-----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, EIVqKggJYr78QUqI5Nq0PR+vVJCgtuT5d26eA7JlScSybEqmYOPNvNWAKBORJ4fH bDAMy1qqJiRXb5LmiuWc0w== 0000950131-99-003570.txt : 19990604 0000950131-99-003570.hdr.sgml : 19990604 ACCESSION NUMBER: 0000950131-99-003570 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990603 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACORN INVESTMENT TRUST CENTRAL INDEX KEY: 0000002110 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 362692100 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30B-2 SEC ACT: SEC FILE NUMBER: 811-01829 FILM NUMBER: 99639704 BUSINESS ADDRESS: STREET 1: 227 W MONROE STE 3000 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3126349200 MAIL ADDRESS: STREET 1: 227 W MONROE ST STE 3000 STREET 2: ATTN: BRUCE LAUER CITY: CHICAGO STATE: IL ZIP: 60606 FORMER COMPANY: FORMER CONFORMED NAME: ACORN FUND INC DATE OF NAME CHANGE: 19920703 N-30B-2 1 FIRST QUARTER REPORT 1999 ACORN INVESTMENT TRUST Acorn Family of Funds First Quarter Report March 31, 1999 Managed by Wanger Asset Management, L.P. [PHOTO OF ACORNS APPEARS HERE]
Acorn Family of Funds First Quarter Report 1999 Table of Contents Squirrel Chatter: An Unusual Occurrence 2 Acorn Twenty In a Nutshell 4 Performance at a Glance 5 Major Portfolio Changes 14 Statement of Investments 15 Acorn Foreign Forty In a Nutshell 6 Performance at a Glance 7 Major Portfolio Changes 16 Statement of Investments 17 Portfolio Diversification 18 Acorn USA In a Nutshell 8 Performance at a Glance 9 Major Portfolio Changes 19 Statement of Investments 20 Acorn International In a Nutshell 10 Performance at a Glance 11 Major Portfolio Changes 22 Statement of Investments 24 Portfolio Diversification 28 Acorn Fund In a Nutshell 12 Performance at a Glance 13 Major Portfolio Changes 29 Statement of Investments 31 Foreign Portfolio Diversification 38 Shareholder News 39 Trustees, Officers and Contact Information 40
1 - --Squirrel Chatter: An Unusual Occurrence [PHOTO APPEARS HERE] I was working at my computer a few days ago trying to get some historical price data from the Internet. Accidentally, I hit two keys simultaneously; the monitor flickered, went black and then produced several screens of text--and not the information I had been searching for. I hit the print button to get a hard copy and called our Information Technology department to see if we had a systems problem. "Funny you should ask," said Sandra. "We were running some Y2K tests on our accounting programs with the system clock set ahead by four years when everything froze up. Wait a minute, you weren't on the network--were you?" "Well . . ." "We sent out an e-mail to everyone two hours ago to let you know we were shutting down for this test!" "Sorry about that," I replied sheepishly. "I didn't read the e-mail. I'm 112 e-mails behind at last count. But I think you should see what appeared on my screen. I printed out a copy." "Bring it down," she said. I went to get the item from the printer. It sure looked like a normal Barron's story, but the dateline was the same as it had been on the screen--January 2003. I ran down to Sandra's office with the article in my hand. "Wow!" she exclaimed. "How could that happen?" "Never mind about that," I said, "how can I get more?" "I don't think you can," she said, sadly. "I had to completely reboot the network after you screwed it up." So, while I could not get back to the future, I did still have this fragment, this glimpse into tomorrow. I can't vouch for its authenticity, but here it is: Another Bang-Up Showing by Secondary Stocks January 2003 ...for the third year in a row, small-cap stocks outstripped their large-cap counterparts. To put it another way, ever since the big bull move began in late 1999, the small-capitalization equities have been in the vanguard. Despite this persistent front-running performance, investors during this span have blown hot and cold on the small caps. Periodically, small caps are "discovered," their virtues become the stuff of interviews in the financial press and they're the subject of a rush of brokerage recommendations. The Street's attention span, of course, is less than legendary: interest wanes. Then, inexplicably, only a few weeks or months later, it revives and the process starts all over again. But small caps have managed to weather the swells and ebbs of investment fashion quite nicely. Indeed, in the year just ended, they lengthened their steady lead over the large-capitalization equities. Specifically, in the past three years-plus, small caps, as measured by the Russell 2000, have appreciated just over 100%, which works out to an average annual advance of 25.4%. That compares with a rise over the same stretch of 45.4%, or 12.9% average yearly, for the big caps, as measured by the S&P 500. And in 2002, small caps climbed by a solid 17.0%, more than twice the 7.1% rise of the S&P 500. A happy combination of things is likely responsible for this superior showing. Not the least of these is the awesome expansion in the number of mutual funds. That unbridled growth has encompassed the launching of numerous funds dedicated to investing in small caps. At the same time, as the bull market has roared on, carrying values to unprecedented heights, institutional investors have widened their focus and sought more diversity in their portfolios by exploring the small-cap universe. 2 Moreover, small caps had been laggards for some years until the latest bull move got under way in November 1999. As a result, many were selling at extremely tempting prices. In light of their strong gains the past three years, the question logically arises: Are they now at the point where they've been transformed into expensive from cheap? History, at least, says no. For the popularity of small caps tends to run in cycles, and by past standards, the current one has quite a ways to go. Well, this glimpse into the future is dynamite stuff! All of our hardworking squirrels at Acorn waved their bushy tails in ecstasy. One question remained, could we tell our shareholders without getting in trouble with the SEC? Mystery Explained I had been back on the Internet for an hour doing a search or two ("Tropical islands for sale" and "Owning your own NBA franchise") when Sandra reappeared. "I figured it out," she said. "The laws of physics still hold. You didn't get in touch with the future at all. Your PC actually picked up a Barron's story by Rhonda Brammer dated January 3, 1994. All the date information had been moved ahead four years." Obviously we were disappointed to hear that we would still have to work for a living after our Miracle of Prophecy had been debunked. But maybe the story is right! I decided to go ahead and print that four and a half year old article just to demonstrate that market cycles keep on cycling. The Barron's piece was one of many being writ ten at that time justifying the outperformance of small-cap stocks and predicting the continuation of small-cap dominance. Was the prediction correct? No. The article was dead wrong; the cycle was turning as the article was being written, and large cap stocks began to do better than small- cap in 1994 and have continued to do so up until the present. Today, you can find many articles in the press explaining why the S&P 500 will continue its successful run. But if history holds true, these articles may soon be no more accurate than the one we cited. In time, small cap stocks and foreign stocks will displace the S&P as king of the hill. Markets are--and always have been--rotational. The undervaluation of small cap stocks relative to the S&P 500 is so extreme that the turn could be sharp and soon. I think there is a good chance that Barron's will carry a story in its January, 2003 issue reporting "Another Bang-up Showing for Secondary Stocks." /s/ Ralph Wanger Ralph Wanger Chief Investment Officer, Wanger Asset Management, Lead Portfolio Manager, Acorn Fund Past performance does not guarantee future results. 3 Acorn Twenty --In a Nutshell [PHOTO APPEARS HERE] Acorn Twenty had an outstanding first quarter, gaining 7.2%. Our benchmark, the S&P 400 Midcap, was actually down -6.4%. We even beat the "unbeatable" S&P 500's 5.0% return. The mega-cap, growth companies phenomenon continued during the first quarter of 1999, outpacing mid- and small-cap stocks. Nevertheless, your Fund's concentrated strategy illustrated that excellent opportunities exist in these markets--as long as you know where to find them. The big winner during the quarter was RCN Corp., up 90.1%. Investors dialed into this telephone, video and data company as it secured additional financing from investment firm Hick, Muse, Tate & Furst. With this capital RCN is even better positioned to take market share from regional bell operating companies, throwing the baby bells out with the bath water. Other winners: Expeditors International, flying quickly to a 28.9% gain; Jones Apparel, which after being dressed down for announcing the acquisition of Nine West finished the quarter up 27.3% once Wall Street saw that the shoe fit; and Telephone & Data Systems ringing up a 25.1% return. Healthcare stocks have been in intensive care lately. Our biggest losers during the quarter were Lincare Holdings, down a breathtaking 30.6%, and McKesson HBOC distributing a 17.7% loss. We are pleased with Acorn Twenty's auspicious start and thank Acorn's research team for their contributions. Your Fund represents our analysts' best mid-cap ideas and the success of Acorn Twenty is ultimately a function of our collective investment skills. However, each quarter we'd like to recognize one team member for a particulary outstanding contribution to Acorn Twenty's success. This quarter's "Twenty Plenty" award goes to Chuck McQuaid, director of research and co-manager of Acorn Fund, who recommended Expeditors, Telephone & Data Systems, and Liberty Media (up 14.3%). In addition, our entire team is indebted to Acorn traders Deb Wolfe and Shelley Maish for their outstanding efforts during the Fund's inauguration. Again, we want to welcome all of our fellow shareholders and hope they are as happy with the Fund's strong start as we are. /s/ John H. Park /s/ Mark H. Yost John H. Park Mark H. Yost Co-Portfolio Manager Co-Portfolio Manager Acorn Twenty had an outstanding First Quarter, gaining 7.2%. Our benchmark, the S&P 400 Midcap, was actually down -6.4%. A New Bundle of Joy Rivals Baby Bells RCN, Inc. (RCNC) vaulted to our #1 position in Acorn Twenty during the first quarter. RCN is a new-age telecommunication company offering bundled voice (local and long distance), video and high speed Internet services to city dwellers from Boston to Washington, DC. RCN brings competitive choice to residential customers who desire better, cheaper and faster communications services than the incumbent RBOCs (regional bell operating companies) can provide. By offering up to four services per home in densely populated areas, RCN has a unique opportunity to generate substantial returns on a single fixed capital investment. At the same time, RCN offers residential customers savings of 10 to 30% off their existing telephone and cable rates. Recently, RCN announced plans to begin offering service in the San Francisco market by early 2000. Check if RCN services are available in your neighborhood by visiting: www.rcn.com. You'll be glad you did! 4 - --Performance at a Glance Acorn Twenty Information Ticker Symbol: ACTWX Minimum Initial Investment: $1,000 $1,000 for an IRA Minimum Subsequent Investment: $100 Exchange Fee: None Management Fee*: 0.90% 12b-1 Fee: None Administrative Fee: 0.05% Total Expense Ratio*: 1.35% *Fees and expenses are calculated for the period since the Fund's inception on November 23, 1998 through December 31, 1998. Wanger Asset Management has undertaken to reimburse the Fund for any ordinary operating expenses exceeding 1.35% of its average annual net assets.
Fund Net Assets as of 3/31/99: $46.1 million - ---------------------------------------------------------------- --Acorn Twenty Top 10 Holdings RCN Corporation 7.4% Metro Market: Voice, Video & Internet Services Americredit 7.3% Auto Lending Expeditors Int'l of Washington 6.4% International Freight Forwarder Telephone & Data Systems 6.2% Cellular & Telephone Franchises PRIMEDIA 6.1% Specialty Magazines & Other Publications Liberty Media Group, AT&T 5.4% CATV & Satellite Dish Programming McKesson HBOC 5.2% Hospital Computer Services (formerly HBO) H&R Block 5.1% Tax Preparation Lincare Holdings 4.9% Home Health Care Services MidAmerican Energy 4.7% Growth Utility (formerly CalEnergy)
The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings. Acorn Twenty Portfolio Diversification - -------------------------------------------------------------------------------- --as a % of net assets, as of 3/31/99 [PIE CHART APPEARS HERE] Other* 4.3% Energy/Minerals 8.6% Consumer Goods/Services 41.3% Information 9.8% Finance 11.0% Industrial Goods/Services 11.1 Health Care 13.9% * includes "Cash and other assets less liabilities" of 4.3%
Relative Performance - -------------------------------------------------------------------------------- 1st quarter Life of Fund 1999 Acorn Twenty 7.2% 14.8% S&P MidCap 400 -6.4% 4.0% S&P 500 5.0% 11.1%
*Life of Fund Performance is from Acorn Twenty's inception (11/23/98) through 3/31/99. Net Asset Value Per Share 3/31/99: $11.48 - -------------------------------------------------------------------------------- The Value of a $10,000 Investment in Acorn Twenty - -------------------------------------------------------------------------------- --November 23, 1998 through March 31, 1999 [PERFORMANCE GRAPH APPEARS HERE]
Acorn Twenty $ 11,480 S & P Midcap 400 $ 10,400 DATE ACORN 20 ($) S & P MIDCAP 400 - ---- ------------ ---------------- 11/23/98 10,000 10,000 12/31/98 10,710 11,109 1/31/99 11,000 10,676 2/28/99 10,710 10,117 03/31/99 11,480 10,400
Total Return Life of Fund 14.8% This graph compares the results of $10,000 invested in Acorn Twenty on November 23, 1998 (the date Fund shares were first offered to the public), with all dividends and capital gains reinvested to the S&P MidCap 400. The S&P MidCap 400 is a market value-weighted index of 400 stocks that are in the next tier down from the S&P 500. The S&P 500 is a broad market-weighted average of U.S. blue-chip companies. All indexes are unmanaged and returns include reinvested dividends. Past performance does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. 5 Acorn Foreign Forty --In a Nutshell [PHOTO APPEARS HERE] Acorn Foreign Forty gained 8.9% in the first quarter, an outstanding result in absolute terms. We also trounced the various benchmarks we use, as these were up a little over 1% each (see inset). We were helped by a rally in Japanese stocks and by good returns from our investment in the computer, publishing, and telecommunication sectors. The prize for biggest percentage gain goes to Softbank whose share price rose 86% in the quarter. Softbank benefitted from two factors: investors suddenly recognizing the strong performance of its internet-related businesses, and being Japan- based. Unlike many U.S. internet stocks, which look dangerously overpriced to us, Softbank has businesses which are profitable today with an "un-internet like" share price. Michael King, covering Japanese stocks, deserves the credit for uncovering this exciting stock. The prize for biggest dollar gain goes to NTL, which reported continued rapid growth in the number of subscribers to their UK cable television and telephone services and their plans to rollout internet access services in that country. Our director of research and co-manager of the Acorn Fund, Chuck McQuaid, did the legwork to uncover this stock. On the downside, we would have been better off in the quarter had we not owned any of our utilities or insurance companies. An increase in interest rates caused prices in these sectors to decline. This affected even the companies we own, in spite of the fact that we project strong earnings for our holdings. For example, our Spanish life insurer, Mapfre Vida, continues to experience double digit growth in sales and earnings driven by strong inflows into the life insurance and mutual fund products they offer. We liked these companies when we bought them, and at the new lower prices we now like them even more. We talked about the favorable outlook for international stocks in our 1998 annual report, and Leah Zell does so again in the Acorn International section of this report. Acorn Foreign Forty and Acorn International give you two very different ways to own exciting foreign stocks. Both funds invest with Acorn's proven methodology. Both funds benefit from Acorn's renowned research team and experienced fund management. Acorn International invests in smaller cap stocks outside the U.S. The fund is also broadly diversified across the globe-- including emerging markets. Acorn Foreign Forty, on the other hand, focuses on mid-to-larger company non-US stocks. In addition, Acorn Foreign Forty concentrates its investments on fewer positions and primarily in developed countries. It does not invest in emerging markets. As opportunities continue to unfold abroad, we believe Acorn International and Acorn Foreign Forty will continue to uncover great stocks in their respective arenas. We think that owning both funds offers the best coverage of this world of opportunties. Acorn Foreign Forty and Acorn International give you two very different ways to own exciting foreign stocks. /s/ Marcel P. Houtzager Marcel P. Houtzager Lead Portfolio Manager As discussed in the 1998 annual report, there is no widely recognized benchmark for international midcap stocks, so, as a compromise, we use three indexes to help you judge our performance. The EAFE and Lipper International Funds indexes are well known, but they track larger cap international stocks than the ones we invest in (EAFE's average market cap is $22 billion, dwarfing Acorn Foreign Forty's average market cap of $3.5 billion). The Lipper International Funds Average tracks all mutual funds investing in non-U.S. stocks except small-cap international stocks. The Salomon Smith Barney Cap Range $2-$10 Billion index does track mid cap international stocks, but with a catchy name like "Salomon Smith Barney Cap Range $2-$10 Billion" it may take some time before this index becomes well known. 6 - --Performance at a Glance Acorn Foreign Forty Information Ticker Symbol: ACFFX Minimum Initial Investment: $1,000 $1,000 for an IRA Minimum Subsequent Investment: $100 Exchange Fee: None Management Fee*: 0.95% 12b-1 Fee: None Administrative Fee: 0.05% Total Expense Ratio*: 1.45% *Fees and expenses are calculated for the period since the Fund's inception on November 23, 1998 through December 31, 1998. Wanger Asset Management has undertaken to reimburse the Fund for any ordinary operating expenses exceeding 1.45% of its average annual net assets.
Fund Net Assets as of 3/31/99: $22.8 million --Acorn Foreign Forty Top 10 Holdings NTL United Kingdom 5.4% Voice, Video & Data Services NuSkin Enterprises Japan 4.5% Personal Care / Herbal Products Newsquest United Kingdom 4.1% Regional Newspapers Canadian Natural Resources Canada 3.8% Oil & Gas Producer Bodycote United Kingdom 3.5% Materials Tech. & Metal Processing Airtours United Kingdom 3.2% Packaged Tour Vacations Helsinki Telephone Finland 3.2% Telecommunications Operator Kon. Pakhoed Netherlands 3.2% Logistics Serco Group United Kingdom 3.1% Facilities Management Softbank Japan 3.0% Internet Leader in Japan
The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings. Acorn Foreign Forty Portfolio Diversification --as a % of net assets, as of 3/31/99 [PIE CHART APPEARS HERE] Other* 15.7% Health Care 5.2% Information 39.4% Finance 7.7% Industrial Goods/Services 16.5% Consumer Goods/Services 15.5% * includes "Cash and other assets less liabilities" of 6.0%
Relative Performance - --------------------------------------------------------------- 1st quarter Life of Fund 1999 Acorn Foreign Forty 8.9% 19.8% EAFE 1.4% 5.6% SSB Cap Range $2-10B 1.1% 4.5% Lipper Int'l Funds Average 1.5% NA%
*Life of Fund performance for Acorn Foreign Forty is from inception (11/23/98) through 3/31/99. Net Asset Value Per Share 3/31/99: $11.98 The Value of a $10,000 Investment in Acorn Foreign 40 --November 23, 1998 through March 31, 1999 [PERFORMANCE GRAPH APPEARS HERE] Acorn Foreign Forty $11,980 EAFE $ 10,556 Date Acorn Foreign Forty ($) EAFE ($) ---- ------------------------ -------- 11/23/98 10,000 10,000 12/31/98 11,000 10,411 1/31/99 11,790 10,381 2/28/99 11,590 10,133 3/31/99 11,980 10,556
Total Return Life of Fund 19.8% This graph compares the results of $10,000 invested in Acorn Foreign Forty on November 23, 1998 (the date Fund shares were first offered to the public), with all dividends and capital gains reinvested, with EAFE. EAFE is Morgan Stanley's Europe, Australasia and Far East Index, an unmanaged widely recognized international benchmark that comprises 20 major markets in Europe, Australia, and the Far East. The SSB Cap Range $2-10B is Salomon Smith Barney's two to ten billion U.S. dollar security market capitalization subset of its Broad Market Index. It represents a mid-cap developed market index, excluding the U.S. The Lipper Int'l Funds Average measures the performance of all non-U.S. funds tracked by Lipper, excluding the International Small Cap Funds group. For the first quarter of 1999, this consisted of 618 funds. All indexes are unmanaged and returns include reinvested dividends. Past performance does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. 7 Acorn USA - --In a Nutshell [PHOTO APPEARS HERE] Your Fund ran the wrong way last quarter. Acorn USA slid-7.9%, a little worse than the small-cap Russell 2000 index (-5.4%), and well below the S&P 500's +5.0%. Over the past year, Acorn USA's performance still ranks in the top third (#211) of all 663 small-cap funds followed by Lipper Inc. We're number 136 of 493 small-cap funds for the two years ended March 31, 1999. The two hottest fashions on Wall Street last quarter were Size and Youth. Plus-sized stocks were all the rage on the stock market's catwalk. Over the past year, the S&P 500 whales rose +18.5%, while small-caps remained caught in their own private bear market (Russell 2000 down -16.3%). Within the small stock group itself, the infants and toddlers ran amok. Newly minted Internet companies fared best, especially those brewed-up just last semester in some college dorm room (dorms having replaced garages as the entrepreneurial start-up sites of choice). The main reason your Fund lagged last quarter was because it owned too many reasonably-priced stocks. That sounds strange, doesn't it? How can it be wrong to own reasonably-priced stocks? Does that mean owning unreasonably-priced stocks is good? Over the past three months, yes. The silliest priced stocks kept getting sillier last quarter. Investors (strike that, Speculators) paid up and up and up for Internet companies growing their business values (i.e. losses) at mind-boggling, unstable rates. Meanwhile, stocks of companies growing business value at a consistent, healthy pace suffered from neglect. Our most infirm industry last quarter was healthcare. Weak stocks included Lincare (hit with a Medicare subpoena) and Magellan (psychiatric managed care). Many of our other losers were in good businesses seemingly too ordinary for today's wild times. MidAmerican Energy is a utility, Host Marriott serves food in airports, and Acceptance Insurance writes crop insurance. Our best stocks were, not surprisingly, companies benefiting from the Internet. RCN is an Internet service provider building an advanced fiber optic telecommunications network in the Northeast. Intelliquest has built a direct marketing database full of Internet users' vital statistics. TV Guide offers an interactive TV guide that one day may be your TV's portal to the World Wide Web. Stocks have momentarily become what economists call a luxury good... the higher the price the greater the demand, because the price itself validates the underlying value of the product. Stocks have momentarily become what economists call a luxury good. Normally when the price of a product goes up, people buy less of it. Think meat or gasoline. But for luxury goods, the higher the price the greater the demand, because the price itself validates the underlying value of the product. Think very expensive restaurants, where the higher the price of the entrees, the better the food must be. At Acorn, we don't confuse a higher stock price with a better value. Unreal `Net companies and their unreal valuations are holding the market spellbound. Our portfolio of real companies with real franchise values trading at good prices is well cast to benefit when the spell breaks. /s/ Robert A. Mohn Robert A. Mohn Lead Portfolio Manager Service --With a Dial When your PC crashes (and you don't have Sandra to fix it) you can call a toll- free number to a "help desk." Lots of times, the help desk is run by an outside contractor rather than the PC company itself. (After all, if the PC company wanted to have friendly chats with its customers it wouldn't have designed the PC that way to begin with!) One of the outsourcing companies that runs these help desks is Sykes Enterprises. Sykes is one of our favorite Internet plays. As this "super highway" of complex technology takes over the world, its eager users increasingly need the road-side assistance Sykes provides. Their additional markets include handling customer care for cellular phone companies, Internet service providers and Web sites. Sykes is a great stock that gives us the growth promise of the Internet at the right price. 8 - --Performance at a Glance Acorn USA Information Ticker Symbol: AUSAX Minimum Initial Investment: $1,000 $1,000 for an IRA Minimum Subsequent Investment: $100 Exchange Fee: None Management Fee*: 0.94% 12b-1 Fee: None Administrative Fee: 0.05% Total Expense Ratio*: 1.20% *Fees and expenses are for the fiscal year ended December 31, 1998. Fund Net Assets as of 3/31/99: $252.0 million - ------------------------------------------------------ --Acorn USA Top 10 Holdings MidAmerican Energy 7.6% Growth Utility (formerly CalEnergy) Micros Systems 6.8% Information Systems for Restaurants & Hotels RCN 5.8% Metro Market: Voice, Video & Internet Services Sykes Enterprises 4.5% Call Center Services Lincare Holdings 4.3% Home Health Care Services National Data 4.0% Credit Card & Health Claims Processor TV Guide 3.8% TV Program Guides & Programming Hub Group 3.3% Truck & Rail Freight Forwarder UICI 3.2% Health Insurance Wackenhut 2.7% Prison Management The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings. Acorn USA Portfolio Diversification - ----------------------------------------- --as a % of net assets, as of 3/31/99 [PIE CHART APPEARS HERE] Other* 10.3% Health Care 7.7% Information 40.1% Industrial Goods/Services 12.3% Finance 14.7% Energy/Minerals 14.9% * includes: "Cash and other assets less liabilities" of 6.8%
Relative Performance - ------------------------------------------------------------------- 1st quarter Last 12 mos. 1999 Acorn USA -7.9% -13.7% Russell 2000 -5.4% -16.3% Lipper Small-Cap Funds Avg. -6.0% -15.5% S&P MidCap 400 -6.4% 0.5% S&P 500 5.0% 18.5%
Net Asset Value Per Share 3/31/99: $13.63 - ----------------------------------------- The Value of a $10,000 Investment in Acorn USA - ----------------------------------------------------- --September 4, 1996 through March 31, 1999 [PERFORMANCE GRAPH APPEARS HERE] Acorn USA $ 15,016 Russell 2000 $ 12,292
Date Acorn USA ($) Russell 2000 ($) - ---- ------------- ---------------- 09/04/96 10,000 10,000 09/30/96 10,720 10,360 12/31/96 11,650 10,899 03/31/97 11,480 10,335 06/30/97 13,320 12,011 09/30/97 15,340 13,798 12/31/97 15,413 13,335 03/31/98 17,401 14,678 06/30/98 17,525 13,993 09/30/98 14,151 11,174 12/31/98 16,305 12,997 03/31/99 15,016 12,292
Average Annual Total Return 1 Year Life of Fund -13.7% 17.1% This graph compares the results of $10,000 invested in Acorn USA on September 4, 1996, (the date Fund shares were first offered to the public), with all dividends and capital gains reinvested, to the Russell 2000 Index with dividends reinvested. The Russell 2000 is formed by taking the 3,000 largest U.S. companies and then eliminating the largest 1,000, leaving a market capitalization-weighted index of 2,000 small companies. The Lipper Small-Cap Funds Avg. is an average of all U.S. small-cap funds tracked by Lipper, which consisted of 747 and 663 funds for the 1st qtr. 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. 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. 9 Acorn International --In a Nutshell [PHOTO APPEARS HERE] We pronounce last year's financial crisis dead. What evidence can we present? . Brazil devalued its currency in January and none of the dire predictions of doom materialized--the Hong Kong peg held; and the dollar strengthened instead of weakened. . Emerging markets equities soared (see the IFCI Composite Index opposite). . Sony announced on March 9th that it would cut its labor force by 12,000 and close 15 out of 60 production plants in order to raise returns on capital. Foreign critics have long felt that Japanese companies have to restructure to give a kick in the pants to Japan's ailing economy. When a bellwether company like Sony agrees to a western-style restructuring, it has an enormous, positive psychological impact. Foreign investors piled into the market, setting a monthly record for foreign cash inflows, and the strongest quarterly record since the summer of 1994. . Oskar-The Grouch-LaFontaine got canned. The Minister of Finance to the newly- elected German Chancellor Gerhard Schroeder abruptly resigned when it became clear that his socialist plans for Europe's largest economy were unpopular. Apparently, nobody wanted to turn back the clock. The next day, the German market rallied a robust 5.3% in celebration. The outlook for foreign investing is brighter. Japanese stocks have done a lot better recently. We now think we have seen the end of one of the longest bear markets in history. The other Asian economies are also on the mend. One example of this is Moodys' upgrade of Korean sovereign government bonds. Brazil has been in permanent financial crisis. Yet even they returned this month to international capital markets with a two billion dollar debt offering that was well received. The new European Central Bank has just cut interest rates .5% to 2.5% to stimulate demand. Even legendary investor Warren Buffet is reported to be looking for neat stocks outside the U.S. Acorn International rose 1.2% from January to March, in line with its EMI benchmark and the Lipper International Funds Index (see pg.7), but behind the Lipper International Small Cap Index. Our cautious stance towards Japan (where smaller companies led the upturn) held us back, as did consolidation in the European information technology service stocks. April went very well and our long-term investment style hasn't changed. Over the quarter, we initiated 23 new positions and added to 35 existing positions, particularly in the telecommunications, healthcare and media sectors. At the same time, we've reduced the overall number of names so the portfolio is brimming with high- quality smaller companies that have great potential. Our job is to add to the ones that flourish, dump those that disappoint, and hold on to the best of them for a very long time. /s/ Leah Joy Zell Leah Joy Zell Lead Portfolio Manager Latin Impressario Mexico led the performance tables this quarter (surprise!), up 30%. A favorite holding there is Corporacion Interamericana de Entretenimiento, or CIE. Imagine a Latin American version of Ticketmaster, Madison Square Garden and Disney combined. Whether it's the Rolling Stones concert in Mexico City or Beauty and the Beast in Buenos Aires, CIE makes it happen. Sales have been growing 75-100% a year, We don't think it will stay small for long. 10 - --Performance at a Glance Acorn International Information
Fund Net Assets as of 3/31/99: $1,652.3 million - -------------------------------------------------------------------------------- --Acorn International Top 10 Holdings WM Data Nordic Sweden 4.3% Computer Services/Consulting Tieto Corporation Finland 3.7% Computer Services/Consulting Serco Group United Kingdom 2.9% Facilities Management NTL United Kingdom 2.3% Voice, Video & Data Services Rhoen Klinikum Germany 2.2% Hospital Management Venture Manufacturing Singapore 2.0% Electronic Manufacturing Services Cie Fin Richemont Switzerland 2.0% Luxury Goods, Tobacco & Pay TV Atos France 2.0% Computer Services/Transaction Processing Li and Fung Hong Kong 1.9% Sourcing of Consumer Goods Autogrill Italy 1.7% Tollway Restaurants
The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings. Acorn International Portfolio Diversification - --------------------------------------------- --as a % of net assets, as of 3/31/99 [PIE CHART APPEARS HERE] Other* 13.9% Information 37.0% Health Care 5.5% Finance 8.9% Consumer Goods/Services 20.6% Industrial Goods/Services 14.1% * includes "Cash and other assets less liabilities" of 6.7%
Relative Performance - --------------------------------------------------------- 1st quarter Last 12 mos. 1999 Acorn International 1.2% EMI (World ex-U.S.) 1.4% -3.0% IFCI Composite 10.8% -19.3% Lipper Int'l Small-Cap Funds Index 3.7% -3.1%
Net Asset Value Per Share 3/31/99: $21.06 - ----------------------------------------- The Value of a $10,000 Investment in Acorn Int'l - ------------------------------------------------ --September 23, 1992 through March 31, 1999 [PERFORMANCE GRAPH APPEARS HERE] Acorn Int'l $ 23,574 EMI (World ex-U.S.) $ 15,864 Date Acorn Int'l ($) - ---- --------------- 1992 10,690 1993 15,940 1994 15,334 1995 16,703 1996 20,133 1997 20,170 1998 23,305 3/31/99 23,574 Average Annual Total Return 1year 5years Life of Fund - -1.2% 8.3% 14.1% This graph compares the results of $10,000 invested in Acorn International on September 23, 1992 (the date Fund shares were first offered to the public), with all dividends and capital gains reinvested, with the EMI (World ex-U.S.). In preceding years, the performance of Acorn International was compared to Morgan Stanley's Europe, Australasia Far East Index (EAFE), an international benchmark that comprises 20 major markets in Europe, Australia and the Far East. The EMI (world-ex U.S.) more closely approximates the composition of Acorn International's portfolio. For the 12 months ended 3/31/99, the EMI showed a total return of -3.0% and EAFE showed a return of 6.1%, compared to Acorn International's total return of -1.2%. EMI World ex-U.S. is Salomon Smith Barney's index of the bottom 20% of institutionally investable capital of countries, as selected by Salomon, excluding the U.S. The IFCI Composite is the International Finance Corporation's index of 31 emerging markets, which weights securities according to their market capitalization after adjusting for shares held by other constituents in the index. The Lipper Int'l Small-Cap Funds Index measures the performance of the 10 largest int'l small-cap funds tracked by Lipper, including Acorn International. All indexes are unmanaged and returns include reinvested dividends. Past performance does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. 11 Acorn Fund --In a Nutshell [PHOTO APPEARS HERE] First Quarter Results Acorn Fund fell 3.6% in the quarter. Down is not as good as up, but we did beat the small cap indexes and the Lipper Small Cap Funds Index, which dropped 4.7%. Blue chips again outperformed small caps; the S&P 500 jumped 5.0%. Media and communications stocks remained hot in the quarter. Foreign cable TV/Telephone/Internet providers United International Holdings and NTL sizzled, providing 125% and 44% gains respectively. Domestic counterparts RCN and Cablevision also surged, wiring home 90% and 45% returns. Softbank, a Japanese holding company with Internet investments, banked an 86% gain. TV Guide and CMP Media were also big winners. Many niche companies were also hot. Atwood Oceanics pumped forth a 75% profit as its depressed stock rebounded on an oil price recovery. Labor Ready worked up a 32% return as its earnings exceeded expectations. Expeditors International expedited a 29% gain as it grew through the economic slowdown in Asia. Technology was tough. Aspect Telecom, a maker of call center telephone equipment, reported a disappointing quarter and plunged 62%. RCM Technologies and Aztech Technology, computer services firms, dropped 59% and 54%, respectively. HA.Lo Industries fell 55% on lower than expected quarterly earnings; we purchased more as its price got real Lo. Borders Group fell 44% on disappointing same store sales growth, while International Game Technology rolled a 40% loss. The Trend is Near At close to 30, Acorn Fund is one of the oldest funds on the block. It has experienced a lot of market cycles. As Squirrel Chatter highlights this quarter, in some cycles, small cap stocks are the hot performers, and in others, they lag the hot performance of large caps. These shifting trends are inevitable and we do our best to exploit them. Over the past four years, small caps as a group have underperformed larger stocks. Therefore, we've sought out exceptional opportunities in the more solid mid-cap market. We actively exploited this trend and did it well. We think it's time for this trend to go in the other direction. Here's why: Valuations are the relationship of a stock's price to earnings. Currently, valuations of large cap stocks are significantly higher than small cap stocks. Consequently, investors are paying a lot of money for a little upside potential in large caps--and small caps are offering incredible opportunities. Consider the valuation trends of the Russell 1,000* (larger companies) and the Russell 2,000** (smaller companies). Twenty years ago, both larger and smaller companies had valuations of roughly 8x earnings. Over the next several years, the two moved in similar patterns until 1996--when the two were tied at 22x earnings. Now, the Russell 1,000 is at 28x earnings and the Russell 2,000 is at 18x earnings--the most significant split in recent history. More often than not, the Russell 2000 has sold at a premium to the Russell 1,000--not a discount. But like the end of a Meg Ryan and Tom Hanks movie, these two characters will inevitably end up together. Therefore, we went through a "smallification" program away from big companies with high valuations to small companies with good value. This past quarter, we shifted approximately $300 million from stocks that have grown into high p/e mid-cap or large-cap stocks, to smaller stocks that offer new opportunities. We may be early, but when a big move occurs, it may be fast. We want to be on board with our seat belts fastened before it takes off. So, for anyone who wondered, Acorn continues to be a small company fund. /s/ Ralph Wanger /s/ Charles P. McQuaid Ralph Wanger Charles P. McQuaid Lead Portfolio Manager Co-Portfolio Manager *Russell 1000(R) Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 89% of the total market capitalization of the Russell 3000 Index. As of the latest reconstitution, the average market capitalization was approximately $9.9 billion; the median market capitalization was approximately $3.7 billion. The smallest company in the index had an approximate market capitalization of $1,404.7 million. **Russell 2000(R) Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 11% of the total market capitalization of the Russell 3000 Index. As of the latest reconstitution, the average market capitalization was approximately $592.0 million; the median market capitalization was approximately $500.0 million. The largest company in the index had an approximate market capitalization of $1,402.7 million. Russell 3000(R) Index measures the performance of the 3,000 largest US companies based on total market capitalization, which represents approximately 98% of the investable US equity market. 12 - --Performance at a Glance Acorn Fund Information Ticker Symbol: ACRNX Minimum Initial Investment: $1,000 $1,000 for an IRA Minimum Subsequent Investment: $100 Exchange Fee: None Management Fee*: 0.69% 12b-1 Fee: None Administrative Fee: 0.05% Total Expense Ratio*: 0.84% *Fees and expenses are for the fiscal year ended December 31, 1998. Fund Net Assets as of 3/31/99: $3,154.5 million - -------------------------------------------------------------------------------- --Acorn Fund Top 10 Holdings Liberty Media Group, AT&T 4.6% CATV & Satellite Dish Programming Harley-Davidson 3.1% Motorcycles & Related Merchandise Carnival 2.6% Largest Cruise Line National Data 2.4% Credit Card & Health Claims Processor Lincare Holdings 2.4% Home Health Care Services Solectron 2.2% Electronic Manufacturing Services Expeditors International of Washington 1.9% International Freight Forwarder AES Corporation 1.7% Power Plants McKesson HBOC 1.7% Hospital Computer Services (formerly HBO & Co.) RCN 1.7% Metro Market: Voice, Video & Internet Services The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings. Acorn Fund Portfolio Diversification - -------------------------------------------------------------------------------- --as a % of net assets, as of 3/31/99 [PIE CHART APPEARS HERE] Other* 23.8% Industrial Goods/Services 8.7% Consumer Goods/Services 10.3% Foreign Securities 11.3% Information 32.0% Finance 13.9% * includes "Cash and other assets less liabilities" of 4.0% Relative Performance - --------------------------------------------------------------- 1st quarter Last 12 mos. 1999 Acorn Fund -3.6% -8.7% S&P 500 5.0% 18.5% Russell 2000 -5.4% -16.3% Lipper Small Cap Funds Index -4.7% -14.7% S&P MidCap 400 -6.4% 0.5%
Net Asset Value Per Share 3/31/99: $16.25 - ----------------------------------------- The Value of a $10,000 Investment in Acorn Fund - ------------------------------------------------ --June 10, 1970 through December 31, 1998 [PERFORMANCE GRAPH APPEARS HERE] Acorn Fund S & P 500 $778,925 --------- $ 502,576 Date Acorn Funds ($) S & P ($) - ------- --------------- --------- 1970 $ 13,587 $ 12,676 1974 10,691 10,816 1978 31,777 18,200 1982 68,208 33,054 1986 136,843 67,295 1990 183,674 105,386 1994 411,750 165,032 1998 807,685 478,724 3/31/99 778,925 502,576 Average Annual Total Return 1 year 5 years 10 years Life of Fund - -8.7% 13.1% 15.0% 16.3% 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, to the S&P 500 Index with dividends reinvested 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 market capitalization-weighted index of 2,000 small companies. The Lipper Small Cap Funds Index measures the performance of the 30 largest U.S. small-cap funds tracked by Lipper, including Acorn Fund. 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. All indexes are unmanaged and returns include reinvested dividends. Past performance does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. 13 Acorn Twenty --Major Portfolio Changes in the First Quarter
Number of Shares -------------------- 12/31/98 3/31/99 Additions - ----------------------------------------------------- Information Acxiom 50,000 78,000 Concord EFS 0 66,500 H & R Block 28,000 50,000 PRIMEDIA 70,000 200,000 Sterling Commerce 0 40,000 - ----------------------------------------------------- Health Care Lincare Holdings 40,000 80,000 McKesson HBOC (Acquirer of HBO & Co.) 41,000 36,000 - ----------------------------------------------------- Finance Americredit 135,000 255,000 - ----------------------------------------------------- Industrial Goods/Services Servicemaster 0 105,000 - ----------------------------------------------------- Energy/Minerals AES Corporation 28,000 49,000 MidAmerican Energy (formerly known as CalEnergy) 35,000 77,000 Number of Shares -------------------- 12/31/98 3/31/99 Sales - ----------------------------------------------------- Information AC Nielsen 25,000 0 Telephone & Data Systems 83,000 51,000 RCN 170,000 101,000 - ----------------------------------------------------- Consumer Goods/Services Jones Apparel 54,000 39,000 - ----------------------------------------------------- Finance Republic NY 28,000 0 Peoples Heritage Financial 51,000 0
14 Acorn Twenty --Statement of Investments March 31, 1999
Number of Shares Value (000) - ---------------------------------------------------------------------------------- Common Stocks: 95.7% - ---------------------------------------------------------------------------------- Information: 41.3% --Television Programming: 5.4% 47,000 Liberty Media Group, AT&T $2,473 CATV & Satellite Dish Programming --Telephone Services: 7.3% 101,000 RCN 3,390 Metro Market: Voice, Video & Internet Services --Mobile Communications: 6.2% 51,000 Telephone and Data Systems 2,875 Cellular & Telephone Franchises --Transaction Processors: 4.0% 66,500 Concord EFS 1,833 Credit Card Services --Business Software: 2.7% 40,000 Sterling Commerce 1,230 Electronic Commerce Software & Services --Business Information/ Marketing Services: 15.7% 200,000 PRIMEDIA 2,800 Specialty Magazines & Other Publications 50,000 H & R Block 2,369 Tax Preparation 78,000 Acxiom 2,067 Database Marketing Services - ---------------------------------------------------------------------------------- 7,236 -------- Information: Total 19,037 - ---------------------------------------------------------------------------------- Health Care: 13.9% --Services: 13.9% 36,000 McKesson HBOC (Acquirer of HBO & Co.) 2,376 Hospital Computer Services 80,000 Lincare Holdings 2,250 Home Health Care Services 110,000 First Health Group 1,767 PPO Network -------- Health Care: Total 6,393 - ---------------------------------------------------------------------------------- Consumer Goods/Services: 9.8% --Cruise Lines: 4.5% 53,000 Royal Caribbean Cruises 2,067 Cruises to Caribbean & Alaska --Leisure Vehicles: 3.0% 24,000 Harley-Davidson 1,380 Motorcycles & Related Merchandise Number of Shares Value (000) - ----------------------------------------------------------------------------------- --Manufacturers: 2.3% 39,000 Jones Apparel $ 1,089 Women's Apparel -------- Consumer Goods/Services: Total 4,536 - ----------------------------------------------------------------------------------- Finance: 11.0% --Finance Companies: 7.3% 255,000 Americredit 3,347 Auto Lending --Insurance: 3.7% 12,000 Progressive 1,722 Auto Insurance -------- Finance: Total 5,069 - ----------------------------------------------------------------------------------- Industrial Goods/Services: 11.1% --Logistics: 6.5% 55,000 Expeditors Int'l of Washington 2,970 International Freight Forwarder --Other Industrial Services: 4.6% 105,000 Servicemaster 2,133 Facilities Management --------- Industrial Goods/Services: Total 5,103 - ----------------------------------------------------------------------------------- Energy/Minerals: 8.6% --Independent Power: 8.6% 77,000 MidAmerican Energy (formerly known as CalEnergy) 2,156 Growth Utility 49,000 AES Corporation 1,825 Power Plants --------- Energy/Minerals: Total 3,981 --------- Total Common Stocks: 95.7% 44,119 --------- Short-Term Obligations: 5.7% 2,609 --------- Total Investments: 101.4% 46,728 --------- Cash and Other Assets less Liabilities: (1.4%) (632) --------- Total Net Assets: 100% $46,096 - -----------------------------------------------------------------------------------
15 Acorn Foreign Forty --Major Portfolio Changes in the First Quarter
Number of Shares ------------------------------ 12/31/98 3/31/99 Additions - -------------------------------------------------------------- Europe - --Germany MobilCom 0 2,000 - --Finland Helsinki Telephone 7,500 15,000 Tieto Corporation 0 14,000 - --United Kingdom Airtours 60,000 100,000 Bodycote 30,000 60,000 Newsquest 0 150,000 NTL 9,000 15,000 Scottish Power 0 50,000 - --Italy SEAT Pagine Gialle 0 200,000 - --Spain Indra Sistemas 0 40,000 - --Netherlands Getronics 0 10,000 Hunter Douglas 13,000 20,000 Kon. Pakhoed 20,000 30,000 - ------------------------------------------------------------- Asia - --Hong Kong SmarTone Telecom 0 149,900 - --Japan NuSkin Enterprises 4,500 45,000 Olympus Optical 0 30,000 Softbank 2,000 6,000 - ------------------------------------------------------------- Other Countries - --Canada Canadian Natural Resources 20,000 50,000 - --Israel Amdocs 5,000 20,000 Sales - ------------------------------------------------------------- Europe - --Sweden Autoliv 4,000 0 - --United Kingdom Hays 60,000 40,000 Logica 45,000 20,000 - --Italy Olivetti 160,000 0 - --Netherlands Unique International 23,000 0 - ------------------------------------------------------------- Asia - --Hong Kong Li and Fung 7,000 0 - --Japan NTT Data 100 0 Terumo 10,000 0 - --Singapore Natsteel Electronics 200,000 100,000 - ------------------------------------------------------------- Other Countries - --South Africa Comparex Holdings 16,000 0
16 Acorn Foreign Forty --Statement of Investments March 31, 1999
Number of Shares Value (000) - ---------------------------------------------------------------------------------- Common Stocks: 94.0% - ---------------------------------------------------------------------------------- Europe: 68.8% --Germany: 3.8% 2,000 MobilCom $ 525 Telecommunication Services 3,000 Rhoen Klinikum 330 Hospital Management - ---------------------------------------------------------------------------------- 855 --Denmark: 2.0% 7,000 ISS International System 455 Cleaning Services --Finland: 5.8% 15,000 Helsinki Telephone 734 Telecommunications Operator 14,000 Tieto Corporation 577 Computer Services/Consulting - ---------------------------------------------------------------------------------- 1,311 --France: 4.0% 5,000 Atos 459 Computer Services/Transaction Processing 2,000 SITA 451 Waste Hauling & Landfills - ---------------------------------------------------------------------------------- 910 --United Kingdom: 29.0% 15,000 NTL 1,221 Voice, Video & Data Services 150,000 Newsquest 938 Regional Newspapers 60,000 Bodycote 787 Materials Technology & Metal Processing 100,000 Airtours 735 Packaged Tour Vacations 30,000 Serco Group 712 Facilities Management 200,000 Smith & Nephew 487 Medical Equipment 50,000 Scottish Power 436 Electric Utility 40,000 Hays 412 Outsourcing Services 35,000 Sema Group 395 Computer Software & Services 10,000 Energis 284 Telecommunications Services 20,000 Logica 206 Computer Software & Services - ---------------------------------------------------------------------------------- 6,613 --Switzerland: 4.9% 400 Cie Fin Richemont 665 Luxury Goods, Tobacco & Pay TV 300 Pargesa Holdings 443 Industrial & Media Conglomerate - ---------------------------------------------------------------------------------- 1,108 Number of Shares Value (000) - ---------------------------------------------------------------------------------- --Italy: 4.4% 42,000 Editoriale L'Espresso $ 472 Newspapers & Magazines 30,000 Autogrill Finanziari 296 Tollway Restaurants 200,000 SEAT Pagine Gialle 234 Yellow Pages - ---------------------------------------------------------------------------------- 1,002 --Spain: 5.5% 7,500 Aguas de Barcelona 451 Utility 40,000 Indra Sistemas 413 Business Information Services 12,000 Mapfre Vida 395 Life Insurance & Mutual Funds - ---------------------------------------------------------------------------------- 1,259 --Netherlands: 9.4% 30,000 Kon. Pakhoed 727 Logistics 20,000 Hunter Douglas 583 Decorative Window Coverings 6,400 ASR Verzekeringsgroep 473 Insurance 10,000 Getronics 369 Computer Services - ---------------------------------------------------------------------------------- 2,152 --------- Europe: Total 15,665 - ---------------------------------------------------------------------------------- Asia: 14.6% --Hong Kong: 1.9% 149,900 SmarTone Telecom 434 Mobile Telecommunications --Japan: 11.5% 45,000 NuSkin Enterprises 1,029 Personal Care/Herbal Products 6,000 Softbank 673 Internet Leader in Japan 30,000 Olympus Optical 395 Medical Equipment 4,000 Takefuji 307 Unsecured Consumer Loans 2,500 Nintendo 216 Video Games - ---------------------------------------------------------------------------------- 2,620 --Singapore: 1.2% 100,000 Natsteel Electronics 273 Electronic Manufacturing Services Asia: Total 3,327 ---------
17 Acorn Foreign Forty --Statement of Investments, continued
Number of Shares Value (000) - ---------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------- Other Countries: 10.6% --Canada: 7.2% 50,000 Canadian Natural Resources $ 859 Oil & Gas Producer 20,000 Celestica 654 Electronic Manufacturing Services 7,000 Power Financial 134 Financial Services Holding Company 1,647 - ---------------------------------------------------------------------------------- --Israel: 1.9% 20,000 Amdocs 433 Telecommunications Billing & Customer Care Software --United States: 1.5% 6,000 Global TeleSystems 336 Telecommunication Services --------- Other: Total 2,416 --------- Total Common Stocks: 94.0% $21,408 --------- Short-Term Obligations: 12.6% 2,873 --------- Total Investments: 106.6% 24,281 --------- Cash and Other Assets Less Liabilities: (6.6%) (1,512) --------- Total Net Assets: 100% $22,769 - ----------------------------------------------------------------------------------
--Portfolio Diversification At March 31, 1999, Acorn Foreign Forty's portfolio of investments as a percent of net assets was diversified as follows:
Value (000) Percent - ----------------------------------------------------------------- - --Information Telephone Services $ 2,547 11.2% Publishing 2,083 9.1 Computer Services 2,006 8.8 CATV 1,221 5.4 Business Software 433 1.9 Business Information 413 1.8 Contract Manufacturing 273 1.2 - ----------------------------------------------------------------- 8,976 39.4 - --Health Care Hospital/Laboratory Supplies 487 2.1 Medical Equipment 395 1.7 Hospital Management 330 1.4 - ----------------------------------------------------------------- 1,212 5.2 - --Consumer Goods/Services Nondurables 1,029 4.5 Travel 735 3.2 Entertainment 665 2.9 Durable Goods 583 2.6 Restaurants 296 1.3 Consumer Software 216 1.0 - ----------------------------------------------------------------- 3,524 15.5 - --Finance Insurance 1,002 4.5 Closed End Funds 443 1.9 Savings & Loans 307 1.3 - ----------------------------------------------------------------- 1,752 7.7 Value (000) Percent - ----------------------------------------------------------------- - --Industrial Goods/Services Outsourcing Services $ 1,579 6.9% Industrial Materials 787 3.5 Industrial Services 727 3.2 Electrical Components 654 2.9 - ----------------------------------------------------------------- 3,747 16.5 - --Energy/Minerals Oil/Gas Producers 859 3.8 - ----------------------------------------------------------------- 859 3.8 - --Other Industries Regulated Utilities 887 3.9 Waste Management 451 2.0 - ----------------------------------------------------------------- 1,338 5.9 ------------------------------ Total Common Stocks: 21,408 94.0 ------------------------------ Short-Term Obligations: 2,873 12.6 ------------------------------ Total Investments: 24,281 106.6 Cash and Other Assets less ------------------------------ Liabilities: (1,512) (6.6) ------------------------------ Net Assets: $22,769 100.0% - -----------------------------------------------------------------
18 Acorn USA --Major Portfolio Changes in the First Quarter
Number of Shares -------------------------------- 12/31/98 3/31/99 Additions - ----------------------------------------------------------------------------- Information CACI International 0 206,000 IntelliQuest Information 408,100 483,100 National Data 214,300 239,300 Pinnacle Holdings 0 50,000 Playboy Enterprises 0 31,800 Sykes Enterprises 258,500 353,500 - ----------------------------------------------------------------------------- Health Care Lincare Holdings 352,200 382,200 - ----------------------------------------------------------------------------- Consumer Goods/Services Whole Foods Market 0 30,000 - ----------------------------------------------------------------------------- Finance Americredit 135,000 407,000 Phoenix Investment Partners 0 130,000 - ----------------------------------------------------------------------------- Industrial Goods/Services Labor Ready 0 95,000 - ----------------------------------------------------------------------------- Energy/Minerals MidAmerican Energy 674,400 684,400 (formerly known as CalEnergy) Number of Shares ------------------------------ 12/31/98 3/31/99 Sales - ---------------------------------------------------------------------------- Information Centennial Cellular 254,000 0 Info USA, Cl. A 107,000 0 Kronos 147,100 166,650 (includes effect of 3 for 2 stock split) Liberty Media Group, AT&T 106,000 71,000 (formerly known as Liberty Media Group, Tele-Communications) Mettler Toledo 56,000 0 TV Guide 288,000 258,000 (formerly known as United Video Satellite Group) - ---------------------------------------------------------------------------- Consumer Goods/Services First Years 2,500 0 Fresh Foods 84,700 0 - ---------------------------------------------------------------------------- Finance Washington Mutual 94,400 66,400 - ---------------------------------------------------------------------------- Industrial Goods/Services Farr Company 221,200 92,700 - ---------------------------------------------------------------------------- Energy/Minerals GeoScience 179,000 0 - ---------------------------------------------------------------------------- Other Industries Forest City Enterprises, Cl. A 85,400 28,400
19 Acorn USA --Statement of Investments March 31, 1999
Number of Shares Value (000) - ---------------------------------------------------------------------------------- Common Stocks: 93.2% - ---------------------------------------------------------------------------------- Information: 40.1% --Broadcasting: 2.0% 209,100 Data Transmission Network $ 4,992 Data Services for Farmers --Television Programming: 5.5% 258,000 TV Guide 9,514 (formerly known as United Video Satellite Group) TV Program Guides & Programming 71,000 Liberty Media Group, AT&T 3,736 CATV Programming 31,800 Playboy Enterprises 716 CATV Programming - ----------------------------------------------------------------------------------- 13,966 --Telephone Services: 6.6% 434,700 RCN 14,590 Metro Market: Voice, Video & Internet Services 55,500 Commonwealth Telephone 2,043 Rural Market: Local, Long Distance & Internet Access - ----------------------------------------------------------------------------------- 16,633 --Mobile Communications: 1.4% 121,800 COMARCO 2,740 Wireless Network Testing 50,000 Pinnacle Holdings 756 Towers for Cellular, PCs, & Paging - ----------------------------------------------------------------------------------- 3,496 --Telecommunications Equipment: 1.0% 377,100 Aspect Telecommunications 2,498 Call Center Equipment --Gaming Equipment: 0.8% 146,000 International Game Technology 2,126 Slot Machines & Progressive Jackpots --Computer Services: 4.9% 353,500 Sykes Enterprises 11,422 Call Center Services 534,700 Aztec Technology Partners 886 Technology Staffing Services - ----------------------------------------------------------------------------------- 12,308 --Consumer Software: 0.4% 75,500 Activision 934 Entertainment Software --Business Software: 1.5% 210,400 Systems & Computer Technology 2,104 Enterprise Software & Services 214,000 JDA Software 1,592 Applications Software & Services for Retailers 21,600 Information Management 46 Call Center Software - ----------------------------------------------------------------------------------- 3,742 --Transaction Processors: 4.0% 239,300 National Data 10,051 Credit Card & Health Claims Processor Number of Shares Value (000) - ----------------------------------------------------------------------------------- --Business Information/ Marketing Services: 3.6% 483,100 IntelliQuest Information $ 4,891 Technology Market Research 206,000 CACI International 3,489 Technology Services for Government 154,400 Info USA, Cl. B 695 Business Data for Sales Leads - ----------------------------------------------------------------------------------- 9,075 --Computer Hardware/ Related Systems: 8.4% 518,500 Micros Systems 17,111 Information Systems for Restaurants & Hotels 166,650 Kronos 4,083 Time Accounting Software & Clocks - ----------------------------------------------------------------------------------- 21,194 --------- Information: Total 101,015 - ----------------------------------------------------------------------------------- Health Care: 7.7% --Biotechnology/Drug Delivery: 0.3% 78,000 Synaptic Pharmaceuticals 536 Receptor Targeted Drug Design 27,000 CuraGen 179 Genomics - ----------------------------------------------------------------------------------- 715 --Services: 7.4% 382,200 Lincare Holdings 10,749 Home Health Care Services 352,000 First Health 5,654 PPO Network 540,000 Magellan Health Services 2,261 Mental Health Services - ----------------------------------------------------------------------------------- 18,664 --------- Health Care: Total 19,379 - ----------------------------------------------------------------------------------- Consumer Goods/Services: 2.9% --Retail: 2.9% 930,600 Host Marriott Services 6,282 Fast Food Kiosks in Airports 30,000 Whole Foods Market 1,031 --------- Natural Food Supermarkets Consumer Goods/Services: Total 7,313 - ----------------------------------------------------------------------------------- Finance: 14.7% --Savings & Loans: 1.4% 66,400 Washington Mutual 2,714 West Coast Savings & Loan 156,500 Coast Contingency Rights 929 Litigation Claim Against US Government - ----------------------------------------------------------------------------------- 3,643
20
Number of Shares Value (000) - ---------------------------------------------------------------------------------- --Finance Companies: 3.4% 407,000 Americredit $ 5,342 Auto Lending 590,000 World Acceptance 3,171 Personal Loans - ---------------------------------------------------------------------------------- 8,513 --Money Management: 0.8% 130,000 Phoenix Investment Partners 1,121 Mutual Fund & Pension Manager 52,800 Pioneer Group 782 Equity Mutual Funds - ---------------------------------------------------------------------------------- 1,903 --Insurance: 9.1% 354,700 UICI 7,981 Health Insurance 392,100 Acceptance Insurance 5,293 Crop Insurance 184,500 AmerUs Life Holdings 4,428 Annuities/Life Insurance 93,000 Leucadia National 2,813 Insurance Holding Company 13,800 Markel 2,487 Specialty Insurance - ---------------------------------------------------------------------------------- 23,002 ------ Finance: Total 37,061 - ---------------------------------------------------------------------------------- Industrial Goods/Services: 12.3% --Steel: 0.7% 119,000 Atchison Casting 959 Steel Foundries 77,300 Schnitzer Steel 918 Scrap Steel Processor - ---------------------------------------------------------------------------------- 1,877 --Industrial Distribution: 0.5% 70,000 Vallen 1,190 Safety Products Distribution --Machinery: 0.3% 92,700 Farr Company 788 Filters --Specialty Chemicals: 1.4% 225,600 Lilly Industries, Cl. A 3,483 Industrial Coatings --Other Industrial Services: 9.4% 346,000 Hub Group 8,217 Truck & Rail Freight Forwarder 402,500 Wackenhut, Cl. B 6,843 Prison Management 347,400 Insurance Auto Auctions 4,212 Auto Salvage Services Number of Shares Value (000) - ---------------------------------------------------------------------------------- 95,000 Labor Ready $ 2,476 Temporary Manual Labor 244,500 Compass International Services 1,834 Collection Agencies - ---------------------------------------------------------------------------------- 23,582 ---------- Industrial Goods/Services: Total 30,920 - ---------------------------------------------------------------------------------- Energy/Minerals: 14.9% --Independent Power: 7.6% 684,400 MidAmerican Energy 19,163 (formerly known as CalEnergy) Growth Utility --Oil/Gas Producers: 2.1% 473,800 Tesoro Petroleum 5,212 Oil Refinery/Gas Reserves --Distribution/Marketing/Refining: 4.8% 283,000 Atmos Energy 6,810 Natural Gas Utility 208,400 Dynegy 2,931 Natural Gas & Electric Processing & Marketing 92,300 Equitable Resources 2,406 Natural Gas Utility & Producer - ---------------------------------------------------------------------------------- 12,147 --Oil Services: 0.4% 35,000 J Ray McDermott 1,046 Offshore Construction --------- Energy/Minerals: Total 37,568 - ---------------------------------------------------------------------------------- Real Estate: 0.6% 37,300 Gaylord Entertainment 905 Opryland Hotel & Other Assets 28,400 Forest City Enterprises Cl. A 687 Shopping Centers ---------- Real Estate: Total 1,592 ---------- Total Common Stocks: 93.2% 234,848 ---------- Short-Term Obligations: 7.1% 17,988 ---------- Total Investments: 100.3% 252,836 ---------- Cash and Other Assets Less Liabilities: (0.3%) (808) ---------- Total Net Assets: 100% $252,028 - ----------------------------------------------------------------------------------
21 Acorn International --Major Portfolio Changes in the First Quarter
Number of Shares --------------------- 12/31/98 3/31/99 Additions - -------------------------------------------------------------------------------- Europe - --Germany EM.TV & Merchandising 0 7,000 Fresenius, Pfd. 0 40,000 Sixt 0 50,000 - --Denmark Carli Gry 100,000 150,000 ISS International System 45,000 75,000 - --Finland Helsinki Telephone 85,000 150,000 Talentum 1,200,000 1,300,000 - --Sweden Mandator 50,000 1,000,000 Sigma 0 250,000 WM Data Nordic 1,800,000 1,830,000 - --United Kingdom/Ireland Bodycote 450,000 650,000 Esat Telecom (Ireland) 0 75,000 Hogg Robinson 1,100,000 1,500,000 Icon (Ireland) 0 100,000 Newsquest 0 760,000 Photobition Group 0 665,000 Premier Oil 10,000,000 15,000,000 Saville Systems ADR (Ireland) 325,000 400,000 Smith & Nephew 500,000 2,500,000 - --Switzerland Sarasin & Cie Bank 4,500 6,500 Selecta Group 60,000 65,000 - --Italy SEAT Pagine Gialle 0 2,000,000 - --Spain/Portugal Aguas de Barcelona 79,500 100,000 Cortefiel 250,000 350,000 Filmes Lusomundo (Portugal) 118,200 417,000 Mapfre Vida 370,000 400,000 - --Netherlands Kempen 300,000 400,000 Kon. Pakhoed 150,000 250,000 - --Hungary Gedeon Richter 30,000 80,000 Matav 750,000 1,200,000 Number of Shares --------------------- 12/31/98 3/31/99 Additions - ------------------------------------------------------------------------------- Asia - --Hong Kong Li and Fung 14,327,000 14,999,000 SmarTone Telecom 0 2,500,000 TVB 1,500,000 2,000,000 Varitronix International 9,250,000 10,000,000 - --Japan Aiful 0 13,000 Bellsystem 24 10,000 20,000 Kadokawa Shoten 0 33,000 Meitec 0 65,000 Nichii Gakkan 0 90,000 (includes effect of 15% stock dividend) NuSkin Enterprises 132,000 310,000 OBIC 0 27,600 (includes effect of 20% stock dividend) Olympus Optical 0 500,000 Otsuka Kagu 0 21,000 Ryohin Keikaku 76,500 115,000 Takefuji 0 80,000 Trans Cosmos 0 31,000 - --Korea S1 Corporation 0 31,000 - ------------------------------------------------------------------------------- Latin America - --Brazil Embratel 0 250,000 - ------------------------------------------------------------------------------- Other Countries - --Australia AAPT 4,000,000 5,000,000 - --Canada Bracknell 800,000 1,110,000 Celestica 600,000 650,000 Canadian Natural Resources 400,000 500,000 Leitch Technology 0 300,000 Power Financial 400,000 500,000 - --Israel ECI Telecom 0 225,000 Galileo Technology 90,000 250,000 - --South Africa Dimension Data 2,000,000 2,500,000 - --United States Global TeleSystems 40,000 75,000
22
Number of Shares ----------------- 12/31/98 3/31/99 Sales - -------------------------------------------------------------- Europe - --Germany/Austria Cewe Color Holding 18,500 8,000 Merck KGA 200,000 150,000 United International Holdings (Austria) 473,000 250,000 - --Finland KCI Konecranes International 135,000 0 - --Sweden Atle 315,000 0 Getinge Industrier 760,000 0 Semcon 35,400 0 - --France Virbac 6,600 0 - --United Kingdom AEA Technology 650,000 385,000 City Centre Restaurants 4,400,000 0 Dialog Corporation 350,000 0 Edinburgh Fund Managers 766,000 0 Energis 50,000 0 Hays 350,000 0 Ocean Group 225,000 0 Ocean Group, Cl. B 250,000 0 Sema Group 401,908 0 Serco Group 2,045,000 2,000,000 Vosper Thornycroft Holdings 270,500 0 - --Italy/Greece Gewiss 600,000 110,000 Industrie Natuzzi ADR 400,000 300,000 Hellenic Bottling (Greece) 250,000 0 - --Spain Sol Melia 150,000 0 - --Portugal Jeronimo Martins 13,800 0 - --Netherlands DOCdata 175,000 0 - --Hungary Pick Szeged 100,000 0 Number of Shares ----------------- 12/31/98 3/31/99 Sales - ------------------------------------------------------------------ Asia - --India Housing Development Finance 80,000 0 - --Japan Fuji Software ABC 200,000 210,000 (includes effect of 30% stock dividend) Hokuto 108,000 0 NTT Data 1,000 0 Terumo 120,000 0 - ------------------------------------------------------------------ Latin America - --Brazil Cemig, Pfd. 160,000,000 0 Itau Banco 8,000,000 0 - --Panama Banco Latinoamericano de 150,000 0 Exportaciones - ------------------------------------------------------------------ Other Countries - --Australia Anaconda Nickel 2,500,000 0 Mayne Nickless 1,250,000 0 Tyndall Australia 6,500,000 0 - --Canada Shaw Industries 1,000,000 0 - --Israel Blue Square Israel 350,000 0 - --United States Carnival 350,000 0
23 Acorn International --Statement of Investments March 31, 1999
Number of Shares Value (000) - ----------------------------------------------------------------------------------- Common Stocks and Other Equity-Like Securities: 93.3% - ----------------------------------------------------------------------------------- Europe: 61.4% --Germany/Austria: 5.0% 200,000 Rhoen Klinikum Pfd. $19,433 160,000 Rhoen Klinikum 17,619 Hospital Management 250,000 United International Holdings (Austria) 10,875 Cable Television for Austria & Other Countries 40,000 Fresenius, Pfd. 7,881 Dialysis Equipment & Solutions 165,000 Flughafen Wien (Austria) 6,979 Vienna Airport Authority 7,000 EM.TV & Merchandising 6,008 Children's Television Programming 150,000 Merck KGA 5,182 Pharmaceuticals 50,000 Sixt 3,077 Automobile Rental/Leasing 200,000 Berzelius Umwelt 1,943 Industrial Waste Recycling 60,000 Boewe Systec 1,619 Envelope Stuffing Machines 8,000 Cewe Color Holding 1,503 Photographic Developing & Printing - ---------------------------------------------------------------------------------- 82,119 --Denmark: 0.8% 75,000 ISS International System 4,874 Cleaning Services 50,000 Vest Wood 3,123 Furniture Company 150,000 Carli Gry 2,615 Casual Clothing 44,000 Kompan International 2,364 Playground Equipment - ---------------------------------------------------------------------------------- 12,976 --Finland: 6.4% 1,500,000 Tieto Corporation 61,780 Computer Services/Consulting 1,300,000 Talentum 18,526 Trade Journals & Multimedia 500,000 Fiskars, Series A 7,827 Scissors & Gardening Tools 150,000 Helsinki Telephone 7,336 Telecommunications Operator 770,000 Elcoteq Network 6,251 Electronic Manufacturing Services 100,000 Spar Finland 3,995 Grocery/Convenience Stores - ---------------------------------------------------------------------------------- 105,715 --Norway: 0.1% 654,750 Atex Media Solutions 1,440 Print Media Software Number of Shares Value (000) - ----------------------------------------------------------------------------------- --Sweden: 6.2% 1,830,000 WM Data Nordic $71,437 Computer Services/Consulting 295,000 Autoliv 11,081 Seatbelts & Airbags 400,000 Esselte, Series A 6,421 Office Supplies & Related Equipment 475,000 Bure Investment 5,892 Health Care Services & Investments 1,000,000 Mandator 5,631 Computer Services/Consulting 250,000 Sigma 1,931 Technical Consulting - ---------------------------------------------------------------------------------- 102,393 --France: 4.5% 360,000 Atos 33,036 Computer Services/Transaction Processing 62,000 NRJ 12,450 Radio Network 45,000 SITA 10,154 Waste Hauling & Landfills 60,000 Fininfo 9,969 Data Feeds for French Banks & Brokers 95,000 Spir Communications 5,559 Regional Newspapers 15,000 Penauille Polyservice 4,065 Industrial Cleaning 6,200 Assystem 120 Nuclear Energy Consulting - ---------------------------------------------------------------------------------- 75,353 --United Kingdom/Ireland: 16.2% 2,000,000 Serco Group 47,460 Facilities Management 467,000 NTL 38,002 Voice, Video & Data Services 1,870,000 Capita Group 21,554 Outsourcing Services 13,000,000 Electronics Boutique 17,576 Videogame/Computer Software Stores 1,000,000 Seton Scholl Healthcare 12,914 Pharmaceuticals 510,000 Euro Money Publications 11,835 Financial Publications 1,700,000 Rotork 10,730 Valve Actuators for Oil & Water Pipelines 1,350,000 Atkins 8,881 Outsourcing Services 650,000 Bodycote 8,526 Materials Technology & Metal Processing 1,500,000 N. Brown Group 8,354 Mail Order Clothing in Large Sizes 2,000,000 Shanks & McEwan 8,184 Landfills & Waste Incinerators 3,500,000 Taylor Nelson 7,811 Market Research Services
24
Number of Shares Value (000) - -------------------------------------------------------------------------------- 2,500,000 Smith & Nephew $ 6,084 Medical Equipment & Supplies 2,000,000 Oriflame International 5,811 Cosmetics Sold Door-to-Door 500,000 Parity 5,638 Computer Software, IT Staffing & Services 3,425,000 HALMA 5,170 Fire, Burglary & Flooding Detection Devices 500,000 Logica 5,162 Computer Software & Services 1,500,000 Hogg Robinson 5,146 Corporate Travel Management 700,000 Airtours 5,142 Packaged Tour Vacations 400,000 Saville Systems ADR (Ireland) 4,900 Telecommunications Billing & Customer Care Software 760,000 Newsquest 4,754 Regional Newspapers 715,000 Fairey Group 3,780 Electronic Products 15,000,000 Premier Oil 3,390 Oil & Gas Producer 75,000 Esat Telecom (Ireland) 3,141 Telecommunication Services 665,000 Photobition Group 2,582 Production of Graphics for Exhibits 385,000 AEA Technology 2,135 Lithium Batteries/Nuclear Energy Consulting 250,000 ITNET 1,550 IT Outsourcing Services 100,000 Icon (Ireland) 1,450 Contract Research Organization for Drug Development - --------------------------------------------------------------------------------- 267,662 --Switzerland: 6.5% 20,000 Cie Fin Richemont 33,241 Luxury Goods, Tobacco & Pay TV 65,000 Selecta Group 20,640 Vending Machine Owner/Operator 33,000 Phoenix Mecano 15,652 Electrical Components Manufacturer 6,500 Sarasin & Cie Bank 10,935 Private Banking 15,000 Bon Appetit 7,854 Cash & Carry Stores/Speciality Restaurants 18,000 Societe Generale d'Affichage 7,297 Billboard Advertising 13,000 Hero 6,605 Packaged Foods 3,200 Pargesa Holdings 4,724 Industrial & Media Conglomerate - --------------------------------------------------------------------------------- 106,948 Number of Shares Value (000) - --------------------------------------------------------------------------------- --Italy/Greece: 8.0% 2,900,000 Autogrill $28,647 Tollway Restaurants 2,000,000 Editoriale L'Espresso 22,456 Newspapers & Magazines 700,000 Banco Pop Commercia e Industria 17,193 Regional Bank 3,000,000 Banca Fideuram 17,166 Life Insurance & Mutual Funds 1,400,000 Aeroporti di Roma 11,034 Airport Management 1,200,000 Attica Enterprises (Greece) 10,216 Ferry Line 1,400,000 Mediolanum 9,280 Life Insurance & Mutual Funds 250,000 Banca Popolare Di Bergamo 6,343 Regional Bank 300,000 Industrie Natuzzi ADR 4,950 Leather Couches 2,000,000 SEAT Pagine Gialle 2,343 Yellow Pages Publisher 110,000 Gewiss 2,179 Electrical Plugs & Switches - --------------------------------------------------------------------------------- 131,807 --Spain/Portugal: 2.4% 400,000 Mapfre Vida 13,150 Life Insurance & Mutual Funds 350,000 Cortefiel 8,124 Apparel Retailer 650,000 Prosegur 7,052 Security Guards 100,000 Aguas de Barcelona 6,013 250 Aguas de Barcelona New Shares 15 Utility 417,000 Filmes Lusomundo (Portugal) 5,290 Newspapers, Radio, Video, Film Distribution - --------------------------------------------------------------------------------- 39,644 --Netherlands: 4.8% 400,000 Kempen 22,153 Stock Brokerage/Investment Management 560,000 Getronics 20,676 Computer Services/Consulting 145,000 ASR Verzekeringsgroep 10,723 Insurance 300,000 Hunter Douglas 8,745 Decorative Window Coverings 950,000 Scala Business Solutions 6,102 95,775 Scala Business Solutions Warrants 3/31/01 5 Enterprise Software for Small-to-Medium Sized Companies 250,000 Kon. Pakhoed 6,059 Logistics 370,000 Wegener Arcade NV 5,612 Newspapers/Direct Marketing - --------------------------------------------------------------------------------- 80,075
25 Acorn International --Statement of Investments, continued
Number of Shares Value (000) - --------------------------------------------------------------------------------- --Hungary: 0.5% 1,200,000 Matav $ 6,395 Telecommunications Services 80,000 Gedeon Richter 2,595 Pharmaceuticals - --------------------------------------------------------------------------------- 8,990 --------- Europe: Total 1,015,122 - --------------------------------------------------------------------------------- Asia: 19.0% --Hong Kong: 3.7% 14,999,000 Li and Fung 31,741 Sourcing of Consumer Goods 10,000,000 Varitronix International 15,614 LCD Manufacturer 2,000,000 TVB 7,291 Television Broadcasting 2,500,000 SmarTone Telecom 7,242 Cellular Telephone Services - --------------------------------------------------------------------------------- 61,888 --India: 0.0% 2,000,000 Centurion Quantum Growth 462 Closed-End Fund --Japan: 8.1% 115,000 Ryohin Keikaku 18,256 Designer & Retailer of Muji Brand Specialty Consumer Goods 125,000 Nidec 15,410 Spindle Motor Manufacturer 210,000 Fuji Software ABC 13,742 Computer Services/Consulting 130,000 Nintendo 11,218 Video Games 255,000 Noritsu Koki 7,644 Photo Processing Equipment Manufacturer 100,000 Orix 7,507 Finance Leasing 310,000 NuSkin Enterprises 7,091 Direct Distributor of Cosmetics & Sundries 20,000 Bellysystem 24 6,839 Telemarketing 500,000 Olympus Optical 6,586 Photographic & Medical Equipment 90,000 Nichii Gakkan 6,574 Healthcare Services 80,000 Takefuji 6,147 Consumer Lending 27,600 OBIC 5,139 Systems Integration for Small to Medium Sized Companies 54,000 Secom 5,116 Central Station Alarm Business 33,000 Kadokawa Shoten 4,403 Magazine/Book Publisher Principal Amount or Number of Shares Value (000) - --------------------------------------------------------------------------------- 218,000 Shinki $ 3,663 Corporate & Consumer Lending 207,000 Arrk Corporation 2,325 Industrial Modeling 21,000 Otsuka Kagu 2,305 Furniture Retailer 65,000 Meitec 1,894 Engineering Outsourcing 31,000 Trans Cosmos 1,361 Information Technology Services & Investments 13,000 Aiful 886 Consumer Lending - --------------------------------------------------------------------------------- 134,106 --Taiwan: 0.2% 1,249,616 Chroma Ate 2,715 Electronics Manufacturing Test & Measurement Instruments --Malaysia: 0.1% 1,595,000 Malaysian Oxygen 2,384 Industrial Gases --Philippines: 0.8% $8,750,000 Int'l Container Terminal Services Cv. 1.75% 3/13/04 7,525 79,260,000 Int'l Container Terminal Services 5,318 Container Handling Terminals & Port Management - --------------------------------------------------------------------------------- 12,843 --South Korea: 0.4% 31,000 S1 Corporation 5,861 Central Station Alarm Business --Singapore: 5.7% 7,500,000 Venture Manufacturing 33,844 Electronic Manufacturing Services 10,000,000 Datacraft Asia 23,400 Network Systems Integration 6,500,000 Natsteel Electronics 17,749 Electronic Manufacturing Services 9,500,000 Star Cruises 17,385 Cruise Line 16,900,000 Genting International 1,690 Investment Holding - --------------------------------------------------------------------------------- 94,068 ------- Asia: Total 314,327 - --------------------------------------------------------------------------------- Latin America:4.7% --Mexico: 3.2% 7,000,000 Grupo Industrial Bimbo 15,578 Bread, Baked Goods & Snacks 3,500,000 Kimberly Clark de Mexico 13,172 Paper Products
26
Number of Shares Value (000) ------------------------------------------------------------------------------------- 3,600,000 Corp Interamericana de Entretenimiento $10,657 Special Events & Live Entertainment 2,300,000 Grupo Continental 6,519 Beverages 8,940,000 Nadro, Series L 6,513 Pharmaceutical Distributor ------------------------------------------------------------------------------------- 52,439 --Brazil: 0.6% 470,000 Elevadores Atlas 4,933 Elevator Installation & Maintenance 250,000 Embratel 4,172 Long Distance Telephone Services ------------------------------------------------------------------------------------- 9,105 --Argentina: 0.6% 400,000 IRSA GDS 10,550 Real Estate Management & Development --Peru: 0.3% 6,500,000 Enrique Ferreyros 4,623 Heavy Machinery Dealer ------- Latin America: Total 76,717 ------------------------------------------------------------------------------------- Other Countries: 8.2% --Australia: 0.9% 5,000,000 AAPT 14,840 Telecommunications Services --Canada: 3.9% 650,000 Celestica 21,269 Electronic Manufacturing Services 500,000 Power Financial 9,585 Financial Services Holding Company 500,000 Canadian Natural Resources 8,593 Oil & Gas Producer 300,000 Leitch Technology 5,553 Equipment for Television Production 1,110,000 Bracknell 4,806 Electrical Contractor & Facilities Management 600,000 LGS Group 4,700 Computer Systems Integration 350,000 Penn West Petroleum 4,500 Oil & Gas Producer Principal Amount or Number of Shares Value (000) ------------------------------------------------------------------------------------- 4,000,000 Dundee Realty $ 3,199 Real Estate 100,000 Northstar Energy 2,710 Oil & Gas Producer ------------------------------------------------------------------------------------- 64,915 --Israel: 1.2% 225,000 ECI Telecom 7,875 Digital Telecommunication Equipment 250,000 Galileo Technology 7,312 Communications Semiconductors 200,000 Amdocs 4,325 Telecommunications Billing & Customer Care Software ------------------------------------------------------------------------------------- 19,512 --South Africa: 1.2% 2,500,000 Dimension Data 11,075 Networks & Computer Services 1,050,000 Comparex Holdings 8,166 Computer Networking & Systems Integration ------------------------------------------------------------------------------------- 19,241 --Russia: 0.0% $1,500,000 Khanty Mansiysk 10% Notes 750 419 Khanty Mansiysk 94 Oil Production in Russia ------------------------------------------------------------------------------------- 844 --United States: 1.0% 325,000 AES Corporation 12,106 Power Plants 75,000 Global TeleSystems 4,195 Telephone Services ------------------------------------------------------------------------------------- 16,301 ---------- Other: Total 135,653 Total Common Stocks and Other ---------- Equity-Like Securities: 93.3% 1,541,819 ---------- Short-Term Obligations: 6.0% 98,449 ---------- Total Investments: 99.3% 1,640,268 ---------- Cash and Other Assets less Liabilities: 0.7% 12,076 ---------- Total Net Assets: 100% $1,652,344 -------------------------------------------------------------------------------------
27 Acorn International --Portfolio Diversification At March 31, 1999, Acorn International's portfolio of investments as a percent of net assets was diversified as follows:
Value (000) Percent - ------------------------------------------------------------ - --Information Computer Services $242,425 14.7% Publishing 80,778 4.9 Telephone Services 63,396 3.8 Contract Manufacturing 51,593 3.1 CATV 48,877 3.0 Business Software 22,410 1.4 Instrumentation 19,789 1.2 Computer Hardware 15,410 0.9 Broadcasting 12,844 0.8 Business Information 12,551 0.8 Radio 12,450 0.8 Marketing 7,811 0.5 Semiconductors 7,312 0.4 Advertising 7,297 0.4 Programming 6,008 0.3 - ------------------------------------------------------- 610,951 37.0 - --Health Care Hospital Management 37,052 2.2 Pharmaceuticals 20,691 1.3 Medical Equipment 14,467 0.9 Services 12,466 0.8 Hospital/Laboratory Supplies 6,084 0.3 - ------------------------------------------------------- 90,760 5.5 - --Consumer Goods/Services Entertainment 56,641 3.4 Consumer Services 53,741 3.3 Retail 49,106 3.0 Nondurables 33,901 2.1 Food 30,037 1.8 Travel 29,363 1.8 Restaurants 28,647 1.7 Durable Goods 19,826 1.2 Consumer Software 11,218 0.7 Consumer Goods Distribution 10,508 0.6 Furniture & Textiles 8,073 0.5 Beverages 6,519 0.4 Leisure Products 2,364 0.1 - ------------------------------------------------------- 339,944 20.6 Value (000) Percent - ---------------------------------------------------------- - --Finance Banks $ 34,471 2.1% Insurance 33,458 2.0 Money Management 26,446 1.6 Brokerage 22,153 1.3 Finance Companies 17,317 1.0 Closed End Funds 13,352 0.9 - ------------------------------------------------------- 147,197 8.9 - --Industrial Goods/Services Outsourcing Services 116,404 7.0 Electrical Components 60,965 3.7 Machinery Processing 24,616 1.5 Industrial Services 20,378 1.2 Industrial Materials 8,526 0.6 Speciality Chemicals 2,384 0.1 - ------------------------------------------------------- 233,273 14.1 - --Energy/Minerals Oil/Gas Producers 26,458 1.6 Independent Power 12,106 0.7 - ------------------------------------------------------- 38,564 2.3 - --Other Industries Transportation 41,072 2.5 Waste Management 20,281 1.2 Real Estate 13,749 0.8 Regulated Utilities 6,028 0.4 - ------------------------------------------------------- 81,130 4.9 Total Common Stocks and --------------------- Other Equity-Like Securities: 1,541,819 93.3 --------------------- Short-Term Obligations: 98,449 6.0 --------------------- Total Investments: 1,640,268 99.3 --------------------- Cash and Other Assets less Liabilities: 12,076 0.7 --------------------- Net Assets: $1,652,344 100.0% - -------------------------------------------------------
28 Acorn Fund --Major Portfolio Changes in the First Quarter
Number of Shares --------------------- 12/31/98 3/31/99 Additions - -------------------------------------------------------------------- Information Altera 0 24,000 American Power Conversion 200,000 225,000 Choicepoint 270,000 355,000 CMP Media 400,000 500,000 Computer Task Group 590,000 652,000 Comverse Technology 0 24,000 Hutchinson Technology 0 69,000 IMR Global 0 159,000 International Game Technology 2,262,000 2,342,000 JDA Software Group 400,000 650,000 Keane 0 123,000 Kronos 575,000 913,000 (includes effect of 3 for 2 stock split) Macrovision 150,000 200,000 National Data 1,808,000 1,840,000 Natsteel Electronics (Singapore) 1,500,000 2,000,000 NeoPlanet 0 250,000 Pinnacle Holdings 0 500,000 Playboy Enterprises 30,000 150,000 PRIMEDIA 705,000 1,000,000 RCM Technologies 500,000 564,000 Security Dynamics 0 200,000 Softbank Corporation (Japan) 86,200 165,000 Sterling Commerce 228,800 279,000 Structural Dynamics 0 33,000 Systems & Computer Technology 950,000 1,065,000 THQ 0 97,000 World Color Press 910,000 1,050,000 - --------------------------------------------------------------------- Health Care Acuson 0 414,000 Genome Therapeutics 0 578,000 Guilford Pharmaceuticals 0 290,000 Lincare Holdings 2,470,000 2,690,000 Myriad Genetics 0 432,000 Ocular Sciences 0 13,000 Olympus Optical (Japan) 0 300,000 Protein Design Labs 0 329,000 Wesley Jessen Vision 0 13,000 - -------------------------------------------------------------------- Consumer Goods/Services Anchor Gaming 86,000 270,000 Aristocrat Leisure (Australia) 0 500,000 Bally Total Fitness 236,000 400,000 Ducati Motor (Italy) 0 1,800,000 First Years 139,000 344,000 Gadzooks 0 63,000 Jones Apparel 500,000 630,000 Just For Feet 0 68,000 Nautica Enterprises 0 270,000 St. John Knits 340,000 420,000 Station Casinos 0 190,000 Steiner Leisure 0 45,000 Whole Foods Market 0 345,000 - -------------------------------------------------------------------- Finance Ace Cash Express 0 58,000 Affiliated Managers Group 80,000 180,000 Americredit 2,070,000 2,938,000 Chittenden 0 64,000 Creditrust Corp 165,000 465,000 DVI Health Services 448,000 533,000 Edinburgh Fund Managers 484,000 1,250,000 (United Kingdom) FPIC Insurance 0 151,000 HCC Insurance Holdings 0 320,000 Markel 0 75,000 Phoenix Investment Partners 2,112,000 2,524,000 - -------------------------------------------------------------------- Industrial Goods/Services Applied Industrial Technologies 140,000 350,000 Clarcor 585,000 987,000 Expeditors International of 1,000,000 1,100,000 Washington GP Strategies 438,000 512,000 HA.LO Industries 209,000 801,000 (includes effect of 3 for 2 stock split) Intermet Holdings 0 76,000 Labor Ready 1,070,000 1,310,000 Wackenhut, Cl. B 1,236,000 1,303,000 - -------------------------------------------------------------------- Energy/Minerals Atmos Energy 650,000 847,000 Canadian 88 Energy (Canada) 0 450,000 Devon Energy 650,000 900,000 Dynegy 800,000 890,000 Equitable Resources 900,000 1,000,000 J Ray McDermott 400,000 570,000 - -------------------------------------------------------------------- Other Industries Central Hudson Gas & Electric 0 130,000 Unisource Energy 0 500,000
29 Acorn Fund --Major Portfolio Changes in the First Quarter, continued
Number of Shares ----------------------- 12/31/98 3/31/99 Sales - ---------------------------------------------------------------------------- Information AC Nielsen 1,278,000 638,000 BISYS 231,000 195,000 BRC Holdings 608,000 0 Cablevision Systems 600,000 125,000 Centennial Cellular 450,000 0 Comparex Holdings 200,000 0 Filmes Lusomundo (Portugal) 297,200 0 Harte Hanks Communications 100,000 0 Jabil Circuit 370,000 675,000 (includes effect of 2 for 1 stock split) Liberty Media Group, AT&T 3,500,000 2,750,000 (formerly known as Liberty media Group, Tele-Communications) Micros Systems 886,000 750,000 National Instruments 266,000 135,000 Pioneer-Standard Electron 990,000 790,000 Richey Electronics 250,000 0 Sanmina 250,000 200,000 SkyTel Communications 700,000 400,000 SMART Modular Technology 52,000 0 Solectron 770,000 1,440,000 (includes effect of 2 for 1 stock split) Thermo Bio Analysis 200,000 0 Thermo Instrument Systems 705,000 367,000 True North Communications 200,000 0 TV Guide 1,000,000 750,000 (formerly known as United Video Satellite Group) United International Holdings 552,000 100,000 (Austria) - ---------------------------------------------------------------------------- Health Care Affymetrix 307,000 153,000 Getinge Industrier (Sweden) 495,000 0 Sybron International 544,000 0 Number of Shares -------------------------- 12/31/98 3/31/99 - ---------------------------------------------------------------------------- Consumer Goods/Services Autoliv (Sweden) 256,000 165,000 Barnes & Noble 10,000 0 Carnival 2,650,000 1,700,000 Fred Meyer Holdings 599,000 25,000 Grand Casinos 250,000 0 Harley-Davidson 2,200,000 1,700,000 Hellenic Bottling (Greece) 250,000 0 Industrie Natuzzi (Italy) 325,000 0 Nintendo (Japan) 180,000 87,000 Rio Hotel & Casino 155,000 0 Royal Caribbean Cruises 240,000 140,000 - ---------------------------------------------------------------------------- Finance AmerUs Life Holdings 200,000 0 Banco Latinoamericano de 135,000 0 Exportaciones (Panama) SEI Investments 604,000 551,000 Washington Mutual 664,000 475,000 - ---------------------------------------------------------------------------- Industrial Goods/Services Baldor Electric 882,000 0 Cambrex 610,000 523,000 Noritsu Koki (Japan) 76,000 0 Schnitzer Steel 140,000 0 Thermo Electron 650,000 325,000 - ---------------------------------------------------------------------------- Energy/Minerals Atwood Oceanics 525,000 377,000 Enron Oil & Gas 1,220,000 470,000 KN Energy 240,000 260,000 (includes effect of 3 for 2 stock split) Shaw Industries, Cl. A (Canada) 440,000 0 Weatherford International 300,000 0 - ---------------------------------------------------------------------------- Other Industries Cemig (Brazil) 112,000,000 0
30 Acorn Fund --Statement of Investments March 31, 1999
Number of Shares Value (000) - ------------------------------------------------------------------------ Common Stocks and Other Equity-Like Securities; 96.0% - ------------------------------------------------------------------------- Information: 32.0% Media --Broadcasting: 1.7% 500,000 Young Broadcasting $ 22,812 Television Stations 819,000 Data Transmission Network 19,554 Data Services for Farmers 85,000 Univision Communications 4,250 TV Network & Stations 575,000 Granite Broadcasting 3,809 Television Stations 150,000 Cumulus Media 1,763 Radio Stations - ------------------------------------------------------------------------- 52,188 --Cable Television: 0.7% 100,000 Cablevision Systems, Pfd. 11,150 125,000 Cablevision Systems 9,266 Cable TV - ------------------------------------------------------------------------- 20,416 --Television Programming: 5.8% 2,750,000 Liberty Media Group, AT&T 144,719 CATV & Satellite Dish Programming 750,000 TV Guide 27,656 (formerly known as United Video Satellite Group) TV Program Guides & Programming 200,000 Macrovision 7,400 Copyright Protection for Video Tapes & DVDs 150,000 Playboy Enterprises 3,375 Publishing, CATV - ------------------------------------------------------------------------- 183,150 Telecommunications --Telephone Services: 2.3% 1,584,000 RCN 53,163 Metro Market: Voice, Video & Data Services 454,000 Commonwealth Telephone 16,713 Rural Market: Local, Long Distance & Internet Access 140,000 Startec Global Communications 1,085 International Telecommunications - ------------------------------------------------------------------------- 70,961 --Mobile Communications: 1.7% 577,000 Telephone & Data Systems 32,528 Cellular & Telephone Franchises 500,000 Pinnacle Holdings 7,562 Towers for Cellular, PCS, Paging, Etc. 355,000 COMARCO 7,988 Wireless Network Testing 400,000 SkyTel Communications 6,650 Nationwide Paging - ---------------------------------------------------------------------------- 54,728 Principal Amount or Number of Shares Value (000) - ---------------------------------------------------------------------------- --Telecommunications Equipment: 0.3% 864,000 Aspect Telecommunications $ 5,724 Call Center Equipment 24,000 Comverse Technology 2,040 Voicemail & Other Enhanced Services Equipment - ------------------------------------------------------------------------- 7,764 Computer Related Hardware --Computer Hardware/ Related Systems: 1.7% 750,000 Micros Systems 24,750 Information System for Restaurants & Hotels 913,000 Kronos 22,369 Time Accounting Software & Clocks 225,000 American Power Conversion 6,075 Uninterruptable Power Systems 69,000 Hutchinson Technology 1,716 Hard Disk Drive Components - ------------------------------------------------------------------------------ 54,910 --Semiconductors/ Related Equipment: 0.4% 350,000 Oak Industries 11,112 Communications Components 24,000 Altera 1,428 Semiconductors/Programmable Logic Devices - ------------------------------------------------------------------------------ 12,540 --Gaming Equipment: 1.1% 2,342,000 International Game Technology 34,105 Slot Machines & Progressive Jackpots 380,000 Acres Gaming 1,045 Manufacturer of Casino Systems - ------------------------------------------------------------------------------ 35,150 --Contract Manufacturing: 3.5% 1,440,000 Solectron 69,930 Electronic Manufacturing Services 675,000 Jabil Circuit 27,338 Electronic Manufacturing Services 200,000 Sanmina 12,750 Backplanes & Electronic Manufacturing Services - ------------------------------------------------------------------------------ 110,018 --Instrumentation: 1.3% 675,000 Mettler Toledo 16,706 Laboratory Products 613,000 Thermoquest 7,433 $1,500,000 Thermoquest, 5% Note Due 8/15/00 1,432 Mass Spectrometry & Chromatography 367,000 Thermo Instrument Systems 5,299 Scientific & Industrial Instruments
31 Acorn Fund --Statement of Investments, continued
Principal Amount or Number of Shares Value (000) - ------------------------------------------------------------------------------- $5,000,000 Thermo Optek, 5% Note Due 10/15/00 $ 4,850 265,000 Thermo Optek 2,650 Elemental & Molecular Spectroscopy 232,000 Metrika Systems 1,798 Gamma Ray Instrumentation 266,122 Onix Systems 1,430 Field Measurement & Sensor Equipment - ------------------------------------------------------------------------------- 41,598 --Business Software: 1.0% 1,065,000 Systems & Computer Technology 10,650 Enterprise Software & Services 650,000 JDA Software Group 4,834 Applications Software & Services for Retailers 135,000 National Instruments 3,848 Virtual Instruments 200,000 Security Dynamics 3,725 Authentication & Encryption Software 33,000 Structural Dynamics 629 Design Software 66,000 Information Management 140 Call Center Software - ------------------------------------------------------------------------------- 23,826 --Consumer Software: 0.9% 350,000 Electronic Arts 16,625 Entertainment Software $6,500,000 Activision, 6.75% Note Due 1/1/05 5,980 410,000 Activision 5,074 Entertainment Software 97,000 THQ 1,976 Entertainment Software - ------------------------------------------------------------------------------- 29,655 --Computer Services: 2.2% 750,000 Sykes Enterprises 24,234 Call Center Services 652,000 Computer Task Group 13,937 Application Development & Maintenance Services 195,000 BISYS 10,969 Processing for Banks 564,000 RCM Technologies 6,204 Technology Staffing Services 535,000 Analysts International 6,153 Technology Staffing Services 159,000 IMR Global 2,822 Application Development & Maintenance Services 123,000 Keane 2,621 Application Development & Maintenance Services 1,037,000 Aztec Technology Partners 1,718 Application Development & Maintenance Services 360,000 Dunn Computer 765 Custom Computer Systems for Government - ------------------------------------------------------------------------------- 69,423 Number of Shares Value (000) - ------------------------------------------------------------------------------- Software/Services --Business Information/ Marketing Services/Publishing: 4.2% 1,050,000 World Color Press $ 22,312 Web-Offset Printing 355,000 Choicepoint 17,706 Fraud Protection Information 638,000 ACNielsen 17,306 Market Research, Information & Analysis 1,000,000 PRIMEDIA 14,000 Specialty Magazines & Other Publications 350,000 Acxiom 9,275 Database Marketing Services 1,400,000 InfoUSA, Cl. A 5,950 1,000,000 InfoUSA, Cl. B 4,500 Business Data for Sales Leads - ------------------------------------------------------------------------------- 91,049 --Internet: 0.2% 860,000 Getty Images 18,060 Photographs for Publications & Electronic Media 500,000 CMP Media 15,375 Technology Trade Press 279,000 Sterling Commerce 8,579 Electronic Commerce Software & Services 450,000 Information Holdings 8,044 Scientific & Medical Books/Journals 2,683 Bigfoot International 4,025 Internet Direct Marketing 250,000 NeoPlanet, Series A 2,000 Web Browser Application 342,855 GIGA 1,329 29,714 GIGA Warrants 3 Data on Information Technology - ------------------------------------------------------------------------------- 57,415 --Electronics Distribution: 0.3% 790,000 Pioneer-Standard Electronics 5,184 Component & Computer Distribution 400,000 Kent Electronics 3,975 Component Distribution & Contract Assembly - ------------------------------------------------------------------------------- 9,159 --Transaction Processors: 2.7% 1,840,000 National Data 77,280 Credit Card & Health Claims Processor 300,000 Concord EFS 8,269 Credit Card Processor - ------------------------------------------------------------------------------- 85,549 ------------ Information: Total 1,009,499
32
Number of Shares Value (000) - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Health Care: 7.6% --Biotechnology/Drug Delivery: 1.3% 450,000 Inhale Therapeutic Systems $ 12,206 Pulmonary Drug Delivery 768,000 Synaptic Pharmaceuticals 5,280 Receptor Targeted Drug Design 329,000 Protein Design Labs 4,956 Computer Designed Monoclonal Antibodies 432,000 Myriad Genetics 3,888 Gene Discovery & Diagnostic Products 915,000 Microcide Pharmaceuticals 3,774 Antibiotics 1,508,000 Corvas International 3,770 Rational Drug Design 290,000 Guilford Pharmaceuticals 3,299 Drug Delivery & Neurology Drugs 578,000 Genome Therapeutics 1,806 Gene Discovery Services 230,000 CuraGen 1,524 Genomics 156,000 NPS Pharmaceuticals 1,170 Small Molecule Drugs - ------------------------------------------------------------------------------ 41,673 --Medical Equipment: 0.7% 729,000 Respironics 9,614 Sleep Apnea Products 414,000 Acuson 6,184 Ultra Sound Devices 153,000 Affymetrix 5,326 Diagnostic Development 13,000 Ocular Sciences 373 Contact Lenses 13,000 Wesley Jessen Vision 358 Contact Lenses - ------------------------------------------------------------------------------ 21,855 --Hospital/Laboratory Supplies: 0.4% 239,000 Hillenbrand Industries 11,039 Hospital Beds & Coffins --Services: 5.2% 2,690,000 Lincare Holdings 75,656 Home Health Care Services 806,000 McKesson HBOC 53,196 (Acquirer of HBO & Co.) Hospital Computer Services 1,952,000 First Health Group 31,354 PPO Network 1,110,000 Magellan Health Services 4,648 Mental Health Services 43,000 Spectrum Health Solutions 11 Workman's Compensation - ------------------------------------------------------------------------------ 164,865 --------- Health Care: Total 239,432
Principal Amount or Number of Shares Value (000) - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Consumer Goods/Services: 10.3% Goods --Leisure Vehicles: 3.4% 1,700,000 Harley-Davidson $ 97,750 Motorcycles & Related Merchandise 480,000 Thor Industries 10,860 Mobile Homes & RV's - ------------------------------------------------------------------------------ 108,610 --Nondurables: 0.1% 344,000 First Years 4,795 Infant & Toddler Products --Manufacturers: 1.2% 630,000 Jones Apparel 17,601 Women's Apparel 420,000 St. John Knits 11,077 Upscale Knitware 600,000 Unifi 7,650 Polyester & Nylon Fabrics - ------------------------------------------------------------------------------ 36,328 Services --Retail: 1.5% 1,540,000 Borders Group 21,656 Bookstores 345,000 Whole Foods Market 11,859 Natural Food Supermarkets 911,000 Host Marriott Services 6,149 Fast Food Kiosks in Airports 270,000 Nautica Enterprises 3,054 Men's Apparel 400,000 Au Bon Pain 2,100 Bakery & Deli Restaurants 25,000 Fred Meyer Holdings 1,472 Supermarkets in the West 68,000 Just for Feet 850 Athletic Shoe Retailer 63,000 Gadzooks 469 Retail Specialty Stores for Young Adults - ------------------------------------------------------------------------------ 47,609 --Consumer Services: 0.5% 400,000 Bally Total Fitness 9,550 Fitness Centers 742,000 Protection One 4,637 Security Alarm Monitoring 45,000 Steiner Leisure 1,384 Spas & Hair/Skin Products on Cruise Ships - ------------------------------------------------------------------------------ 15,571
33 Acorn Fund --Statement of Investments, continued
Number of Shares Value (000) - -------------------------------------------------------------------------------- --Casinos: 0.8% Colorado Casino 500,000 Hollywood Park 5,156 Race Track & Casino 535,000 Monarch Casino & Resort 3,712 Casino/Hotel in Reno 190,000 Station Casinos 2,422 Casinos & Riverboats 63,000 Lakes Gaming 516 Hotel & Casino in Biloxi & Gulfport $6,250,000 Grand Palais Casino 14% Note Due 2/25/98 312 New Orleans Casino - -------------------------------------------------------------------------------- 23,931 --Cruise Lines: 2.8% 1,700,000 Carnival 82,556 Largest Cruise Line 140,000 Royal Caribbean Cruises 5,460 Cruises to Caribbean & Alaska 410,000 Royal Olympic Cruise 1,486 Cruises in Mediterranean - -------------------------------------------------------------------------------- 89,502 --------- Consumer Goods/Services: Total 326,346 - -------------------------------------------------------------------------------- Finance: 13.9% --Banks: 1.4% 695,000 TCF Financial 18,070 Great Lakes Bank 542,000 Texas Regional Bancshares 14,634 Tex Mex Bank 170,000 CNB Bancshares 6,843 Indiana Bank 64,000 Chittenden 1,704 Vermont & West Massachusetts Bank 70,000 Peoples Heritage Financial 1,260 New England Bank - -------------------------------------------------------------------------------- 42,511 --Savings & Loans: 3.0% 1,554,000 Peoples Bank Bridgeport 46,231 Connecticut Savings & Loan 475,000 Washington Mutual 19,416 West Coast Savings & Loan 812,000 Washington Federal 17,052 Washington State Savings & Loan 575,000 Commonwealth Bancorp 8,733 Philadelphia Savings & Loan 554,000 Coast Contingency Rights 3,289 Litigation Claims Against US government - -------------------------------------------------------------------------------- 94,721 Number of Shares Value (000) - -------------------------------------------------------------------------------- --Insurance: 3.8% 815,000 UICI $ 18,337 Health Insurance 511,000 Leucadia National 15,458 Insurance Holding Company 400,000 Protective Life 15,150 Life/Dental Insurance 723,000 Baldwin & Lyons, Cl. B 15,047 Trucking Insurance 687,000 Foremost 13,826 Mobile Home & RV Insurance 75,000 Markel 13,519 Specialty Insurance 351,000 United Fire & Casualty 9,038 Property & Casualty 612,000 Acceptance Insurance 8,262 Crop Insurance 151,000 FPIC Insurance 6,267 Medical & Dental Malpractice Insurance 320,000 HCC Insurance Holdings 6,160 Aviation Insurance - -------------------------------------------------------------------------------- 121,064 --Money Management: 3.4% 551,000 SEI Investments 50,967 Mutual Fund Administration 2,524,000 Phoenix Investment Partners 21,769 Mutual Fund & Pension Manager 1,063,000 Baker Fentress 16,078 Closed-End Investment Company 974,000 Pioneer Group 14,427 Equity Mutual Funds 180,000 Affiliated Managers Group 4,680 Mutual Fund & Pension Manager - -------------------------------------------------------------------------------- 107,921 --Finance Companies: 2.3% 2,938,000 Americredit 38,561 Auto Lending 1,820,000 World Acceptance 9,782 Personal Loans 465,000 Creditrust 9,184 Collection Agency 533,000 DVI Health Services 7,928 Leases for Big Medical Equipment 1,375,000 Capital Trust 6,703 Whole Mortgage Loans 58,000 Ace Cash Express 740 Check Cashing Stores - -------------------------------------------------------------------------------- 72,898 -------- Finance: Total 439,115
34
Number of Shares Value (000) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Industrial Goods/Services: 8.7% --Steel: 1.3% 825,000 Gibraltar Steel $16,448 Steel Processing 1,295,000 Worthington Industries 15,216 Steel Processing 345,000 A M Castle 4,162 Steel Distribution 420,000 Atchison Casting 3,386 Steel Foundries 76,000 Intermet Holdings 1,017 Ductile Iron & Aluminum Foundries - -------------------------------------------------------------------------------- 40,229 --Machinery: 0.7% 987,000 Clarcor 16,841 Filters 350,000 Applied Industrial Technologies 3,894 Industrial Components Distribution - -------------------------------------------------------------------------------- 20,735 --Conglomerates: 0.1% 325,000 Thermo Electron 4,408 Instrumentation, Biomedical & Industrial Products --Specialty & Industrial Materials: 0.9% 1,000,000 Lilly Industries, Cl. A 15,438 Industrial Coatings 523,000 Cambrex 11,571 Pharmaceutical & Other Specialty Chemicals 445,000 Symex 2,002 Combinatorial Materials 100,000 Brunswick Technologies 575 Fiberglass Fabric for Composites - -------------------------------------------------------------------------------- 29,586 --Outsourcing Services & Training: 1.4% 1,310,000 Labor Ready 34,142 Temporary Manual Labor 512,000 GP Strategies 9,088 Training Programs 500,000 International Total Services 1,750 Aviation Services - -------------------------------------------------------------------------------- 44,980 --Logistics: 3.0% 1,100,000 Expeditors Int'l of Washington 59,400 International Freight Forwarder 759,000 Hub Group 18,026 Truck & Rail Freight Forwarder 435,000 C H Robinson 11,065 Truck Freight Forwarder 613,000 Airnet Systems 4,291 Check & Other Small Package Shipment - -------------------------------------------------------------------------------- 92,782 Number of Shares Value (000) - -------------------------------------------------------------------------------- --Other Industrial Services: 1.3% 1,303,000 Wackenhut, Cl. B $22,151 31,000 Wackenhut, Cl. A 690 Prison Management 801,000 HA.LO Industries 9,862 Distributor of Specialty Products 806,000 Compass International Services 6,045 Collection Agencies 218,000 Advanced Lighting Technologies 1,690 Metal Halide Lighting - -------------------------------------------------------------------------------- 40,438 -------- Industrial Goods/Services: Total 273,158 - -------------------------------------------------------------------------------- Energy/Minerals: 8.0% --Independent Power: 3.1% 1,464,000 AES Corporation 54,534 1,852 AES Corporation Warrants 83 Power Plants 1,500,000 MidAmerican Energy 42,000 (formerly known as CalEnergy) Growth Utility - -------------------------------------------------------------------------------- 96,617 --Oil/Gas Producers: 2.0% 900,000 Devon Energy 24,806 Oil & Gas Producer 2,100,000 Tesoro Petroleum 23,100 Oil Refinery/Gas Reserves 470,000 Enron Oil & Gas 7,814 Oil & Gas Producer 300,000 Evergreen Resources 6,000 Oil & Gas Producer 1,031,000 Tipperary 838 Oil & Gas Producer - -------------------------------------------------------------------------------- 62,558 --Distribution/Marketing/Refining: 2.0% 1,000,000 Equitable Resources 26,063 Natural Gas Utility & Producer 847,000 Atmos Energy 20,381 Natural Gas Utility 890,000 Dynegy 12,516 Natural Gas & Electric Processing, Production & Marketing 260,000 KN Energy 5,184 Natural Gas Pipelines - -------------------------------------------------------------------------------- 64,144 --Oil Services: 0.9% 570,000 JRay McDermott 17,029 Offshore Construction 377,000 Atwood Oceanics 11,310 Offshore Drilling - -------------------------------------------------------------------------------- 28,339 -------- Energy/Minerals: Total 251,658
35 Acorn Fund --Statement of Investments, continued
Number of Shares Value (000) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Other Industries: 4.2% --Real Estate: 3.9% 829,000 The Rouse Company $ 18,393 Shopping Malls 770,312 Security Capital European Realty 15,406 Strategic Real Estate Investments 820,000 Cornerstone Properties 11,993 Downtown Office Buildings 466,000 Forest City Enterprises, Cl. B 11,126 370,000 Forest City Enterprises, Cl. A 8,949 Shopping Centers 260,000 Equity Residential Properties Trust 10,725 Nationwide Apartments 699,000 LaSalle Hotel Properties 9,262 Upscale/Full Service Hotels 400,000 Macerich Company 9,075 Regional Shopping Malls 350,000 Archstone 7,044 Equity Real Estate Investment Trust 165,000 Weingarten Realty Investors 6,538 Community Shopping Centers 200,000 First Industrial Realty Trust 4,788 Industrial Properties 190,000 First Washington Realty Trust 4,073 120,000 First Washington Realty Trust, Cv. Pfd. 3,255 Community Shopping Centers 945,000 Homestead Village 2,303 Extended Stay Hotels - -------------------------------------------------------------------------------- 122,930 --Regulated Utilities: 0.3% 500,000 Unisource Energy 5,531 Electric Utility in Tuscon 130,000 Central Hudson Gas & Electric 4,656 Electric Utility - -------------------------------------------------------------------------------- 10,187 -------- Other Industries: Total 133,117 - -------------------------------------------------------------------------------- Foreign Securities: 11.3% --Canada: 0.3% 400,000 Canadian Natural Resources 6,875 Oil & Gas Producer 450,000 Canadian 88 Energy 1,606 Oil & Gas Producer - -------------------------------------------------------------------------------- 8,481 --Australia: 0.1% 500,000 Aristocrat Leisure 3,151 Slot Machines Number of Shares Value (000) - -------------------------------------------------------------------------------- --United Kingdom: 3.4% 644,000 NTL $ 52,405 Voice, Video & Data Services 1,200,000 Serco Group 28,476 Facilities Management 1,650,000 Airtours 12,119 Packaged Tour Vacations 1,250,000 Edinburgh Fund Managers 8,092 Investment Management 1,100,000 N. Brown Group 6,126 Mail Order Clothing in Large Sizes - -------------------------------------------------------------------------------- 107,218 --Germany/Austria: 0.6% 180,000 Flughafen Wien (Austria) 7,614 Vienna Airport Authority 23,000 Binding-Brauerei 5,587 Brewery 100,000 United International Holdings (Austria) 4,350 Cable Television for Austria & Other Countries - -------------------------------------------------------------------------------- 17,551 --Sweden: 1.4% 1,000,000 WM Data Nordic 39,037 Computer Services/Consulting 165,000 Autoliv 6,198 Seatbelts & Airbags - -------------------------------------------------------------------------------- 45,235 --Netherlands: 0.8% 150,000 ASR Verzekeringsgroep 11,093 Insurance 305,000 Hunter Douglas 8,891 Decorative Window Coverings 170,000 Getronics 6,277 Computer Services/Consulting - -------------------------------------------------------------------------------- 26,261 --Switzerland: 0.6% 11,000 Cie Fin Richemont 18,283 Luxury Goods, Tobacco & Pay TV --France: 0.7% 230,000 Atos 21,106 Computer Services/Transaction Processing --Italy: 0.7% 1,500,000 Banca Fideuram 8,583 Life Insurance & Mutual Funds 1,000,000 Aeroporti di Roma 7,881 Airport Management 1,800,000 Ducati Motor 5,266 Motorcycles - -------------------------------------------------------------------------------- 21,730
36
Number of Shares Value (000) - ------------------------------------------------------------------------------ --Malaysia: 0.0% 750,000 Resorts World Berhad $ 739 Casino/Hotel Resort 590,000 Berjaya Sports Toto 591 Lottery/Gaming - ------------------------------------------------------------------------------ 1,330 --Hong Kong: 0.2% 4,500,000 Varitronix International 7,026 LCD Manufacturer --China: 0.0% 200,000 The Investment Company of China 1,100 Closed-End Fund --Singapore: 0.6% 8,130,000 Star Cruises 14,878 Cruise Line 2,000,000 Natsteel Electronics 5,461 Electronic Manufacturing Services - ------------------------------------------------------------------------------ 20,339 Japan: 1.0% 165,000 Softbank Corporation 18,502 Internet Leader in Japan 87,000 Nintendo 7,508 Video Games 300,000 Olympus Optical 3,952 Medical Equipment - ------------------------------------------------------------------------------ 29,962 --Mexico: 0.6% 3,300,000 Kimberly Clark de Mexico 12,419 Paper Products 7,350,000 Nadro, Series L 5,355 Pharmaceutical Distributor - ------------------------------------------------------------------------------ 17,774 Number of Shares Value (000) - ------------------------------------------------------------------------------ --Argentina: 0.3% 407,124 IRSA $ 10,738 Real Estate Management & Development -------- Foreign: Total 357,285 Total Common Stocks and Other ----------- Equity-Like Securities: 96.0% $3,029,610 ----------- Short-Term Obligations: 4.0% 125,460 ----------- Total Investments: 100.00% 3,155,070 ----------- Cash and Other Assets Less Liabilities: (0.0%) (530) ----------- Total Net Assets: 100% $3,154,540 - ------------------------------------------------------------------------------
37 Acorn Fund --Foreign Portfolio Diversification At March 31, 1999 Acorn Fund's foreign portfolio of investments as a percent of net assets was diversified as follows:
Value (000) Percent - ----------------------------------------------------------- - --Information Computer Services $ 66,420 2.1% Cable Television 56,755 1.8 Semiconductors & Related Equipment 28,476 0.9 Business Information/Publishing 18,502 0.6 Contract Manufacturing 5,461 0.2 - ----------------------------------------------------------- 175,614 5.6 - --Health Care Medical Equipment 3,952 0.1 - ----------------------------------------------------------- 3,952 0.1 - --Consumer Goods/Services Travel 26,997 0.8 Entertainment 19,022 0.6 Beverages 14,478 0.5 Nondurable Goods 12,419 0.4 Consumer Software 7,508 0.2 Durable Goods 6,198 0.2 Retail 6,126 0.2 Consumer Goods Distribution 5,355 0.2 Leisure Vehicles 5,266 0.2 Gaming 3,742 0.1 - ----------------------------------------------------------- 107,111 3.4 Value (000) Percent - ----------------------------------------------------------- - --Finance Money Management $ 16,675 0.5% Insurance 11,093 0.4 Closed-End Funds 1,100 0.0 - ----------------------------------------------------------- 28,868 0.9 - --Industrial Goods/Services Electrical Components 7,026 0.2 - ----------------------------------------------------------- 7,026 0.2 - --Energy/Minerals Oil/Gas Producers 8,481 0.3 - ----------------------------------------------------------- 8,481 0.3 - --Other Industries Transportation 15,495 0.5 Real Estate 10,738 0.3 - ----------------------------------------------------------- 26,233 0.8 -------------------- Total Foreign Portfolio $357,285 11.3% - -----------------------------------------------------------
38 >Shareholder News On May 1, 1999, Margaret Forster joined Leah Zell as co-portfolio manager of Acorn International. Margaret has been a key member of the international analytical team since 1994 and became a principal of Wanger Asset Management, L.P. (WAM) in January, 1999. "The international market place is a land of opportunity--particularly if you have access to solid information," says Forster. "Our international team has lived--and regularly travels--all over the globe. That gives us an unbelievable inside edge in understanding cultural, political and economic situations that impact the long-term success of the companies we invest in." --Ms. Forster has been featured in popular financial publications such as the Wall Street Journal and in several international and academic journals. --Before joining WAM, Ms. Forster was a professor of finance at Northwestern and Ohio State Universities, and an economist with the International Monetary Fund. A Chartered Financial Analyst (CFA), her degrees include a B.A. from Universidade de Sao Paulo, Escola Politecnica, and an M.B.A., M.S. and Ph.D. from Cornell University. --A native of Sao Paulo, Brazil, she is married and has a newborn daughter. -- Steve Radis takes the helm as Chief Marketing Officer. Steve comes to WAM from the Zurich Insurance organization where most recently he was Vice President, Corporate and Marketing Communications, Zurich Kemper Life. A fifteen-year industry veteran, Steve began his career at Porter/Novelli Public Relations. Before that, he headed Corporate Communications at one of Zurich's mutual fund groups, Kemper Funds. --"The Acorn Family of Funds and Wanger Asset Management have such a strong reputation in the marketplace," says Radis. "There is so much to work with here, the opportunities for growth are limitless." --Mr. Radis is a Member of the Direct Marketing Committee of the Investment Company Institute and a former faculty member of the University of Wisconsin's Graduate School of Banking. He received his BS from Bradley University. --A native of Chicago, he lives in a suburb of Chicago with his wife Beverly and son Cameron. - -- Howard Kastel, our former CEO, has left WAM. -- 39 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 Allan B. Muchin Robert E. Nason Katherine Schipper Ralph Wanger Officers Ralph Wanger President Margaret M. Forster Vice President Marcel P. Houtzager Vice President Kenneth A. Kalina Assistant Treasurer Bruce H. Lauer Vice President and Treasurer Charles P. McQuaid Senior Vice President Robert A. Mohn Vice President John H. Park Vice President Mark H. Yost 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.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. Watch for your favorite Acorn portfolio managers on CNBC's Market Wrap each Wednesday evening at 4:01 and 6:01 Eastern Time. Our e-mail address is: acorn@wanger.com Find out what's new visit our web site at: www.acornfunds.com 40 [PHOTO OF ACORNS 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-----