-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MwiPcrR/A6xOP2gehcoW+0etQ9GSXEhsC/Hx4H5KpJSttaF/PzT6Km6sUzgPodMg GRzLhSUaswJ/i+6VqGx6SA== 0000950131-98-004988.txt : 19980827 0000950131-98-004988.hdr.sgml : 19980827 ACCESSION NUMBER: 0000950131-98-004988 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980826 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACORN INVESTMENT TRUST CENTRAL INDEX KEY: 0000002110 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 362692100 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-01829 FILM NUMBER: 98698106 BUSINESS ADDRESS: STREET 1: 227 W MONROE STE 3000 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3126349200 MAIL ADDRESS: STREET 1: 227 W MONROE ST STE 3000 STREET 2: ATTN: BRUCE LAUER CITY: CHICAGO STATE: IL ZIP: 60606 FORMER COMPANY: FORMER CONFORMED NAME: ACORN FUND INC DATE OF NAME CHANGE: 19920703 N-30D 1 SECOND QUARTER REPORT = ACORN INVESTMENT TRUST [ART WORK APPEARS HERE] Acorn The Acorn Family of Funds Semi-Annual Report ------------------------------ June 30, 1998 Managed by Wanger Asset Management, L.P. Acorn Family of Funds Semi-Annual Report 1998 >Table of Contents
Squirrel Chatter .Why is the Stock Market so High? 1 .Meet the Trustees 3 Acorn USA .In a Nutshell 4 .Performance at a Glance 5 .Major Portfolio Changes 10 .Statement of Investments 11 Acorn Fund .In a Nutshell 6 .Performance at a Glance 7 .Major Portfolio Changes 14 .Statement of Investments 16 .Foreign Portfolio Diversification 25 Acorn International .In a Nutshell 8 .Performance at a Glance 9 .Major Portfolio Changes 26 .Statement of Investments 28 .Portfolio Diversification 34 Acorn Family of Funds .Statements of Assets and Liabilities 35 .Statements of Operations 36 .Statements of Changes in Net Assets 37 .Financial Highlights 38 .Notes to Financial Statements 40
.Mid-Year Distributions The following table details the funds' mid-year distributions. The record date was June 22, 1998, the ex-dividend date was June 23, 1998, and the payable date was June 26, 1998.
Acorn Fund Acorn Int'l Acorn USA - -------------------------------------------------------------------------------- Ordinary Income $0.03/share $0.15/share N/A Short-Term Capital Gain N/A N/A $0.06/share Long-Term Capital Gain $0.23/share $0.27/share $0.04/share Reinvestment Price $18.18 $21.49 $16.79
.Squirrel Chatter: Why is the Stock Market so High? At the end of June, the S&P 500 index was 1134N--28 times earnings. Over the long-term, the average price-to-earnings ratio for the S&P 500 has been only 15 times earnings. For the last couple of years, market commentators repeatedly have warned that the market is too high, but the market keeps going up anyway. Why? Markets are rather like bathtubs. In a tub, the water level rises when water flows in faster than it drains out. Markets rise when money flows in from investors faster than investment bankers can invent new securities. Mutual fund investors have been a very important source of new money, but not the only one. Foreign impact is amazingly large. ($290 billion would buy all of Merck plus all of IBM). Where is this money going? Another driving force is investment by foreigners in the U.S. stock and bond markets. There have been two massive changes in the last five years, both in the direction of increasing foreign ownership. First, the United States has been running a large balance of trade deficit with the rest of the world since the mid-1980s. The balance of trade deficit has run from $60 billion to $180 billion per year over this entire period, but the last few years have shown the largest deficits. When several Asian economies blew up in the last half of 1997, our balance of trade deficit got a lot worse. Asians stopped buying U.S. exports, and the U.S. is taking even more imports from these countries, because their currencies have depreciated and their goods have become cheaper. In 1997 the balance of trade deficit was about $180 billion, and it may reach $240 billion this year. Our balance of payments is made up of our large balance of trade deficit and a smaller service income surplus. Our service income is $70-80 billion, which reduces our balance of payments deficit but does not come close to eliminating it. The effect of a large balance of payments deficit is to put dollar claims in the hands of foreign companies and individuals. This means that foreigners who end up with our dollars have to buy American stocks, bonds, or real estate with this money. The foreign dollar holders can sell dollars to someone else, of course, but this only transfers the bucks to a different person who still must own U.S. financial assets. In many cases, the final holder is a bank that prefers to own short-term treasury bills. All this buying of U.S. assets by foreigners is recorded as a large capital inflow into the U.S. over this period. The second massive change has been in the U.S. government deficit. From 1984 to 1987 we ran a large deficit every year, running from $110 to $320 billion per year. A large federal deficit means that the U.S. government has to issue treasury bonds for that amount of money. Much of that imbalance of trade results in foreign-purchased U.S. treasury securities. Since foreigners have to buy U.S. assets with their balance of trade deficit dollars, the two dollar figures from trade imbalance and new treasury issues pretty much offset each other so that from 1993-1996, for instance, the net swing between these two numbers was less than $50 billion dollars. This means that (from 1993-1996) foreigners shipped us VCRs and automobiles and shoes and we paid them with government bonds, and the net effect on financial prices was basically zero because the two more or less balanced out. This year we have a big change in the federal deficit. Instead of having an enormous deficit as we did a couple of years ago, we now have a slight surplus. This means that net new issues of government bonds have not been available, so all of the financial flows that have been going overseas can no longer be neutralized by offsetting government bond issuance. Therefore, instead of [PHOTO OF RALPH WANGER APPEARS HERE] 1 Markets are rather like bathtubs. In a tub, the water level rises when water flows in faster than it drains out. foreign money exerting a neutral effect on U.S. asset prices, there is now an enormous net buying of existing financial assets (both bonds and stocks) with foreign money, which will amount to $250 billion-$300 billion this year, up from $180 billion in 1997. In 1992, just the opposite happened: the U.S. sold $241 billion more bonds than it received in goods, so the budget deficit had a large net drag on U.S. financial markets. So if you look at the swing over a 6-year period, our balance of trade minus bonds issued has gone from minus $241 billion to plus $290 billion--about a $530 billion per year swing.
Foreign Impact on U.S. Market (Billions of dollars) 1992 1997 1998 est Trade Deficit 84 180 240 U.S. Govt. Deficit (Surplus) 325 0 (50) - ----------------------------------------------------------------- Foreign Impact -241 180 290
Foreign impact is amazingly large. ($290 billion would buy all of Merck plus all of IBM). Where is this money going? Most goes into short- and long-term government bonds. Some goes into the stock market ($65 billion in 1997). Now, if foreign capital was affecting the market, how would it show up? The first thing that would happen is that foreigners buying U.S. bonds would buy taxable bonds and ignore municipals because the tax-exempt feature of municipal bonds is of no use to a foreign holder. Therefore, you should see a decrease in the yield spread between treasuries and municipals. That is occurring. In the stock market, we would expect foreigners to favor blue chip U.S. companies over small companies, and therefore one would see the Russell 1000 (the largest companies) do better than the Russell 2000 (much smaller companies). This also has been happening. Of course, a third effect would be a rising level of U.S. stock and bond prices, which is quite obviously happening, although mutual fund inflows and corporate stock repurchases help push the stock market higher, too. No one should argue that what happens in the U.S. financial markets is driven by any one single factor, but I do contend that the enormous increase in the amount of money invested by foreigners in U.S. financial assets is one major factor in the extraordinary rise in stock and bond prices that we have seen over the last year. How long can this go on? The amount of money that foreigners will have to invest in excess of new bond issues is going to go on for some period of time. It can be ended if the U.S. government goes back into a substantial annual deficit position, or if imports into the U.S. should decline dramatically. The most likely cause of these events would be a recession within the U.S., which is undoubtedly going to occur at some time within the next few years. A recession would cause a decline in corporate profits. Imports would fall, reducing our balance of trade deficit. So if there was a weak market associated with a recession, it could be made worse by a drop in foreign inflows. Until that recession occurs--and there is no sign of it yet--we expect that foreign inflows will continue to be huge. So, for now, get used to "high" stock prices. The market emphasis on blue-chip stocks has pushed the valuation of big companies to high levels. Small company stocks have not gone up as much (compare the Russell 2000 with the S&P 500). Our Acorn stocks now represent excellent value as compared with the S&P 500. Best Regards, /s/ Ralph Wanger Ralph Wanger Chief Investment Officer, Wanger Asset Management Lead Portfolio Manager, Acorn Fund 2 [PHOTO APPEARS HERE] Irving B. Harris Chairman, Acorn Investment Trust .Meet the Trustees Acorn's board of trustees has overall responsibility for the funds. The trustees are experienced business people with diverse backgrounds, who bring their judgement and expertise to the oversight of the funds. We thought you would be interested in learning more about your funds' board members. Beginning with this report, we will introduce our distinguished trustees to you. In 1969, Irving Harris met with the representatives of several Chicago families who wanted him to supervise their personal holding company. Mr. Harris suggested that a mutual fund would be a better vehicle for the family than continuing the personal holding company. Harris added funds of his own to the mutual fund making a total of $7 million for the newly created Acorn Fund. He made the fund investor-friendly with low-fees and no loads. More unusually, the Fund concentrated its investments in issues of smaller companies. Today, with over 600 small-cap funds, that doesn't sound like a novel concept, but in 1969 there was no such category as "Small Company Growth Fund." Harris' young, very able associate, Ralph Wanger, was made portfolio manager. In addition to his financial interests, Irving Harris has also devoted a good deal of time and money to philanthropic activities. His special interest has been early childhood education, on the sensible theory that children cannot become effective adults unless their early years give them the right start in life. The Erikson Institute, Yale University, and the University of Chicago have received major funding from the Harris Foundation. Before and since establishing the Acorn Fund, Irving Harris has been a successful business entrepreneur. He and his brother developed the Toni Home Permanent Wave Company ("Which Twin Has the Toni?") many years ago. After it was sold to the Gillette Company, they developed the Pittway Corporation into a very successful leader in the security business--both home security and industrial security. In the case of both Pittway and the Acorn Funds, the interests of shareholders have always been of primary concern to Irving Harris. From the beginning, Acorn's board has carefully monitored the management of the Acorn funds, and has kept the fees, expenses and charges to shareholders as low as possible, consistent with the Funds' ability to attract the most qualified security analysts. More than two-thirds of the trustees are unaffiliated with the Acorn funds or their advisor, and have never shared in the advisor's fees, profits or losses. Acorn Fund's policy of investing in international securities as well as U.S. securities was board initiated. Trustees and their families are and have been substantial investors in the funds, so their interest in keeping expenses low and optimizing shareholders' results are in their own personal interests as well as that of all shareholders. Adolph Meyer, Jr. has also had a long-term impact on Acorn's operations. A representative of the family whose tannery business profits contributed to Acorn Fund's creation, he is not only one of the Fund's earliest shareholders, but also one of three trustees who have served on Acorn's board since its inception. Mr. Meyer is President of Gulco Corporation, a Chicago-based leather manufacturer, and an avid fisherman. At the end of 1998, he will retire from his position as trustee. We extend our gratitude to him for his years of service, and wish him well. 3 Acorn USA .In a Nutshell [PHOTO OF ROBERT A. MOHN APPEARS HERE] Last quarter, mass mattered. Big stocks jumped (S&P 500 gained +3.3%), and small-caps capsized (Russell 2000 sank -4.7%). Acorn USA dodged the general small-cap drubbing, gaining +0.7% for the quarter. Over the past year, Acorn USA has returned +31.6%, well ahead of its small-cap peers (Lipper small-cap fund average rose +17.7%), and better than the average S&P 500 leviathan (+30.2%). Your Fund experienced perfect symmetry last quarter--34 stocks went up and 34 fell down. Each industry group had its pair of have and have-not stocks. In telecommunications, Centennial (cellular) soared, but RCN (new-wave telephone entrepreneur) soured. In health care, Lincare (oxygen therapist) bubbled, but Respironics (oxygen therapy equipment maker) stumbled. In transportation, autos hummed (Insurance Auto Auctions), but trains wrecked (Hub Group's rail freight agency). In energy, geothermal power was hot (CalEnergy), but oil and gas were not (Tesoro). The stock market's speculative bubble of the moment is the Internet. Excitable chat room junkies talk of nothing but 'Net. Yes, it's real. The Internet will transform the way the world communicates and recreates. But the stock market has stretched this insight to the point of absurdity. Internet stocks trade in a topsy-turvy world where "profit" is a pejorative and companies are worth more money the more money they choose to lose. Their valuations are fantastic, their fans hyperbolic, their charts parabolic. In a word, we think they're "icky." We will own Internet stocks once saner prices prevail. Meantime, our Internet deficiency hasn't been a handicap. Acorn USA's total return ranked 22nd out of the 526 small-cap growth funds tracked by Lipper over the past twelve Internet-obsessed months. /s/Robert A. Mohn Robert A. Mohn Lead Portfolio Manager Fund Assets as of 6/30/98: $282.7 million .Acorn USA Top 10 Holdings
CalEnergy 5.3% Power Plants Micros Systems 5.0% Information Systems for Restaurants & Hotels Host Marriott 4.3% Fast Food Kiosks in Airports Magellan Health Services 4.1% Mental Health Services Lincare Holdings 4.1% Home Health Care Services Acceptance Insurance 3.4% Crop Insurance Centennial Cellular 3.3% Cellular Franchises UICI 3.1% Health Insurance Data Transmission 3.0% Data Services for Farmers Mecklermedia 2.9% Internet Trade Shows & Magazines
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. Hot Centennial Cellular provides wireless phone service to the Chicago/Detroit corridor, parts of Louisiana, Northern California and Puerto Rico. Early last year, cellular stocks were in the dumps as investors fretted over the threat posed by a new wireless phone technology called PCS. But the PCS players were targeting densely populated cities, not Centennial's rural outposts. Centennial was adding subscribers at a furious 40% annual rate, but was trading at a throwaway price of 7 times cash flow when the going rate was 11 times. Our communications champ, Chuck McQuaid, started scooping up shares last June at $14. A year later, Centennial has a takeover offer at $43.50, and we have a bicentennial return. 4 .Performance at a Glance The Value of a $10,000 Investment in Acorn USA .September 4, 1996 through June 30, 1998 [LINE GRAPH APPEARS HERE]
Average Annual Total Return - ------------------------------------ 1 Year Life of Fund 31.6% 36.1% 9/04/96 10,000 10,000 9/30/96 +7.2% 10,720 10,360 12/31/96 +8.7% 11,650 10,899 3/31/97 -1.5% 11,480 10,335 6/30/97 +16.0% 13,320 12,011 9/30/97 +15.2% 15,340 13,798 12/31/97 +0.5% 15,413 13,335 3/31/98 +12.9% 17,401 14,678 6/30/98 +0.7% 17,525 13,993
This graph compares the results of $10,000 invested in Acorn USA on September 4, 1996 (the date Fund shares were first offered to the public), with the Russell 2000 Stock Index with dividends reinvested. 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 USA Portfolio Diversification .as a % of net assets, at 6/30/98 [PIE CHART APPEARS HERE]
Information 36.2% Finance 14.6% Energy/Minerals 14.4% Industrial Goods/Services 12.7% Health Care 10.2% Consumer Goods/Services 4.3% Other Industries 1.8% Cash and other assets less liabilities 5.8% ----- 100.0%
Relative Performance - ------------------------------------------------------------------ 2nd quarter Year to date Last 12 mos. 1998 1998 Acorn USA 0.7% 13.7% 31.6% Russell 2000 -4.7% 4.9% 16.5% Lipper Small Cap Funds Avg. -4.1% 6.5% 17.7% S&P MidCap 400 -2.1% 8.6% 27.2% S&P 500 3.3% 17.7% 30.2%
The Russell 2000 is formed by taking the 3,000 largest U.S. companies and then eliminating the largest 1,000 leaving a good small company index. The Lipper Small Cap Funds Avg. is an average of all U.S. small-cap funds tracked by Lipper, which consisted of 636, 623 and 526 funds for the 2nd qtr., YTD and 12- mos. periods above. 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 S&P 500 is a broad market-weighted average of U.S. blue-chip companies. All indexes are unmanaged and returns include reinvested dividends. Net Asset Value Per Share 6/30/98: $17.09 - ----------------------------------------- 5 Acorn Fund .In a Nutshell [PHOTO OF RALPH WANGER AND CHARLES P. MCQUAID APPEARS HERE.] Acorn Fund lost 0.3% in the second quarter, beating the Lipper Small Cap Funds Average, which lost 4.1%, and the Russell 2000, which lost 4.7%. Large-caps once again outperformed small-caps, as the S&P 500 rose 3.3%. Computer service stocks continued to do well in both the U.S. and Europe. Atos, headquartered in France, computed a 44% jump. Sweden's WM Data, a long- time Acorn holding, calculated a 32% rise. Back in the USA, Systems and Computer Technology resumed its run, growing 31%. Media and communications stocks were fueled by takeovers. Centennial Cellular and Young Broadcasting announced intentions to "explore strategic alternatives," encouraging their stocks to explore new highs, gaining 42% and 30%, respectively. Cablevision Systems wired a 27% hike. Special situations often provide excitement for Acorn. Labor Ready, a temporary help provider, readily provided a 42% gain. Americredit, an auto loan company, credited a 30% gain. The market penalized bad news. Respironics halved due to disappointing earnings caused by Medicare changes. Energy stocks were weak as oil prices collapsed. Pride International, EVI, and Atwood each slipped more than 20%. Some price declines, however, produce opportunities. Many real estate stocks are down year-to-date, creating good values. We bought LaSalle Hotel Properties and First Industrial Realty Trust. We are happy to announce that Ben Andrews has joined us to follow consumer companies and special situations. Ben has five years experience as a securities analyst, and was most recently with Rothschild Investment in Chicago. /s/ Ralph Wanger /s/ Charles P. McQuaid Ralph Wanger Charles P. McQuaid Lead Portfolio Manager Co-Portfolio Manager A Fund Assets as of 6/30/98: $3,968.7 million .Acorn Fund Top 10 Holdings
Liberty Media 3.4% CATV Programming AES Corporation 3.0% Global Power Producer Carnival 2.8% Cruise Ship Line Lincare Holdings 2.6% Home Health Care Services Harley Davidson 2.1% Motorcycle Manufacturer National Data 1.8% Credit Card Processing HBO and Co. 1.8% Health Care Information Systems Borders 1.6% Bookstores Cablevision Systems 1.6% Cable TV International Game Technology 1.3% Gaming Equipment
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. Blockbuster - -------------------------------------------------------------------------------- Sequel Cablevision Systems (CVC) catapulted into our top 10 list this quarter. We initially bought the stock in 1991, and profited in 1994 when we sold 80% of our stake near our target price. Last summer, CVC engaged in a series of complex transactions which concentrated its CATV franchises, enhanced its programming, cleaned up its balance sheet, and sold a 36% stake to TCI. We calculated how much value was enhanced and quadrupled our holdings. Acorn earned $40 million when CVC stock subsequently tripled. 6 .Performance at a Glance The Value of a $10,000 Investment in Acorn Fund .June 10, 1970 through June 30, 1998 [LINE GRAPH APPEARS HERE] Average Annual Total Return ------------------------------------- 1 Year 5 Years 10 Years Life of Fund 26.1% 16.7% 17.5% 17.2%
Date Acorn Fund($) S & P($) - ---- ------------- -------- 6/10/70 10,000 10,000 1970 13,587 12,676 1971 17,828 14,490 +31% 1972 19,368 17,242 +9% 1973 14,765 14,709 - -24% 1974 10,691 10,816 - -28% 1975 13,945 14,842 +30% 1976 23,045 18,394 +65% 1977 27,168 17,077 +18% 1978 31,777 18,200 +17% 1979 47,790 21,586 +50% 1980 62,594 28,602 +31% 1981 58,005 27,195 -7% 1982 68,208 33,054 +18% 1983 85,389 40,510 +25% 1984 89,045 43,051 +4% 1985 117,142 56,710 +32% 1986 136,843 67,295 +17% 1987 142,923 70,828 +4% 1988 178,370 82,591 +25% 1989 222,681 108,761 +25% 1990 183,674 105,386 - -18% 1991 270,641 137,492 +47% 1992 336,210 147,928 +24% 1993 444,889 162,882 +32% 1994 411,750 165,032 -7% 1995 497,407 227,047 +21% 1996 609,569 279,177 +23% 1997 761,852 372,320 +25% 6/30/98 850,978 438,266 11.7%
This graph compares the results of $10,000 invested in Acorn Fund on June 10, 1970 (the date Fund shares were first offered to the public), with all dividends and capital gains reinvested, with the Standard & Poor's 500 Stock Index with dividends reinvested. 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 Fund Portfolio Diversification .as a % of net assets, at 6/30/98
Relative Performance - ------------------------------------------------------------------ 2nd quarter Year to date Last 12 mos. 1998 1998 Acorn Fund -0.3% 11.7% 26.1% S&P 500 3.3% 17.7% 30.2% Russell 2000 -4.7% 4.9% 16.5% Lipper Small Cap Funds Avg. -4.1% 6.5% 17.7% S&P MidCap 400 -2.1% 8.6% 27.2% Dow-Jones 1.7% 13.2% 16.7%
The S&P 500 is a broad market-weighted average of U.S. blue-chip companies. The Russell 2000 is formed by taking the 3,000 largest U.S. companies and then eliminating the largest 1,000, leaving a good small company index. The Lipper Small Cap Funds Avg. is an average of all U.S. small-cap funds tracked by Lipper, which consisted of 636, 623 and 526 for the 2nd qtr., YTD and 12-mos. periods above. 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 Dow Jones Industrial Average includes 30 large companies. All indexes are unmanaged and returns include reinvested dividends. [PIE CHART APPEARS HERE] Net Asset Value Per Share 6/30/98: $18.71 - -----------------------------------------
Information 30.3% Finance 11.8% Energy/Minerals 9.2% Industrial Goods/Services 9.9% Health Care 8.6% Consumer Goods/Services 10.3% Other Industries 4.2% Foreign 11.3% Cash and other assets less liabilities 4.4% ------ 100.0%
7 Acorn International .In a Nutshell [PHOTO OF LEAH JOY ZELL APPEARS HERE.] Acorn International rose 2% in the second quarter, a fine return over a period when the average equity mutual fund lost money. Beneath the headline numbers, actual returns by individual markets varied enormously. Finland, France and Germany all rose between 10-15%, extending Europe's bull run. At the other extreme, emerging markets posted their worst quarter in ten years, with Latin America down 19% and Asia down 36%. In viewing some of the sharper market declines, a reasonable shareholder might well ask why we don't just avoid bear markets altogether. The simplest answer is that predicting when a market will turn is difficult, if not impossible. It could be very costly if we sold many of our positions in a hurry, and there would be no guarantee that we could get them back at attractive levels later. A better answer is that poor markets often create opportunities to buy good companies at prices that have the potential to produce returns in the future. Precisely because we cannot know whether or when a given stock will go up in price, we like to spread our bets. Holding positions that are out of favor, together with those that are in demand, helps smooth returns and reduce risk. A leading measurement of risk is volatility, expressed by the degree to which a series of data points diverges from the mean. On that score, Acorn International's record is outstanding, with a lower standard deviation than either EAFE or EMI (or the S&P 500!). We consider the fund's low volatility one of its key attractions.* On another subject, we are pleased to announce that Michael King has joined the international team. Michael has an MBA from the University of Chicago and is fluent in Japanese. We welcome him and look forward to his contribution. With best wishes for the summer season, /s/ Leah Joy Zell Leah Joy Zell Lead Portfolio Manager Fund Assets as of 6/30/98: $1,861.3 million .Acorn International Top 10 Holdings
Tieto Corporation Finland 5.4% Computer Services/Consulting WM Data Sweden 3.7% Computer Services/Consulting Serco Group United Kingdom 2.5% Facilities Management Kempen Netherlands 2.4% Stock Brokerage/ Investment Management Atos France 2.3% Computer Services Rhoen Klinikum Germany 1.8% Hospital Management Banca Fideuram Italy 1.7% Life Insurance/Mutual Funds Getronics Netherlands 1.6% Computer Services NTL United Kingdom 1.3% Cable TV/Telephone System Phoenix Mecano Switzerland 1.3% Electrical Components Manufacturer
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. I The Color Kempen, a Dutch merchant bank, took control of the Orange Fund in early 1995. Marcel Houtzager, a partner of Wanger Asset Management and a Dutchman by birth, had visited the Orange Fund six months earlier. His information led us to acquire a significant stake in Kempen after the deal. Kempen has subsequently grown its assets from 500 million to 10 billion guilders, to become the largest independent mutual fund manager in the Netherlands. Acorn International's investment in Kempen has appreciated six-fold since purchase, and the stock is now the #4 position in the Fund. * Standard deviation was calculated by Wanger Asset Management based on 5 years of monthly performance data, ending June 30, 1998. The standard deviations are: Acorn Int'l 10.99; EAFE 12.97; EMI (Ex-US) 11.89; S&P 500 11.03. 8 .Performance at a Glance The Value of a $10,000 Investment in Acorn International .September 23, 1992 through June 30, 1998 [LINE GRAPH APPEARS HERE] Average Annual Total Return ------------------------------------- 1 Year 5 Years Life of Fund 11.6% 13.5% 16.6%
Date Acorn Int'l ($) EAFE ($) ---- --------------- -------- 9/23/92 10,000 10,000 12/31/92 10,690 9,614 +6.8% 12/31/93 15,940 12,745 +49.1% 12/31/94 15,334 13,736 -3.8% 12/31/95 16,703 15,275 +8.9% 12/31/96 20,133 16,199 +20.7% 12/31/97 20,170 16,487 +0.2% 6/30/98 24,310 19,113 +20.5%
This graph compares the results of $10,000 invested in Acorn International on September 23, 1992 (the date Fund shares were first offered to the public), with all dividends and capital gains reinvested, with Morgan Stanley's Europe, Australasia Far East Index (EAFE). The beginning value of EAFE is as of 9/30/92. 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 International Portfolio Diversification .as a % of net assets, at 6/30/98 [PIE CHART APPEARS HERE.]
Information 28.3% Finance 12.1% Energy/Minerals 3.5% Industrial Goods/Services 14.9% Health Care 5.8% Consumer Goods/Services 19.7% Other Industries 5.0% Cash and other assets less liabilities 10.7% ----- 100.0%
Relative Performance - --------------------------------------------------------------------- 2nd quarter Year to date Last 12 mos. 1998 1998 Acorn International 2.0% 20.5% 11.6% EAFE 1.1% 15.9% 6.1% EMI (World ex-U.S.) -0.4% 16.8% 0.6% Lipper Int'l Small Cap Funds Avg. 3.3% 22.2% 11.2% Lipper Int'l Funds Avg. 0.7% 15.5% 8.2%
EAFE is Morgan Stanley's Europe, Australasia Far East Index, an unmanaged index of companies throughout the world in proportion to world stock market capitalization, excluding the U.S. and Canada. The EMI is Salomon Brothers' index of the bottom 20% of institutionally investable capital of countries, as selected by Salomon, excluding the U.S. The Lipper Int'l Small Cap Funds Avg. is calculated from the performance of a group of small-cap int'l funds, including Acorn Int'l. For the 2nd qtr., YTD and 12-mos. periods above, the group consisted of 56, 56 and 37 funds, respectively. The Lipper Int'l Funds Avg. is an average of all int'l funds tracked by Lipper, excluding the Int'l Small Cap Funds. This group consisted of 570, 544 and 480 funds for the 2nd qtr., YTD and 12-mos. periods above, respectively. All indexes are unmanaged and returns include reinvested dividends. Net Asset Value Per Share 6/30/98: $21.74 - ----------------------------------------- 9 Acorn USA .Major Portfolio Changes in the Second Quarter
Number of Shares ------------------------ 3/31/98 6/30/98 Additions - -------------------------------------------------------------------------------- Information American Business Information, Cl. B 26,000 125,400 CMP Media 0 50,000 IntelliQuest Information 124,000 396,200 International Game Technology 0 48,000 Mecklermedia 285,000 364,000 Mettler Toledo 0 93,000 Micros Systems 160,600 430,000 (includes effect of 2 for 1 stock split) National Data 144,100 182,100 Startec Global Communications 87,000 137,000 Sykes Enterprises 0 138,800 Thermoquest 95,400 181,000 - -------------------------------------------------------------------------------- Health Care Magellan Health Services 196,000 458,000 - -------------------------------------------------------------------------------- Consumer Goods/Services Host Marriott Services 523,200 842,100 - -------------------------------------------------------------------------------- Finance UICI 0 322,000 - -------------------------------------------------------------------------------- Industrial Goods/Services Atchison Casting 88,000 166,000 Hub Group 19,000 336,000 Insurance Auto Auctions 245,100 322,100 - -------------------------------------------------------------------------------- Energy/Minerals CalEnergy Company 419,000 503,000 Equitable Resources 81,000 114,000 Tesoro Petroleum 367,700 463,500 - -------------------------------------------------------------------------------- Sales - -------------------------------------------------------------------------------- Information Aspect Telecommunications 156,000 137,100 Cable Michigan 73,300 35,100 Cablevision Systems 106,000 32,000 Harte Hanks Communications 16,000 0 United Video Satellite Group 189,000 156,000 Wonderware 346,100 0 - -------------------------------------------------------------------------------- Health Care Lincare Holdings 197,000 275,200 (includes effect of 2 for 1 stock split) Respironics 107,000 0 - -------------------------------------------------------------------------------- Consumer Goods/Services Royal Caribbean Cruises 101,000 0 Windmere Durable Holdings 25,000 0 - -------------------------------------------------------------------------------- Finance H.F. Ahmanson 128,000 89,000
10 Acorn USA .Statement of Investments (unaudited) June 30, 1998
Number of Shares Value (000) - -------------------------------------------------------------------------------- Common Stocks and Other Equity-Like Securities: 94.2% - -------------------------------------------------------------------------------- Information: 36.2% .Broadcasting: 3.0% 209,100 Data Transmission Network (b) $ 8,364 Data Services for Farmers .Television Programming: 3.6% 156,000 United Video Satellite Group (b) 6,182 CATV & Satellite Dish Programming 106,000 Liberty Media Group, Tele-Communications (b) 4,114 CATV & Satellite Dish Programming - -------------------------------------------------------------------------------- 10,296 .Cable Television: 1.4% 32,000 Cablevision Systems (b) 2,672 Cable TV 35,100 Cable Michigan (b) 1,369 Cable TV - -------------------------------------------------------------------------------- 4,041 .Telephone Services: 2.9% 269,400 RCN (b) 5,220 Metro Market:Voice, Video & Data Services 137,000 Startec Global Communications (b) 1,575 International Telecommunications 54,000 Commonwealth Telephone (b) 1,424 Rural Market:Local, Long Distance & Internet Access - -------------------------------------------------------------------------------- 8,219 .Mobile Communications: 4.3% 254,000 Centennial Cellular (b) 9,477 Cellular Franchises 121,800 COMARCO (b) 2,603 Wireless Network Testing - -------------------------------------------------------------------------------- 12,080 .Telecommunications Equipment: 1.3% 137,100 Aspect Telecommunications (b) 3,753 Call Center Equipment .Gaming Equipment: 0.4% 48,000 International Game Technology 1,164 Slot Machines & Progressive Jackpots .Computer Services: 1.0% 138,800 Sykes Enterprises (b) 2,785 Call Center Services .Transaction Processors: 2.8% 182,100 National Data 7,967 Credit Card & Health Claims Processor .Instrumentation: 1.6% 181,000 Thermoquest (b) 2,704 Mass Spectrometry 93,000 Mettler Toledo (b) 1,866 Laboratory Products - -------------------------------------------------------------------------------- 4,570 .Internet: 2.9% 364,000 Mecklermedia (b) 8,144 Internet Trade Shows & Magazines .Business Information/ Marketing Services: 4.0% 396,200 IntelliQuest Information (b) 3,962 Technology/Market Research 90,000 World Color Press (b) 3,150 Web-Offset Printing 125,400 American Business Information, Cl. B (b) 2,006 82,000 American Business Information, Cl. A (b) 1,250 Business Data for Sales Leads 50,000 CMP Media (b) 875 Technology Trade Journals - -------------------------------------------------------------------------------- 11,243 .Computer Hardware/ Related Systems: 7.0% 430,000 Micros Systems (b) 14,230 Information Systems for Restaurants & Hotels 152,100 Kronos (b) 5,514 Time Accounting Software & Clocks - -------------------------------------------------------------------------------- 19,744 ---------- Information: Total 102,370 - -------------------------------------------------------------------------------- Health Care: 10.2% .Biotechnology/Drug Delivery: 0.4% 78,000 Synaptic Pharmaceuticals (b) 1,092 Receptor Targeted Drug Design .Medical Equipment: 0.1% 9,600 Cardiac Pathways (b) 68 Heart Surgery Device .Services: 9.7% 275,200 Lincare Holdings (b) 11,576 Home Health Care Services
See accompanying notes to financial statements 11 Acorn USA .Statement of Investments (unaudited)
Number of Shares Value (000) - -------------------------------------------------------------------------------- 458,000 Magellan Health Services (b) $11,622 Mental Health Services 152,000 First Health (b) 4,332 PPO Network - -------------------------------------------------------------------------------- 27,530 ------ Health Care: Total 28,690 - -------------------------------------------------------------------------------- Consumer Goods/Services: 4.3% .Retail: 4.3% 842,100 Host Marriott Services (b) 12,263 Fast Food Kiosks in Airports ------ Consumer Goods/Services: Total 12,263 - -------------------------------------------------------------------------------- Finance: 14.6% .Savings & Loans: 3.1% 89,000 H.F. Ahmanson 6,319 California Savings & Loan 159,000 Coast Contingency Rights (b) 2,405 Litigation Claim Against US Government - -------------------------------------------------------------------------------- 8,724 .Finance Companies: 1.2% 590,000 World Acceptance (b) 3,356 Personal Loans .Insurance: 10.3% 392,100 Acceptance Insurance (b) 9,631 Crop Insurance 322,000 UICI (b) 8,775 Health Insurance 187,500 AmerUs Life Holdings 6,070 Annuities/Life Insurance 93,000 Leucadia National 3,075 Insurance Holding Company 53,000 Penn Treaty American (b) 1,669 Nursing Home Insurance - -------------------------------------------------------------------------------- 29,220 ------ Finance: Total 41,300 - -------------------------------------------------------------------------------- Industrial Goods/Services: 12.7% .Steel: 2.0% 166,000 Atchison Casting (b) 2,967 Steel Foundries 97,300 Schnitzer Steel 2,299 Scrap Steel Processor 28,000 Gibraltar Steel (b) 574 Steel Processing - -------------------------------------------------------------------------------- 5,840 .Industrial Distribution: 0.5% 70,000 Vallen (b) 1,391 Safety Products Distribution .Machinery: 1.1% 251,250 Farr Company (b) 3,094 Filters .Specialty Chemicals: 1.8% 232,000 Lilly Industries, Cl. A 5,017 Industrial Coatings .Outsourcing Services: 0.3% 31,500 Labor Ready (b) 951 Temporary Manual Labor .Other Industrial Services: 7.0% 336,000 Hub Group (b) 7,098 Truck & Rail Freight Forwarder 328,100 Wackenhut, Cl. B 7,054 Prison Management 322,100 Insurance Auto Auctions (b) 4,550 Auto Salvage Services 83,000 Compass International Services (b) 788 Collection Agencies 51,000 Trailer Bridge (b) 204 Tug & Barge Transportation - -------------------------------------------------------------------------------- 19,694 ------ Industrial Goods/Services: Total 35,987 - -------------------------------------------------------------------------------- Energy/Minerals: 14.4% .Independent Power: 5.3% 503,000 CalEnergy (b) 15,121 Power Plants .Oil/Gas Producers: 2.6% 463,500 Tesoro Petroleum (b) 7,358 Oil Refinery/Gas Reserves .Distribution/Marketing/Refining: 4.9% 242,000 Atmos Energy 7,381 Natural Gas Utility 114,000 Equitable Resources 3,477 Gas Utility & Gas Producer 228,400 Dynegy (formerly known as NGC) 2,855 Gas Processing/Marketing - -------------------------------------------------------------------------------- 13,713
12
Number of Shares Value (000) - -------------------------------------------------------------------------------- .Oil Services: 1.6% 252,000 GeoScience (b) 2,835 Offshore Seismic Equipment Company 41,100 J Ray McDermott (b) 1,706 Offshore Construction Company - -------------------------------------------------------------------------------- 4,541 -------- Energy/Minerals: Total 40,733 - -------------------------------------------------------------------------------- Other Industries: 1.8% .Real Estate: 1.8% 50,700 Forest City Enterprises Cl. A 3,001 Shopping Centers 47,500 Gaylord Entertainment 1,532 Opryland Hotel & Other Assets 22,000 Cornerstone Properties 388 Downtown Office Buildings - -------------------------------------------------------------------------------- 4,921 -------- Other Industries: Total 4,921 Principal Amount Value (000) - -------------------------------------------------------------------------------- Total Common Stocks and -------- Other Equity-Like Securities: 94.2% 266,264 (Cost: $225,569) Short-Term Obligations: 7.2% Yield 5.67%-5.75% Due 7/2-7/6/98 $9,002 Prudential Funding 8,995 $7,196 Ford Motor Credit 7,195 $4,132 Commercial Credit 4,132 - -------------------------------------------------------------------------------- (Amortized Cost: $20,322) 20,322 -------- Total Investments: 101.4% 286,586 (Cost: $245,891) -------- Cash and Other Assets Less Liabilities: (1.4%) (3,960) -------- Total Net Assets: 100% $282,626 ================================================================================
.Notes to Statement of Investments (a) At June 30, 1998, for federal income tax purposes cost of investments was $245,905,000 and net unrealized appreciation was $40,680,000, consisting of gross unrealized appreciation of $49,821,000 and gross unrealized depreciation of $9,141,000. (b) Non-income producing security. 13 Acorn Fund .Major Portfolio Changes in the Second Quarter
Number of Shares ------------------------ 3/31/98 6/30/98 Additions - -------------------------------------------------------------------------------- Information American Business Information, Cl. A 1,035,000 1,200,000 Bigfoot International 1,350 2,683 BRC Holdings 254,000 567,000 (includes the effect of 2 for 1 stock split) CMP Media 0 400,000 Computer Task Group 340,000 475,000 Dunn Computer 0 250,000 International Game Technology 2,110,000 2,158,000 Jabil Circuit 300,000 350,000 Mettler Toledo 0 570,000 National Data 1,510,000 1,672,000 Natsteel Electronics (Singapore) 0 1,500,000 RCM Technologies 0 390,000 RCN 564,000 1,298,000 (includes the effect of 2 for 1 stock split) Richardson Electronics 0 157,000 Startec Global Communications 0 90,000 Sykes Enterprises 0 670,000 - -------------------------------------------------------------------------------- Health Care Innovasive Devices 275,000 475,000 Magellan Health Services 1,220,000 1,410,000 - -------------------------------------------------------------------------------- Consumer Goods/Services Airtours (United Kingdom) 990,000 1,350,000 Autoliv (Sweden) 254,000 320,000 Host Marriott Services 731,000 911,000 Hunter Douglas (Netherlands) 270,000 305,000 Industrie Natuzzi (Italy) 260,000 300,000 Kimberly Clark de Mexico (Mexico) 3,100,000 3,400,000 Nintendo (Japan) 145,000 180,000 Protection One 0 770,000 St. John Knits 0 296,000 Windmere Durable Holdings 228,000 300,000 - -------------------------------------------------------------------------------- Finance Baker Fentress 974,000 1,063,000 Capital Trust 345,000 745,000 Pioneer Group 620,000 673,000 UICI 0 800,000 - -------------------------------------------------------------------------------- Industrial Goods/Services AirNet Systems 200,000 500,000 Brunswick Technologies 0 100,000 Clarcor 181,000 431,000 (includes effect of 3 for 2 stock split) Expeditors International of Washington 775,000 900,000 Hub Group 709,000 759,000 Intermet 200,000 300,000 International Total Services 0 400,000 Labor Ready 385,000 670,000 (includes effect of 3 for 2 stock split) Lilly Industries, Cl. A 900,000 1,000,000 Spectra Physics Lasers 223,000 298,000 - -------------------------------------------------------------------------------- Energy/Minerals Equitable Resources 500,000 800,000 Evergreen Resources 0 250,000 Tesoro Petroleum 1,600,000 2,000,000 - -------------------------------------------------------------------------------- Real Estate Cornerstone Properties 350,000 820,000 First Industrial Realty Trust 0 485,000 IRSA (Argentina) 250,000 320,000 La Salle Hotel Properties 0 1,025,000 Security Capital Global 0 398,437
14
Number of Shares ------------------------ 3/31/98 6/30/98 Sales - -------------------------------------------------------------------------------- Information American Management Systems 225,000 125,000 CACI International 83,000 0 Cellular Communications International (Italy) 300,000 110,000 (includes effect of 3 for 2 stock split) Centennial Cellular 600,000 450,000 Compuware 400,000 300,000 Keane 200,000 120,000 Peterson Companies 50,000 0 Playboy Enterprises 50,000 0 PriCellular 450,000 0 Solectron 1,025,000 1,000,000 Source Informatics Cv. Pfd. 208,333 0 Systems & Computer Technology 430,000 760,000 (includes effect of 2 for 1 stock split) TCA Cable TV 180,000 0 TVB (Hong Kong) 1,800,000 0 United Video Satellite Group 850,000 500,000 USA Networks 500,000 0 Vanguard Cellular Systems 200,000 0 Verilink 393,000 282,000 WM Data Nordic (Sweden) 1,340,000 1,300,000 Wonderware 608,000 0 - -------------------------------------------------------------------------------- Health Care Respironics 812,000 650,000 - -------------------------------------------------------------------------------- Consumer Goods/Services Amway Asia Pacific (Hong Kong) 185,000 60,000 Bally Total Fitness 200,000 0 Borders Group 1,960,000 1,750,000 Carnival 1,400,000 2,760,000 (includes effect of 2 for 1 stock split) Esselte, Series A (Sweden) 260,000 125,000 Fred Meyer Holdings 911,000 871,000 Newell 540,000 480,000 - -------------------------------------------------------------------------------- Finance Amvescap (United Kingdom) 445,000 0 Baldwin & Lyons, Cl. B 823,000 723,000 Banca Fideuram (Italy) 3,325,000 3,000,000 Formosa Growth Fund (Taiwan) 150,000 0 Highlands Insurance 210,000 81,000 Housing Development Finance (India) 39,373 0 Nichiei (Japan) 27,500 0 United Asset Management 641,000 0 Washington Mutual 116,000 66,000 (includes effect of 3 for 2 stock split) - -------------------------------------------------------------------------------- Industrial Goods/Services Hein-Werner 198,000 0 Steel Dynamics 500,000 300,000 Steven Myers & Associates 350,000 40,000 Stevens International, Cl. A 410,000 0 Stevens International, Cl. B 19,000 0 Valmont Industries 270,000 150,000 - -------------------------------------------------------------------------------- Energy/Minerals Atwood Oceanics 516,000 398,000 Costilla Energy 165,000 0 EVI 700,000 500,000 J Ray McDermott 500,000 350,000 Perez Companc (Argentina) 510,000 0 PetSec Energy ADR (Australia) 260,000 141,000 Saipem (Italy) 1,800,000 1,500,000 Southern Union 400,000 0 - -------------------------------------------------------------------------------- Other Industries Gaylord Entertainment 100,000 13,000
15 Acorn Fund .Statement of Investments (unaudited) June 30, 1998
Number of Shares Value (000) - -------------------------------------------------------------------------------- Common Stocks and Other Equity-Like Securities: 95.6% - -------------------------------------------------------------------------------- Information: 30.3% Media .Broadcasting: 1.7% 819,000 Data Transmission Network (b)(c) $32,760 Data Services for Farmers 465,000 Young Broadcasting (b) 30,225 Television Stations 370,000 Granite Broadcasting (b) 4,394 Television Stations - -------------------------------------------------------------------------------- 67,379 .Cable Television: 1.8% 700,000 Cablevision Systems (b) 58,450 100,000 Cablevision Systems, Pfd. 6,394 Cable TV 140,000 Cable Michigan (b) 5,460 Cable TV - -------------------------------------------------------------------------------- 70,304 .Television Programming: 4.8% 3,500,000 Liberty Media Group, Tele-Communications (b) 135,844 CATV & Satellite Dish Programming 420,000 BET Holdings, Cl. A (b) 26,434 CATV & Satellite Dish Programming 500,000 United Video Satellite Group (b) 19,813 CATV & Satellite Dish Programming 280,000 Macrovision (b) 6,685 Copyright Protection for Video Tapes & DVDs - -------------------------------------------------------------------------------- 188,776 Telecommunications .Telephone Services: 0.9% 1,298,000 RCN (b) 25,149 Metro Market: Voice, Video & Data Services 374,000 Commonwealth Telephone (b) 9,864 Rural Market: Local, Long Distance & Internet Access 90,000 Startec Global Communications (b) 1,035 International Telecommunications - -------------------------------------------------------------------------------- 36,048 .Mobile Communications: 1.6% 865,000 SkyTel Communications (b) 20,246 Nationwide Paging 500,000 Telephone and Data Systems 19,688 Cellular & Telephone Franchises 450,000 Centennial Cellular (b) 16,791 Cellular Franchises 355,000 COMARCO (b)(c) 7,588 Wireless Network Testing - -------------------------------------------------------------------------------- 64,313 .Telecommunications Equipment: 0.6% 714,000 Aspect Telecommunications (b) 19,546 Call Center Equipment 577,000 Larscom (b) 4,075 Digital Access Equipment 282,000 Verilink (b) 2,327 Integrated Access Devices - -------------------------------------------------------------------------------- 25,948 Computer Related Hardware .Computer Hardware/ Related Systems: 1.7% 900,000 Micros Systems (b)(c) 29,784 Information System for Restaurants & Hotels 650,000 Kronos (b)(c) 23,563 Time Accounting Software & Clocks 503,000 American Power Conversion (b) 15,090 Uninterruptable Power Systems - -------------------------------------------------------------------------------- 68,437 .Semiconductors/ Related Equipment: 0.4% 350,000 Oak Industries (b) 12,381 CATV Coax Connectors 125,000 Electro Scientific Industries (b) 3,945 DRAM Repair Equipment - -------------------------------------------------------------------------------- 16,326 .Gaming Equipment: 1.4% 2,158,000 International Game Technology 52,332 Slot Machines & Progressive Jackpots 406,000 Acres Gaming (b) 2,030 Manufacturer of Casino Systems - -------------------------------------------------------------------------------- 54,362
16
Principal Amount or Number of Shares Value (000) - -------------------------------------------------------------------------------- .Contract Manufacturing: 1.7% 1,000,000 Solectron (b) $ 42,063 Equipment Manufacturing Services 350,000 Jabil Circuit (b) 11,572 Equipment Manufacturing Services 200,000 Sanmina (b) 8,675 Backplanes & Equipment Manufacturing Services 285,000 Altron (b) 3,669 Backplanes & Equipment Manufacturing Services - -------------------------------------------------------------------------------- 65,979 .Instrumentation: 2.1% 1,085,000 Thermo Instrument Systems (b) 28,481 Scientific & Industrial Instruments 570,000 Mettler Toledo (b) 11,436 Laboratory Products 613,000 Thermoquest (b) 9,157 $1,500,000 Thermoquest, 5% Note Due 8/15/00 1,688 Mass Spectrometry & Chromatography 450,000 IFR Systems (c) 8,100 Test Instruments for Communications $5,000,000 Thermo Optek, 5% Note Due 10/15/00 5,488 265,000 Thermo Optek (b) 3,925 Elemental & Molecular Spectroscopy 330,000 Itron (b) 4,208 Remote-Readable Electric Meters 232,000 Metrika Systems (b) 3,886 Gamma Ray Instrumentation 200,000 Thermo Bio Analysis (b) 3,625 Biochemical Instruments 234,122 Onix Systems (b) 3,014 Field Measurement & Sensor Equipment - -------------------------------------------------------------------------------- 83,008 .Business Software: 1.3% 760,000 Systems & Computer Technology (b) 20,520 Enterprise Software 300,000 Compuware (b) 15,337 Software Tools & Services 266,000 National Instruments (b) 9,510 Virtual Instruments 160,000 Sterling Commerce (b) 7,760 Electronic Commerce Software & Services - -------------------------------------------------------------------------------- 53,127 - -------------------------------------------------------------------------------- .Consumer Software: 0.6% 350,000 Electronic Arts (b) 18,900 Entertainment Software $6,500,000 Activision, 6.75% Note Due 1/1/05 5,590 Entertainment Software 220,000 MicroProse (b) 976 Entertainment Software - -------------------------------------------------------------------------------- 25,466 .Computer Services: 2.1% 475,000 Computer Task Group 15,912 Application Development & Maintenance Services 670,000 Sykes Enterprises (b) 13,442 Call Center Services 427,000 Analysts International 12,116 Technology Staffing Services 567,000 BRC Holdings (b) 10,879 Technology Outsourcing for Local Governments 231,000 BISYS Group (b) 9,471 Processing for Banks 390,000 RCM Technologies (b) 7,922 Technology Staffing Services 120,000 Keane (b) 6,720 Application Development & Maintenance Services 125,000 American Management Systems (b) 3,742 Systems Integration 250,000 Dunn Computer (b) 2,062 Custom Computer Systems for Government - -------------------------------------------------------------------------------- 82,266 Software/Services .Business Information/ Marketing Services/Publishing: 4.5% 1,185,000 World Color Press (b) 41,475 Web-Offset Printing 1,300,000 ACNielsen (b) 32,824 Retail Measurement 411,000 Choicepoint (b) 20,807 Fraud Protection Information 1,200,000 American Business Information, Cl. A (b) 18,300 1,000,000 American Business Information, Cl. B (b) 16,000 Business Data for Sales Leads 600,000 Harte Hanks Communications 15,488 Direct Marketing Services
See accompanying notes to financial statements 17 Acorn Fund .Statement of Investments (unaudited)
Number of Shares Value (000) - -------------------------------------------------------------------------------- 500,000 Getty Images (b) $ 11,125 Photographs for Publications & Media 300,000 Acxiom (b) 7,481 Database Marketing Services 400,000 CMP Media (b) 7,000 Technology Trade Journals 107,955 Cognizant (b) 6,801 Healthcare Data Services - -------------------------------------------------------------------------------- 177,301 .Internet: 0.4% 300,000 Mecklermedia (b) 6,713 Internet Trade Shows & Magazines 2,683 Bigfoot International (b)(c) 4,024 Internet Direct Marketing 885,714 GIGA Series B. Cv. Pfd. (b)(c) 3,100 71,429 GIGA Series D. Cv. Pfd. (b)(c) 500 300,000 GIGA Partnership (FBR Information Investors, L.P.) (b) 300 Data on Information Technology - -------------------------------------------------------------------------------- 14,637 .Electronics Distribution: 0.7% 600,000 Kent Electronics (b) 10,988 Component Distribution & Contract Assembly 1,090,000 Pioneer-Standard Electronics 10,491 Component & Computer Distribution 450,000 Richey Electronics (b) 3,516 Component Distribution & Contract Assembly 157,000 Richardson Electronics 2,120 Electron Tube & Semiconductor Distribution - -------------------------------------------------------------------------------- 27,115 .Transaction Processors: 2.0% 1,672,000 National Data 73,150 Credit Card & Health Claims Processor 300,000 Concord EFS (b) 7,837 Credit Card Processor - -------------------------------------------------------------------------------- 80,987 --------- Information: Total 1,201,779 - -------------------------------------------------------------------------------- Health Care: 8.6% .Biotechnology/Drug Delivery: 0.8% 450,000 Inhale Therapeutic Systems (b) 11,138 Pulmonary Drug Delivery 680,000 Synaptic Pharmaceuticals (b)(c) 9,520 Receptor Targeted Drug Design 790,000 Microcide Pharmaceuticals (b)(c) 5,283 Antibiotics 800,000 Corvas International (b) 3,300 800,000 Corvas International Warrants (b) 800 Rational Drug Design - -------------------------------------------------------------------------------- 30,041 .Medical Equipment: 0.5% 650,000 Respironics (b) 10,116 Sleep Apnea Products 300,000 Affymetrix (b) 7,219 Diagnostic Development 475,000 Innovasive Devices (b)(c) 4,453 Soft Tissue Bone Anchors - -------------------------------------------------------------------------------- 21,788 .Hospital/Laboratory Supplies: 0.8% 273,000 Hillenbrand Industries 16,380 Hospital Beds & Coffins 644,000 Sybron International (b) 16,261 Laboratory Supplies - ------------------------------------------------------------------------------- 32,641 .Services: 6.5% 2,470,000 Lincare Holdings (b) 103,894 Home Health Care Services 1,992,000 HBO & Company 70,218 Hospital Computer Services 1,700,000 First Health Group (b) 48,450 PPO Network 1,410,000 Magellan Health Services (b) 35,779 Mental Health Services 43,000 Spectrum Health Solutions (b) 11 Workman's Compensation - -------------------------------------------------------------------------------- 258,352 --------- Health Care: Total 342,822
18
Principal Amount or Number of Shares Value (000) - ------------------------------------------------------------------ Consumer Goods/Services: 10.3% Goods .Leisure Vehicles: 2.5% 2,200,000 Harley-Davidson $85,250 Motorcycles & Related Merchandise 480,000 Thor Industries 13,290 Mobile Homes & RV's - ------------------------------------------------------------------ 98,540 .Hardware/Appliances: 0.9% 480,000 Newell 23,910 Household Appliances 300,000 Windmere Durable Holdings (b) 10,744 Household Appliances - ------------------------------------------------------------------ 34,654 .Manufacturers: 0.3% 296,000 St. John Knits 11,433 Upscale Knitwear Services .Retail: 3.1% 1,750,000 Borders Group (b) 64,750 Bookstores 871,000 Fred Meyer Holdings (b) 37,017 Supermarkets in the West 911,000 Host Marriott Services (b) 13,266 Fast Food Kiosks in Airports 634,000 Au Bon Pain (b)(c) 6,974 Bakery & Deli Restaurants - ------------------------------------------------------------------ 122,007 .Consumer Services: 0.2% 770,000 Protection One 8,422 Security Alarm Monitoring .Casinos: 0.3% 290,000 Rio Hotel & Casino (b) 5,474 Casino/Hotel in Las Vegas 392,000 Hollywood Park 4,949 Race Track & Casino 535,000 Monarch Casino & Resort (b)(c) 3,411 Casino/Hotel in Reno $6,250,000 Grand Palais Casino 14% Note Due 2/25/98 (b) 313 New Orleans Casino - ------------------------------------------------------------------ 14,147 .Cruise Lines: 3.0% 2,760,000 Carnival 109,365 Largest Cruise Line 120,000 Royal Caribbean Cruises 9,540 Cruises to Caribbean & Alaska 130,000 Royal Olympic Cruise (b) 1,300 Cruises in Mediterranean - ------------------------------------------------------------------ 120,205 ---------- Consumer Goods/Services: Total 409,408 - ------------------------------------------------------------------ Finance: 11.8% .Banks: 1.5% 570,000 Texas Regional Bancshares 18,668 Tex Mex Bank 285,000 Union Planters 16,762 Confederate States Bank 510,000 TCF Financial 15,045 Great Lakes Bank 162,000 CNB Bancshares 7,776 Indiana Bank - ------------------------------------------------------------------ 58,251 .Savings & Loans: 3.1% 1,267,000 Peoples Bank Bridgeport 43,870 Connecticut Savings & Loan 435,000 H F Ahmanson 30,885 California Savings & Loan 738,000 Washington Federal 20,387 Washington State Savings & Loan 538,000 Commonwealth Bancorp 12,340 Philadelphia Savings & Loan 554,000 Coast Contingency Rights (b) 8,379 Litigation Claim Against US Government 275,000 Imperial Thrift & Loan (b) 5,706 California Thrift & Loan 66,000 Washington Mutual 2,867 West Coast Savings & Loan - ------------------------------------------------------------------ 124,434
See accompanying notes to financial statements 19 Acorn Fund .Statement of Investments (unaudited)
Number of Shares Value (000) - -------------------------------------------------------------------------------- .Insurance: 3.4% 800,000 UICI (b) $ 21,800 Health Insurance 741,000 Foremost 17,877 Mobile Home & RV Insurance 511,000 Leucadia National 16,895 Insurance Holding Company 723,000 Baldwin & Lyons, Cl. B 16,810 Trucking Insurance 612,000 Acceptance Insurance (b) 15,032 Crop Insurance 460,000 AmerUs Life Holdings 14,892 Annuities/Life Insurance 400,000 Protective Life 14,675 Life/Dental Insurance 351,000 United Fire & Casualty 13,755 Property & Casualty 81,000 Highlands Insurance (b) 1,499 Property & Casualty Insurance - -------------------------------------------------------------------------------- 133,235 .Money Management: 2.3% 618,000 SEI Investments 38,316 Mutual Fund Administration 1,063,000 Baker Fentress 19,466 Closed-End Investment Company 673,000 Pioneer Group 17,708 Investment Management 1,728,000 Phoenix Investment Partners 15,012 Mutual Fund & Pension Manager 60,000 Affiliated Managers Group (b) 2,227 Mutual Fund & Pension Manager - -------------------------------------------------------------------------------- 92,729 .Finance Companies: 1.5% 935,000 Americredit (b) 33,368 Auto Lending 1,820,000 World Acceptance (b)(c) 10,351 Personal Loans 340,000 DVI Health Services (b) 8,670 Leases for Big Medical Equipment 745,000 Capital Trust (b) 7,171 Whole Mortgage Loans - -------------------------------------------------------------------------------- 59,560 -------- Finance: Total 468,209 Industrial Goods/Services: 9.9% .Steel: 1.8% 1,295,000 Worthington Industries 19,506 Steel Processing 805,000 Gibraltar Steel (b)(c) 16,502 Steel Processing 350,000 A M Castle 7,700 Steel Distribution 420,000 Atchison Casting (b)(c) 7,507 Steel Foundries 300,000 Intermet 5,438 Ductile Iron & Aluminum Castings 190,000 Schnitzer Steel 4,489 Scrap Steel Processor 400,000 Metal Management (b) 4,275 Scrap Steel Collection & Processing 300,000 Steel Dynamics (b) 4,163 Flat Rolled Steel Production - -------------------------------------------------------------------------------- 69,580 .Machinery: 1.3% 1,071,000 Baldor Electric 26,106 Electric Motors 431,000 Clarcor 9,051 Filters 365,000 Applied Industrial Technologies 7,505 Industrial Components Distribution 196,000 Applied Power 6,737 Hydraulic Tools 150,000 Valmont Industries 2,995 Irrigation, Lighting & Communication Structures - -------------------------------------------------------------------------------- 52,394 .Conglomerates: 0.8% 900,000 Thermo Electron (b) 30,769 Instrumentation, Biomedical & Industrial Products .Specialty Chemicals: 2.4% 900,000 Unifi 30,825 Polyester & Nylon Texturizing 1,000,000 Lilly Industries, Cl. A 21,625 Industrial Coatings 295,000 H B Fuller 16,354 Adhesives, Sealants & Coatings 610,000 Cambrex 16,012 Pharmaceutical & Other Specialty Chemicals 600,000 MA Hanna 10,988 Supplies Resins, Colorant & Rubber - -------------------------------------------------------------------------------- 95,804
20
Number of Shares Value (000) - -------------------------------------------------------------------------------- .Electrical Components/ Industrial Materials: 0.1% 298,000 Spectra Physics Lasers (b) $ 2,719 Lasers Manufacturer 100,000 Brunswick Technologies (b) 1,325 Fiberglass Fabric for Composites - -------------------------------------------------------------------------------- 4,044 .Outsourcing Services/Training: 0.7% 670,000 Labor Ready (b) 20,226 Temporary Manual Labor 355,000 GP Strategies (b) 5,192 Training Programs 400,000 International Total Services (b)(c) 2,800 Aviation Services 40,000 Steven Myers & Associates (b) 770 Proposal Management - -------------------------------------------------------------------------------- 28,988 .Logistics: 1.9% 900,000 Expeditors International of Washington 39,600 International Air Freight Forwarder 759,000 Hub Group (b) 16,034 Truck & Rail Freight Forwarder 400,000 C H Robinson 9,950 Truck Freight Forwarder 500,000 Airnet Systems (b) 8,062 Check & Other Small Package Shipment - -------------------------------------------------------------------------------- 73,646 .Other Industrial Services: 0.9% 1,051,000 Wackenhut, Cl. B 22,597 45,000 Wackenhut, Cl. A 1,018 Prison Management 210,000 HA*LO Industries 6,536 Distributor of Specialty Products 627,000 Compass International Services (b)(c) 5,956 Collection Agencies 421,000 Trailer Bridge (b) 1,684 Tug & Barge Transportation 37,791 - -------------------------------------------------------------------------------- Industrial Goods/Services: Total 393,016 --------- Energy/Minerals: 9.2% .Independent Power: 4.0% 2,230,000 AES Corporation (b) 117,214 1,852 AES Corporation Warrants (b) 144 Power Plants 1,420,000 CalEnergy (b) 42,689 Power Plants - -------------------------------------------------------------------------------- 160,047 .Oil/Gas Producers: 1.6% 2,000,000 Tesoro Petroleum (b)(c) 31,750 Oil Refinery/Gas Reserves 1,550,000 Seagull Energy (b) 25,672 Oil & Gas Producer 250,000 Evergreen Resources (b) 4,687 Coalseam Gas Production 1,031,000 Tipperary (b)(c) 2,964 Oil & Gas Producer - -------------------------------------------------------------------------------- 65,073 .Distribution/Marketing/Refining: 1.5% 800,000 Equitable Resources 24,400 Gas Utility & Gas Producer 560,000 Atmos Energy 17,080 Natural Gas Utility 240,000 KN Energy 13,005 Unregulated Gas Gatherer & Processor 520,000 Dynegy (formerly known as NGC) 6,500 Gas Processing/Marketing - -------------------------------------------------------------------------------- 60,985 .Oil Services: 1.7% 500,000 EVI (b) 18,562 Drill Pipe 1,000,000 Pride International (b) 16,938 Offshore/Onshore Drilling 398,000 Atwood Oceanics (b) 15,845 Offshore Drilling 350,000 J Ray McDermott (b) 14,525 Offshore Construction Company - -------------------------------------------------------------------------------- 65,870 .Mining: 0.4% 800,000 Zeigler Coal Holding 13,700 Coal Mining --------- Energy/Minerals: Total 365,675
See accompanying notes to financial statements 21 Acorn Fund .Statement of Investments (unaudited)
Number of Shares Value (000) - -------------------------------------------------------------------------------- Other Industries: 4.2% .Real Estate: 4.2% 829,000 The Rouse Company $26,062 Shopping Malls 1,025,000 LaSalle Hotel Properties (b)(c) 17,361 Upscale/Full Service Hotels 485,000 First Industrial Realty Trust 15,429 Industrial Properties 820,000 Cornerstone Properties 14,452 Downtown Office Buildings 233,000 Forest City Enterprises, Cl. B 13,747 185,000 Forest City Enterprises, Cl. A 10,950 Shopping Centers 260,000 Equity Residential Properties Trust 12,334 Nationwide Apartments 400,000 Macerich Company 11,725 Regional Shopping Malls 945,000 Homestead Village (b) 11,222 Extended Stay Hotels 398,437 Security Capital Global (b) 7,969 101,000 Security Capital Group, Cl. B (b) 2,689 18,000 Security Capital Warrants (b) 6 Strategic Real Estate Investments 350,000 Security Capital Atlantic 7,809 Moderate Income Apartments 165,000 Weingarten Realty Investors 6,899 Community Shopping Centers 190,000 First Washington Realty Trust 4,417 120,000 First Washington Realty Trust, Cv. Pfd. 3,476 Community Shopping Centers 13,000 Gaylord Entertainment 419 Opryland Hotel & Other Assets - -------------------------------------------------------------------------------- Other Industries: Total 166,966 ------- 166,966 - -------------------------------------------------------------------------------- Foreign Securities: 11.3% .Canada: 0.2% 520,000 Shaw Industries, Cl. A 6,223 Oil Field Services - -------------------------------------------------------------------------------- .United Kingdom: 2.5% 1,200,000 Serco Group 27,630 Facilities Management 400,000 NTL (b) 21,400 Cable TV & Telephone Systems 650,000 Comcast UK Cable Partners (b) 10,197 Cable TV & Telephone Systems 1,350,000 Airtours 10,159 Tour Operator 3,300,000 Medeva 9,415 Drugs for Hyperactive Children 1,100,000 N. Brown Group 6,644 Mail Order Clothing in Large Sizes 600,000 Edinburgh Fund Managers 5,786 Investment Management 700,000 Oriflame 5,197 Natural Cosmetics Sold Door-to-Door 1,050,000 Powerscreen International 1,621 Mobile Crushing & Screening Equipment 1,200,000 Ethical Holdings ADR (b)(c) 450 Drug Delivery - -------------------------------------------------------------------------------- 98,499 .Germany/Austria: 0.6% 552,000 United International Holdings (Austria) (b) 8,832 Cable Television for Austria & Other Countries 180,000 Flughafen Wien (Austria) 8,632 Vienna Airport Authority 23,000 Binding-Brauerei 6,945 Brewery - -------------------------------------------------------------------------------- 24,409 .Sweden: 1.8% 1,300,000 WM Data Nordic 45,154 Computer Services/Consulting 650,000 Getinge Industrier 13,285 Sterilization & Disinfection Equipment 320,000 Autoliv 10,120 Seatbelts & Airbags 125,000 Esselte, Series A 2,774 Office Supplies & Related Equipment 80,000 Lifco (b) 391 Dental Supplies & Health Food - -------------------------------------------------------------------------------- 71,724
22
Number of Shares Value (000) - -------------------------------------------------------------------------------- .Netherlands: 1.0% 305,000 Hunter Douglas $ 16,568 Decorative Window Coverings 161,000 ASR Verzekeringsgroep 13,661 Insurance 167,000 Getronics 8,661 Computer Services - -------------------------------------------------------------------------------- 38,890 .Switzerland: 0.4% 11,000 Cie Fin Richemont 14,395 Luxury Goods & Tobacco .France: 0.7% 115,000 Atos (b) 27,580 Computer Services/Transaction Processing .Portugal: 0.1% 374,000 Filmes Lusomundo (b)(c) 5,568 Newspapers, Radio, Video, Film Distribution .Italy/Greece: 1.3% 3,000,000 Banca Fideuram 17,105 Life Insurance & Mutual Funds 300,000 Industrie Natuzzi 7,800 Leather Couches 250,000 Hellenic Bottling (Greece) 7,723 Coca-Cola Bottler 1,500,000 Saipem 7,704 Pipeline Construction & Drilling Contractor 1,000,000 Aeroporti di Roma 6,295 Airport Management 110,000 Cellular Communications International (b) 5,486 Mobile Telephone Network - -------------------------------------------------------------------------------- 52,113 .Malaysia: 0.1% 2,150,000 Berjaya Sports Toto 3,188 Lottery/Gaming .Hong Kong: 0.2% 4,500,000 Varitronix International 9,002 LCD Manufacturer 60,000 Amway Asia Pacific 784 Personal Care Products - -------------------------------------------------------------------------------- 9,786 .China: 0.0% 200,000 The Investment Company of China (b) 1,112 Closed-End Fund .Singapore: 0.4% 7,250,000 Star Cruises (b) 13,848 Cruise Line 1,500,000 Natsteel Electronics 2,513 Contract Electronics Manufacturer - -------------------------------------------------------------------------------- 16,361 .Japan: 0.8% 180,000 Nintendo 16,666 Video Games 60,000 Rohm 6,161 Semiconductors & Electronic Components 20,000 Shohkoh Fund 4,914 Short-Term Loans for Small Businesses 174,000 Noritsu Koki 3,887 Photo Processing Lab Manufacturer - -------------------------------------------------------------------------------- 31,628 .Australia/New Zealand: 0.2% 1,700,000 Sky City (New Zealand) 4,192 Casino & Hotel 141,000 PetSec Energy ADR (b) 2,282 540,000 PetSec Energy (b) 1,772 Oil & Gas Producer - -------------------------------------------------------------------------------- 8,246 .Mexico: 0.4% 3,400,000 Kimberly Clark de Mexico 12,013 Paper Products 5,960,000 Nadro, Series L (b) 3,635 Pharmaceutical Distributor - -------------------------------------------------------------------------------- 15,648 .Other Latin America: 0.6% 320,000 IRSA (Argentina) 9,320 Real Estate Management & Development 2,800,000 Siderca (Argentina) 4,760 Steel Pipe Producer 150,000 Banco Latinoamericano de Exportaciones (Panama) 4,613 Trade Financing 140,750,000 Cemig (Brazil) 4,381 Electric Utility - -------------------------------------------------------------------------------- 23,074
See accompanying notes to financial statements 23 Acorn Fund .Statement of Investments (unaudited)
Principal Amount Value (000) - ------------------------------------------------------------------------------- ---------- Foreign: Total 448,444 Total Common Stocks and Other ---------- Equity-Like Securities: 95.6% 3,796,319 (Cost: $2,065,310) Short-Term Obligations: 4.4% Yield 4.815%--5.650% Due 7/1--7/30/98 $43,056 GTE 42,975 $41,124 Baxter International 41,009 $29,842 American General Finance 29,803 $19,334 GMAC 19,313 $17,760 Hertz 17,760 $12,000 US Treasury Bill 11,987 $10,670 General Electric 10,650 - ------------------------------------------------------------------------------- (Amortized Cost: $173,497) 173,497 ---------- Total Investments: 100.0% 3,969,816 (Cost: $2,238,807) ---------- Cash and Other Assets Less Liabilities: 0.0% (1,126) ---------- Total Net Assets: 100% $3,968,690 ===============================================================================
- -------------------------------------------------------------------------------- .Notes to Statement of Investments (a) At June 30, 1998, for federal income tax purposes cost of investments was $2,241,556,000 and net unrealized appreciation was $1,728,260,000, consisting of gross unrealized appreciation of $1,837,923,000 and gross unrealized depreciation of $109,663,000. (b) Non-income producing security. (c) On June 30, 1998, the Fund held the following percentages of the outstanding voting shares of the affiliated companies (ownership of at least 5%) listed below: Bigfoot International.....................................................10.00% World Acceptance...........................................................9.58% Ethical Holdings...........................................................8.04% Tipperary..................................................................7.85% Kronos.....................................................................7.83% COMARCO....................................................................7.52% Data Transmission Network..................................................7.23% Microcide Pharmaceuticals..................................................7.20% LaSalle Hotel Properties...................................................6.73% Gibraltar Steel............................................................6.45% Synaptic Pharmaceuticals...................................................6.35% Tesoro Petroleum...........................................................6.31% Filmes Lusomundo...........................................................6.20% Au Bon Pain................................................................6.18% International Total Services...............................................6.00% Monarch Casino & Resort....................................................5.67% Micros Systems.............................................................5.61% IFR Systems................................................................5.49% Innovasive Devices.........................................................5.17% Atchison Casting...........................................................5.13% Giga.......................................................................5.10% Compass International Services.............................................5.07% The aggregate cost and value of investments in these companies at June 30, 1998, was $186,614,000 and $240,271,000, respectively. The market value of these securities represents 6.05% of the total net assets at June 30, 1998. During the period ended June 30, 1998, cost of purchases and proceeds from sales in affiliated companies was $65,217,000 and $20,178,000, respectively. Net realized gain on sales of investments in such companies amounted to $5,848,000. There were no dividends received from these companies during the six months ended June 30, 1998. 24 Acorn Fund .Foreign Portfolio Diversification At June 30, 1998 Acorn Fund's foreign portfolio of investments as a percent of net assets was diversified as follows:
Value (000) Percent - -------------------------------------------------------------------------------- .Information Computer Services $ 81,395 2.1% Cable Television 40,429 1.0 Semiconductors & Related Equipment 33,791 0.9 Business Information/Publishing 5,568 0.1 Mobile Communications 5,486 0.1 Contract Manufacturing 2,513 0.1 - -------------------------------------------------------------------------------- 169,182 4.3 .Health Care Hospital Services 13,285 0.3 Pharmaceuticals 9,415 0.2 Biotechnology/Drug Delivery 450 0.0 Medical Equipment 391 0.0 - -------------------------------------------------------------------------------- 23,541 0.5 .Consumer Goods/Services Travel 24,007 0.6 Nondurable Goods 19,984 0.5 Consumer Software 16,666 0.4 Beverages 14,668 0.4 Furniture & Textiles 7,800 0.2 Gaming 7,380 0.2 Retail 6,644 0.2 Consumer Goods Distribution 3,635 0.1 Consumer Services 784 0.0 Other Durable Goods 26,688 0.7 Other Entertainment 14,395 0.4 - -------------------------------------------------------------------------------- 142,651 3.7 .Finance Money Management 22,891 0.6 Insurance 13,661 0.4 Finance Companies 4,914 0.1 Banks 4,613 0.1 Closed-End Funds 1,112 0.0 - -------------------------------------------------------------------------------- 47,191 1.2 .Industrial Goods/Services Electrical Components 9,002 0.2 Machinery 5,508 0.1 Steel 4,760 0.1 - -------------------------------------------------------------------------------- 19,270 0.4 .Energy/Minerals Oil Services 13,927 0.4 Oil/Gas Producers 4,054 0.1 - -------------------------------------------------------------------------------- 17,981 0.5 .Other Industries Transportation 14,927 0.4 Real Estate 9,320 0.2 Utilities 4,381 0.1 - -------------------------------------------------------------------------------- 28,628 0.7 Total Foreign Portfolio $448,444 11.3% ================================================================================
25 Acorn International .Major Portfolio Changes in the Second Quarter
Number of Shares -------------------------- 3/31/98 6/30/98 Additions Europe .Germany Merck KGA 0 75,000 Rhoen Klinikum 135,000 150,000 .Austria Scala Business Solutions 250,000 900,000 .Denmark Vest Wood 0 50,000 .Finland Elcoteq Network 507,000 750,000 KCI Konecranes International 55,000 125,000 .United Kingdom Computacenter 0 75,000 Dialog Corporation 1,200,000 1,600,000 Professional Staff 0 230,000 .Switzerland Cie Fin Richemont 13,000 16,000 Pargesa Holdings 0 3,200 Phoenix Mecano 33,000 36,000 Sarasin & Cie Bank 0 5,000 .Greece Ergo Bank 20,000 70,000 .Spain Prosegur 0 375,000 Sol Melia 0 150,000 .Hungary Pick Szeged 0 30,000 Gedeon Richter 40,000 80,000 - -------------------------------------------------------------------------------- Asia .Taiwan Chroma Ate 250,000 700,000 .Singapore Datacraft Asia 3,300,000 4,150,000 Natsteel Electronics 4,400,000 5,725,000 - -------------------------------------------------------------------------------- Latin America .Mexico Grupo Industrial Bimbo 6,000,000 6,500,000 Grupo Continental 1,570,000 2,000,000 Kimberly Clark de Mexico 3,300,000 3,600,000 .Brazil Cemig 150,000,000 220,000,000 (includes effect of 22.4% stock dividend) .Argentina Perez Companc 1,200,000 1,400,000 .Panama Panamerican Beverage 120,000 200,000 - -------------------------------------------------------------------------------- Other Countries .Australia AAPT 0 2,720,000 Coca Cola Amatil 900,000 1,400,000 Tyndall Australia 4,600,000 5,626,307 .Canada Celestica 0 175,000 LGS Group 170,000 300,000 LGS Group Warrants 0 80,000 Power Financial 150,000 220,000 Ventra Group 0 1,800,000 .South Africa Persetel Q Data 0 750,000
26
Number of Shares --------------------- 3/31/98 6/30/98 Sales - ----------------------------------------------------------------------- Europe .Germany Pfleiderer 260,000 0 Rofin Sinar 110,000 0 Schaltbau 7,000 0 .Finland Tieto Corporation, Cl. B (formerly known as TT Tieto) 500,000 1,310,000 (includes effect of 200% stock dividend) .Sweden WM Data Nordic 2,100,000 2,000,000 .France Groupe Partouche 50,000 0 .United Kingdom Eurotherm 600,000 0 Hozelock Group 450,000 0 St. James Place 4,000,000 0 Vosper Thornycroft Holdings 700,000 430,000 .Switzerland PubliGroupe 40,000 5,000 .Italy Banca Fideuram 6,025,000 5,430,000 Cellular Communications International 120,000 55,000 (includes effect of 3 for 2 stock split) Saipem SPA 1,800,000 1,500,000 .Portugal Lusotur 180,000 101,000 .Netherlands Fugro NV 200,000 100,000 Telegraaf Holdings 240,000 80,000 - ----------------------------------------------------------------------- Asia .Hong Kong China HK Photo Products 5,200,000 0 Dickson Concepts 1,400,000 0 .India Tube Investment GDR 810,000 0 .Japan Aderans 370,000 0 Aeon Credit Service 165,000 0 Aiful 90,000 10,000 Asatsu 10,000 0 Jafco 99,000 0 Jusco 200,000 0 Keyence 40,000 0 Mirai Industry 275,000 113,000 Nichiei 68,000 0 NuSkin Asia Pacific 160,000 0 Shohkoh Fund 40,000 15,000 .Malaysia Berjaya Sports Toto 1,400,000 0 Malaysian Oxygen 2,350,000 1,850,000 Oriental Holdings 265,000 0 Technology Resources 1,000,000 0 .Thailand Bangkok Insurance 320,000 0 Telecom Asia 12,800,000 0 - ----------------------------------------------------------------------- Latin America .Panama Banco Latinoamericano de Exportaciones 195,000 165,000 - ----------------------------------------------------------------------- Other Countries .Australia PetSec Energy 1,400,000 900,000 Publishing & Broadcasting 1,000,000 0 Siddons Ramset 690,000 0 Sonic Healthcare 5,200,000 0 .Canada Shaw Industries 520,000 1,280,000 (includes effect of 3 for 1 stock split) .Israel ZAG Industries 350,000 253,000 .South Africa Energy Africa 930,000 500,000
27 Acorn International .Statement of Investments (unaudited) June 30, 1998
Number of Shares Value (000) - --------------------------------------------------------------------------- Common Stocks and Other Equity-Like Securities: 89.3% - --------------------------------------------------------------------------- Europe: 63.5% .Germany/Austria: 5.3% 200,000 Rhoen Klinikum Pfd. $ 19,280 150,000 Rhoen Klinikum 14,834 Hospital Management 375,000 IVG Holdings 17,244 Real Estate 900,000 Scala Business Solutions (Austria) (b)(c) 13,466 95,775 Scala Business Solutions Warrants 3/31/99 (b) 603 95,775 Scala Business Solutions Warrants 3/31/01 (b) 453 ERP Software 190,000 Flughafen Wien (Austria) 9,112 Vienna Airport Authority 473,000 United International Holdings (Austria) (b) 7,568 Cable Television for Austria & Other Countries 212,000 Berzelius Umwelt 4,369 Industrial Waste Recycling 21,000 Cewe Color Holding 4,363 Photographic Developing & Printing 100,000 Boewe Systec 4,017 Envelope Stuffing Machines 75,000 Merck KGA 3,361 Pharmaceuticals - --------------------------------------------------------------------------- 98,670 .Denmark: 0.5% 50,000 Vest Wood 4,871 Furniture 44,000 Kompan International (c) 3,679 Playground Equipment - --------------------------------------------------------------------------- 8,550 .Finland: 7.7% 1,310,000 Tieto Corporation, Cl. B 99,566 Computer Services/Consulting 80,000 Fiskars, Series A 11,373 Scissors & Gardening Tools 750,000 Elcoteq Network (c) 9,227 Contract Electronics Manufacturer 550,000 Talentum (c) 8,822 Trade Journals & Multimedia 100,000 Spar Finland (c) 7,427 Grocery/Convenience Stores 125,000 KCI Konecranes International 6,334 Industrial Equipment - --------------------------------------------------------------------------- 142,749 .Norway: 0.1% 500,000 Atex Media Solutions (b) $ 1,010 Print Media Software .Sweden: 7.1% 2,000,000 WM Data Nordic 69,468 Computer Services/Consulting 1,000,000 Getinge Industrier 20,439 Sterilization & Disinfection Equipment 700,000 Bure Investment 11,147 Health Care Services & Investments 350,000 Autoliv 11,069 Seatbelts & Airbags 525,000 Atle 9,151 Investment Company 315,000 Esselte, Series A 6,991 Office Supplies & Related Equipment 360,000 Segerstrom & Svensson 2,957 Contract Electronics Manufacturer 120,000 Lifco (b) 587 Dental Supplies & Health Food - --------------------------------------------------------------------------- 131,809 .France: 4.4% 180,000 Atos (b) 43,169 Computer Services/Transaction Processing 60,000 Fininfo 10,619 Data Feeds for French Banks & Brokers 62,000 NRJ 9,886 Radio Network 95,000 Spir Communications 7,729 Regional Newspapers 52,500 Virbac 4,185 Veterinary Medicine 13,000 Penauille Polyservice 3,752 Industrial Cleaning 50,000 Assystem 2,067 Nuclear Energy Consulting - --------------------------------------------------------------------------- 81,407 .United Kingdom: 14.5% 2,000,000 Serco Group 46,051 Facilities Management 467,000 NTL (b) 24,984 Cable TV & Telephone System 510,000 Euro Money Publications 20,359 Financial Publications 13,000,000 Electronics Boutique (b) 19,196 Videogame/Computer Software Stores
28
Number of Shares Value (000) - -------------------------------------------------------------------------------- 1,500,000 Seton Scholl Healthcare (formerly known as Seton Healthcare Group) $ 18,833 Pharmaceuticals 2,000,000 Capita Group 17,202 Outsourcing Services 2,000,000 Oriflame International 14,850 Natural Cosmetics 4,400,000 City Centre Restaurants 10,829 Fast Food Restaurants 1,700,000 Rotork 10,211 Valve Actuators for Oil & Water Pipelines 1,000,000 Atkins 9,903 Outsourcing Services 950,000 Edinburgh Fund Managers 9,162 Investment Management 3,200,000 Medeva 9,130 Drugs for Hyperactive Children 600,000 AEA Technology 9,085 Nuclear Energy Consulting 1,500,000 N. Brown Group 9,060 Mail Order Clothing in Large Sizes 3,400,000 HALMA 7,063 Fire Detection Devices 2,000,000 Shanks & McEwan 6,007 Landfills & Waste Incinerators 430,000 Vosper Thornycroft Holdings 5,919 Naval Shipbuilding 1,300,000 Dorling Kindersley 4,577 Reference Books & CD-ROMs 1,000,000 Hogg Robinson 4,530 Corporate Travel Management 1,600,000 Dialog Corporation (b) 4,071 Online Business Information 600,000 Fairey Group 3,279 Electronic Products 230,000 Professional Staff (b) 3,162 Specialist Temporary Staffing 1,500,000 Powerscreen International 2,315 Mobile Crushing & Screening Equipment 75,000 Computacenter (b) 938 Computer Desktop Support Services - -------------------------------------------------------------------------------- 270,716 .Switzerland: 5.4% 36,000 Phoenix Mecano 23,259 Electrical Components Manufacturer 16,000 Cie Fin Richemont 20,939 Luxury Goods & Tobacco 60,000 Selecta Group 12,816 Vending Machines 13,500 Bon Appetit 8,838 12,500 Bon Appetit Warrants 10/29/98 (b) 251 Cash & Carry Stores/Specialty Restaurants 5,000 Sarasin & Cie Bank 8,768 Private Banking 12,000 Hero 8,149 Packaged Foods 18,000 Societe Generale d'Affichage 7,832 Billboard Advertising 3,200 Pargesa Holdings 5,686 Industrial & Media Conglomerate 1,000 Julius Baer Holdings 3,128 Private Banking & Brokerage 5,000 PubliGroupe 1,549 Advertising - -------------------------------------------------------------------------------- 101,215 .Italy/Greece: 9.4% 5,430,000 Banca Fideuram 30,960 Life Insurance & Mutual Funds 650,000 Mediolanum 20,624 Life Insurance & Mutual Funds 2,750,000 Autogrill Finanziari 19,431 Tollway Restaurants 2,000,000 Editoriale L'Espresso 16,596 Newspapers & Magazines 700,000 Banca Popolare Di Bergamo 14,413 Regional Bank 600,000 Gewiss 12,590 Electrical Plugs & Switches 500,000 Banco Pop Commercia e Industria 8,495 Regional Bank 576,000 Attica Enterprises (Greece) 8,310 Ferry Line 300,000 Industrie Natuzzi ADR 7,800 Leather Couches 250,000 Hellenic Bottling (Greece) 7,723 Coca-Cola Bottler 1,500,000 Saipem SPA 7,704 Pipeline Construction & Drilling Contractor
See accompanying notes to financial statements 29 Acorn International .Statement of Investments (unaudited)
Number of Shares Value (000) - -------------------------------------------------------------------------------- 1,000,000 Aeroporti di Roma $ 6,295 Airport Management 70,000 Ergo Bank (Greece) 5,982 Commercial Bank 325,000 Saes Getters 4,607 Getters used in TV's/PC's 55,000 Cellular Communications International (b) 2,743 Cellular Franchises - -------------------------------------------------------------------------------- 174,273 .Spain/Portugal: 2.1% 300,000 Mapfre Vida 14,345 Life Insurance & Mutual Funds 150,000 Sol Melia 7,153 Hotel Management 220,000 Cortefiel 4,814 Apparel Retailer 375,000 Prosegur (b) 4,470 Security Guards 144,300 Estoril Sol (Portugal) 3,750 Casino Resort 149,000 Filmes Lusomundo (Portugal) (b) 2,218 Newspapers, Radio, Video, Film Distribution 101,000 Lusotur (Portugal) (b) 1,394 Real Estate/Resort Developer 87,500 Televisao Independente (Portugal) (b) 197 Television Station - -------------------------------------------------------------------------------- 38,341 .Netherlands: 6.6% 580,000 Kempen (c) 44,907 Stock Brokerage/Investment Management 560,000 Getronics 29,043 Computer Services 275,000 Hunter Douglas 14,938 Decorative Window Coverings 151,000 ASR Verzekeringsgroep 12,812 Insurance 320,000 DOCdata (b) 9,171 Audio CD & CD-Rom Replication 310,000 Wegener Arcade NV 6,157 Newspaper 100,000 Fugro NV 3,982 Consulting & Surveying 80,000 Telegraaf Holdings 1,927 Newspaper - -------------------------------------------------------------------------------- 122,937 .Hungary: 0.3% 80,000 Gedeon Richter $ 6,436 Generic Drugs 30,000 Pick Szeged 1,754 Salami Producer - -------------------------------------------------------------------------------- 8,190 .Poland: 0.1% 200,000 Best Company Series D (c) 694 Electronics Retailer 140,000 Bank Komunalny (b) 458 Gdansk - Area Bank - -------------------------------------------------------------------------------- 1,152 --------- Europe: Total 12.3% 1,181,019 - -------------------------------------------------------------------------------- Asia: 12.3% .Hong Kong: 2.8% 14,050,000 Li and Fung 22,665 Sourcing of Consumer Goods 8,500,000 Varitronix International 17,003 LCD Manufacturer 3,500,000 TVB 9,260 Television Broadcasting 16,000,000 Vanda Systems 2,891 Systems Integrator 51,819 - -------------------------------------------------------------------------------- .India: 0.3% 82,682 Housing Development Finance 5,840 Mortgage Lender 2,000,000 Centurion Quantum Growth (b) 217 Closed-End Fund - -------------------------------------------------------------------------------- 6,057 .Japan: 5.1% 390,000 Meitec 13,488 Engineering Outsourcing 130,000 Nintendo 12,037 Video Games 125,000 Nidec 8,538 Spindle Motor Manufacturer 250,000 Fuji Software ABC 8,502 Computer Services/Consulting 300,000 Hokuto 8,430 Mushroom Grower 85,000 Ryohin Keikaku 8,146 Designer & Retailer of Muji Brand Specialty Consumer Goods
30
Principal Amount or Number of Shares Value (000) - -------------------------------------------------------------------------------- 90,000 Orix Corporation $ 6,076 Leasing Company 270,000 Noritsu Koki 6,031 Photo Processing Lab Manufacturer 204,000 People 4,851 Sports Clubs 40,000 Rohm 4,107 Semiconductors & Electronic Components 15,000 Shohkoh Fund 3,686 Short-Term Loans for Small Businesses 310,000 Shinki 3,440 Corporate & Consumer Lending 161,000 Lasertec 3,306 Manufacturer of LCD & Photomask Defect Detectors 210,000 Arrk Corporation 2,875 Industrial Modeling 113,000 Mirai Industry 949 Manufacturer of Plastic Housing Components 10,000 Aiful 488 Consumer Lending 80,000 Central Uni 337 Health Care/Medical Equipment - -------------------------------------------------------------------------------- 95,287 .Taiwan: 0.1% 700,000 Chroma Ate (b) 2,170 Measuring Instruments .Malaysia: 0.2% 1,850,000 Malaysian Oxygen 4,104 Industrial Gases .Indonesia: 0.0% 3,000,000 Mustika Ratu (b) 304 Traditional Cosmetics 1,750,000 Medco Energi 272 Oil & Gas Drilling & Production - -------------------------------------------------------------------------------- 576 .Philippines: 0.8% $ 8,750,000 Int'l Container Terminal Services Cv. 1.75% 3/13/04 7,612 52,840,000 Int'l Container Terminal Services (b) 6,019 Container Handling Terminals & Port Management 3,985,000 Philippine Savings Bank (b) 1,696 Banking - -------------------------------------------------------------------------------- 15,327
Number of Shares Value (000) - -------------------------------------------------------------------------------- .Singapore: 3.0% 8,300,000 Star Cruises (b) 15,853 Cruise Line 7,000,000 Venture Manufacturing 13,258 Contract Electronics Manufacturer 4,150,000 Datacraft Asia 9,960 Network Integration 5,725,000 Natsteel Electronics 9,590 Contract Electronics Manufacturer 4,247,000 Electronic Resources 2,891 5,015,000 Electronic Resources Warrants 7/17/01 (b) 1,128 Distribution of Electronic Components 16,900,000 Genting International (b) 1,775 Investment Holding - -------------------------------------------------------------------------------- 54,455 -------- Asia: Total 229,795 - -------------------------------------------------------------------------------- Latin America: 6. 4% .Mexico: 2.7% 6,500,000 Grupo Industrial Bimbo 13,165 Bread, Baked Goods & Snacks 3,600,000 Kimberly Clark de Mexico 12,720 Paper Products 2,000,000 Grupo Continental 6,677 Beverages 510,000 Tubos de Acero de Mexico ADR 6,534 Seamless Pipe for Oil Wells 8,940,000 Nadro, Series L (b) 5,452 Pharmaceutical Distributor 1,900,000 Corp Interamericana de Entretenimiento 5,286 Special Events & Live Entertainment - -------------------------------------------------------------------------------- 49,834 .Brazil: 0.9% 470,000 Elevadores Atlas 7,924 Elevator Installation & Maintenance 220,000,000 Cemig Pfd. 6,848 Electric Utility 181,000 Bompreco GDS 2,624 Supermarket Chain - -------------------------------------------------------------------------------- 17,396
See accompanying notes to financial statements 31 Acorn International .Statement of Investments (unaudited)
Number of Shares Value (000) - -------------------------------------------------------------------------------- .Argentina: 1.5% 500,000 IRSA GDS $ 14,562 Real Estate Management & Development 1,400,000 Perez Companc 7,029 Oil & Gas Producer 3,600,000 Siderca 6,121 Steel Pipe Producer - -------------------------------------------------------------------------------- 27,712 .Peru: 0.7% 6,000,000 Enrique Ferreyros 8,083 Heavy Machinery Dealer 250,000 Telefonica del Peru 5,109 Telecommunications - -------------------------------------------------------------------------------- 13,192 .Panama: 0.6% 200,000 Panamerican Beverage 6,287 Coca-Cola Bottler 165,000 Banco Latinoamericano de Exportaciones 5,074 Trade Financing - -------------------------------------------------------------------------------- 11,361 ----------- Latin America: Total 119,495 - -------------------------------------------------------------------------------- Other Countries: 7.1% .Australia/New Zealand: 2.0% 1,400,000 Coca Cola Amatil 9,364 Coca-Cola Bottler 5,626,307 Tyndall Australia 7,317 562,630 Tyndall Australia New Shares 697 Money Management & Insurance 3,000,000 Anaconda Nickel (b) 7,060 Nickel Mining 2,720,000 AAPT (b) 5,222 Telephone Services 1,750,000 Sky City (New Zealand) 4,315 Casino & Hotel 900,000 PetSec Energy (b) 2,954 Oil & Gas Producer - -------------------------------------------------------------------------------- 36,929
Principal Amount or Number of Shares Value (000) - -------------------------------------------------------------------------------- .Canada: 2.6 % 1,280,000 Shaw Industries 15,319 Oil Field Services 220,000 Power Financial 10,285 Financial Services Holding Company 1,700,000 Bracknell (b)(c) 6,416 Electrical Contractor & Facilities Management 1,800,000 Ventra Group (b) 4,529 Auto Parts for Europe & North America 300,000 LGS Group (b) 3,366 80,000 LGS Group Warrants (b) 898 Computer Systems Integration 175,000 Celestica (b) 3,302 Contract Electronics Manufacturer 1,600,000 Dundee Realty Special Warrants (b) 2,829 900,000 Dundee Realty (b) 1,591 Real Estate - -------------------------------------------------------------------------------- 48,535 .Israel: 0.7% 350,000 Blue Square Israel ADR 5,403 Supermarkets & Department Stores 100,000 Orbotech (b) 3,637 Printed Circuit Board Manufacturing Equipment 253,000 ZAG Industries (b) 3,546 Plastic Hardwares - -------------------------------------------------------------------------------- 12,586 .South Africa: 0.4% 750,000 Persetel Q Data 6,749 Networks & Computer Systems 500,000 Energy Africa (b) 1,677 Oil & Gas Producer - -------------------------------------------------------------------------------- 8,426 .Russia: 0.1% $1,500,000 Khanty Mansiysk 10% Notes 1,500 152 Khanty Mansiysk 68 Oil Production in Russia - -------------------------------------------------------------------------------- 1,568 .United States: 1.3% 322,000 Carnival 12,759 Largest Cruise Line 203,000 AES Corporation (b) 10,670 Electric Generating Plants - -------------------------------------------------------------------------------- 23,429 ----------- Other: Total 131,473
32
Principal Amount or Number of Shares Value (000) - -------------------------------------------------------------------------------- 240 Miscellaneous Securities: 0.0% $ 1 ----------- Total Common Stocks and Other Equity-Like Securities: 89.3% 1,661,783 (Cost: $1,062,811) Short-Term Obligations: 9.5% Yield 5.53%-5.70% Due 7/1-7/16/98 $37,836 Hertz 37,803 $31,388 Cargill Finance 31,329 $21,116 GE Capital 21,093
Principal Amount Value (000) - -------------------------------------------------------------------------------- $19,135 Commercial Credit $ 19,108 $18,169 GTE 18,169 $17,900 AON 17,878 $15,770 Aetna Services 15,768 $15,017 Cigna 14,982 - -------------------------------------------------------------------------------- (Amortized Cost: $176,130) 176,130 ----------- Total Investments: 98.8% 1,837,913 (Cost: $1,238,941) ----------- Cash and Other Assets Less Liabilities: 1.2% 23,372 ----------- Total Net Assets: 100% $ 1,861,285 ================================================================================
- -------------------------------------------------------------------------------- .Notes to Statement of Investments Notes to Statement of Investments: (a) At June 30, 1998, for federal income tax purposes cost of investments was $1,245,875,000 and net unrealized appreciation was $592,038,000 consisting of gross unrealized appreciation of $705,384,000 and gross unrealized depreciation of $113,346,000. (b) Non-income producing security. (c) On June 30, 1998, the Fund held the following percentages of the outstanding voting shares of the affiliated companies (ownership of at least 5%) listed below: Kompan International (Denmark)............................................ 9.36% Best Company (Poland)..................................................... 9.09% Spar Finland (Finland).................................................... 8.80% Talentum (Finland)........................................................ 6.89% Bracknell (Canada)........................................................ 6.47% Elcoteq Network (Finland)................................................. 5.89% Scala Business Solutions (Austria)........................................ 5.68% Kempen (Netherlands)...................................................... 5.49%
The aggregate cost and value of investments in these companies at June 30, 1998, was $33,187,327 and $71,945,000 respectively. The market value of these securities represents 3.87% of the total net assets at June 30, 1998. During the six months ended June 30, 1998, the cost of purchases was $12,823,000. There were no sales of these affiliated companies during this period. Dividends net of foreign taxes withheld received from these companies amounted to $1,083,000. 33 Acorn International .Portfolio Diversification At June 30, 1998, the Fund's portfolio of investments as a percent of net assets was diversified as follows:
Value (000) Percent - ----------------------------------------------------- . Information Computer Services $ 274,549 14.8% Publishing 68,384 3.7 Contract Manufacturing 38,278 2.1 CATV 32,552 1.8 Instrumentation 17,118 0.9 Business Software 15,531 0.8 Computer Hardware 15,482 0.8 Business Information 14,690 0.8 Telephone Services 10,331 0.6 Radio 9,885 0.5 Broadcasting 9,457 0.5 Advertising 9,382 0.5 Semiconductors 4,107 0.2 Electronics Distribution 4,019 0.2 Mobile Communications 2,743 0.1 - ----------------------------------------------------- 526,508 28.3 . Health Care Pharmaceuticals 41,946 2.3 Hospital Management 34,114 1.8 Hospital/Laboratory Supplies 20,439 1.1 Services 11,147 0.6 Medical Equipment 924 0.0 - ----------------------------------------------------- 108,570 5.8 . Consumer Goods/Services Retail 59,027 3.2 Travel 42,069 2.3 Nondurables 39,247 2.1 Food 31,498 1.7 Restaurants 30,260 1.6 Beverages 30,051 1.6 Cruise Lines 14,533 0.8 Consumer Goods Distribution 12,879 0.7 Furniture & Textiles 12,672 0.7 Consumer Software 12,037 0.6 Leisure Products 8,530 0.5 Casinos 8,065 0.4 Other Durable Goods 34,082 1.8 Other Entertainment 26,225 1.4 Other Consumer Services 20,931 1.1 - ----------------------------------------------------- 367,573 19.7 . Finance Money Management 68,760 3.8 Banks 48,015 2.6 Brokerage 44,907 2.4 Insurance 37,442 2.0 Finance Companies 19,042 1.0 Closed-End Funds 5,903 0.3 Savings & Loans 488 0.0 - ----------------------------------------------------- 224,557 12.1 . Industrial Goods/Services Outsourcing Services 129,280 6.9 Electrical Components 62,080 3.3 Machinery Processing 42,909 2.3 Industrial Services 16,029 0.9 Steel 12,655 0.7 Conglomerates 9,151 0.5 Speciality Chemicals 4,104 0.2 Construction 948 0.1 - ----------------------------------------------------- 277,156 14.9 . Energy/Minerals Oil Services 27,005 1.4 Oil/Gas Producers 20,491 1.1 Independent Power 10,670 0.6 Non-Ferrous Metals 7,060 0.4 - ----------------------------------------------------- 65,226 3.5 . Other Industries Transportation 37,349 2.0 Real Estate 37,620 2.0 Waste Management 10,376 0.6 Regulated Utilities 6,848 0.4 - ----------------------------------------------------- 92,193 5.0 Total Common Stocks and Other Equity-Like Securities 1,661,783 89.3 ===================================================== Short-Term Obligations 176,130 9.5 Total Investments 1,837,913 98.8 ===================================================== Cash and Other Assets less Liabilities 23,372 1.2 --------------------- Net Assets $1,861,285 100.0% =====================================================
34 Acorn Family of Funds .Statements of Assets and Liabilities (unaudited)
Acorn (in thousands) Acorn Fund International Acorn USA - ---------------------------------------------------------------------------------------------------------------------- 6/30/98 Assets Investments, at value (cost: Acorn Fund $2,238,807; Acorn International $1,238,941; Acorn USA $245,891) $3,969,816 $1,837,913 $286,586 Cash 51 1,600 - Net unrealized appreciation on futures and foreign forward currency contracts 68 1,740 - Organization costs - - 68 Receivable for: Securities sold 15,074 25,378 530 Fund shares sold 5,018 2,997 685 Dividends and interest 1,920 3,418 19 Other assets 75 36 3 - ---------------------------------------------------------------------------------------------------------------------- Total assets 3,992,022 1,873,082 287,891 Liabilities and Net Assets Payable for: Securities purchased 21,623 9,760 4,580 Fund shares redeemed 962 918 506 Organization costs - - 68 Other 747 1,119 111 - ---------------------------------------------------------------------------------------------------------------------- Total liabilities 23,332 11,797 5,265 Net assets applicable to Fund shares outstanding $3,968,690 $1,861,285 $282,626 - ---------------------------------------------------------------------------------------------------------------------- Fund shares outstanding 212,102 85,629 16,537 - ---------------------------------------------------------------------------------------------------------------------- Pricing of Shares Net asset value, offering price and redemption price per share $ 18.71 $ 21.74 $ 17.09 - ---------------------------------------------------------------------------------------------------------------------- Analysis of Net Assets Paid-in capital $2,066,902 $1,261,635 $223,219 Accumulated net realized gain on sales of investments, futures and foreign currency transactions 170,974 40 19,259 Net unrealized appreciation of investments and other assets (net of unrealized PFIC gains of $1,485 for Acorn Fund and $3,335 for Acorn International) 1,729,585 597,320 40,695 Undistributed net investment income (loss) 1,229 2,290 (547) - ---------------------------------------------------------------------------------------------------------------------- Net assets applicable to Fund shares outstanding $3,968,690 $1,861,285 $282,626 ======================================================================================================================
See accompanying notes to financial statements 35 Acorn Family of Funds .Statements of Operations (unaudited)
Acorn Acorn Fund International Acorn USA 6 months Year 6 months Year 6 months Year (in thousands) ended 6/30, ended 12/31, ended 6/30, ended 12/31, ended 6/30, ended 12/31, - ---------------------------------------------------------------------------------------------------------------------------------- 1998 1997 1998 1997 1998 1997 Investment Income: Dividends $ 16,705 $ 28,012 $ 19,455 $ 27,667 $ 417 $ 568 Interest 6,598 15,566 3,174 8,098 457 470 - ---------------------------------------------------------------------------------------------------------------------------------- 23,303 43,578 22,629 35,765 874 1,038 Foreign taxes withheld (397) (797) (1,909) (2,912) -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Total investment income 22,906 42,781 20,720 32,853 874 1,038 Expenses: Investment advisory 13,073 14,349 7,192 16,235 1,114 1,199 Administration 954 -- 438 -- 59 -- Custodian 508 1,034 1,024 2,489 20 24 Transfer and dividend disbursing agent 730 1,328 715 1,882 131 164 Reports to shareholders 295 564 270 841 51 85 Legal and audit 125 287 57 221 14 29 Registration and blue sky 30 273 32 73 18 72 Trustees' and other 176 441 77 364 17 56 - ---------------------------------------------------------------------------------------------------------------------------------- Total expenses 15,891 18,276 9,805 22,105 1,424 1,629 Custodian fees paid indirectly -- -- -- -- (3) (2) - ---------------------------------------------------------------------------------------------------------------------------------- Net expenses 15,891 18,276 9,805 22,105 1,421 1,627 - ---------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 7,015 24,505 10,915 10,748 (547) (589) Net Realized and Unrealized Gain (Loss) on Investments, Futures and Foreign Currency Transactions: Net realized gain on sales of investments 186,950 361,502 3,035 76,648 19,318 5,521 Net realized gain on foreign currency transactions -- -- 15,480 22,816 -- -- Net realized gain (loss) on futures (13,999) (16,098) 1,516 -- -- -- Change in net unrealized appreciation of investments and foreign currency transactions 241,698 356,307 287,282 (99,759) 9,329 27,198 - ---------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments, futures and foreign currency transactions 414,649 701,711 307,313 (295) 28,647 32,719 - ---------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations $421,664 $726,216 $318,228 $ 10,453 $28,100 $ 32,130 ==================================================================================================================================
See accompanying notes to financial statements 36 Acorn Family of Funds . Statements of Changes in Net Assets (unaudited)
Acorn Acorn Fund International Acorn USA 6 months Year 6 months Year 6 months inception 9/4 ended ended ended ended ended through (in thousands) 6/30, 12/31, 6/30, 12/31, 6/30, 12/31, - -------------------------------------------------------------------------------------------------------------------------------- 1998 1997 1998 1997 1998 1997 From Operations: Net investment income (loss) $ 7,015 $ 24,505 $ 10,915 $ 10,748 $ (547) $ (589) Net realized gain on sales of investments, futures and foreign currency transactions 172,951 345,404 20,031 99,464 19,318 5,521 Change in net unrealized appreciation of investments and foreign currency transactions 241,698 356,307 287,282 (99,759) 9,329 27,198 - -------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 421,664 726,216 318,228 10,453 28,100 32,130 Distributions to Shareholders From: Net investment income (a) (6,284) (31,681) (12,611) (33,072) -- -- Net realized gain (48,180) (320,289) (22,701) (77,970) (1,640) (3,351) - -------------------------------------------------------------------------------------------------------------------------------- Total distributions to shareholders (54,464) (351,970) (35,312) (111,042) (1,640) (3,351) From Fund Share Transactions: Reinvestment of dividends and capital gain distributions 49,163 320,054 33,102 104,129 1,491 3,178 Proceeds from other shares sold 271,357 711,329 234,333 468,766 106,806 133,753 - -------------------------------------------------------------------------------------------------------------------------------- 320,520 1,031,383 267,435 572,895 108,297 136,931 Payments for shares redeemed (400,487) (566,224) (312,005) (621,910) (36,755) (34,171) - -------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from Fund share transactions (79,967) 465,159 (44,570) (49,015) 71,542 102,760 - -------------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 287,233 839,405 238,346 (149,604) 98,002 131,539 Net Assets: Beginning of period 3,681,457 2,842,052 1,622,939 1,772,543 184,624 53,085 - -------------------------------------------------------------------------------------------------------------------------------- End of period (b) $3,968,690 $3,681,457 $1,861,285 $1,622,939 $282,626 $184,624 ================================================================================================================================
(a) Includes distributions of unrealized PFIC gains of $7,674 for Acorn Fund and $24,166 for Acorn International in 1997. (b) Includes undistributed net investment income (loss) of $1,229 at June 30, 1998 and $498 at December 31, 1997 for Acorn Fund, $2,290 at June 30, 1998 and $3,986 at December 31, 1997 for Acorn International and $(547) at June 30, 1998 and $0 at December 31, 1997 for Acorn USA. See accompanying notes to financial statements 37 Acorn Family of Funds .Financial Highlights (unaudited)
6 months Years Acorn Fund ended 6/30, ended 12/31, - ----------------------------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period 1998 1997 Net Asset Value, beginning of period $16.99 $15.04 Income From Investment Operations Net investment income .03 .15 Net realized and unrealized gain (loss) on investments, foreign currency and futures 1.95 3.57 - ----------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.98 3.72 Less Distributions Dividends from net investment income (0.03) (0.16) Distributions from net realized and unrealized gains reportable for federal income taxes (0.23) (1.61) - ----------------------------------------------------------------------------------------------------------------------------------- Total distributions (0.26) (1.77) - ----------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, end of period $18.71 $16.99 =================================================================================================================================== Total Return 11.7% 25.0% Ratios/Supplemental Data Ratio of expenses to average net assets .83%* .56% Ratio of net investment income to average net assets .37%* .75% Portfolio turnover rate 25%* 32% Net assets at end of period (in millions) $3,969 $3,681
6 months Years Acorn International ended 6/30, ended 12/31, - ----------------------------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period 1998 1997 Net Asset Value, beginning of period $18.39 $19.61 Income From Investment Operations Net investment income (loss) .13 .40 Net realized and unrealized gain (loss) on investments, foreign currency and futures 3.64 (.34) - ----------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 3.77 .06 Less Distributions Dividends from net investment income (.15) (.38) Distributions from net realized and unrealized gains reportable for federal income taxes (.27) (.90) - ----------------------------------------------------------------------------------------------------------------------------------- Total distributions (.42) (1.28) - ----------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, end of period $21.74 $18.39 =================================================================================================================================== Total Return 20.5% 0.2% Ratios/Supplemental Data Ratio of expenses to average net assets 1.11%* 1.19% Ratio of net investment income (loss) to average net assets 1.23%* .58% Portfolio turnover rate 38%* 39% Net assets at end of period (in millions) $1,861 $1,623
6 months Years Acorn USA ended 6/30, ended 12/31, - ----------------------------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period 1998 1997 Net Asset Value, beginning of period $15.12 $11.65 Income From Investment Operations Net investment loss (b) (.04) (.07) Net realized and unrealized gain on investments 2.11 3.83 - ----------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.07 3.76 Less Distributions Dividends from net investment income -- -- Distributions from net realized and unrealized gains reportable for federal income taxes (.10) (.29) - ----------------------------------------------------------------------------------------------------------------------------------- Total distributions (.10) (.29) - ----------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, end of period $17.09 $15.12 =================================================================================================================================== Total Return 13.7% 32.3% Ratios/Supplemental Data Ratio of expenses to average net assets (a) 1.20%* 1.35% Ratio of net investment loss to average net assets (.46%)* (.49%) Portfolio turnover rate 49%* 33% Net assets at end of period (in millions) $ 283 $ 185
38
- ---------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 1991 1990 1989 $13.60 $12.24 $13.95 $11.06 $ 9.32 $ 6.51 $ 8.58 $7.27 .09 .11 .06 .04 .07 .11 .12 .13 2.93 2.42 (1.10) 3.50 2.16 2.95 (1.62) 1.65 - ---------------------------------------------------------------------------------- 3.02 2.53 (1.04) 3.54 2.23 3.06 (1.50) 1.78 (.11) (.09) (.11) (.06) (.08) (.10) (.13) (.11) (1.47) (1.08) (.56) (.59) (.41) (.15) (.44) (.36) - ---------------------------------------------------------------------------------- (1.58) (1.17) (.67) (.65) (.49) (.25) (.57) (.47) - ---------------------------------------------------------------------------------- $15.04 $13.60 $12.24 $13.95 $11.06 $ 9.32 $ 6.51 $8.58 - ---------------------------------------------------------------------------------- 22.6% 20.8% (7.4%) 32.3% 24.2% 47.3% (17.5%) 24.8% .57% .57% .62% .65% .67% .72% .82% .73% .53% .89% .55% .30% .72% 1.30% 1.60% 1.59% 33% 29% 18% 20% 25% 25% 36% 26% $2,842 $2,399 $1,983 $2,035 $1,449 $1,150 $ 767 $ 855 Inception 9/23 through 12/31, - ------------------------------------------------------- 1996 1995 1994 1993 1992 $16.59 $15.24 $15.94 $10.69 $10.00 .13 .16 .07 - (.03) 3.29 1.20 (.67) 5.25 .72 - ------------------------------------------------------- 3.42 1.36 (.60) 5.25 .69 (.12) - - - - (.28) (.01) (.10) - - - ------------------------------------------------------- (.40) (.01) (.10) - - - ------------------------------------------------------- $19.61 $16.59 $15.24 $15.94 $10.69 - ------------------------------------------------------- 20.7% 8.9% (3.8%) 49.1% 6.9% 1.17% 1.22% 1.24% 1.21% 2.35%* .51% .90% .48% .06% (1.37%)* 34% 26% 20% 19% 20%* $1,773 $1,276 $1,363 $ 907 $ 30 Inception 9/4 through 12/31, - -------------- 1996 $10.00 (.02) 1.67 ------ 1.65 - - ------ - ------ $11.65 ------ 16.5% 1.85%* (.99%)* 20%* $53
- -------------------------------------------------------------------------------- (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 period ended December 31, 1996. (b) Net investment loss per share was based upon the average shares outstanding during each period. *Annualized See accompanying notes to financial statements 39 Acorn Family of Funds .Notes to Financial Statements (unaudited) 1. Nature of Operations Acorn Fund, Acorn International and Acorn USA (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 portfolios. 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. 40 There were no futures contracts open at June 30, 1998 in Acorn Fund. Acorn Fund entered into forward contracts to sell foreign currency, settling November 20, 1998, as described below:
Foreign U.S. Dollar Unrealized Amount Currency Proceeds (000) Gain (000) - -------------------------------------------------------------------------------- 78,460,000 Hong Kong Dollar $10,000 $68
Acorn International had the following open foreign index futures contract at June 30, 1998:
Number of Contract Value Expiration Unrealized Contracts (000) Date Gain (000) - -------------------------------------------------------------------------------- Hong Kong Hang Seng Index (Short) 171 $ 9,512 7/98 $2
Acorn International also entered into forward contracts to sell foreign currency, settling July 15 through September 28, 1998, as described below:
U.S.Dollar Unrealized Gain Foreign Amount Currency Proceeds (000) (Loss) (000) - -------------------------------------------------------------------------------- 84,000,000 Swiss Franc $56,834 $ 967 175,000,000 German Mark $98,203 744 200,000,000 French Franc $33,523 272 310,000,000 Hong Kong Dollar $39,675 (279) 82,405,280,000 Italian Lira $46,848 416 9,335,000,000 Japanese Yen $68,589 456 482,000,000 Swedish Krone $60,152 (504) 50,000,000 Singapore Dollar $29,135 (334) ------- $1,738
Acorn USA did not enter into any futures or forward foreign currency contracts during the period ended June 30, 1998. .Fund share valuation Fund shares are sold and redeemed on a continuous 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. Dividends payable to shareholders are recorded by the Funds on the ex-dividend date. Acorn and Acorn International have elected to mark-to-market their investments in Passive Foreign Investment Companies ("PFICs") for federal income tax purposes. A summary of transactions relating to PFICs is as follows:
Acorn Fund (000) - -------------------------------------------------------------------------------- Cumulative net unrealized appreciation recognized in prior years at December 31, 1997 $ 2,804 Unrealized appreciation recognized through June 30, 1998 -- Cumulative net unrealized appreciation recognized in prior years on PFICs sold through June 30, 1998 (1,319) --------- Cumulative net unrealized appreciation recognized in prior years at June 30, 1998 1,485 A summary of transactions relating to PFICs during 1997 follows: Unrealized appreciation recognized 2,483 Distributions to shareholders from net investment income relating to PFICs 7,674
Acorn International (000) - -------------------------------------------------------------------------------- Cumulative net unrealized appreciation recognized in prior years at December 31, 1997 $ 16,193 Unrealized appreciation recognized through June 30, 1998 -- Cumulative net unrealized appreciation recognized in prior years on PFICs sold through June 30, 1998 (12,858) --------- Cumulative net unrealized appreciation recognized in prior years at June 30, 1998 3,335 A summary of transactions relating to PFICs during 1997 follows: Unrealized appreciation recognized 15,105 Distributions to shareholders from net investment income relating to PFICs 24,166
Distributions relating to PFICs are treated as ordinary income for federal income tax purposes. 41 Acorn Family of Funds .Notes to Financial Statements (unaudited) 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 agreements which were in effect for 1997 each fund paid WAM an annual management fee, payable monthly, at the rates set forth below. The fees for Acorn Fund and Acorn International were determined at the beginning of each calendar quarter and the fees for Acorn USA were determined and accrued daily:
Acorn Fund - -------------------------------------------------------------------------------- Net asset value: For the first $100 million .75% Next $1.4 billion .50% Net assets in excess of $1.5 billion .40% Acorn International - -------------------------------------------------------------------------------- Net asset value: For the first $100 million 1.25% Next $400 million 1.00% Net assets in excess of $500 million .80% Acorn USA - -------------------------------------------------------------------------------- Net asset value: For the first $200 million 1.00% Net assets in excess of $200 million .95%
Beginning in 1998, each Fund's management agreement was replaced with a new investment management agreement and a separate administrative service agreement. Under the new administrative services agreement, WAM provides administrative services to each Fund at an annual rate of .05% of average daily net assets. Under the new 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%
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. Acorn Fund paid trustees' fees and expenses of $84,000 in 1998 and $196,000 in 1997; Acorn International paid $53,000 in 1998 and $118,700 in 1997 and Acorn USA paid $2,800 in 1998 and $6,900 in 1997 to trustees not affiliated with WAM. 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. 42 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) 1998 1997 Shares sold 14,971 42,779 Shares issued in reinvestment of dividend and capital gain distributions 2,704 19,004 --------------------------- 17,675 61,783 Less shares redeemed 22,218 34,056 --------------------------- Net increase (decrease) in shares outstanding (4,543) 27,727 =============================================================================== 6 months Acorn International ended 6/30, - -------------------------------------------------------------------------------- (in thousands) 1998 1997 Shares sold 11,167 23,235 Shares issued in reinvestment of dividend and capital gain distributions 1,540 5,501 --------------------------- 12,707 28,736 Less shares redeemed 15,351 30,846 --------------------------- Net decrease in shares outstanding (2,644) (2,110) ================================================================================ 6 months Acorn USA ended 6/30, - -------------------------------------------------------------------------------- (in thousands) 1998 1997 Shares sold 6,461 9,880 Shares issued in reinvestment of dividend and capital gain distributions 90 212 --------------------------- 6,551 10,092 Less shares redeemed 2,226 2,436 --------------------------- Net increase in shares outstanding 4,325 7,656 ================================================================================
6. Investment Transactions
6 months Acorn Fund ended 6/30, - -------------------------------------------------------------------------------- (in thousands) 1998 1997 Investment securities (excluding Money Market instruments): Purchases $473,646 $ 928,010 Proceeds from sales 449,198 1,084,981 6 months Acorn International ended 6/30, - -------------------------------------------------------------------------------- (in thousands) 1998 1997 Investment securities (excluding Money Market instruments): Purchases $304,730 $ 656,789 Proceeds from sales 364,062 824,939 6 months Acorn USA ended 6/30, - -------------------------------------------------------------------------------- (in thousands) 1998 1997 Investment securities (excluding Money Market instruments): Purchases $117,277 $ 126,503 Proceeds from sales 50,161 36,965 ================================================================================
43 The Acorn - -------------------------- Family of Funds .Trustees Irving B. Harris Chairman James H. Lorie Vice Chairman Leo A. Guthart Jerome Kahn, Jr. David C. Kleinman Charles P. McQuaid Roger S. Meier Adolph Meyer, Jr. Ralph Wanger .Officers Ralph Wanger President Marcel P. Houtzager Vice President Kenneth A. Kalina Assistant Treasurer Merrillyn J. Kosier Senior Vice President and Secretary Bruce H. Lauer Vice President and Treasurer Charles P. McQuaid Senior Vice President Robert A. Mohn Vice President John H. Park Vice President Leah J. Zell Vice President .Investment Advisor Wanger Asset Management, L.P. 227 West Monroe Street, Suite 3000 Chicago, Illinois 60606 1-800-9-ACORN-9 (1-800-922-6769) e-mail: acorn@wanger.com web site: www.wanger.com www.acornfunds.com .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 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. 44 Wanger Asset Management, L.P. ("WAM") is one of the leading global small-cap equity managers in the U.S., with over 28 years of small-cap investment experience. WAM manages over $7 billion in equities and is also the investment advisor for Wanger Advisors Trust, and separately managed accounts for institutions and high net worth individuals. [ART WORK APPEARS HERE] The Acorn - ---------------------------------- Family of Funds WAM Brokerage Services, L.L.C. P.O. Box 8502 Boston, MA 02266-8502 -----END PRIVACY-ENHANCED MESSAGE-----