. >Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. >Financial instruments Each Fund may purchase or sell exchange-traded financial futures contracts, which are contracts that obligate that Fund to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Funds enter into such contracts to hedge a portion of their portfolio. Gains and losses are reflected as "Net Realized Gain (Loss) on Futures" in the Statements of Operations. Additionally, each Fund may engage in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell foreign currencies. The Statements of Operations reflect gains and losses as realized for closed forward foreign currency contracts and unrealized for open contracts. A Fund bears the market risk that arises from changes in the value of financial instruments and securities indices (futures contracts) or from changes in foreign currency rates (forward foreign currency contracts) and the credit risk should a counterparty fail to perform under such contracts. None of the funds had futures contracts open at June 30, 2000. Acorn International entered into forward contracts to sell foreign currency as described below: Acorn International Foreign Settlement U.S. Dollar Unrealized Amount (000) Currency Date Proceeds (000) Gain (000) ------------------------------------------------------------------------ 5,260,000 Japanese Yen 9/22/00 $50,488 $89 ---------- $89 ========== Acorn USA, Acorn Twenty and Acorn Foreign Forty did not enter into any futures or forward foreign currency contracts during the six months ended June 30 2000. 49 >Fund share valuation Fund shares are sold and redeemed on a continuing basis at net asset value. Net asset value per share is determined daily as of the close of trading on the New York Stock Exchange on each day the Exchange is open for trading by dividing the total value of each Fund's investments and other assets, less liabilities, by the respective number of Fund shares outstanding. >Federal income taxes, dividends and distributions to shareholders Each Fund has complied with the special provisions of the Internal Revenue Code available to investment companies. Acorn Fund, Acorn International and Acorn Foreign Forty have elected to mark-to-market their investments in Passive Foreign Investment Companies ("PFICs") for Federal income tax purposes. At June 30, 2000, Acorn International had cumulative net unrealized appreciation on PFICS of $65,710,000 of which $66,039,000 was recognized in 1999. At June 30, 2000, Acorn Fund had no cumulative net unrealized appreciation on PFICs. At June 30, 2000, Acorn Foreign Forty had cumulative net unrealized appreciation on PFICS of $305,000, of which $286,000 was recognized in 1999. Distributions relating to PFICs are treated as ordinary income for Federal income tax purposes. Dividends payable to shareholders are recorded by the Funds on the ex-dividend date. 3. Transactions with Affiliates The Funds' investment advisor, Wanger Asset Management, L.P. ("WAM") furnishes continuing investment supervision to the Funds and is responsible for the overall management of the Funds' business affairs. Under the Funds' investment management agreement, fees are accrued daily and paid monthly to WAM at the annual rates shown in the table below for each fund. Acorn Fund ----------------------------------------------------------------------------- Net asset value: For the first $700 million .75% Next $1.300 billion .70% Net assets in excess of $2 billion .65% Acorn International ----------------------------------------------------------------------------- Net asset value: For the first $100 million 1.20% Next $400 million .95% Net assets in excess of $500 million .75% Acorn USA ----------------------------------------------------------------------------- Net asset value: For the first $200 million .95% Net assets in excess of $200 million .90% Acorn Foreign Forty ----------------------------------------------------------------------------- On average daily net assets .95% Acorn Twenty ----------------------------------------------------------------------------- On average daily net assets .90% WAM has also contracted to provide administrative services to each Fund at an annual rate of .05% of average daily net assets. 50 Acorn Family of Funds >Notes to Financial Statements (unaudited) continued Certain officers and trustees of the Trust are also principals of WAM. The Trust makes no direct payments to its officers and trustees who are affiliated with WAM. The Funds paid trustees' fees and expenses of the following:
6 months ended 6/30, ------------------------------------------------------- (in thousands) 2000 1999 Acorn Fund $168 $293 Acorn International 122 150 Acorn USA 18 24 Acorn Foreign Forty 6 2 Acorn Twenty 4 4 ---------------- $318 $473 ----------------
WAM advanced Acorn USA $107,000 in connection with the organization and initial registration of the Fund. These costs are being amortized and reimbursed to WAM over the period September 1996 though August 2001. WAM Brokerage Services, L.L.C., a wholly-owned subsidiary of WAM, is the distributor of the Funds' shares and receives no compensation for its services. 4. Borrowing Arrangements The trust participates in a $250,000,000 credit facility which was entered into to facilitate portfolio liquidity. No amounts have been borrowed under this facility in 1999 or 2000. 5. Fund Share Transactions Proceeds and payments on Fund shares as shown in the Statements of Changes in Net Assets are in respect of the following numbers of shares:
6 months Acorn Fund ended 6/30, --------------------------------------------------------------------- (in thousands) 2000 1999 Shares sold 23,285 19,615 Shares issued in reinvestment of dividend and capital gain distributions 11,903 33,973 --------------------- 35,188 53,588 Less shares redeemed 25,152 52,676 --------------------- Net increase in shares outstanding 10,036 912 =====================================================================
6 months Acorn International ended 6/30, --------------------------------------------------------------------- (in thousands) 2000 1999 Shares sold 25,410 25,580 Shares issued in reinvestment of dividend and capital gain distributions 2,915 4,028 ---------------------- 28,325 29,608 Less shares redeemed 18,602 31,304 ---------------------- Net increase (decrease) in shares outstanding 9,723 (1,696) =====================================================================
6 months Acorn USA ended 6/30, --------------------------------------------------------------------- (in thousands) 2000 1999 Shares sold 4,280 7,922 Shares issued in reinvestment of dividend and capital gain distributions 509 1,645 --------------------- 4,789 9,567 Less shares redeemed 4,767 6,383 --------------------- Net increase in shares outstanding 22 3,184 =====================================================================
6 months Acorn Foreign Forty ended 6/30, --------------------------------------------------------------------- (in thousands) 2000 1999 Shares sold 5,810 4,836 Shares issued in reinvestment of dividend and capital gain distributions 48 7 --------------------- 5,858 4,843 Less shares redeemed 3,932 891 --------------------- Net increase in shares outstanding 1,926 3,952 =====================================================================
6 months Acorn Twenty ended 6/30, --------------------------------------------------------------------- (in thousands) 2000 1999 Shares sold 758 2,862 Shares issued in reinvestment of dividend and capital gain distributions 283 51 --------------------- 1,041 2,913 Less shares redeemed 1,405 1,067 --------------------- Net increase (decrease) in shares outstanding (364) 1,846 =====================================================================
6. Investment Transactions Investment Transactions (excluding money market instruments) for each of the Funds are as follows:
6 months Acorn Fund ended 6/30, --------------------------------------------------------------------- (in thousands) 2000 1999 Investment securities: Purchases $636,325 $1,092,137 Proceeds from sales 621,656 1,809,918 =====================================================================
6 months Acorn International ended 6/30, --------------------------------------------------------------------- (in thousands) 2000 1999 Investment securities: Purchases $1,095,963 $846,014 Proceeds from sales 1,094,884 844,062 =====================================================================
6 months Acorn USA ended 6/30, --------------------------------------------------------------------- (in thousands) 2000 1999 Investment securities: Purchases $111,421 $138,244 Proceeds from sales 104,145 135,001 =====================================================================
6 months Acorn Foreign Forty ended 6/30, --------------------------------------------------------------------- (in thousands) 2000 1999 Investment securities: Purchases $94,271 $76,252 Proceeds from sales 48,797 26,238 =====================================================================
6 months Acorn Twenty ended 6/30, --------------------------------------------------------------------- (in thousands) 2000 1999 Investment securities: Purchases $51,713 $71,463 Proceeds from sales 56,819 53,710 =====================================================================
51 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 52 RSVP for the Annual Shareholder Meeting On September 26, 2000 If you plan to attend, please tear out and mail this postage-paid postcard. To ensure our presenters are addressing the issues that are most important to you, please consider submitting a question in the space indicated. If you aren't able to make it but would like to ask a question of our management team, please mark that you won't be attending and include your question in the space provided. A transcript of the meeting, along with answers to the questions asked and submitted, will be posted on our web site following the meeting. You may also submit questions via e-mail to acorn@wanger.com. RSVP today by sending back this card! Even if you can't make it, send us your question. I will be attending. I can't make it but I do have a question. My question is: NO YES ________________________________________________________ NAME ________________________________________________________ ADDRESS ________________________________________________________ CITY STATE ZIP There is a private lot (indoor) located in the Bank One building. The entrance is at 40 S. Clark directly across from the Bank One building. Clark is one-way south. Space is limited. A public lot is located half a block east of the Bank One building on Madison Street. Space is limited. The entrance is on the south side of Madison between Dearborn and State Streets. Madison is one-way west. Mid-Continental Plaza parking is located on Monroe Street two blocks east of the Bank One building. The entrance is on the south side (right) of Monroe Street between Wabash and Michigan Avenues. Monroe is one-way east. Grant Park Underground (indoor) parking is located three blocks east of the Bank One building on Monroe Street. The entrance is on the north side of Monroe Street between Columbus Drive and Lake Shore. Monroe is two-way between Lake Shore Drive and Michigan Avenue. West of Michigan, Monroe is a one-way east. For directions using public transportation, call (312) 836-7000 for CTA travel information. ----------------- NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES --------------------------------------------- ----------------- BUSINESS REPLY MAIL FIRST CLASS MAIL PERMIT NO. 21202 CHICAGO, IL --------------------------------------------- POSTAGE WILL BE PAID BY ADDRESSEE TO: Meeting Coordinator Wanger Asset Management 227 W. Monroe, Suite 3000 Chicago, Illinois 60606-9830 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 Foreign Forty and Acorn Twenty, 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 1.45% and 1.35% 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 Foreign Forty and Acorn Twenty would have been 1.45% and 1.35%, respectively. The Acorn ------------------------ Family of Funds WAM Brokerage Services, L.L.C. P.O. Box 8502 Boston, MA 02266-8502 Mark Your Calendar For The 2000 Annual Shareholder Meeting When: September 26, 2000 9 a.m. to 10 a.m., Central time Where: Bank One Auditorium, Plaza Level 38 South Dearborn Street Chicago, IL 60602 Refreshments will be served. Directions to the 2000 Annual Shareholder Meeting The Bank One Auditorium is located on the Plaza Level of the Bank One building (formerly First Chicago). The Bank One building is located in the center of the Loop, bordered by Dearborn Street on the east, Madison Street on the north, Clark Street on the west and Monroe Street on the south. From the south: Take I-57 (which merges with I-94, also known as the Dan Ryan Expressway). Take the Dan Ryan into Chicago. Follow the signs for the Kennedy Expressway West. Travel on the Kennedy and exit using the Monroe Street exit. Turn right (east) from the exit onto Monroe Street. Proceed east on Monroe Street to Dearborn. From the north: Take the Kennedy Expressway (I-90/94) south to Chicago. Exit in the city at Monroe Street. Turn left (east) from the exit onto Monroe Street. Proceed east on Monroe Street to Dearborn. From the west: Take the Eisenhower Expressway (I-290) from the west. This becomes Congress Street in the city. Take Congress east to Dearborn Street. Turn left (north) on Dearborn to Monroe Street. From the southwest: Take the Stevenson Expressway (I-55). Exit to the Kennedy Expressway (North-Wisconsin). Travel on the Kennedy and exit using the Monroe Street exit. Turn right (east) from the exit onto Monroe Street. Proceed east on Monroe Street to Dearborn. Please RSVP by returning the postcard included in the back of the shareholder report. Please RSVP by returning the postcard included in the back of the shareholder report. Please Join Us At The 2000 Annual Meeting For Shareholders On September 26. Look inside for more details. The Acorn ---------------------- Family of Funds [STAMP APPEARS HERE] WAM Brokerage Services, L.L.C. P.O. Box 8502 Boston, MA 02266-8502 Member NASD