-----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, BgaoPvd5rZdJ/HLk+3rnIvSzt8Nc7b0CcpMOLqrmQTgcCGZ/EjMa5k9oaHgvKKUV YrbBqQtRVFkRG7pHsWOcbg== 0000950131-99-005099.txt : 19990827 0000950131-99-005099.hdr.sgml : 19990827 ACCESSION NUMBER: 0000950131-99-005099 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990826 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACORN INVESTMENT TRUST CENTRAL INDEX KEY: 0000002110 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 362692100 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-01829 FILM NUMBER: 99699872 BUSINESS ADDRESS: STREET 1: 227 W MONROE STE 3000 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3126349200 MAIL ADDRESS: STREET 1: 227 W MONROE ST STE 3000 STREET 2: ATTN: BRUCE LAUER CITY: CHICAGO STATE: IL ZIP: 60606 FORMER COMPANY: FORMER CONFORMED NAME: ACORN FUND INC DATE OF NAME CHANGE: 19920703 N-30D 1 ACORN FAMILY OF FUNDS SEMIANNUAL REPORT 6/30/99 2 Acorn Family of Funds Semiannual Report June 30, 1999 Managed by Wanger Asset Management, L.P. [PHOTO OF ACORNS APPEARS HERE] We are glad you are a shareholder in some of the Acorn Funds. Our investment staff are shareholders just like you. As fellow shareholders, we take pride in the good performance of all five funds so far this year. If you would like to make automatic regular investments to your fund or try one of our other funds, please call us at 800-922-6769. Reserve This Date! September 28, 1999 Meet your Acorn portfolio managers, analysts and fellow shareholders. Find out what's new with Acorn USA, Acorn Fund, Acorn International, and our two newest funds - Acorn Twenty and Acorn Foreign Forty. Bring your ideas and questions, we'd love to listen and to answer. TURN OVER TO LEARN MORE Please join us at the 1999 Annual Meeting for Shareholders Hosted by Ralph Wanger President of Acorn Investment Trust September 28, 1999 9-10 am 1 Bank One Plaza (formerly First Chicago Center) 38 South Dearborn Street Chicago, Illinois 60670 REFER TO THE SECOND HALF OF THIS INSERT FOR DIRECTIONS AND PARKING INFORMATION PS: If you are not able to attend the meeting, e-mail us your questions. We'll e-mail a response back. Send your questions to acorn@wanger.com. Acorn Family of Funds Semiannual Report 1999 Table of Contents Squirrel Chatter: J.P. Morgan 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 19 Acorn USA In a Nutshell 8 Performance at a Glance 9 Major Portfolio Changes 20 Statement of Investments 21 Acorn International In a Nutshell 10 Performance at a Glance 11 Major Portfolio Changes 24 Statement of Investments 26 Portfolio Diversification 30 Acorn Fund In a Nutshell 12 Performance at a Glance 13 Major Portfolio Changes 31 Statement of Investments 33 Foreign Portfolio Diversification 39 Acorn Family of Funds Statements of Assets and Liabilities 41 Statements of Operations 42 Statements of Changes in Net Assets 44 Financial Highlights 46 Notes to Financial Statements 49 Trustees, Officers and Contact Information 52 .Mid-Year Distributions The following table details the funds' midyear distributions. The record date was June 21, 1999, the ex-dividend date was June 22, 1999, and the payable date was June 25, 1999.
Acorn Fund Acorn International Acorn USA Acorn Twenty Acorn Foreign Forty - ----------------------------------------------------------------------------------------------------------------------------- Long-term Capital Gains $0.19 $0.00 $0.02 None $0.00 - ----------------------------------------------------------------------------------------------------------------------------- Short-term Capital Gains $0.00 $0.00 $0.02 None $0.03 - ----------------------------------------------------------------------------------------------------------------------------- Ordinary Income $0.03 $0.03 $0.15 $0.00 None $0.00 - -----------------------------------------------------------------------------------------------------------------------------
1 .Squirrel Chatter: J.P. Morgan [PHOTO APPEARS HERE] In the history of American finance, there have been many interesting and important figures from Alexander Hamilton to George Soros. None approaches the mythic status of John Pierpont Morgan. He dominated the banking scene from the end of the Civil War to the eve of World War I. Since his death in 1913, no other person has achieved his level of power and reputation. Morgan was loved by a few, respected by many, and hated by most. He was not hated for his deeds so much as what he stood for--massive wealth and power. In the Gilded Age, he personified the wealth of a Bill Gates and the influence of an Alan Greenspan. Morgan: American Financier1, a new biography by Jean Strouse, is a splendid study of the man and his period. What a period it was! Some of the people who did business with Morgan were Mellon, Rockefeller, Harriman, Frick, Carnegie, Baker, Widener and Edison, a group of tycoons now turned into universities, museums, banks or libraries. One could ponder on the transformation of a businessman into a building. Morgan, as a person, was agreeably complex and contradictory. He was deeply religious and a womanizer. He was a handsome youth, but an ugly adult (his nose became deformed by rhinophyma). He was a leader, but not a good speaker or writer. Despite achieving every worldly success, he suffered from fits of depression, and often sat alone in his study, smoking a cigar and playing solitaire. (Strouse does not say what game of solitaire he favored, but in that primitive age he had to use real cards, not the Microsoft version.) Mr. Morgan played solitaire in very nice surroundings. He had a Manhattan mansion (a series of five, of increasing splendor), an art-filled house in London, a great country house on the Hudson, and three vacation houses. He had a fabulous yacht, the Corsair, built in three different versions. His art collection included Gutenberg bibles and other rare books and manuscripts, old master paintings, armor, Egyptian antiquities, all in great quantity, many now in the Met or the Morgan Library. It was the best art collection ever assembled by one private individual. His artistic taste was informed and refined, but conventional. For instance, he missed the French Impressionist movement altogether, although he could have bought a boxcar load of VanGoughs and Monets for what he paid for one Gainsborough. As mutual fund investors, you and I should be most interested in Morgan as the supreme financial tycoon. His firm put together U.S. Steel, creating the biggest industrial company in the country. Another deal created International Harvester. Railroads were the leading industry of his time, and he put together the Northern Pacific and the Southern Railway. His least successful trust was an ocean shipping company, IMM, that not only lost money in the freight business, but through the White Star Line, owned the ill-fated (but photogenic) Titanic. These mergers were attacked by Progressive "trust-busters," but big companies were needed as the United States became an industrial giant. Regardless of your opinion on these mergers, Morgan did many things that clearly benefited the country. Bringing in Capital The construction of the U.S. railway network was dependent on European capital. By today's standards, 19th Century America would have been classified as an Emerging Market. If you think of the United States in Morgan's era as the equivalent to Argentina now, it's not surprising that many European investors lost their money on American railroads that went bust. Morgan's firm (Drexel, Morgan & Co. until 1895, now J.P. Morgan & Co.) was in the center of international banking, with his father's bank in London funneling money to New York.2 The amount of European capital invested in the United States grew from $222 million in 1853 to $3 billion in 1890. Morgan himself spent about half of each year in Europe, mixing business, art collecting, and spa treatments.3 The key to keeping European investors happy was a sound dollar, backed by gold. Therefore, Morgan and the other bankers fought to base the U.S. currency on a gold standard. Whether your were pro or anti, the gold standard was one of the key political divides of the 1890s. Farmers always hate bankers, and opposed the gold standard. So did silver miners, who wanted silver to be counted in monetary reserves together with gold. The Populist party, which represented the anti-gold standard factions, wanted faster growth in the money supply and inflation to enable debtors to pay off their obligations in cheaper dollars. Morgan, the defender of sound money, was hated as the leader of the gold-standard Eastern banking interests. The One-Man Fed In 1894, foreign investors became nervous that the Populists would prevail and inflate the money supply, which would cause their dollar-denominated bonds to lose value. European investors started selling bonds for gold and physically shipping the gold to London. At the end of 1894, the U.S. gold reserve plunged from $100 million to $45 million. In early 1895, gold losses reached $2 million per day, and the U.S. government faced a crisis not unlike the one that 2 forced several Asian countries to devalue their currencies two years ago. Morgan and several other bankers met with President Cleveland in February 1895, the day gold reserves dropped to only $9 million, with claims of $12 million against that gold. A U.S. government default was only a day away. Morgan's group figured out a way to sell $62 million in new gold-backed bonds without Congressional approval (the silverites in Congress would not have approved the bond issue), and saved the government. After the bond sale, Morgan ran a delicate foreign-exchange support program that succeeded, and U.S. gold reserves rebounded back over $100 million by June. Despite this triumph, Morgan and Rothschild, the two syndicate managers, were vilified in the press and in Congress, where Bryan made a nasty anti-gold, anti-Semitic speech. In 1896, the Democrats nominated the Populist William Jennings Bryan for president. His convention speech was perhaps the best political oration in American history, ending with the famous phrase: "You shall not crucify mankind upon a cross of gold." I always had thought that this was a great anti-materialistic religious thunderbolt, but its context was merely part of Bryan's violent hatred of the gold standard. Bryan lost the election anyway. The Panic of 1907 In 1907, there was a terrible panic, one of the worst financial crises ever to hit America. Many banks, trust companies, insurance companies, and stockbrokers had too much debt. After a couple of banks failed, a panic started that threatened to wipe out a large part of the American financial system and create the kind of depression that showed up 22 years later in 1929. There was no Federal Reserve System to regulate banks or act as lender of last resort. Morgan and a small group of allies acted as a private Fed, deciding which financial institutions were hopeless and should be allowed to go under, and which were sound but illiquid and could be saved by extending new credit. Morgan then browbeat his friends into extending the savable banks new credit despite the fear and panic that enveloped Wall Street at that moment. It worked. The Panic of 1907 was short-lived, and no depression followed. A lot of the time Morgan and other nineteenth century bankers were don't- rock-the-boat conservatives. Sometimes Morgan acted as a risk-taking venture capitalist. His most successful undertaking was Edison and his new electric light. In 1878, Edison was well-known, but had little money. Drexel, Morgan supplied capital for the new Edison Electric Light Co., and continued to support Edison during the start-up phase. Development was not smooth: the 1878 lamp used a platinum filament that proved a dead end (Carbon filament worked better, and finally the tungsten filament bulb, that we still use today, replaced carbon in turn). The electric light was the "killer app" for the electrical industry. In 1892, Edison's company was combined with its major competition to form General Electric, with Morgan as the investment banker. If Morgan did so many good things in his life, why did he receive such bad press in his lifetime and to this day? One answer is that his critics on the left--variously Anarchists, Communists, Fabian Socialists, Utopian Socialists, other sects of Socialists, union organizers, Populists and Progressives--detested his immense wealth and unparalleled power. They didn't believe any one man should be allowed to obtain that kind of wealth and influence. The standard anti-capitalist caricature is still J.P. Morgan in formal dress, whether in political cartoon, movie, or the little banker guy in your Monopoly game. No one since Morgan has equaled his immense power. Morgan's power died with him. Our world today has grown too large for any one financier to dominate it. /S/Ralph Wanger Ralph Wanger Chief Investment Officer, Wanger Asset Management, Lead Portfolio Manager, Acorn Fund ________________________________________________________________________________ 1 Strouse, Jean. Morgan: American Financier. Random House, NYC, 1999. 2 Papa's bank became Morgan, Grenfell & Co. in 1910. Other Morgan companies that are in operation today include J.P. Morgan & Co., and Morgan Stanley Dean Witter Discover. 3 Morgan and his wife Fanny both spent six months every year in Europe; just not the same six months. When she was heading back to New York with her companions, he would sail for London with his entourage, usually including one of his lady friends. 3 Acorn Twenty .In a Nutshell [PHOTO APPEARS HERE] This quarter paid off for small- and mid-cap investors. Acorn Twenty gained 13.6% for the quarter ended June 30, 6.5% ahead of the S&P 500, but just slightly behind the 14.2% return of the S&P MidCap 400 Index. Investors rediscovered value during the second quarter. They finally noticed the wide valuation gap between small- and mid-cap stocks versus their large-cap brethren. The small-cap Russell 2000 and the S&P MidCap 400 indexes outperformed the S&P 500 by 8.5% and 7.1%, respectively, during the quarter. This supports our belief that relative value exists among small to midsized companies. Many of Acorn Twenty's stocks trade at lower price-earnings multiples than S&P 500 companies, yet have higher expected growth rates. Twelve stocks posted double-digit gains in your Fund. Some standouts include AES, an energy company, up 56% during the quarter. Liberty Media was up 40% following its investment in News Corp. Several other stocks were up 20% or more, including three stocks highlighted in our March 30 report--Telephone & Data Systems, RCN, and Jones Apparel. We had one disappointment this quarter, McKesson HBOC, a hospital computer services company. The stock declined 42% during the quarter when an accounting scandal was uncovered in April. While we are disappointed, it is important to remember that our concentrated strategy is to have our winners outweigh the losers, resulting in superior, long-term return potential. We continue to be excited about the Fund's future prospects and we appreciate your investment in Acorn Twenty. /s/ John H. Park /s/ Mark H. Yost John H. Park Mark H. Yost Co-Portfolio Manager Co-Portfolio Manager Keeping Up with Jones Jones Apparel Group (JNY) has been in Acorn Twenty since the Fund's inception. Jones manufactures apparel, primarily for women, and owns well- regarded brand names. In addition to the Jones New York and Evan Picone labels, Jones makes the Lauren by Ralph Lauren line of clothes as well as Polo Jeans, both under license from Ralph Lauren. The Jones management team is impressive. The company has posted 20% or greater sales and earnings growth every year since its 1991 IPO, even though the industry is notorious for its fickle fashion fads. This year, Jones announced it was acquiring shoe manufacturer/retailer Nine West. Wall Street was initially thumbs (or toes) down on the deal since Nine West had been a troubled, mismanaged company. But where investors turned up their noses, Jones saw opportunity. Poor performing Nine West stores will be closed. As a result, we estimate as much as $100 million in working capital could be redeployed by tighter inventory management. Wall Street had put its foot in its mouth. After seeing the acquisition's potential opportunities and return, Jones' stock price climbed, up 56% for the year at June 30, 1999. The acquisition closed on June 15, 1999, and we expect Jones' new "sole-mate" to add significantly to earnings and cash flow. 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 Other Expenses: 0.93% Less Expense Reimbursement: 0.48% Total Expense Ratio*: 1.35% *Fees and expenses are calculated for the period from 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. This expense limitation is voluntary and is terminable by either the Fund or Wanger Asset Management on 30 days' notice to the other.
Fund Net Assets as of 6/30/99: $62.7 million - -------------------------------------------------------------- .Acorn Twenty Top 10 Holdings Americredit 6.5% Auto Lending PRIMEDIA 6.4% Specialty Magazines & Other Publications Telephone & Data Systems 6.0% Cellular & Telephone Franchises RCN 5.5% Metro Market: Voice Video & Internet Services UICI 5.3% Insurance/Specialty Finance AES Corporation 5.2% Power Plants ServiceMaster 5.1% Facilities Management H & R Block 5.0% Tax Preparation National Data 4.9% Credit Card & Health Claims Processor Liberty Media Group, AT&T 4.8% Cable Programming
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 6/30/99 [PIE CHART APPEARS HERE]
Catagory Percentage Other 9.2 Industrial Goods/Services 5.1 Energy/Minerals 9.9 Consumer Goods/Services 9.9 Finance 19.5 Information 44.0 Health Care 2.4
*Includes "Cash and other assets less liabilities" of 4.5%.
Relative Performance - --------------------------------------------------------------------- 2nd quarter Year to date Life of Fund* 1999 Acorn Twenty 13.6% 21.8% 30.4% S&P MidCap 400 14.2% 6.9% 18.7% Russell 2000 15.6% 9.3% 17.1% S&P 500 7.1% 12.4% 18.9%
*Life of Fund performance is from Acorn Twenty's inception 11/23/98 through 6/30/99. Net Asset Value Per Share 6/30/99: $13.04 - ----------------------------------------- The Value of a $10,000 Investment in Acorn Twenty - ------------------------------------------------- November 23, 1998 through June 30, 1999 [PERFORMANCE GRAPH APPEARS HERE]
Acorn Twenty $13,040 S & P Midcap 400 $11,872 DATE ACCORN 20 ($) 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 3/31/99 11,480 10,400 4/30/99 12,710 11,220 5/31/99 12,730 11,270 6/30/99 13,040 11,872
Total Return Life of Fund 30.4% 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. 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. All indexes are unmanaged and returns include reinvested dividends. Past performance does not guarantee future results. The investment return and principle 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] Since inception, the Fund has returned 31%, more than triple the returns of its benchmark indexes. Acorn Foreign Forty returned a satisfying 9.4% in the second quarter, well ahead of the 4.8% return of the creatively named Salomon Smith Barney Cap Range $2-10 Billion Index. Since inception, the Fund has returned 31%, more than triple the returns of its benchmark indexes. Three of your Fund's stocks gained more than 50% during the quarter. We highlighted Softbank last quarter when it was our 10th largest holding. It is now our largest position. We once again thank Michael King, our Japanese analyst, for unearthing Softbank at a time when it was very underfollowed. Michael also scored with Nintendo (up 64%--see inset), a name that is on the tip of every child's tongue, but not yet in every parent's portfolio. Our international research director, Roger Edgley, contributed contract manufacturer Natsteel Electronics in Singapore, up 56%. Not all of our stocks went up. We experienced modest declines in two of our European life insurance companies, Mapfre Vida in Spain, and ASR in the Netherlands. We visited these companies recently and have confirmed that their core life insurance businesses are still doing extremely well. Danish cleaning contractor ISS and Olivetti, an Italian typewriter-maker-turned-telecom- operator, also had poor stock returns this quarter although nothing bad happened to their businesses. We continue to see many excellent opportunities in the international mid- to large-cap stock universe. We believe Acorn Foreign Forty provides both a good way to diversify your portfolio and to own what we predict will be tomorrow's blue chips. Move Over Mickey Most six to twelve year olds today enjoy Coca-Cola, McDonald's, Disney, and Nintendo. Ranked by hours used, the winner is Nintendo. Unique products plus a strong, global brand equals high barriers to entry, high margins, and a mountain of cash to fund future growth. This is a classic case where the company is well- known, but the stock is not. We think this will change as Nintendo, a leader in the expanding industry of interactive entertainment, advances to the next level in the great stock market game (and becomes a blue chip on everyone's buy list). /s/ Marcel P. Houtzager Marcel P. Houtzager Portfolio Manager 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 Other Expenses: 1.75% Less Expense Reimbursement: 1.25% Total Expense Ratio*: 1.45% *Fees and expenses are calculated for the period from 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. This expense limitation is voluntary and is terminable by either the Fund or Wanger Asset Management on 30 days' notice to the other.
Fund Net Assets as of 6/30/99: $45.2 million - ----------------------------------------------------------------------- .Acorn Foreign Forty Top 10 Holdings Softbank Japan 3.1% Internet Services/Investment Holding Bodycote United Kingdom 3.1% Materials Technology & Metal Processing Nintendo Japan 3.1% Video Games Atos France 2.9% Computer Services/Transaction Processing NTL United Kingdom 2.9% Voice, Video & Data Services Canadian Natural Resources Canada 2.8% Oil & Gas Producer Getronics Netherlands 2.6% Computer Services SmarTone Telecom Hong Kong 2.6% Mobile Telecommunications Mapfre Vida Spain 2.5% Life Insurance & Mutual Funds SITA France 2.5% Waste Hauling & Landfills
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 6/30/99 [PIE CHART APPEARS HERE]
Catagory Percentage Energy/Minerals 4.1 Health Care 7.8 Industrial Goods/Services 11.3 Information 38.0 Consumer Goods/Services 11.5 Other* 15.6 Finance 11.7
*Includes "Cash and other assets less liabilities" of 8.2%.
Relative Performance - -------------------------------------------------------------------------- 2nd quarter Year to date Life of Fund* 1999 Acorn Foreign Forty 9.4% 19.2% 31.1% EAFE 2.5% 4.0% 8.3% SSB Cap Range $2-10B 4.8% 6.0% 9.5% Lipper Int'l Funds Average 5.6% 7.4% N/A
*Life of Fund performance for Acorn Foreign Forty is from inception 11/23/98 through 6/30/99. Net Asset Value Per Share 6/30/99: $13.08 F40 - ----------------------------------------- The Value of a $10,000 Investment in Acorn Foreign Forty - --------------------------------------------------------------------------- .November 23, 1998 through June 30, 1999 [PERFORMANCE GRAPH APPEARS HERE]
Date Acorn Foreign Forty ($) 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 4/30/99 12,240 10,980 5/31/99 12,170 10,418 6/30/99 13,110 10,825
Total Return Life of Fund 31.1% 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 10 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, which includes Acorn Foreign Forty, measures the performance of all non-U.S. funds tracked by Lipper, excluding the International Small Cap Funds group. This group consisted of 630 funds for the second quarter. 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 Small stocks rallied during the second quarter. The small-cap Russell 2000 Index rose 15.6%, more than double the 7.1% return of the S&P 500. Acorn USA outpaced both indexes, gaining 17.5%. At the start of the first quarter, the market was persecuting whole groups of stocks. Value stocks were thought to be the ugly stepsisters of the growth- stock beauties. Cyclical stocks were given up for dead after the Asian economies crumbled. Small-cap stocks were on the wrong side of the market's large-cap bias. The only bull-market participants were the darling fat-caps and Internet companies. Everything changed in April after interest rates increased. That's usually bad for all stocks, but it is particularly troublesome for stocks trading on hyped future earnings. As rates rose, price became more important than future promises. Undervalued stocks soared (even the historically rate-sensitive utility stocks rallied), while high-priced glamour stocks declined. Many investors were surprised to discover that Internet stocks could be derailed (temporarily) by something as old-fashioned as an interest rate hike. Acorn USA's best stocks of the quarter were not so long ago its worst. All are thriving small companies whose stock prices had plunged, then rebounded 50% or more by June. Some examples include Magellan (managed care), Aspect Telecom (call center software) and Equitable Resources (gas utility). Small stocks finally were the market's big winners. How long will this small-cap rally continue? Well, small stocks underperformed large stocks for five years. We can hope that the market will shift to favor small caps over the next five years. Acorn USA shareholders should do well if this normal market rotation occurs. Just What the Patient Ordered National Data knows two truths: 1) People prefer plastic to paper. Money, that is. Ten years ago, only 15% of all consumer payments were made via credit cards. Today it's 25% and growing. Processors like National Data make their money routing credit card and other electronic payments between merchants and banks. 2) For all the miracles of modern medicine, the health care payment system is strictly Stone Age. You can get your kidney stones removed in one hour, but your insurance claim likely won't get paid for five months. National Data is helping solve the problem by automating the whole health-claims process. Small stocks rallied during the second quarter. The small-cap Russell 2000 Index rose 15.6%, more than double the 7.1% return of the S&P 500. /s/ Robert A. Mohn Robert A. Mohn Portfolio Manager 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 Other Expenses: 0.26% Total Expense Ratio*: 1.20%
*Fees and expenses are for the fiscal year ended December 31, 1998.
Fund Net Assets as of 6/30/99: $312.7 million - --------------------------------------------------------- .Acorn USA Top 10 Holdings MidAmerican Energy 9.5% Growth Utility Micros Systems 5.3% Information Systems for Restaurants & Hotels UICI 5.1% Insurance/Specialty Finance National Data 3.8% Credit Card & Health Claims Processor Sykes Enterprises 3.2% Call Center Services Wackenhut 3.1% Prison Management Lincare Holdings 3.0% Home Health Care Services Telephone & Data Systems 2.8% Cellular & Telephone Franchises Americredit 2.8% Auto Lending RCN 2.7% 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 USA Portfolio Diversification - -------------------------------------------- .as a % of net assets, as of 6/30/99 [PIE CHART APPEARS HERE]
Catagory Percentages Consumer Goods/Services 6.4 Other* 6.7 Information 34.3 Health Care 8.2 Industrial Goods/Services 11.8 Finance 16.0 Energy/Minerals 16.6
*Includes "Cash and other assets less liabilities" of 5.8%.
Relative Performance - ------------------------------------------------------------------- 2nd quarter Year to date Last 12 mos. 1999 Acorn USA 17.5% 8.3% 0.7% Russell 2000 15.6% 9.3% 1.5% Lipper Small-Cap Funds Avg. 15.6% 8.6% 1.9% S&P MidCap 400 14.2% 6.9% 17.2% S&P 500 7.1% 12.4% 22.8%
Net Asset Value Per Share 6/30/99: $15.98 - ----------------------------------------- The Value of a $10,000 Investment in Acorn USA - -------------------------------------------------------- .September 4, 1996 through June 30, 1999 [PERFORMANCE GRAPH APPEARS HERE]
Date Accorn USA ($) Russel 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 06/30/99 17,650 14,203
Average Annual Total Return 1 Year Life of Fund 0.7% 22.3% This graph compares the results of $10,000 invested in Acorn USA on September 4, 1996, (the date Fund shares were first offered to the public), with all dividends and capital gains reinvested, to the Russell 2000 Index. The Russell 2000 is formed by taking the 3,000 largest U.S. companies and then eliminating the largest 1,000, leaving a market capitalization-weighted index of 2,000 small companies. The Lipper Small-Cap Funds Average, which includes Acorn USA, is an average of all U.S. small-cap funds tracked by Lipper, which consisted of 789, 777 and 698 funds for the second quarter, 6- and 12- month 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] These results are no flash-in-the-pan. Whether you look at the last twelve months or the trailing five years, your Fund's performance numbers rank in the top-quintile of all international equity funds followed by Lipper. Your Fund is flying. Acorn International was up 15.5% in the second quarter. This is 9.3% better than the EMI Index and 9.9% above the Lipper International Funds Index, and nearly 2% ahead of the Lipper International Small Cap Funds Index for the three months. It even beats the S&P 500 by 8.4% (diversification finally pays!). These results are no flash-in-the-pan. Whether you look at the last twelve months or the trailing five years, your Fund's performance numbers rank in the top-quintile of all international equity funds followed by Lipper. For the one- and five-year periods ended June 30, 1999, the Fund ranked 84 out of 638 funds and 35 out of 200 funds, respectively./1/ Contractors for Hire Electronics companies love to design and market products. Making them is more of a challenge in today's world. Many of the best brand names outsource the manufacturing function to specialist contractors known as EMS (electronic manufacturing services) companies. Two of our Singapore EMS holdings, Venture Manufacturing and Natsteel Electronics, work for Hewlett Packard, Apple, Sony, Cisco and others, making items such as computers, servers and disk drives. Both sides win. The customer lowers production costs and frees up capital, while the EMS provider earns a high return by running its facilities efficiently. No wonder these stocks are growing earnings yearly in excess of 25%. How did we do it? The short answer, this quarter, is Singapore. The local Straits Times Index had a fabulous run, up 46% in U.S. dollars since the end of March. Our five stock picks in that market did even better, rising a stellar 93% over the same period. Best of all, they were BIG holdings, generating a combined $93 million in profits for shareholders in three months. Credit goes to Roger Edgley, our director of International Research and Asian equity specialist, who identified Singapore as the place to hide during the regional meltdown. Secondary credit goes to that old-fashioned virtue, patience. We first bought Star Cruises in the summer of 1993 and Venture Manufacturing in the spring of 1995. We added to both positions at the depths of the crisis, between June and September of last year, at prices in excess of 75% below where the stocks sell today. Datacraft Asia and Natsteel Electronics are newer positions, initially appearing in the portfolio around 18 months ago. What all these stocks have in common is: (1) Roger identified them all as quality companies with top-flight management; and (2) we put fresh money into them when they were deeply out of favor. That defines long-term investing to us. We wrote in the last quarterly report that the outlook for foreign investing was improving. Small-cap stocks are leading the charge, after two years of lagging their large-cap peers by double digits. According to the Salomon Smith Barney indexes, equities outside the United States with market capitalizations below $1 billion are up 14.7% year-to-date versus a gain of 4.7% for those with market capitalizations above $5 billion. Patience wins again. /s/ Leah Joy Zell Leah Joy Zell Lead Portfolio Manager /s/ Margaret M. Forster Margaret M. Forster Co-Portfolio Manager /1/ This ranking represents a combination of the Lipper International Small Cap Funds category and the Lipper International Funds category for the 1- and 5-year periods ended June 30. The two categories were combined to show how Acorn International performed among the broadest universe of international funds. The ranking was calculated by Wanger Asset Management, L.P., Acorn International's investment adviser, assigning a rank to the average annual total return of each fund in the International Small Cap Funds and International Funds categories, on a combined basis (the best-performing fund received a rank of 1 and the worst received a rank of 638, or 200, respectively, for the 1- and 5-year periods). The percentile rank was calculated by dividing Acorn International's 1- and 5-year rank (84 and 35, respectively) by the total number of funds for the 1- and 5-year periods (638 and 200, respectively). This produced a rank of 13.2% and 17.5%, respectively, for Acorn International, placing it in the combined categories top quintile. 10 .Performance at a Glance Acorn International Information Ticker Symbol: ACINX Minimum Initial Investment: $1,000 $1,000 for an IRA Minimum Subsequent Investment: $ 100 Exchange Fee: None Management Fee*: 0.82% 12b-1 Fee: None Other Expenses: 0.30% Total Expense Ratio*: 1.12% *Fees and expenses are for the fiscal year ended December 31, 1998. Fund Net Assets as of 6/30/99: $1,883.1 million - ----------------------------------------------- .Acorn International Top 10 Holdings WM Data Sweden 3.3% Computer Services/Consulting Tieto Corporation Finland 3.3% Computer Services/Consulting Venture Manufacturing Singapore 2.7% Electronic Manufacturing Services Serco Group United Kingdom 2.5% Facilities Management NTL United Kingdom 2.3% Voice, Video & Data Services Star Cruises Singapore 2.2% Cruise Line Atos France 2.2% Computer Services/Transaction Processing Datacraft Asia Singapore 2.1% Network Systems Integration Li and Fung Hong Kong 1.9% Sourcing of Consumer Goods Rhoen Klinikum Germany 1.9% Hospital Management The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings. Acorn International Portfolio Diversification - ------------------------------------------------ .as a % of net assets, as of 6/30/99 Health Care 5.0% Energy/Minerals 2.7% Other* 10.0% Finance 7.0% Information 42.2% Industrial Goods/Services 12.4% Consumer Goods/Services 20.7% *Includes "Cash and other assets less liabilities" of 5.6% Relative Performance - ----------------------------------------------------------------------------- 2nd quarter Year to date Last 12 mos. 1999 Acorn International 15.5% 16.8% 11.9% EMI (World ex-U.S.) 6.2% 7.7% 3.4% IFCI Composite 23.8% 37.3% 27.0% Lipper Int'l Small-Cap Funds Index 13.6% 17.8% 7.8% Lipper Int'l Funds Index 5.6% 6.9% 4.0% Net Asset Value Per Share 6/30/99: $24.17 - ----------------------------------------- The Value of a $10,000 Investment in Acorn International - -------------------------------------------------------- .September 23, 1992 through June 30, 1999 [PERFORMANCE GRAPH APPEARS HERE] Acorn Int'l $ 27,574 EMI (World ex-U.S.) $ 16,839 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 6/30/99 27,222 Average Annual Total Return 1 year 5 years Life of Fund 11.9% 11.9% 15.9% This graph compares the results of $10,000 invested in Acorn International on September 23, 1992 (the date Fund shares were first offered to the public), with all dividends and capital gains reinvested, with the EMI (World ex-U.S.). EMI is Salomon Brothers' 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 International Small-Cap Funds Index measures the performance of the 10 largest International small-cap funds tracked by Lipper, which includes Acorn International. The Lipper International Funds Index measures the performance of the 30 largest non-U.S. small-cap funds tracked by Lipper. 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 [PICTURE APPEARS HERE] It finally happened--small stocks outperformed blue-chip stocks in the second quarter. Acorn Fund was up 15.8% for the quarter, double the return of the S&P 500, and slightly ahead of the small-cap Russell 2000 Index. We had been complaining about small caps underperforming large caps. While we were whining, we were actively swapping some of our winners that had become mid-caps, into small caps, which were better values. We bought about $300 million of small stocks in the second quarter. Most of our largest-percentage winners in the quarter were stocks with cap sizes under $1 billion. Magellan Health, a managed-care company, jumped a robust 137%, while Gadzooks, a retail speciality store for young adults, surprised us by more than doubling. Electronics distributors Kent Electronics and Pioneer Standard rose 99% and 84%, respectively. AirNet Systems soared 93%. Employee timeclock company Kronos clocked an 86% move. Fears about Asia subsided in the quarter. Singapore-based Star Cruises sailed to a 145% gain and Natsteel Electronics zapped a 61% return. Independent power producer AES, which had dropped due to fears about Asian contracts, provided an electrifying 56% rise. Our Internet-related stocks were hot. Softbank, a Japanese-based company featured in our 1998 annual report, netted an 80% return, while information provider InfoUSA doubled. We are continuing to find and buy great small-cap companies and we believe these companies have the potential to deliver long-term rewards. A Towering Landlord We like companies that benefit from the declining costs of electronics. For example, Acorn Fund was an early owner of cellular telephone companies at a time when cell phone prices plunged as much as 90%. A play on this theme is the recently purchased Pinnacle Holdings that controls valuable real estate in the form of broadcasting towers. Competition to provide wireless phone service in urban areas is robust. Since all cellular phone companies need towers to broadcast their signals to provide service, and since zoning restricts new tower construction, Pinnacle Holdings stands to benefit as more competitors build wireless systems. Its stock rose 62% last quarter. Acorn Fund was up 15.8% for the quarter, double the return of the S&P 500, and slightly ahead of the small-cap Russell 2000 Index. /s/ Ralph Wanger /s/ Charles P. McQuaid Ralph Wanger Charles P. McQuaid Lead Portfolio Manager Co-Portfolio Manager 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 Other Expenses: 0.15% Total Expense Ratio*: 0.84% *Fees and expenses are for the fiscal year ended December 31, 1998. Fund Net Assets as of 6/30/99: $3,406.1 million - -------------------------------------------------------------------- .Acorn Fund Top 10 Holdings Liberty Media Group, AT&T 2.8% Cable Programming National Data 2.3% Credit Card & Health Claims Processor AES Corporation 2.2% Power Plants Carnival 2.1% Largest Cruise Line Harley Davidson 2.0% Motorcycles & Related Materials Lincare Holdings 1.9% Home Health Care Services RCN 1.8% Metro Market: Voice, Video & Internet Services Solectron 1.7% Electronic Manufacturing Services NTL 1.6% Voice, Video & Data Services Americredit 1.5% Auto Lending
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 6/30/99 Other* 8.8% Health Care 6.0% Energy/Minerals 9.0% Information 30.3% Industrial Goods/Services 9.6% Consumer Goods/Services 14.6% Finance 10.0% Foreign 11.7%
*Includes "Cash and other assets less liabilities" of 4.0%.
Relative Performance - ----------------------------------------------------------------- 2nd quarter Year to date Last 12 mos. 1999 Acorn Fund 15.8% 11.6% 6.0% S&P 500 7.1% 12.4% 22.8% Russell 2000 15.6% 9.3% 1.5% Lipper Small Cap Funds Index 14.9% 9.4% 1.9% S&P MidCap 400 14.2% 6.9% 17.2%
Net Asset Value Per Share 6/30/99: $18.59 - ----------------------------------------- The Value of a $10,000 Investment in Acorn Fund - ------------------------------------------------- .June 10, 1970 through June 30, 1999 [PERFORMANCE GRAPH APPEARS HERE]
Acorn Fund S & P 500 --------- $901,804 $537,999 Date Acorn Funds ($) 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 6/30/99 901,844 537,999
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 the S&P 500 Stock Index with dividends reinvested. The S&P 500 is a broad market-weighted average of U.S. blue-chip companies. The 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, which includes Acorn Fund, measures the performance of the 30 largest U.S. small-cap funds tracked by Lipper. 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 Fund .Major Portfolio Changes in the Second Quarter
Number of Shares Held ------------------------- 3/31/99 6/30/99 Additions - -------------------------------------------------------- Information Acxiom 78,000 105,000 H & R Block 50,000 63,000 Keane 0 100,000 National Data 0 72,000 PRIMEDIA 200,000 235,800 Sterling Commerce 40,000 65,000 - -------------------------------------------------------- Consumer Goods/Services Herman Miller 0 63,800 Jones Apparel 39,000 65,000 - -------------------------------------------------------- Finance SEI Investments 0 31,500 UICI 0 120,000 - -------------------------------------------------------- Industrial Goods/Services ServiceMaster 105,000 170,000 - -------------------------------------------------------- Real Estate The Rouse Company 0 116,000 Sales - -------------------------------------------------------- Information Concord EFS 66,500 0 RCN 101,000 82,000 - -------------------------------------------------------- Health Care First Health 110,000 0 Lincare Holdings 80,000 59,700 McKesson HBOC 36,000 0 - -------------------------------------------------------- Consumer Goods/Services Harley-Davidson 24,000 0 - -------------------------------------------------------- Industrial Goods/Services Expeditors Int'l of Washington 55,000 0 (includes effect of 2 for 1 stock split)
14 Acorn Twenty .Statement of Investments (unaudited) June 30, 1999
Number of Shares Value (000) - ---------------------------------------------------------- Common Stocks: 95.5% - ---------------------------------------------------------- Information: 44.0% .Television Programming: 4.8% 82,000 Liberty Media Group, AT&T (b) $ 3,014 Cable Programming .Telephone Services: 5.4% 82,000 RCN (b) 3,413 Metro Market: Voice, Video & Internet Services .Mobile Communications: 5.9% 51,000 Telephone & Data Systems 3,726 Cellular & Telephone Franchises .Transaction Processors: 4.9% 72,000 National Data 3,078 Credit Card & Health Claims Processor .Computer Services: 3.6% 100,000 Keane (b) 2,262 Application Development & Maintenance Services .Business Software: 3.8% 65,000 Sterling Commerce (b) 2,373 Electronic Commerce Software & Services .Business Information/ Marketing Services/ Publishing: 15.6% 235,800 PRIMEDIA (b) 3,994 Specialty Magazines & Other Publications 63,000 H & R Block 3,150 Tax Preparation 105,000 Acxiom (b) 2,618 Database Marketing Services - ---------------------------------------------------------- 9,762 -------- Information: Total 27,628 - ---------------------------------------------------------- Health Care: 2.4% .Services: 2.4% 59,700 Lincare Holdings (b) 1,493 Home Health Care Services -------- Health Care: Total 1,493 - ---------------------------------------------------------- Consumer Goods/Services: 9.9% .Cruise Lines: 4.2% 60,400 Royal Caribbean Cruises 2,643 Cruises to Caribbean & Alaska .Furniture & Manufacturers: 5.7% 65,000 Jones Apparel (b) 2,230 Women's Apparel 63,800 Herman Miller 1,340 Office Furniture - ---------------------------------------------------------- 3,570 -------- Consumer Goods/Services: Total 6,213 Principal Amount or Number of Shares Value (000) - ---------------------------------------------------------- - ---------------------------------------------------------- Finance: 19.5% .Finance Companies: 6.5% 255,000 Americredit (b) $ 4,080 Auto Lending .Money Management: 4.4% 31,500 SEI Investments 2,780 Mutual Fund Administration .Insurance: 8.6% 120,000 UICI (b) 3,315 Insurance/Specialty Finance 14,100 Progressive 2,044 Auto Insurance - ---------------------------------------------------------- 5,359 -------- Finance: Total 12,219 - ---------------------------------------------------------- Industrial Goods/Services: 5.1% .Other Industrial Services: 5.1% 170,000 ServiceMaster 3,188 Facilities Management -------- Industrial Goods/Services: Total 3,188 - ---------------------------------------------------------- Energy/Minerals: 9.9% .Independent Power: 9.9% 56,000 AES Corporation (b) 3,255 Power Plants 85,000 MidAmerican Energy 2,943 Growth Utility Energy/Minerals: Total 6,198 - ---------------------------------------------------------- Real Estate: 4.7% 116,000 The Rouse Company 2,943 Regional Shopping Malls -------- Total Common Stocks: 95.5% 59,882 (Cost: $49,893) Short-Term Obligations: 7.5% Yield 4.85% - 5.10% Due 7/1 - 7/2/99 $2,783 Pru Funding 2,783 $1,884 Commercial Credit 1,884 - ---------------------------------------------------------- (Amortized Cost: $4,667) 4,667 Total Investments: 103.00% 64,549 (Cost: $54,560) Cash and Other Assets less Liabilities: (3.0%) (1,865) -------- Total Net Assets: 100% $62,684 - ----------------------------------------------------------
.Notes to Statement of Investments (a) At June 30, 1999, for federal income tax purposes cost of investments was $54,676,000 and net unrealized appreciation was $9,873,000, consisting of gross unrealized appreciation of $10,638,000 and gross unrealized depreciation of $765,000. (b) Non-income producing security. 15 Acorn Foreign Forty >Major Portfolio Changes in the Second Quarter
Number of Shares ------------------------- 3/31/99 6/30/99 Additions - ---------------------------------------------------------- Europe .Germany Rhoen Klinikum 3,000 10,000 Stinnes 0 49,500 .Sweden Netcom 0 30,000 .Finland Tieto Corporation 14,000 20,000 .France Atos 5,000 13,000 SITA 2,000 5,000 .United Kingdom Energis 10,000 35,000 NFC 0 250,000 SSL International 0 90,000 WPP Group 0 10,000 .Italy Banca Fideuram 0 150,000 Mediolanum 0 70,000 Olivetti 0 170,000 Saipem 0 150,000 SEAT Pagine Gialle 200,000 600,000 .Spain Mapfre Vida 12,000 40,000 .Netherlands Getronics 10,000 30,064 - ---------------------------------------------------------- Asia .Hong Kong SmarTone Telecom 149,900 324,900 .Japan Nintendo 2,500 10,000 Other Countries .Canada Power Financial 7,000 40,000 .United States Azurix 0 30,000 MIH 0 35,000 Sales - ---------------------------------------------------------- Europe .Finland Helsinki Telephone 15,000 0 .United Kingdom Newsquest 150,000 0 .Netherlands Kon Pakhoed 30,000 0
16 Acorn Foreign Forty .Statement of Investments (unaudited) June 30, 1999 Number of Shares Value (000) - ------------------------------------------------------------- Common Stocks: 91.8% - ------------------------------------------------------------- Europe: 63.0% .Germany: 6.3% 12,000 MobilCom $1,074 Telecommunication Services 10,000 Rhoen Klinikum 995 Hospital Management 49,500 Stinnes (b) 771 Freight Forwarder - ------------------------------------------------------------- 2,840 .Denmark: 1.2% 10,000 ISS International System (b) 535 Cleaning Services .Sweden: 2.2% 30,000 Netcom (b) 1,009 Telecommunication Services .Finland: 1.8% 20,000 Tieto Corporation 833 Computer Services/Consulting .France: 5.4% 13,000 Atos (b) 1,327 Computer Services/Transaction Processing 5,000 SITA 1,131 Waste Hauling & Landfills - ------------------------------------------------------------- 2,458 .United Kingdom: 20.8% 225,000 Bodycote 1,406 Materials Technology & Metal Processing 15,000 NTL (b) 1,293 Voice, Video & Data Services 90,000 SSL International 1,038 Medical & Footcare Products 80,000 Hays 843 Outsourcing Services 35,000 Energis (b) 835 Telecommunication Services 250,000 NFC 830 Logistics & Moving Services 100,000 Airtours 798 Packaged Tour Vacations 30,000 Serco Group 676 Facilities Management 60,000 Logica 629 Computer Services/Consulting 200,000 Smith & Nephew 608 Medical Equipment & Supplies 35,000 Sema Group 338 Computer Software & Services 10,000 WPP Group 85 Advertising - ------------------------------------------------------------- 9,379 .Switzerland: 3.7% 600 Pargesa $ 911 Industrial & Media Conglomerate 390 Cie Fin Richemont 750 Luxury Goods, Tobacco & Pay TV - ------------------------------------------------------------- 1,661 - ------------------------------------------------------------- .Italy: 9.4% 150,000 Banca Fideuram 874 Life Insurance & Mutual Funds 600,000 SEAT Pagine Gialle 820 Yellow Pages Publishers 42,000 Editoriale L'Espresso 680 Newspapers & Magazines 150,000 Saipem 599 Offshore Construction 70,000 Mediolanum 538 Life Insurance & Mutual Funds 170,000 Olivetti 408 Telecommunication Services 30,000 Autogrill Finanziari 309 Tollway Restaurants - ------------------------------------------------------------- 4,228 .Spain: 6.4% 40,000 Mapfre Vida 1,143 Life Insurance & Mutual Funds 90,000 Indra Sistemas 970 Computer Services 15,000 Aguas de Barcelona 781 Water Utility - ------------------------------------------------------------- 2,894 .Netherlands: 5.8% 30,064 Getronics 1,156 Computer Services 30,487 Hunter Douglas 1,047 Decorative Window Coverings 6,501 ASR Verzekeringsgroep 429 Insurance - ------------------------------------------------------------- 2,632 ------ Europe: Total 28,469 - ------------------------------------------------------------- Asia: 16.1% .Hong Kong: 2.6% 324,900 SmarTone Telecom 1,156 Mobile Telecommunications .Japan: 11.6% 7,000 Softbank 1,417 Internet Services/Investment Holding 10,000 Nintendo 1,405 Video Games 45,000 NuSkin Enterprises (b) 897 Personal Care/Herbal Products 60,000 Olympus Optical 887 Photographic & Medical Equipment 6,000 Takefuji 620 Unsecured Consumer Loans - ------------------------------------------------------------- 5,226 17 Acorn Foreign Forty .Statement of Investments, continued Number of Shares Value (000) - ------------------------------------------------------------------------- .Singapore: 1.9% 200,000 Natsteel Electronics $ 875 Electronic Manufacturing Services -------- Asia: Total 7,257 - ------------------------------------------------------------------------- Other Countries: 12.7% .Canada: 6.4% 65,000 Canadian Natural Resources (b) 1,274 Oil & Gas Producer 20,000 Celestica (b) 861 Electronic Manufacturing Services 40,000 Power Financial 757 Financial Services Holding Company - ------------------------------------------------------------------------- 2,892 .Israel: 1.5% 30,000 Amdocs (b) 683 Telecommunications Billing & Customer Care Software - ------------------------------------------------------------------------- .United States: 4.8% 35,000 MIH (b) $ 928 Pay-TV 8,000 Global TeleSystems (b) 648 Telecommunication Services -------- 30,000 Azurix (b) 600 Owner & Operator of Water Utilities 2,176 -------- Other: Total 5,751 -------- Total Common Stocks: 91.8% $ 41,477 (Cost: $36,773) Short-Term Obligations: 6.5% $2,935,000 American General Corp 2,935 5.00% Due 7/1/99 (Amortized Cost: $2,935) -------- Total Investments: 98.3% 44,412 (Cost: $39,708) -------- Cash and Other Assets Less Liabilities: 1.7% 785 -------- Total Net Assets: 100% $ 45,197 F40 - ----------------------------------------------------------------------------- .Notes to Statement of Investments (a) At June 30, 1999, for federal income tax purposes cost of investments was $39,708,000 and net unrealized appreciation was $4,704,000 consisting of gross unrealized appreciation of $5,864,000 and gross unrealized depreciation of $1,160,000. (b) Non-income producing security. 18 Acorn Foreign Forty .Portfolio Diversification At June 30, 1999, the Fund's portfolio of investments as a percent of net assets was diversified as follows: Value (000) Percent - --------------------------------------------------------------- .Information Telephone Services $ 5,542 12.3% Computer Services 4,283 9.6 CATV 2,221 4.9 Publishing 2,097 4.6 Business Information 970 2.1 Contract Manufacturing 875 1.9 Business Software 683 1.5 Mobile Communications 408 0.9 Advertising 85 0.2 - --------------------------------------------------------------- 17,164 38.0 .Health Care Health Services 1,038 2.3 Hospital Management 995 2.2 Medical Equipment 887 2.0 Hospital/Laboratory Supplies 608 1.3 - --------------------------------------------------------------- 3,528 7.8 .Consumer Goods/Services Consumer Software 1,405 3.1 Durable Goods 1,047 2.3 Nondurables 897 2.0 Travel 798 1.8 Entertainment 750 1.7 Restaurants 309 0.6 - --------------------------------------------------------------- 5,206 11.5 .Finance Finance Companies 2,169 4.8 Insurance 1,572 3.5 Closed-End Funds 911 2.0 Savings & Loans 620 1.4 - --------------------------------------------------------------- 5,272 11.7 .Industrial Goods/Services Outsourcing Services $ 2,054 4.5% Industrial Materials 1,406 3.1 Electrical Components 861 1.9 Industrial Services 771 1.8 - --------------------------------------------------------------- 5,092 11.3 .Energy/Minerals Oil/Gas Producers 1,274 2.8 Oil Services 599 1.3 - --------------------------------------------------------------- 1,873 4.1 .Other Industries Regulated Utilities 1,381 3.1 Waste Management 1,131 2.5 Transportation 830 1.8 - --------------------------------------------------------------- 3,342 7.4 ------------------------ Total Common Stocks: 47,477 91.8 ------------------------ Short-Term Obligations: 2,935 6.5 ------------------------ Total Investments: 44,412 98.3 Cash and Other Assets less ------------------------ Liabilities: 785 1.7 ------------------------ Net Assets: $ 45,197 100.0% - --------------------------------------------------------------- 19 Acorn USA .Major Portfolio Changes in the Second Quarter Number of Shares ---------------- 3/31/98 6/30/99 Additions - -------------------------------------------------------------------- Information Computer Task Group 0 119,000 IMR Global 0 50,000 National Data 239,300 278,300 PRIMEDIA 0 169,000 Telephone & Data Systems 0 120,000 Young Broadcasting 0 22,500 - -------------------------------------------------------------------- Health Care Magellan Health Services 540,000 811,100 - -------------------------------------------------------------------- Consumer Goods/Services Gadzooks 0 355,000 NuSkin Enterprises 0 158,000 Whole Foods Market 30,000 74,000 - -------------------------------------------------------------------- Finance UICI 354,700 580,700 Americredit 407,000 543,500 Chittenden 0 91,600 Protective Life 0 57,000 TCF Financial 0 33,000 Texas Regional Bancshares 0 34,000 - -------------------------------------------------------------------- Industrial Goods/Services Labor Ready 95,000 131,000 - -------------------------------------------------------------------- Energy/Minerals MidAmerican Energy 684,400 855,400 - -------------------------------------------------------------------- Real Estate The Rouse Company 0 47,000 Sales - -------------------------------------------------------------------- Information Commonwealth Telephone 55,500 0 Information Management 21,600 0 InfoUSA 154,400 26,800 Kronos 166,650 148,500 Liberty Media, AT&T 71,000 0 Micros Systems 518,500 491,000 Playboy Enterprises 31,800 0 RCN 434,700 205,700 Sykes Enterprises 353,500 296,500 Systems & Computer Technology 210,400 170,400 TV Guide 258,000 187,000 - -------------------------------------------------------------------- Health Care CuraGen 27,000 0 - -------------------------------------------------------------------- Finance AmerUs Life Holdings 184,500 93,500 Washington Mutual 66,400 0 - -------------------------------------------------------------------- Industrial Goods/Services Schnitzer Steel 77,300 27,300 - -------------------------------------------------------------------- Energy/Minerals J Ray McDermott 35,000 0 20 Acorn USA .Statement of Investments (unaudited) June 30, 1999 Number of Shares Value (000) - ------------------------------------------------------------------------- Common Stocks: 94.2% - ------------------------------------------------------------------------- Information: 34.3% .Broadcasting: 2.2% 209,100 Data Transmission Network (b) $ 5,881 Data Services for Farmers 22,500 Young Broadcasting (b) 958 Television Stations - ------------------------------------------------------------------------- 6,839 .Television Programming: 2.2% 187,000 TV Guide (b) 6,849 TV Program Guides & Programming .Telephone Services: 2.7% 205,700 RCN (b) 8,562 Metro Market: Voice, Video & Internet Services .Mobile Communications: 4.0% 120,000 Telephone & Data Systems 8,768 Cellular & Telephone Franchises 121,800 COMARCO (b) 2,413 Wireless Network Testing 50,000 Pinnacle Holdings (b) 1,225 Towers for Cellular, PCS, & Paging - ------------------------------------------------------------------------- 12,406 .Telecommunications Equipment: 1.2% 377,100 Aspect Telecommunications (b) 3,677 Call Center Equipment .Gaming Equipment: 0.9% 146,000 International Game Technology 2,701 Slot Machines & Progressive Jackpots .Computer Services: 4.4% 296,500 Sykes Enterprises (b) 9,896 Call Center Services 119,000 Computer Task Group 2,023 Application Development & Staffing Services 534,700 Aztec Technology Partners (b) 1,003 Technology Staffing Services 50,000 IMR Global (b) 963 Application Development & Maintenance Services - ------------------------------------------------------------------------- 13,885 .Consumer Software: 0.4% 75,500 Activision (b) 1,099 Entertainment Software .Business Software: 1.4% 170,400 Systems & Computer Technology (b) 2,481 Enterprise Software & Services 214,000 JDA Software (b) 1,993 Applications/Software & Services for Retailers - ------------------------------------------------------------------------- 4,474 .Transaction Processors: 3.8% 278,300 National Data 11,897 Credit Card & Health Claims Processor .Business Information/ Marketing Services: 3.6% 206,000 CACI International (b) 4,635 Technology Services for Government 483,100 IntelliQuest Information (b) $ 3,623 Technology/Market Research 169,000 PRIMEDIA 2,862 Specialty Magazines & Other Publications 26,800 InfoUSA (b) 228 Business Data for Sales Leads - ------------------------------------------------------------------------- 11,348 .Computer Hardware/ Related Systems: 7.5% 491,500 Micros Systems (b) 16,711 Information Systems for Restaurants & Hotels 148,500 Kronos (b) 6,757 Labor Management Solutions - ------------------------------------------------------------------------- 23,468 ------- Information: Total 107,205 - ------------------------------------------------------------------------- Health Care: 8.2% .Biotechnology/Drug Delivery: 0.1% 78,000 Synaptic Pharmaceuticals (b) 371 Receptor Targeted Drug Design .Services: 8.1% 382,200 Lincare Holdings (b) 9,555 Home Health Care Services 811,100 Magellan Health Services (b) 8,111 Mental Health Services 352,000 First Health (b) 7,590 PPO Network - ------------------------------------------------------------------------- 25,256 ------- Health Care: Total 25,627 - ------------------------------------------------------------------------- Consumer Goods/Services: 6.4% .Retail: 5.4% 930,600 Host Marriott Services (b) 7,561 Fast Food Kiosks in Airports 355,000 Gadzooks (b) 5,680 Teen Apparel Retailer 74,000 Whole Foods Market (b) 3,557 Natural Food Supermarkets - ------------------------------------------------------------------------- 16,798 .Non Durables: 1.0% 158,000 NuSkin Enterprises (b) 3,150 Personal Care/Herbal Products ------- Consumer Goods/Services: Total 19,948 - ------------------------------------------------------------------------- Finance: 16.0% .Savings & Loans 156,500 Coast Contingency Rights (b) 166 Litigation Claim Against US Government .Finance Companies: 3.7% 543,500 Americredit (b) 8,696 Auto Lending 590,000 World Acceptance (b) 2,968 Personal Loans - ------------------------------------------------------------------------- 11,664 21 Number of Shares Value (000) - ------------------------------------------------------------------------- .Money Management: 0.7% 163,000 Phoenix Investment Partners $ 1,406 Mutual Fund & Pension Manager 52,800 Pioneer Group (b) 911 Equity Mutual Funds - ------------------------------------------------------------------------- 2,317 .Banks: 1.5% 91,600 Chittenden 2,862 Vermont & West Massachusetts Bank 34,000 Texas Regional Bancshares 924 TexMex Bank 33,000 TCF Financial 920 Great Lakes Bank - ------------------------------------------------------------------------- 4,706 .Insurance: 10.0% 580,700 UICI (b) 16,042 Insurance/Specialty Finance 392,100 Acceptance Insurance (b) 5,906 Crop Insurance 13,800 Markel (b) 2,581 Specialty Insurance 93,500 AmerUs Life Holdings 2,524 Annuities/Life Insurance 93,000 Leucadia National 2,360 Insurance Holding Company 57,000 Protective Life 1,881 Life/Dental Insurance - ------------------------------------------------------------------------- 31,294 -------- Finance: Total 50,147 - ------------------------------------------------------------------------- Industrial Goods/Services: 11.8% .Steel: 0.6% 119,000 Atchison Casting (b) 1,238 Steel Foundries 27,300 Schnitzer Steel 613 Scrap Steel Processor - ------------------------------------------------------------------------- 1,851 .Industrial Distribution: 0.4% 70,000 Vallen (b) 1,120 Safety Products Distribution .Machinery 86,700 Farr (b) 954 Filters .Specialty Chemicals: 1.3% 225,600 Lilly Industries, Cl. A 4,188 Industrial Coatings .Other Industrial Services: 9.2% 402,500 Wackenhut, Cl. B 9,660 Prison Management 346,000 Hub Group (b) 7,763 Truck & Rail Freight Forwarder Principal Amount of Number of Shares Value (000) - -------------------------------------------------------------------------- 347,400 Insurance Auto Auctions (b) $ 5,602 Auto Salvage Services 131,000 Labor Ready (b) 4,258 Temporary Manual Labor 186,900 Compass International Services (b) 1,308 Collection Agencies - ------------------------------------------------------------------------- 28,591 -------- Industrial Goods/Services: Total 36,704 - ------------------------------------------------------------------------- Energy/Minerals: 16.6% .Independent Power: 9.5% 855,400 MidAmerican Energy 29,618 Growth Utility .Oil/Gas Producers: 2.4% 473,800 Tesoro Petroleum (b) 7,551 Oil Refinery/Gas Reserves .Distribution/Marketing/Refining: 4.7% 283,000 Atmos Energy 7,075 Natural Gas Utility 208,400 Dynegy 4,246 Natural Gas & Electric Processing & Marketing 92,300 Equitable Resources 3,484 Natural Gas Utility & Producer - ------------------------------------------------------------------------- 14,805 -------- Energy/Minerals: Total 51,974 - ------------------------------------------------------------------------- Real Estate: 0.9% 47,000 The Rouse Company 1,193 Regional Shopping Malls 28,100 Gaylord Entertainment 843 Opryland Hotel & Other Assets 28,400 Forest City Enterprises Cl. A 795 Shopping Malls - ------------------------------------------------------------------------- 2,831 -------- Real Estate: Total 2,831 -------- Total Common Stocks: 94.2% 294,436 (Cost: $276,703) Short-Term Obligations: 5.9% Yield 5.20% - 5.21% Due 7/1 - 7/2/99 $9,328 Ford Motor Credit 9,328 $9,236 Walmart 9,234 - ------------------------------------------------------------------------- (Amortized Cost $18,562) 18,562 -------- Total Investments: 100.1% 312,998 (Cost $295,265) -------- Cash and Other Assets Less Liabilities: (0.1%) (331) -------- Total Net Assets: 100% $312,667 - ------------------------------------------------------------------------- 22 - -------------------------------------------------------------------------------- .Notes to Statement of Investments (a) At June 30, 1999, for federal income tax purposes cost of investments was $295,458,000 and net unrealized appreciation was $17,540,000, consisting of gross unrealized appreciation of $50,099,000 and gross unrealized depreciation of $32,559,000. (b) Non-income producing security. (c) On June 30, 1999, the Fund held 6.15% of the outstanding voting shares of IntelliQuest Information. The aggregate cost and value of investments in this company at June 30, 1999, was $5,147,000 and $3,623,000, respectively. The market value of this security represents 1.16% of the total net assets of the Fund at June 30, 1999. During the six months ended June 30, 1999, cost of purchases was $909,000. There were no proceeds from sales or dividends received from this company during the six months ended June 30, 1999. 23 Acorn International .Major Portfolio Changes in the Second Quarter Number of Shares ------------------------ 3/31/99 6/30/99 Additions - --------------------------------------------------------------------- Europe .Germany Kamps 0 $47,400 Merck 150,000 175,000 MobilCom 0 30,000 (includes effect of a 3 for 1 stock split) Sixt 50,000 70,000 Stinnes 0 400,000 .Finland Talentum 1,300,000 1,400,000 .Sweden Modern Times 0 350,000 .France Atos 360,000 400,000 Imetal 0 10,000 Penauille Polyservice 15,000 18,500 .United Kingdom Baltimore Technologies 0 300,000 Bodycote 650,000 1,750,000 (includes effect of a 5 for 2 stock split) Esat Telecom (Ireland) 75,000 205,000 Flextech 0 205,000 ITNET 250,000 1,240,000 Logica 500,000 600,000 NFC 0 2,000,000 NTL 467,000 500,000 Ocean Group 0 300,000 Photobition Group 665,000 1,860,000 Serco Group 2,000,000 2,100,000 SSL International 1,000,000 1,250,000 (formerly known as Seton Scholl Healthcare) .Italy Class Editori 0 1,000,000 Saipem 0 1,250,000 SEAT Pagine Gialle 2,000,000 4,000,000 .Spain Aguas de Barcelona 100,000 125,000 Cortefiel 350,000 400,000 .Netherlands Kempen 400,000 420,000 .Hungary Gedeon Richter 80,000 100,000 Matav ADR 0 55,000 - --------------------------------------------------------------------- Asia .Hong Kong SmarTone Telecom 2,500,000 3,000,000 .Japan Aiful 13,000 120,000 Benesse 0 50,000 JAFCO 0 125,000 Kadokawa Shoten 33,000 60,000 Nemic Lambda 0 48,000 Nintendo 130,000 144,000 NuSkin Enterprises 310,000 400,000 OBIC 27,600 35,000 Orix 100,000 175,000 Otsuka Kagu 21,000 25,000 Taiyo Ink 0 65,000 Trans Cosmos 31,000 95,000 .Taiwan Chroma Ate 1,249,616 2,599,500 (includes effect of a 30% stock dividend) .Malaysia Unisem 0 504,000 .Thailand United Broadcasting 0 885,900 .South Korea S1 Corporation 31,000 50,000 - --------------------------------------------------------------------- Latin America .Brazil Embratel 250,000 620,000 Tele Sudeste Celular 0 100,000 - --------------------------------------------------------------------- Other Countries .Australia Computeshare 0 650,000 Ecorp 0 2,500,000 ERG 0 6,500,000 Keycorp 0 2,000,000 .Canada Canadian Natural Resources 500,000 700,000 Power Financial 500,000 600,000 Penn West Petroleum 350,000 500,000 .Israel Amdocs 200,000 420,000 ECI Telecom 225,000 300,000 Gilat Satellite Network 0 25,000 .South Africa Dimension Data 2,500,000 5,000,000 .United States Azurix 0 200,000 Global TeleSystems 75,000 165,000 MIH 0 375,000 24 Number of Shares ------------------------ 3/31/99 6/30/99 Sales - --------------------------------------------------------------------- Europe .Germany Berzelius Umwelt 200,000 0 Boewe Systec 60,000 0 Cewe Color Holding 8,000 0 United Global 250,000 140,000 .Denmark Carli Gry 150,000 0 .Finland Elcoteq Network 770,000 0 Helsinki Telephone 150,000 0 .Sweden Autoliv 295,000 250,000 Esselte, Series A 400,000 0 WM Data Nordic 1,830,000 1,650,000 .United Kingdom AEA Technology 385,000 0 Airtours 700,000 0 N. Brown Group 1,500,000 0 Newsquest 760,000 0 Premier Oil 15,000,000 0 Parity 500,000 0 Shanks & McEwan 2,000,000 0 .Switzerland Cie Fin Richemont 20,000 12,500 Hero 13,000 0 .Italy Banca Pop Commercia e Industria 700,000 500,000 Banca Pop Di Bergamo 250,000 0 Editoriale L' Espresso 2,000,000 1,800,000 Gewiss 110,000 0 Industrie Natuzzi ADR 300,000 0 .Netherlands ASR Verzekeringsgroep 145,000 0 Getronics 560,000 500,000 Hunter Douglas 300,000 0 Kon. Pakhoed 250,000 0 Wegener Arcade NV 370,000 0 Asia - --------------------------------------------------------------------- .Hong Kong Varitronix 10,000,000 5,000,000 .Japan Arrk 207,000 0 Fuji Software ABC 210,000 150,000 Meitec 65,000 0 Nichii Gakkan 90,000 60,000 Nidec 125,000 75,000 Noritsu Koki 255,000 0 Ryohin Keikaku 115,000 100,000 Secom 54,000 0 Shinki 218,000 0 .Malaysia Malaysian Oxygen 1,595,000 576,000 .Philippines Int'l Container Terminal $8,750,000 0 Services Cv. 1.75% 3/13/04 .Singapore Datacraft Asia 10,000,000 9,000,000 Genting International 16,900,000 0 Venture Manufacturing 7,500,000 6,500,000 - --------------------------------------------------------------------- Latin America .Brazil Elevadores Atlas 470,000 380,000 - --------------------------------------------------------------------- Other Countries .South Africa Comparex Holdings 1,050,000 0 25 Acorn International .Statement of Investments (unaudited) June 30, 1999
Number of Shares Value (000) - ------------------------------------------------------------------------------- Common Stocks and Other Equity-Like Securities: 94.4% - ------------------------------------------------------------------------------- Europe: 53.5% .Germany/Austria: 4.8% 200,000 Rhoen Klinikum Pfd. $ 19,595 160,000 Rhoen Klinikum 15,923 Hospital Management 7,100 EM.TV & Merchandising 9,995 Children's Television Programming 140,000 UnitedGlobalCom (b) 9,467 Cable Television for Europe, Israel & Australia 40,000 Fresenius, Pfd. 7,075 Dialysis Equipment & Solutions 165,000 Flughafen Wien (Austria) 6,924 Vienna Airport Authority 400,000 Stinnes (b) 6,229 Freight Forwarder 175,000 Merck KGA 5,692 Pharmaceuticals 70,000 Sixt 4,894 Automobile Rental/Leasing 30,000 MobilCom 2,685 Telecommunication Services 47,400 Kamps 1,931 Bakery Chain - ------------------------------------------------------------------------------- 90,410 .Denmark: 0.5% 75,000 ISS International System (b) (c) 4,015 Cleaning Services 44,000 Kompan International 3,120 Playground Equipment 50,000 Vest Wood 3,031 Furniture - ------------------------------------------------------------------------------- 10,166 .Finland: 5.1% 1,500,000 Tieto Corporation 62,497 Computer Services/Consulting 1,400,000 Talentum (c) 21,369 Trade Journals & Internet Services 500,000 Fiskars, Series A 8,714 Scissors & Gardening Tools 100,000 Spar Finland (c) 2,991 Grocery/Convenience Stores - ------------------------------------------------------------------------------- 95,571 .Norway: 0.1% 654,750 Atex Media Solutions (b) 1,372 Print Media Software .Sweden: 5.0% 1,650,000 WM Data Nordic 62,879 Computer Services/Consulting 350,000 Modern Times (b) 7,595 TV, Newspapers & Internet 250,000 Autoliv 7,562 Seatbelts & Airbags 1,000,000 Mandator $ 6,645 Computer Services/Consulting 950,000 Bure Investment 5,028 Health Care Services & Investments 135,000 IBS (b) 3,041 Enterprise Software 250,000 Sigma 1,941 Technical Consulting - ------------------------------------------------------------------------------- 94,691 .France: 4.7% 400,000 Atos (b) 40,839 Computer Services/Transaction Processing 62,000 NRJ 13,958 Radio Network 60,000 Fininfo 10,272 Data Feeds for French Banks & Brokers 45,000 SITA 10,182 Waste Hauling & Landfills 95,000 Spir Communications 6,976 Regional Newspapers 18,500 Penauille Polyservice 5,209 Industrial Cleaning/Airport Services 10,000 Imetal 1,485 Industrial Materials - ------------------------------------------------------------------------------- 88,921 .United Kingdom/Ireland: 15.2% 2,100,000 Serco Group 47,336 Facilities Management 500,000 NTL (b) 43,094 Voice, Video & Data Services 1,870,000 Capita Group 19,352 Outsourcing Services 13,000,000 Electronics Boutique 18,904 Video/Computer Games Retailer 1,250,000 SSL International 14,423 Medical & Footcare Products 510,000 Euro Money Publications 13,867 Financial Publications 1,700,000 Rotork 11,818 Valve Actuators for Oil & Water Pipelines 1,350,000 Atkins 10,959 Outsourcing Services 1,750,000 Bodycote 10,938 Materials Technology & Metal Processing 205,000 Esat Telecom (Ireland) (b) 8,994 Telecommunication Services 3,500,000 Taylor Nelson 8,717 Market Research Services 1,240,000 ITNET 8,356 Outsourcing Services 2,500,000 Smith & Nephew 7,606 Medical Equipment & Supplies 2,000,000 Oriflame International 7,566 Cosmetics Sold Door-to-Door 2,000,000 NFC 6,636 Logistics & Moving Services
26
Number of Shares Value (000) - ------------------------------------------------------------------------------- 1,860,000 Photobition Group (b) $ 6,348 Production of Graphics for Exhibits 600,000 Logica 6,289 Computer Services/Consulting 400,000 Saville Systems ADR (Ireland) (b) 5,800 Telecommunications Billing & Customer Care Software 3,400,000 HALMA 5,681 Fire, Burglary & Flooding Detection Devices 1,500,000 Hogg Robinson 5,355 Corporate Travel Management 715,000 Fairey Group 4,948 Electronic Products 300,000 Ocean Group (b) 4,942 Freight Forwarder 300,000 Baltimore Technologies 3,405 Security Software & Systems Integration 205,000 Flextech 3,301 Cable Channels 74,000 Icon (Ireland) (b) 1,452 Contract Research Organization - ------------------------------------------------------------------------------- 286,087 .Switzerland: 5.2% 65,000 Selecta Group 25,923 Vending Machine Owner/Operator 12,500 Cie Fin Richemont 24,042 Luxury Goods, Tobacco & Pay TV 33,000 Phoenix Mecano 15,538 Electrical Components Manufacturer 6,500 Sarasin & Cie Bank 11,164 Private Banking 18,000 Societe Generale d'Affichage 8,510 Billboard Advertising 15,000 Bon Appetit 8,443 Cash & Carry Stores/Specialty Restaurants 3,200 Pargesa Holdings 4,858 Industrial & Media Conglomerate - ------------------------------------------------------------------------------- 98,478 .Italy/Greece: 7.4% 2,900,000 Autogrill 29,878 Tollway Restaurants 1,800,000 Editoriale L'Espresso 29,145 Newspapers & Magazines 3,000,000 Banca Fideuram 17,481 Life Insurance & Mutual Funds 1,200,000 Attica Enterprises (Greece) 13,718 Ferry Line 500,000 Banco Pop Commercia e Industria 11,705 500,000 Banco Pop Commercia e Industria Rights (b) 310 Regional Bank 1,400,000 Mediolanum 10,756 Life Insurance & Mutual Funds 1,400,000 Aeroporti di Roma 8,648 Airport Management 1,000,000 Class Editori 7,993 Newspapers & On-Line Financial Data 4,000,000 SEAT Pagine Gialle $ 5,466 Yellow Pages Publisher 1,250,000 Saipem 4,989 Offshore Construction - ------------------------------------------------------------------------------- 140,089 .Spain/Portugal: 2.2% 400,000 Mapfre Vida 11,427 Life Insurance & Mutual Funds 400,000 Cortefiel 10,519 Apparel Retailer 650,000 Prosegur 7,307 Security Guards 125,000 Aguas de Barcelona 6,510 250 Aguas de Barcelona New Shares 13 Water Utility 419,000 Filmes Lusomundo (Portugal) 5,825 Newspapers, Radio, Video, Film Distribution - ------------------------------------------------------------------------------- 41,601 .Netherlands: 2.6% 420,000 Kempen 21,008 Stock Brokerage/Investment Management 500,000 Getronics 19,234 Computer Services/Consulting 950,000 Scala Business Solutions (b) (c) 8,083 95,775 Scala Business Solutions Warrants 3/31/01 (b) 89 Enterprise Software for Small- to Medium- Sized Companies - ------------------------------------------------------------------------------- 48,414 .Hungary: 0.7% 1,200,000 Matav 6,489 55,000 Matav ADR 1,512 Telecommunication Services 100,000 Gedeon Richter 4,351 Pharmaceuticals - ------------------------------------------------------------------------------- 12,352 ---------- Europe: Total 1,008,152 - ------------------------------------------------------------------------------- Asia: 23.8% .Hong Kong: 3.6% 14,999,000 Li and Fung 35,956 Sourcing of Consumer Goods 3,000,000 SmarTone Telecom 10,672 Mobile Telecommunications 5,000,000 Varitronix International 10,407 LCD Manufacturer 2,000,000 TVB 9,383 Television Broadcasting - ------------------------------------------------------------------------------- 66,418
27 Acorn International .Statement of Investments, continued
Number of Shares Value (000) - ------------------------------------------------------------------------------- .India: 0.0% 2,000,000 Centurion Quantum Growth (b) $ 461 Closed-End Fund .Japan: 10.1% 100,000 Ryohin Keikaku 25,157 Designer & Retailer of Muji Brand Specialty Consumer Goods 144,000 Nintendo 20,237 Video Games 175,000 Orix 15,615 Finance Leasing 120,000 Aiful 14,693 Consumer Lending 60,000 Kadokawa Shoten 12,244 Magazine/Book Publisher 75,000 Nidec 11,283 Spindle Motor Manufacturer 35,000 OBIC 9,571 Computer Integrator 150,000 Fuji Software ABC 8,923 Computer Services/Consulting 80,000 Takefuji 8,268 Consumer Lending 125,000 JAFCO 8,262 Venture Capital Fund 20,000 Bellysystem 24 8,171 Telemarketing 400,000 NuSkin Enterprises (b) 7,975 Personal Care/Herbal Products 500,000 Olympus Optical 7,390 Photographic & Medical Equipment 95,000 Trans Cosmos 6,907 Information Technology Services & Investments 60,000 Nichii Gakkan 6,543 Health Care Services 65,000 Taiyo Ink (b) 6,068 Speciality Chemicals 50,000 Benesse (b) 5,432 Correspondence Courses 25,000 Otsuka Kagu 4,523 Furniture Retailer 48,000 Nemic Lambda (b) 3,529 Power Supplies - ------------------------------------------------------------------------------- 190,791 .Taiwan: 0.4% 2,599,499 Chroma Ate (b) 7,605 Test & Measurement Instruments .Malaysia: 0.1% 504,000 Unisem 1,254 Semiconductor Assembly 576,000 Malaysian Oxygen 1,228 Industrial Gases - ------------------------------------------------------------------------------- 2,482 .Philippines: 0.6% 79,260,000 Int'l Container Terminal Services (b) $ 10,311 Container Handling Terminals & Port Management .Thailand: 0.0% 885,900 United Broadcasting (b) 697 Direct-to-Home Satellite Broadcasting .South Korea: 0.5% 50,000 S1 Corporation 9,633 3,402 S1 Corporation Rights (b) 155 Central Stations Alarm Business - ------------------------------------------------------------------------------- 9,788 .Singapore: 8.5% 6,500,000 Venture Manufacturing 50,015 Electronic Manufacturing Services 9,500,000 Star Cruises 42,370 Cruise Line 9,000,000 Datacraft Asia 39,240 Network Systems Integration 6,500,000 Natsteel Electronics 28,443 Electronic Manufacturing Services - ------------------------------------------------------------------------------- 160,068 -------- Asia: Total 448,621 - ------------------------------------------------------------------------------- Latin America: 4.8% .Mexico: 3.0% 7,000,000 Grupo Industrial Bimbo 15,559 Bread, Baked Goods & Snacks 3,500,000 Kimberly Clark de Mexico 14,355 Paper Products 3,600,000 Corp Interamericana de Entretenimiento (b) 11,679 Special Events & Live Entertainment 4,600,000 Grupo Continental 7,196 Beverages 8,940,000 Nadro, Series L 7,097 Pharmaceutical Distributor - ------------------------------------------------------------------------------- 55,886 .Brazil: 0.9% 620,000 Embratel 8,602 Long Distance Telephone Services 380,000 Elevadores Atlas 5,412 Elevator Installation & Maintenance 100,000 TeleSudeste Celular 2,900 Cellular Operator - ------------------------------------------------------------------------------- 16,914 .Argentina: 0.7% 400,000 IRSA GDS 12,350 Real Estate Management & Development .Peru: 0.2% 7,100,000 Enrique Ferreyros 4,662 Heavy Machinery Dealer ------- Latin America: Total 89,812
28
Principal Amount or Number of Shares Value (000) Number of Shares Value (000) - ---------------------------------------------------------------- ---------------------------------------------------------- - ---------------------------------------------------------------- .South Africa: 1.2% Other Countries: 12.3% 5,000,000 Dimension Data (b) $ 22,123 .Australia: 2.4% Networks & Computer Services 5,000,000 AAPT (b) $ 15,555 Telecommunications Services .Russia: 0.0% 6,500,000 ERG (b) 12,047 $1,500,000 Khanty Mansiysk 10% Notes (b) 750 Smart Card Systems for Public Transport 3,834 Khanty Mansiysk (b) 113 650,000 Computershare (b) 7,671 Oil Production in Russia Financial Software/Services ---------------------------------------------------------- 2,000,000 KeyCorp (b) (c) 4,938 863 Smart Card Technology 2,500,000 Ecorp (b) 4,385 .United States: 2.5% On-line Publishing/Services 325,000 AES Corporation (b) 18,891 - -------------------------------------------------------------------- Power Plants 44,596 165,000 Global TeleSystems (b) 13,365 .Canada: 4.5% Telecommunication Services 650,000 Celestica (b) 27,974 375,000 MIH (b) 9,937 Electronic Manufacturing Services Pay-TV 700,000 Canadian Natural Resources (b) 13,715 200,000 Azurix (b) 4,000 Oil & Gas Producer Owner & Operator of Water Utilities 600,000 Power Financial 11,351 ---------------------------------------------------------- Financial Services Holding Company 46,193 500,000 Penn West Petroleum (b) 9,121 --------- Oil & Gas Producer Other: Total 230,764 600,000 LGS Group (b) 5,310 Computer Systems Integrator --------- 1,200,000 Bracknell (b) 5,108 Total Common Stocks and Other Electrical Contractor & Facilities Management Equity-Like Securities: 94.4% 1,777,349 300,000 Leitch Technology (b) 4,895 (Cost: $1,059,651) Television Production Equipment Short-Term Obligations: 4.4% 4,000,000 Dundee Realty (b) 3,783 Yield 4.95% - 5.20% Due 7/1 - 7/2/99 Real Estate $33,904 Edna Services 33,899 100,000 Northstar Energy (b) 3,581 $25,339 Ford Motor Credit 25,339 Oil & Gas Producer $24,618 IBM Credit 24,615 - -------------------------------------------------------------------- --------- 84,838 (Amortized Cost: $83,853) 83,853 .Israel: 1.7% --------- 250,000 Galileo Technology (b) 11,328 Total Investments: 98.8% 1,861,202 Communications Semiconductors (Cost: $1,143,504) 300,000 ECI Telecom 9,956 --------- Telecommunication Equipment Cash and Other Assets less Liabilities: 1.2% 21,904 420,000 Amdocs (b) 9,555 --------- Telecommunications Billing & Customer Total Net Assets: 100% $ 1,883,106 Care Software ---------------------------------------------------------- 25,000 Gilat Satellite Network (b) 1,312 Satellite Communication Equipment - -------------------------------------------------------------------- 32,151
- -------------------------------------------------------------------------------- .Notes to Statement of Investments (a) At June 30, 1999, for federal income tax purposes cost of investments was $1,143,950,000 and net unrealized appreciation was $717,252,000 consisting of gross unrealized appreciation of $771,615,000 and gross unrealized depreciation of $54,363,000. (b) Non-income producing security. (c) On June 30, 1999, the Fund held the following percentages of the outstanding voting shares of the affiliated companies (ownership of at least 5%) listed below: Kompan International (Denmark)........................... 9.36% Key Corp (Australia)......................................... 6.40% Spar Finland (Finland)................................... 8.80% Scala Business Solutions (Netherlands)....................... 5.16% Talentum (Finland)....................................... 8.58%
The aggregate cost and value of investments in these companies at June 30, 1999, was $36,380,000 and $40,500,000 respectively. The market value of these securities represents 2.15% of the total net assets at June 30, 1999. During the period ended June 30, 1999, the cost of purchases and proceeds from sales in affiliated companies was $8,184,000 and $6,644,000 respectively. Net dividends received from these companies amounted to $466,000 and net realized loss in sales of investments in such companies amounted to $3,447,000. 29 Acorn International .Portfolio Diversification At June 30, 1999, the Fund's portfolio of investments as a percent of net assets was diversified as follows:
Value (000) Percent Value (000) Percent - --------------------------------------------------- -------------------------------------------------------------- .Information .Finance Computer Services $256,059 13.6% Finance Companies $ 32,145 1.7% Publishing 102,885 5.5 Money Management 28,237 1.5 Telephone Services 92,908 5.0 Banks 23,179 1.2 Contract Manufacturing 78,458 4.2 Insurance 22,778 1.2 CATV 65,799 3.5 Brokerage 21,008 1.1 Business Software 31,345 1.7 Closed-End Funds 5,319 0.3 Instrumentation 28,753 1.5 ------------------------------------------------------------- Transaction Processors 24,656 1.3 132,666 7.0 Programming 18,287 1.0 .Industrial Goods/Services Business Information 16,620 0.9 Outsourcing Services 117,618 6.2 Broadcasting 14,278 0.7 Electrical Components 57,448 3.1 Radio 13,958 0.7 Industrial Services 21,691 1.1 Semiconductors 12,582 0.7 Machinery Processing 16,480 0.9 Computer Hardware 11,283 0.6 Industrial Materials 12,423 0.7 Marketing 8,717 0.4 Specialty Chemicals 7,296 0.4 Advertising 8,510 0.4 ------------------------------------------------------------- Internet 4,385 0.2 232,956 12.4 Mobile Communications 2,900 0.2 .Energy/Minerals Telephone Equipment 1,312 0.1 Oil/Gas Producers 27,280 1.4 - --------------------------------------------------- Independent Power 18,891 1.0 793,695 42.2 Oil Services 4,989 0.3 .Health Care ------------------------------------------------------------- Hospital Management 35,518 1.9 51,160 2.7 Services 25,994 1.4 .Other Industries Medical Equipment 14,465 0.8 Transportation 46,237 2.5 Pharmaceuticals 10,043 0.5 Real Estate 16,133 0.9 Hospital/Laboratory Supplies 7,606 0.4 Regulated Utilities 10,523 0.5 - --------------------------------------------------- Waste Management 10,182 0.5 93,626 5.0 ------------------------------------------------------------- .Consumer Goods/Services 83,075 4.4 Consumer Services 84,925 4.5 Entertainment 63,282 3.3 ---------------------- Retail 50,515 2.7 Total Common Stocks and Travel 47,725 2.5 Other Equity-Like Securities: 1,777,349 94.4 Nondurables 38,610 2.0 Short-Term Obligations: 83,853 4.4 Restaurants 29,878 1.6 ---------------------- Food 24,002 1.3 Total Investments: 1,861,202 98.8 Consumer Software 20,237 1.1 Cash and Other Assets less Consumer Goods Distribution 10,088 0.5 Liabilities: 21,904 1.2 Durable Goods 7,562 0.4 ---------------------- Beverages 7,196 0.4 Net Assets: $ 1,883,106 100.0% Leisure Products 3,120 0.2 ------------------------------------------------------------- Furniture & Textiles 3,031 0.2 - --------------------------------------------------- 390,171 20.7
30 Acorn Fund .Major Portfolio Changes in the Second Quarter Number of Shares ---------------------- 3/31/99 6/30/99 Additions - --------------------------------------------------------------------- Information AppNet Systems 0 135,000 Computer Task Group 652,000 790,000 Entra Data (Sweden) 0 20,000 IMR Global 159,000 350,000 Keane 123,000 275,000 Online Resources 0 310,000 PRIMEDIA 1,000,000 1,100,000 REMEC 0 262,000 Softbank (Japan) 165,000 235,000 Structural Dynamics 33,000 310,000 Tele Celular Sul (Brazil) 0 36,000 THQ 97,000 200,000 World Color Press 1,050,000 1,240,000 Young Broadcasting 500,000 700,000 - --------------------------------------------------------------------- Health Care Incyte Pharmaceuticals 0 160,000 NPS Pharmaceuticals 156,000 529,000 Orthofix International 0 232,000 Thermedics 0 7,000 Wesley Jessen Vision 13,000 299,000 - --------------------------------------------------------------------- Consumer Goods/Services Anchor Gaming 270,000 450,000 Aristocrat Leisure (Australia) 500,000 849,000 Bally Total Fitness 400,000 480,000 Gadzooks 63,000 425,000 Gildan Activewear 0 166,000 Herman Miller 0 336,000 ITT Educational Services 0 187,000 Just For Feet 68,000 600,000 Mobile Mini 0 294,000 Nautica Enterprises 270,000 580,000 Sirena Apparel 0 504,000 West TeleServices 0 267,000 Whole Foods Market 345,000 390,000 - --------------------------------------------------------------------- Finance Ace Cash Express 58,000 204,000 Affiliated Managers Group 180,000 300,000 Americredit 2,938,000 3,267,000 Chittenden 64,000 409,000 Commonwealth Bancorp 575,000 677,000 Creditrust 465,000 525,000 Eldorado Bancshares 0 400,000 FPIC Insurance 151,000 220,000 Peoples Heritage Financial 70,000 178,000 Phoenix Investment Partners 2,524,000 2,637,000 StanCorp Financial 0 210,000 TCF Financial 695,000 787,000 Texas Regional Bancshares 542,000 602,000 UICI 815,000 1,155,000 - --------------------------------------------------------------------- Industrial Goods/Services Advanced Lighting Technologies 218,000 550,000 Applied Industrial Technologies 350,000 500,000 Cambrex 523,000 600,000 Forward Air 0 120,000 GP Strategies 512,000 600,000 HAoLO Industries 801,000 1,001,000 Intermet 76,000 400,000 Labor Ready 1,310,000 1,440,000 Lilly Industries, Cl. A 1,000,000 1,100,000 Spartech 0 100,000 - --------------------------------------------------------------------- Energy/Minerals Atmos Energy 847,000 1,000,000 Basin Exploration 0 150,000 Canadian Natural Resources (Canada) 400,000 500,000 Cross Timbers Oil 0 481,000 Dynegy 890,000 1,000,000 Hanover Compressor 0 150,000 Saipem (Italy) 0 1,250,000 - --------------------------------------------------------------------- Other Industries Azurix 0 283,000 First Industrial Realty Trust 200,000 500,000 First Washington Realty Trust 190,000 385,000 Stericycle 0 152,000 The Rouse Company 829,000 968,000 Unisource Energy 500,000 700,000 31 Acorn Fund . Major Portfolio Changes in the Second Quarter, continued Number of Shares ---------------------- 3/31/99 6/30/99 Sales - --------------------------------------------------------------------- Information ACNielsen 638,000 403,000 Acres Gaming 380,000 0 Altera 24,000 0 American Power Conversion 225,000 350,000 (includes effect of 2 for 1 stock split) Analysts International 535,000 280,000 Cablevision Systems 125,000 0 Cablevision Systems, Pfd 100,000 0 Choicepoint 355,000 210,000 CMP Media 500,000 0 Commonwealth Telephone 454,000 354,000 Getty Images 860,000 770,000 Hutchinson Technology 69,000 0 Information Management 66,000 0 Jabil Circuit 675,000 475,000 Liberty Media Group, AT&T 2,750,000 2,600,000 (includes effect of 2 for 1 stock split) Macrovision 200,000 150,000 Mettler Toledo 675,000 591,000 Micros Systems 750,000 700,000 National Instruments 135,000 0 RCN 1,584,000 1,484,000 SkyTel Communications 400,000 0 Solectron 1,440,000 890,000 Sykes Enterprises 750,000 670,000 Thermo Instrument Systems 367,000 0 TV Guide 750,000 366,000 United International Holdings (Austria) 100,000 0 Univision Communications 85,000 0 - --------------------------------------------------------------------- Health Care Affymetrix 153,000 0 Hillenbrand Industries 239,000 91,000 Lincare Holdings 2,690,000 2,572,000 McKesson HBOC 806,000 0 Ocular Sciences 13,000 0 Respironics 729,000 555,000 - --------------------------------------------------------------------- Consumer Goods/Services Autoliv 165,000 0 Carnival 1,700,000 1,500,000 Cie Fin Richemont (Switzerland) 11,000 0 Fred Meyer Holdings 25,000 0 Harley-Davidson 1,700,000 1,250,000 Nintendo (Japan) 87,000 0 Protection One 742,000 0 - --------------------------------------------------------------------- Finance Baldwin & Lyons, Cl. B 723,000 498,000 Foremost 687,000 430,000 SEI Investments 551,000 539,000 Washington Mutual 475,000 62,000 - --------------------------------------------------------------------- Industrial Goods/Services Expeditors Int'l of Washington 1,100,000 1,890,000 (includes effect of 2 for 1 stock split) Thermo Electron 325,000 0 Worthington Industries 1,295,000 700,000 - --------------------------------------------------------------------- Energy/Minerals AES Corporation 1,464,000 1,264,000 Atwood Oceanics 377,000 225,000 Enron Oil & Gas 470,000 0 J Ray McDermott 570,000 0 KN Energy 260,000 0 - --------------------------------------------------------------------- Other Industries Archstone 350,000 0 Homestead Village 945,000 0 32 Acorn Fund .Statement of Investments (unaudited) June 30, 1999 Number of Shares Value (000) - --------------------------------------------------------------------- Common Stocks and Other Equity-Like Securities: 96.0% - --------------------------------------------------------------------- Information: 30.3% Media .Broadcasting: 1.8% 700,000 Young Broadcasting (b) $ 29,794 Television Stations 819,000 Data Transmission Network (b) (c) 23,034 Data Services for Farmers 575,000 Granite Broadcasting (b) 4,492 Television Stations 150,000 Cumulus Media (b) 3,281 Radio Stations - --------------------------------------------------------------------- 60,601 .Television Programming: 3.7% 2,600,000 Liberty Media Group, AT&T (b) 95,550 Cable Programming 366,000 TV Guide (b) 13,405 TV Program Guides & Programming 150,000 Macrovision (b) 11,231 Copyright Protection for Video Tapes & Data 150,000 Playboy Enterprises (b) 3,984 Publishing & CATV Programming - --------------------------------------------------------------------- 124,170 Telecommunications .Telephone Services: 2.3% 1,484,000 RCN (b) 61,772 Metro Market: Voice, Video & Internet Services 354,000 Commonwealth Telephone (b) 14,315 Rural Market: Local, Long Distance & Internet Access 140,000 Startec Global Communications (b) 1,698 International Telecommunications - --------------------------------------------------------------------- 77,785 .Mobile Communications: 1.8% 580,000 Telephone & Data Systems 42,376 Cellular & Telephone Franchises 500,000 Pinnacle Holdings (b) 12,250 Towers for Cellular, PCS & Paging 355,000 COMARCO (b) (c) 7,033 Wireless Network Testing - --------------------------------------------------------------------- 61,659 .Telecommunications Equipment: 0.5% 864,000 Aspect Telecommunications (b) 8,424 Call Center Equipment 262,000 REMEC (b) 4,225 Telecommunication Equipment for Defense & Commercial 36,000 Comverse Technology (b) 2,718 Voicemail & Other Enhanced Services Equipment - --------------------------------------------------------------------- 15,367 Computer Related Hardware .Computer Hardware/ Related Systems: 2.1% 913,000 Kronos (b) (c) 41,542 Labor Management Solutions 700,000 Micros Systems (b) 23,800 Information System for Restaurants & Hotels Principal Amount or Number of Shares Value (000) - --------------------------------------------------------------------- 350,000 American Power Conversion (b) $ 7,044 Uninterruptable Power Systems 72,386 .Semiconductors/ Related Equipment: 0.4% 350,000 Oak Industries (b) 15,291 Communications Components .Gaming Equipment: 1.9% 2,342,000 International Game Technology 43,327 Slot Machines & Progressive Jackpots 450,000 Anchor Gaming (b) 21,628 Slot Machines & Casino - --------------------------------------------------------------------- 64,955 .Contract Manufacturing: 2.8% 890,000 Solectron (b) 59,352 Electronic Manufacturing Services 475,000 Jabil Circuit (b) 21,434 Electronic Manufacturing Services 200,000 Sanmina (b) 15,175 Backplanes & Electronic Manufacturing Services - --------------------------------------------------------------------- 95,961 .Instrumentation: 1.0% 591,000 Mettler Toledo (b) 14,664 Laboratory Products 613,000 Thermoquest (b) 8,161 $1,500,000 Thermoquest, 5% Note Due 8/15/00 1,478 Mass Spectrometry & Chromatography $5,000,000 Thermo Optek, 5% Note Due 10/15/00 4,925 265,000 Thermo Optek (b) 2,749 Elemental & Molecular Spectroscopy 232,000 Metrika Systems (b) 2,030 Gamma Ray Instrumentation 266,122 Onix Systems (b) 1,597 Field Measurement & Sensor Equipment - --------------------------------------------------------------------- 35,604 .Business Software: 1.1% 1,075,000 Systems & Computer Technology (b) 15,655 Enterprise Software & Services 280,000 Sterling Commerce (b) 10,220 Electronic Commerce Software & Services 650,000 JDA Software Group (b) 6,053 Applications/Software & Services for Retailers 310,000 Structural Dynamics (b) 5,754 Design Software - --------------------------------------------------------------------- 37,682 .Consumer Software: 1.1% 350,000 Electronic Arts (b) 18,987 Entertainment Software $6,500,000 Activision, 6.75% Note Due 1/1/05 6,207 410,000 Activision (b) 5,971 Entertainment Software 200,000 THQ (b) 5,750 Entertainment Software 36,915 .Computer Services: 2.2% 670,000 Sykes Enterprises (b) 22,361 Call Center Services 790,000 Computer Task Group 13,430 Application Development & Staffing Services 33 Acorn Fund .Statement of Investments, continued Number of Shares Value (000) - -------------------------------------------------------------------------------- 195,000 BISYS (b) $ 11,407 Processing for Banks 642,000 RCM Technologies (b) (c) 8,507 Technology Staffing Services 350,000 IMR Global (b) 6,737 Application Development & Maintenance Services 275,000 Keane (b) 6,222 Application Development & Maintenance Services 280,000 Analysts International 4,025 Technology Staffing Services 1,037,000 Aztec Technology Partners (b) 1,944 Application Development & Maintenance Services 39,000 Dunn Computer (b) 78 Custom Computer Systems for Government - -------------------------------------------------------------------------------- 74,711 Software/Services .Business Information/Marketing Services/Publishing: 3.9% 1,240,000 World Color Press (b) 34,100 Web-Offset Printing 1,100,000 PRIMEDIA 18,631 Specialty Magazines & Other Publications 770,000 Getty Images (b) 14,534 Photographs for Publications & Electronic Media 210,000 Choicepoint (b) 14,096 Fraud Protection Information 1,400,000 InfoUSA, Cl. A (b) 12,425 1,000,000 InfoUSA, Cl. B (b) 8,500 Business Data for Sales Leads 403,000 ACNielsen (b) 12,191 Market Research, Information & Analysis 450,000 Information Holdings (b) 8,831 Scientific & Medical Publications, Patent Information 350,000 Acxiom (b) 8,728 Database Marketing Services - -------------------------------------------------------------------------------- 132,036 .Internet: 0.5% 200,000 Security Dynamics (b) 4,250 Authentication & Encryption Software 310,000 Online Resources (b) 4,204 Internet Banking Technology 2,683 Bigfoot International (b) (c) 4,024 Internet Direct Marketing 250,000 NeoPlanet, Series A (b) 2,000 Cool Web Browser 135,000 AppNet Systems (b) 1,814 Internet Application Development 342,855 GIGA (b) 1,714 29,714 GIGA Warrants (b) 8 Data on Information Technology - -------------------------------------------------------------------------------- 18,014 .Electronics Distribution: 0.5% 790,000 Pioneer-Standard Electronics 9,480 Component & Computer Distribution 400,000 Kent Electronics (b) 7,925 Component Distribution & Contract Assembly - -------------------------------------------------------------------------------- 17,405 .Transaction Processors: 2.7% 1,855,000 National Data (c) $ 79,301 Credit Card & Health Claims Processor 300,000 Concord EFS (b) 12,694 Credit Card Processor - -------------------------------------------------------------------------------- 91,995 --------- Information: Total 1,032,537 - -------------------------------------------------------------------------------- Health Care: 6.0% .Biotechnology/Drug Delivery: 1.5% 450,000 Inhale Therapeutic Systems (b) 10,716 Pulmonary Drug Delivery 329,000 Protein Design Labs (b) 7,300 Computer Designed Monoclonal Antibodies 525,000 Myriad Genetics (b) 4,725 Gene Discovery & Diagnostic Products 1,508,000 Corvas International (b) (c) 4,524 Rational Drug Design 351,000 Guilford Pharmaceuticals (b) 4,475 Drug Delivery & Neurology Drugs 915,000 Microcide Pharmaceuticals (b) (c) 4,318 Antibiotics 160,000 Incyte Pharmaceutical (b) 4,230 Gene Sequencing 768,000 Synaptic Pharmaceuticals (b) (c) 3,648 Receptor Targeted Drug Design 529,000 NPS Pharmaceuticals (b) 3,505 Small Molecule Drugs 664,000 Genome Therapeutics (b) 1,992 Gene Discovery Services 230,000 CuraGen (b) 1,840 Genomics - -------------------------------------------------------------------------------- 51,273 .Medical Equipment: 0.9% 299,000 Wesley Jessen Vision (b) 9,680 Contact Lenses 555,000 Respironics (b) 8,394 Respiratory Devices 443,000 Acuson (b) 7,614 Ultrasound Devices 232,000 Orthofix International (b) 3,451 Bone Fixation & Stimulation Devices 7,000 Thermedics (b) 65 Respiratory, Neurodiagnostics & Cardiovascular - -------------------------------------------------------------------------------- 29,204 .Hospital/Laboratory Supplies: 0.1% 91,000 Hillenbrand Industries 3,936 Hospital Beds & Coffins .Services 3.5% 2,572,000 Lincare Holdings (b) 64,300 Home Health Care Services 1,952,000 First Health Group (b) 42,090 PPO Network 1,280,000 Magellan Health Services (b) 12,800 Mental Health Services 34 Number of Shares Value (000) - -------------------------------------------------------------------------------- 43,000 Spectrum Health Solutions (b) $ 11 Workmen's Compensation - -------------------------------------------------------------------------------- 119,201 ------- Health Care: Total 203,614 - -------------------------------------------------------------------------------- Consumer Goods/Services: 10.0% Goods .Leisure Vehicles: 2.4% 1,250,000 Harley-Davidson 67,969 Motorcycles & Related Merchandise 474,000 Thor Industries 13,450 Busses & RV's - -------------------------------------------------------------------------------- 81,419 .Furniture: 0.2% 336,000 Herman Miller 7,056 Office Furniture .Nondurables: 0.2% 401,000 First Years 6,015 Infant & Toddler Products .Apparel Manufacturers: 1.5% 630,000 Jones Apparel (b) 21,617 Women's Apparel 600,000 Unifi (b) 12,750 Polyester & Nylon Fabrics 429,000 St. John Knits 12,548 Upscale Knitware 166,000 Gildan Activewear (b) 2,801 Cotton T-Shirts 504,000 Sirena Apparel (b) (c) 1,008 Designer Women's Apparel - -------------------------------------------------------------------------------- 50,724 Services .Retail: 2.2% 1,600,000 Borders Group (b) 25,300 Bookstores 390,000 Whole Foods Market (b) 18,744 Natural Food Supermarkets 580,000 Nautica Enterprises (b) 9,788 Men's Casual Apparel 911,000 Host Marriott Services (b) 7,402 Fast Food Kiosks in Airports 425,000 Gadzooks (b) 6,800 Teen Apparel Retailer 600,000 Just for Feet (b) 3,862 Athletic Shoe Retailer 400,000 Panera Bread (b) 2,550 Bakery & Deli Restaurants - -------------------------------------------------------------------------------- 74,446 .Consumer Services: 0.7% 480,000 Bally Total Fitness (b) 13,620 Fitness Centers 187,000 ITT Educational Services (b) 4,874 Technology Oriented Postsecondary Degree Programs 267,000 West TeleServices (b) 2,503 Customer Care & Sales Support 55,000 Steiner Leisure (b) 1,667 Spas & Hair/Skin Products on Cruise Ships - -------------------------------------------------------------------------------- 22,664 Principal Amount of Number of Shares Value (000) - -------------------------------------------------------------------------------- .Casinos: 0.5% 500,000 Hollywood Park (b) $ 8,500 Race Track & Casino 250,000 Station Casinos (b) 5,094 Casinos & Riverboats 535,000 Monarch Casino & Resort (b) (c) 3,411 Casino/Hotel in Reno 63,000 Lakes Gaming (b) 689 Hotel & Casino in Biloxi & Gulfport $ 6,250,000 Grand Palais Casino 14% Note Due 2/25/98 (b) 312 New Orleans Casino - -------------------------------------------------------------------------------- 18,006 .Cruise Lines: 2.3% 1,500,000 Carnival 72,750 Largest Cruise Line 140,000 Royal Caribbean Cruises 6,125 Cruises to Caribbean & Alaska 410,000 Royal Olympic Cruise (b) 1,179 Cruises in Mediterranean - -------------------------------------------------------------------------------- 80,054 ------- Consumer Goods/Services: Total 340,384 - -------------------------------------------------------------------------------- Finance: 14.6% .Banks: 2.0% 787,000 TCF Financial 21,938 Great Lakes Bank 602,000 Texas Regional Bancshares 16,367 TexMex Bank 409,000 Chittenden 12,781 Vermont & West Massachusetts Bank 170,000 CNB Bancshares 9,690 Indiana Bank 400,000 Eldorado Bancshares (b) 4,400 California Bank 178,000 Peoples Heritage Financial 3,349 New England Bank - -------------------------------------------------------------------------------- 68,525 .Savings & Loans: 2.4% 1,578,000 Peoples Bank Bridgeport 48,030 Connecticut Savings & Loan 801,000 Washington Federal 17,972 Washington State Savings & Loan 677,000 Commonwealth Bancorp 12,144 Philadelphia Savings & Loan 62,000 Washington Mutual 2,193 West Coast Savings & Loan 554,000 Coast Contingency Rights (b) 589 Litigation Claims Against US Government - -------------------------------------------------------------------------------- 80,928 .Insurance: 4.0% 1,155,000 UICI (b) 31,907 Insurance/Specialty Finance 78,000 Markel (b) 14,586 Specialty Insurance 400,000 Protective Life 13,200 Life/Dental Insurance 511,000 Leucadia National 12,967 Insurance Holding Company 35 Acorn Fund .Statement of Investments, continued Number of Shares Value (000) - -------------------------------------------------------------------------------- 498,000 Baldwin & Lyons, Cl. B $ 11,796 Trucking Insurance 220,000 FPIC Insurance (b) 10,670 Medical & Dental Malpractice Insurance 430,000 Foremost 9,460 Mobile Home & RV Insurance 612,000 Acceptance Insurance (b) 9,218 Crop Insurance 320,000 United Fire & Casualty 8,320 Property & Casualty 320,000 HCC Insurance Holdings 7,260 Aviation Insurance 210,000 StanCorp Financial (b) 6,300 Group Life, Disability & 401K - -------------------------------------------------------------------------------- 135,684 .Money Management: 3.4% 539,000 SEI Investments 47,567 Mutual Fund Administration 2,637,000 Phoenix Investment Partners (b) (c) 22,744 Mutual Fund & Pension Manager 1,063,000 Baker Fentress 20,197 Closed-End Investment Company 1,034,000 Pioneer Group (b) 17,837 Equity Mutual Funds 300,000 Affiliated Managers Group (b) 9,056 Mutual Fund & Pension Manager - -------------------------------------------------------------------------------- 117,401 .Finance Companies: 2.8% 3,267,000 Americredit (b) (c) 52,272 Auto Lending 525,000 Creditrust (b) (c) 14,569 Buys Defaulted Credit Card Paper 600,000 DVI Health Services (b) 10,275 Leases for Big Medical Equipment 1,820,000 World Acceptance (b) (c) 9,157 Personal Loans 1,375,000 Capital Trust (b) 6,187 Mortgage Loans 204,000 Ace Cash Express (b) 2,881 Check Cashing Stores - -------------------------------------------------------------------------------- 95,341 ------- Finance: Total 497,879 - -------------------------------------------------------------------------------- Industrial Goods/Services: 9.6% .Steel 1.4% 825,000 Gibraltar Steel (b) (c) 20,419 Steel Processing 700,000 Worthington Industries 11,506 Steel Processing 400,000 Intermet Holdings 6,050 Ductile Iron & Aluminum Foundries 345,000 A M Castle 5,865 Steel Distribution 420,000 Atchison Casting (b) (c) 4,371 Steel Foundries - -------------------------------------------------------------------------------- 48,211 .Industrial Goods: 1.0% 1,000,000 Clarcor 19,187 Filters 500,000 Applied Industrial Technologies 9,500 Industrial Components Distribution 550,000 Advanced Lighting Technologies (b) $ 4,950 Metal Halide Lighting - -------------------------------------------------------------------------------- 33,637 .Specialty Chemicals & Industrial Materials: 1.2% 1,100,000 Lilly Industries, Cl. A 20,419 Industrial Coatings 600,000 Cambrex 15,750 Pharmaceutical & Other Specialty Chemicals 100,000 Spartech 3,163 Plastics 445,000 Symex (c) 2,003 Combinatorial Materials 100,000 Brunswick Technologies (b) 544 Fiberglass Fabric for Composites - -------------------------------------------------------------------------------- 41,879 .Outsourcing Services & Training: 1.6% 1,440,000 Labor Ready (b) 46,800 Temporary Manual Labor 600,000 GP Strategies (b) (c) 5,250 Training Programs 500,000 International Total Services (b) (c) 1,594 Aviation Services - -------------------------------------------------------------------------------- 53,644 .Logistics: 2.8% 1,890,000 Expeditors International of Washington 51,502 International Freight Forwarder 759,000 Hub Group (b) 17,030 Truck & Rail Freight Forwarder 435,000 C H Robinson 15,986 Truck Freight Forwarder 650,000 Airnet Systems (b) (c) 8,775 Check & Other Small Package Shipment 120,000 Forward Air (b) 3,375 Transportation Between Airports - -------------------------------------------------------------------------------- 96,668 .Other Industrial Services: 1.6% 1,326,000 Wackenhut, Cl. B 31,824 31,000 Wackenhut, Cl. A 922 Prison Management 1,001,000 HAoLO Industries (b) 9,885 Distributor of Advertising & Promotional Products 294,000 Mobile Mini (b) 5,751 Leases Portable Storage Units 736,000 Compass International Services (b) (c) 5,152 Collection Agencies - -------------------------------------------------------------------------------- 53,534 ------ Industrial Goods/Services: Total 327,573 - -------------------------------------------------------------------------------- Energy/Minerals: 9.0% .Independent Power: 3.7% 1,264,000 AES Corporation (b) 73,470 1,852 AES Corporation Warrants (b) 168 Power Plants 1,500,000 MidAmerican Energy 51,938 Growth Utility - -------------------------------------------------------------------------------- 125,576 36
Number of shares Value (000) - ------------------------------------------------------------------ .Oil/Gas Producers: 2.5% 2,100,000 Tesoro Petroleum (b) (c) $ 33,469 Oil Refinery/Gas Reserves 900,000 Devon Energy 32,175 Oil & Gas Producer 300,000 Evergreen Resources (b) 7,556 Oil & Gas Producer 481,000 Cross Timbers Oil 7,155 Oil & Gas Producer 150,000 Basin Exploration (b) 3,009 Oil & Gas Producer 987,000 Tipperary (b) (c) 1,234 Oil & Gas Producer - ------------------------------------------------------------------ 84,598 .Distribution/Marketing/Refining: 2.4% 1,000,000 Equitable Resources 37,750 Natural Gas Utility & Producer 1,000,000 Atmos Energy 25,000 Natural Gas Utility 1,000,000 Dynegy 20,375 Natural Gas & Electric Processing, Production & Marketing - ------------------------------------------------------------------ 83,125 .Oil Services: 0.4% 225,000 Atwood Oceanics (b) 7,031 Offshore Drilling 150,000 Hanover Compressor (b) 4,819 Compressor Rental - ------------------------------------------------------------------ 11,850 --------- Energy/Minerals: Total 305,149 - ------------------------------------------------------------------ Other Industries: 4.8% .Real Estate: 4.2% 968,000 The Rouse Company 24,563 Regional Shopping Malls 770,312 Security Capital European Realty (b) 15,406 Strategic Real Estate Investments 500,000 First Industrial Realty Trust 13,719 Industrial Properties 466,000 Forest City Enterprises, Cl. B 13,106 370,000 Forest City Enterprises, Cl. A 10,360 Shopping Malls 820,000 Cornerstone Properties 13,017 Downtown Office Buildings 260,000 Equity Residential Properties Trust 11,716 Nationwide Apartments 699,000 LaSalle Hotel Properties 10,703 Upscale/Full Service Hotels 400,000 Macerich Company 10,500 Regional Shopping Malls 385,000 First Washington Realty Trust (b) (c) 8,999 120,000 First Washington Realty Trust, Cv. Pfd. (b) (c) 3,548 Community Shopping Centers 165,000 Weingarten Realty Investors 6,889 Community Shopping Centers - ------------------------------------------------------------------ 142,526 .Waste Management: 0.1% 152,000 Stericycle (b) $ 2,062 Medical Waste Disposal .Regulated Utilities: 0.5% 700,000 Unisource Energy (b) 8,356 Electric Utility in Tuscon 283,000 Azurix (b) 5,660 Owner & Operator of Water Utilities 130,000 Central Hudson Gas & Electric 5,460 Electric Utility - ------------------------------------------------------------------ 19,476 --------- Other Industries: Total 164,064 - ------------------------------------------------------------------ Foreign Securities: 11.7% .Canada: 0.3% 500,000 Canadian Natural Resources (b) 9,797 Oil & Gas Producer 475,000 Canadian 88 Energy (b) 1,322 Oil & Gas Producer - ------------------------------------------------------------------ 11,119 .Australia: 0.2% 849,000 Aristocrat Leisure 6,434 Slot Machines .United Kingdom: 3.2% 644,000 NTL (b) 55,505 Voice, Video & Data Services 1,200,000 Serco Group 27,049 Facilities Management 1,650,000 Airtours 13,161 Packaged Tour Vacations 1,250,000 Edinburgh Fund Managers 8,246 Investment Management 1,100,000 N. Brown Group 5,939 Mail Order Clothing in Large Sizes - ------------------------------------------------------------------ 109,900 .Germany/Austria: 0.4% 180,000 Flughafen Wien (Austria) 7,553 Vienna Airport Authority 23,000 Binding-Brauerei 5,278 Brewery - ------------------------------------------------------------------ 12,831 .Sweden: 1.1% 1,000,000 WM Data Nordic 38,109 Computer Services/Consulting 20,000 Entra Data (b) 395 Business Software - ------------------------------------------------------------------ 38,504 .Netherlands: 0.8% 312,439 Hunter Douglas 10,730 Decorative Window Coverings 152,380 ASR Verzekeringsgroep 10,050 Insurance 171,084 Getronics 6,581 Computer Services/Consulting - ------------------------------------------------------------------ 27,361
37 Acorn Fund .Statement of Investments, continued
Number of Shares Value (000) - ------------------------------------------------------------------ .France: 0.7% 230,000 Atos (b) $ 23,483 Computer Services/Transaction Processing .Italy: 0.8% 1,500,000 Banca Fideuram 8,740 Life Insurance & Mutual Funds 1,000,000 Aeroporti di Roma 6,177 Airport Management 1,970,000 Ducati Motor (b) 5,160 Motorcycles 1,250,000 Saipem 4,989 Offshore Construction - ------------------------------------------------------------------ 25,066 .Malaysia: 0.1% 750,000 Resorts World Berhad 1,591 Casino/Hotel Resort 590,000 Berjaya Sports Toto 1,230 Lottery/Gaming - ------------------------------------------------------------------ 2,821 .Hong Kong: 0.3% 4,500,000 Varitronix International 9,367 LCD Manufacturer .China: 0.0% 200,000 The Investment Company of China (b) 1,092 Closed-End Fund .Singapore: 1.3% 8,130,000 Star Cruises 36,260 Cruise Line 2,000,000 Natsteel Electronics 8,752 Electronic Manufacturing Services - ------------------------------------------------------------------ 45,012 .Japan: 1.5% 235,000 Softbank Corporation 47,586 Internet Services/Investment Holding 300,000 Olympus Optical 4,434 Photographic & Medical Equipment - ------------------------------------------------------------------ 52,020
Principle Amount of Number of shares Value (000) - ------------------------------------------------------------------ .Mexico: 0.6% 3,300,000 Kimberly Clark de Mexico $ 13,535 Paper Products 7,350,000 Nadro, Series L 5,835 Pharmaceutical Distributor - ------------------------------------------------------------------ 19,370 .Other Latin America: 0.4% 407,124 IRSA (Argentina) 12,570 Real Estate Management & Development 36,000 Tele Celular Sul (Brazil) 781 Cellular Operator - ------------------------------------------------------------------ 13,351 ----------- Foreign: Total 397,731
Total Common Stocks and Other ---------- Equity-Like Securities: 96.0% $3,268,931 (Cost: $2,007,523) Short-Term Obligations: 8.5% Yield 4.27%-5.26% Due 7/1-7/15/99 $ 88,696 IBM Credit Corp $ 88,696 $ 53,112 Cigna 53,085 $ 42,882 John Deere Capital 42,882 $ 36,186 GE Company 36,154 $ 33,759 Baxter International 33,759 $ 24,348 Ford Motor Credit 24,344 $ 12,000 US Treasury Bill 11,980 ---------- (Amortized Cost: $290,900) 290,900 ---------- Total Investments: 104.5% 3,559,831 (Cost: $2,298,423) ---------- Cash and Other Assets Less Liabilities: (4.5%) (153,760) ---------- Total Net Assets: 100% $3,406,071 - ------------------------------------------------------------------
.Notes to Statement of Investments: (a) At June 30, 1999, for federal income tax purposes cost of investments was $2,299,435,000 and net unrealized appreciation was $1,260,396,000, consisting of gross unrealized appreciation of $1,417,113,000 and gross unrealized depreciation of $156,717,000. (b) Non-income producing security. (c) On June 30, 1999, the Fund held the following percentages of the outstanding voting shares of the companies listed below: Corvas International.......... 9.99% Bigfoot International........... 6.39% Sirena Apparel................ 9.92% RCM Technologies................ 6.12% World Acceptance.............. 9.57% Phoenix Investment Partners..... 6.01% Microcide Pharmaceuticals..... 8.29% First Washington Realty Trust... 5.89% COMARCO....................... 8.00% Airnet Systems.................. 5.71% International Total Services.. 7.51% Monarch Casino & Resort......... 5.67% Kronos........................ 7.29% GP Strategies................... 5.66% Synaptic Pharmaceuticals...... 7.16% Atchison Casting................ 5.51% Data Transmission Network..... 7.07% National Data................... 5.49% Gibraltar Steel............... 6.59% Compass International Services.. 5.11% Tipperary..................... 6.52% Americredit..................... 5.11% Tesoro Petroleum.............. 6.50% Creditrust...................... 5.05% The aggregate cost and value of investments in these companies at June 30, 1999, was $320,108,000 and $340,394,000, respectively. The market value of these securities represents 9.99% of the total net assets at June 30, 1999. During the six months ended June 30, 1999, cost of purchases and proceeds from sales in affiliated companies was $43,865,000 and $25,640,000, respectively. Dividends received from these companies amounted to $974,000 and net realized gain on sales of investments in such companies amounted to $11,176,000. 38 Acorn Fund .Foreign Portfolio Diversification At June 30, 1999, Acorn Fund's foreign portfolio of investments as a percent of net assets was diversified as follows:
Value (000) Percent - ---------------------------------------------------------- .Information Computer Services $ 68,173 2.0% Cable Television 55,505 1.6 Business Information/Publishing 47,586 1.4 Semiconductors & Related Equipment 27,049 0.8 Contract Manufacturing 8,752 0.3 Mobile Communications 781 0.0 Business Software 395 0.0 - ---------------------------------------------------------- 208,241 6.1 .Health Care Medical Equipment 4,434 0.1 - ---------------------------------------------------------- 4,434 0.1 .Consumer Goods/Services Travel 49,421 1.5 Beverages 16,008 0.4 Nondurable Goods 13,535 0.4 Gaming 7,664 0.2 Retail 5,939 0.2 Consumer Goods Distribution 5,835 0.2 Leisure Vehicles 5,160 0.2 Entertainment 1,591 0.0 - ------------------------------------------------------ 105,153 3.1
Value (000) Percent - ------------------------------------------------------ .Finance Money Management $ 16,986 0.5% Insurance 10,050 0.3 Closed-End Funds 1,092 0.0 - ------------------------------------------------------ 28,128 0.8 .Industrial Goods/Services Electrical Components 9,367 0.3 - ------------------------------------------------------ 9,367 0.3 .Energy/Minerals Oil/Gas Producers 11,119 0.3 Oil Services 4,989 0.2 - ------------------------------------------------------ 16,108 0.5 .Other Industries Transportation 13,730 0.4 Real Estate 12,570 0.4 - ------------------------------------------------------ 26,300 0.8 -------------------- Total Foreign Portfolio $ 397,731 11.7% - ------------------------------------------------------
39 Acorn Family of Funds .Statements of Assets and Liabilities .Statements of Operations .Statements of Changes in Net Assets .Financial Highlights .Notes to Financial Statements 40 Acorn Family of Funds . Statements of Assets and Liabilities (unaudited)
Acorn Acorn Acorn Acorn Acorn (in thousands) Fund International USA Twenty Foreign Forty - ------------------------------------------------------------------------------------------------------------------------------------ 6/30/99 Assets Investments, at value (cost: Acorn Fund $2,298,423; Acorn International $1,143,504; Acorn USA $295,265; Acorn Twenty $54,560; Acorn Foreign Forty $39,708) $ 3,559,831 $ 1,861,202 $ 312,998 $ 64,549 $ 44,412 Cash -- 19,252 1 -- 1,146 Net unrealized appreciation on foreign forward currency contracts -- 758 -- -- -- Organization costs -- -- 47 -- -- Receivable for: Securities sold 15,454 11,885 783 -- 1,112 Fund shares sold 531 4,822 373 253 479 Dividends and interest 1,779 6,626 22 16 -- Other assets 258 105 13 -- 86 - ------------------------------------------------------------------------------------------------------------------------------------ Total assets 3,577,853 1,904,650 314,237 64,818 47,235 Liabilities and Net Assets Cash overdraft 38 -- -- -- -- Net unrealized depreciation on foreign forward currency contracts 3 -- -- -- -- Payable for: Securities purchased 9,463 18,413 -- 1,994 1,955 Fund shares redeemed 161,354 2,065 1,408 3 -- Amount owed to advisor 2 -- 47 115 56 Other 922 1,066 115 22 27 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 171,782 21,544 1,570 2,134 2,038 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to Fund shares outstanding $ 3,406,071 $ 1,883,106 $ 312,667 $ 62,684 $ 45,197 - ------------------------------------------------------------------------------------------------------------------------------------ Fund shares outstanding 183,218 77,922 19,570 4,808 3,455 - ------------------------------------------------------------------------------------------------------------------------------------ Pricing of Shares Net asset value, offering price and redemption price per share $ 18.59 $ 24.17 $ 15.98 $ 13.04 $ 13.08 - ------------------------------------------------------------------------------------------------------------------------------------ Analysis of Net Assets Paid-in capital $ 1,592,872 $ 1,106,306 $ 271,821 $ 50,894 $ 39,274 Accumulated net realized gain on sales of investments, futures and foreign currency transactions 545,418 57,708 22,664 1,928 1,082 Net unrealized appreciation of investments and other assets (net of unrealized PFIC gains of $274 for Acorn International and $19 for Acorn Foreign Forty) 1,261,402 718,118 17,733 9,989 4,683 Undistributed net investment income (loss) 6,379 974 449 (127) 158 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to Fund shares outstanding $ 3,406,071 $ 1,883,106 $ 312,667 $ 62,684 $ 45,197 - ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements 41 Acorn Family of Funds .Statements of Operations (unaudited)
Acorn Acorn Fund International 6 months Year 6 months Year (in thousands) ended 6/30, ended 12/31, ended 6/30, ended 12/31, - ---------------------------------------------------------------------------------------------------------------------------- 1999 1998 1999 1998 Investment Income: Dividends $ 19,697 $ 28,483 $ 16,200 $ 26,225 Interest 4,339 13,414 2,467 10,223 - ---------------------------------------------------------------------------------------------------------------------------- 24,036 41,897 18,667 36,448 Foreign taxes withheld (239) (513) (1,750) (2,521) - ---------------------------------------------------------------------------------------------------------------------------- Total investment income 23,797 41,384 16,917 33,927 Expenses: Investment advisory 11,484 24,905 7,052 14,124 Administration 832 1,812 429 858 Custodian 425 924 1,025 1,957 Transfer and dividend disbursing agent 781 1,414 743 1,384 Reports to shareholders 282 573 302 575 Legal and audit 111 223 63 97 Registration and blue sky 24 55 15 58 Trustees' and other 297 446 131 166 - ---------------------------------------------------------------------------------------------------------------------------- Total expenses 14,236 30,352 9,760 19,219 Less custodian fees paid indirectly -- -- -- -- Less reimbursement of expenses by advisor -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------- Net expenses 14,236 30,352 9,760 19,219 - ---------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 9,561 11,032 7,157 14,708 Net Realized and Unrealized Gain (Loss) on Investments, Futures and Foreign Currency Transactions: Net realized gain (loss) on sales of investments 550,750 252,065 69,986 2,408 Net realized gain (loss) on foreign currency transactions (70) (132) 6,007 (6,031) Net realized gain (loss) on futures (2,990) (17,930) (403) 7,811 Change in net unrealized appreciation of investments and foreign currency transactions (184,417) (43,553) 189,172 215,847 - ---------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments, futures and foreign currency transactions 363,273 190,450 264,762 220,035 - ---------------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations $ 372,834 $201,482 $271,919 $234,743 ============================================================================================================================
See accompanying notes to financial statements 42
Acorn Acorn USA Acorn Twenty Foreign Forty 6 months Year 6 months Inception 11/23 6 months Inception 11/23 ended 6/30, ended 12/31, ended 6/30, through 12/31, ended 6/30, through 12/31, - ----------------------------------------------------------------------------------------------------- 1999 1998 1999 1998 1999 1998 $ 1,596 $ 882 $ 136 $ 38 $ 322 $ 6 462 1,042 54 7 49 3 - ----------------------------------------------------------------------------------------------------- 2,058 1,924 190 45 371 9 -- -- -- -- (29) (1) - ----------------------------------------------------------------------------------------------------- 2,058 1,924 190 45 342 8 1,275 2,336 216 26 121 11 68 124 12 1 6 1 21 39 6 2 32 3 131 246 55 18 30 13 61 126 27 1 24 1 16 32 19 1 19 1 12 33 8 4 6 2 28 43 1 -- 1 -- - ----------------------------------------------------------------------------------------------------- 1,612 2,979 344 53 239 32 (3) (5) (6) (2) (12) (3) -- -- (15) (12) (43) (11) - ----------------------------------------------------------------------------------------------------- 1,609 2,974 323 39 184 18 - ----------------------------------------------------------------------------------------------------- 449 (1,050) (133) 6 158 (10) 22,972 23,791 2,174 (246) 1,098 74 -- -- -- -- -- -- -- -- -- -- -- -- 992 (14,625) 7,457 2,532 3,539 1,163 - ----------------------------------------------------------------------------------------------------- 23,964 9,166 9,631 2,286 4,637 1,237 - ----------------------------------------------------------------------------------------------------- $24,413 $ 8,116 $9,498 $2,292 $4,795 $1,227 =====================================================================================================
43 Acorn Family of Funds >Statements of Changes in Net Assets (unaudited)
Acorn Acorn Fund International 6 months Year 6 months Year (in thousands) ended 6/30 ended 12/31 ended 6/30 ended 12/31 - ----------------------------------------------------------------------------------------------------------------------------------- 1999 1998 1999 1998 From Operations: Net investment income (loss) $ 9,561 $ 11,032 $ 7,157 $ 14,708 Net realized gain (loss) on sales of investments, futures and foreign currency transactions 547,690 234,003 75,590 4,188 Change in net unrealized appreciation of investments and foreign currency transactions (184,417) (43,553) 189,172 215,847 - ----------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 372,834 201,482 271,919 234,743 Distributions to Shareholders From: Net investment income (5,713) (6,284) (11,602) (12,611) Net realized gain (36,184) (219,264) -- (22,701) - ----------------------------------------------------------------------------------------------------------------------------------- Total distributions to shareholders (41,897) (225,548) (11,602) (35,312) From Fund Share Transactions: Reinvestment of dividends and capital gain distributions 37,931 204,856 10,789 33,102 Proceed from other shares sold 169,217 490,137 214,401 406,219 - ----------------------------------------------------------------------------------------------------------------------------------- 207,148 694,993 225,190 439,321 Payments for shares redeemed (681,475) (802,923) (327,898) (536,194) - ----------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from Fund share transactions (474,327) (107,930) (102,708) (96,873) - ----------------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (143,390) (131,996) 157,609 102,558 Net Assets: Beginning of period 3,549,461 3,681,457 1,725,497 1,622,939 - ----------------------------------------------------------------------------------------------------------------------------------- End of period $ 3,406,071 $3,549,461 $1,883,106 $ 1,725,497 - ----------------------------------------------------------------------------------------------------------------------------------- Undistributed Net Investment Income $ 6,379 $ 2,531 $ 974 $ 5,419 - -----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements 44
Acorn Acorn USA Acorn Twenty Foreign Forty 6 months Year 6 months Inception 11/23 6 months Inception 11/31 ended 6/30, ended 12/31, ended 6/30, through 12/31, ended 6/30, through 12/31, - ------------------------------------------------------------------------------------------------------------------------------------ 1999 1998 1999 1998 1999 1998 $ 449 $ (1,050) $ (133) $ 6 $ 158 $ (10) 22,972 23,791 2,174 (246) 1,098 74 992 (14,625) 7,457 2,532 3,539 1,163 - ----------------------------------------------------------------------------------------------------------------------------------- 24,413 8,116 9,498 2,292 4,795 1,227 -- -- -- -- -- -- (784) (19,532) -- -- (99) -- - ------------------------------------------------------------------------------------------------------------------------------------ (784) (19,532) -- -- (99) -- 718 17,705 -- -- 94 -- 65,026 175,578 23,123 31,688 29,060 14,739 - ------------------------------------------------------------------------------------------------------------------------------------ 65,744 193,283 23,123 31,688 29,154 14,739 (57,657) (85,540) (3,661) (256) (4,438) (181) - ------------------------------------------------------------------------------------------------------------------------------------ 8,087 107,743 19,462 31,432 24,716 14,558 - ------------------------------------------------------------------------------------------------------------------------------------ 31,716 96,327 28,960 33,724 29,412 15,785 280,951 184,624 33,724 -- 15,785 -- - ----------------------------------------------------------------------------------------------------------------------------------- $ 312,667 $ 280,951 $ 62,684 $ 33,724 $ 45,197 $ 15,785 - ----------------------------------------------------------------------------------------------------------------------------------- $ 449 $ -- ($127) $ 6 $ 158 $ 9 - ------------------------------------------------------------------------------------------------------------------------------------
45 Acorn Family of Funds .Financial Highlights (unaudited)
6 months Years Acorn Fund ended 6/30, ended 12/31, - ----------------------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period 1999 1998 Net Asset Value, beginning of period $16.85 $16.99 Income From Investment Operations Net investment income .05 .04 Net realized and unrealized gain (loss) on investments, foreign currency and futures 1.91 .91 - ----------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.96 .95 Less Distributions Dividends from net investment income (0.03) (0.03) Distributions from net realized and unrealized gains reportable for federal income taxes (0.19) (1.06) - ----------------------------------------------------------------------------------------------------------------------------- Total distributions (0.22) (1.09) - ----------------------------------------------------------------------------------------------------------------------------- Net Asset Value, end of period $18.59 $16.85 - ----------------------------------------------------------------------------------------------------------------------------- Total Return 11.7% 6.0% Ratios/Supplemental Data Ratio of expenses to average net assets .86%* .84% Ratio of net investment income to average net assets .57%* .30% Portfolio turnover rate 35%* 24% Net assets at end of period (in millions) $3,406 $3,549 6 months Years Acorn International ended 6/30, ended 12/31, - ----------------------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period 1999 1998 Net Asset Value, beginning of period $20.82 $18.39 Income From Investment Operations Net investment income (loss) .17 .17 Net realized and unrealized gain (loss) on investments, foreign currency and futures 3.33 2.68 - ----------------------------------------------------------------------------------------------------------------------------- Total from investment operations 3.50 2.85 Less Distributions Dividends from net investment income (.15) (.15) Distributions from net realized and unrealized gains reportable for federal income taxes -- (.27) - ----------------------------------------------------------------------------------------------------------------------------- Total distributions (.15) (.42) - ----------------------------------------------------------------------------------------------------------------------------- Net Asset Value, end of period $24.17 $20.82 - ----------------------------------------------------------------------------------------------------------------------------- Total Return 16.8% 15.4% Ratios/Supplemental Data Ratio of expenses to average net assets 1.14%* 1.12% Ratio of net investment income to average net assets .84%* .86% Portfolio turnover rate 53%* 37% Net assets at end of period (in millions) $1,883 $1,725 6 months Years Acorn USA ended 6/30, ended 12/31, - ----------------------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period 1999 1998 Net Asset Value, beginning of period $14.80 $15.12 Income From Investment Operations Net investment loss (b) .02 (.07) Net realized and unrealized gain on investments 1.20 .87 - ----------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.22 .80 - ----------------------------------------------------------------------------------------------------------------------------- Less Distributions Dividends from net investment income -- -- Distributions from net realized and unrealized gains reportable for federal income taxes (.04) (1.12) - ----------------------------------------------------------------------------------------------------------------------------- Total distributions (.04) (1.12) - ----------------------------------------------------------------------------------------------------------------------------- Net Asset Value, end of period $15.98 $14.80 - ----------------------------------------------------------------------------------------------------------------------------- Total Return 8.3% 5.8% Ratios/Supplemental Data Ratio of expenses to average net assets (a) 1.18%* 1.20% Ratio of net investment loss to average net assets .33%* (.42%) Portfolio turnover rate 53%* 42% Net assets at end of period (in millions) $313 $281 - -----------------------------------------------------------------------------------------------------------------------------
(a) In accordance with a requirement by the Securities and Exchange Commission, the Acorn USA ratio reflects total expenses prior to the reduction of custodian fees for cash balances it maintains with the custodian ("custodian fees paid indirectly"). This ratio net of custodian fees paid indirectly would have been 1.79% for the period ended December 31, 1996. (b) Net investment income (loss) per share was based upon the average shares outstanding during each period. * Annualized See accompanying notes to financial statements 46
- --------------------------------------------------------------------------------------------- 1997 1996 1995 1994 1993 1992 1991 1990 $15.04 $13.60 $12.24 $13.95 $11.06 $ 9.32 $ 6.51 $8.58 .15 .09 .11 .06 .04 .07 .11 .12 3.57 2.93 2.42 (1.10) 3.50 2.16 2.95 (1.62) - --------------------------------------------------------------------------------------------- 3.72 3.02 2.53 (1.04) 3.54 2.23 3.06 (1.50) (.16) (.11) (.09) (.11) (.06) (.08) (.10) (.13) 1.61 (1.47) (1.08) (.56) (.59) (.41) (.15) (.44) - --------------------------------------------------------------------------------------------- (1.77) (1.58) (1.17) (.67) (.65) (.49) (.25) (.57) - --------------------------------------------------------------------------------------------- $16.99 $15.04 $13.60 $12.24 $13.95 $11.06 $ 9.32 $6.51 - --------------------------------------------------------------------------------------------- 25.0% 22.6% 20.8% -7.4% 32.3% 24.2% 47.3% -17.5% .56% .57% .57% .62% .65% .67% .72% .82% .75% .53% .89% .55% .30% .72% 1.30% 1.60% 32% 33% 29% 18% 20% 25% 25% 36% $3,681 $2,842 $2,399 $1,983 $2,035 $1,449 $1,150 $ 767
Inception 9/23 through 12/31, - ------------------------------------------------------------------------------ 1997 1996 1995 1994 1993 1992 $19.61 $16.59 $15.24 $15.94 $10.69 $10.00 .40 .13 .16 .07 -- (.03) (.34) 3.29 1.20 (.67) 5.25 .72 - ------------------------------------------------------------------------------ .06 3.42 1.36 (.60) 5.25 .69 (.38) (.12) -- -- -- -- (.90) (.28) (.01) (.10) -- -- - ------------------------------------------------------------------------------ (1.28) (.40) (.01) (.10) -- -- - ------------------------------------------------------------------------------ $18.39 $19.61 $16.59 $15.24 $15.94 $10.69 - ------------------------------------------------------------------------------ 0.2% 20.7% 8.9% -3.8% 49.1% 6.9% 1.19% 1.17% 1.22% 1.24% 1.21% 2.35%* .58% .51% .90% .48% .06% (1.37%)* 39% 34% 26% 20% 19% 20%* $1,623 $1,773 $1,276 $1,363 $ 907 $ 30
Inception 9/4 through 12/31 - ----------------------------- 1997 1996 $11.65 $10.00 (.07) (.02) 3.83 1.67 - ----------------------------- 3.76 1.65 - ----------------------------- -- -- (.29) -- - ----------------------------- (.29) -- - ----------------------------- $15.12 $11.65 - ----------------------------- 32.3% 16.5% 1.35% 1.85%* (.49%) (.99%)* 33% 20%* $ 185 $ 53
47
6 months Inception 11/23 Acorn Twenty ended 6/30, through 12/31, - ---------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period 1999 1998 Net Asset Value, beginning of period $10.71 $10.00 Income From Investment Operations Net investment income (loss) (b) (.03) -- Net realized and unrealized gain on investments 2.36 .71 - ---------------------------------------------------------------------------------------------------------- Total from investment operations 2.33 .71 - ---------------------------------------------------------------------------------------------------------- Net Asset Value, end of period $13.04 $10.71 ========================================================================================================== Total Return 21.8% 7.1% Ratios/Supplemental Data Ratio of expenses to average net assets (a) (c) 1.38%* 1.41%* Ratio of net investment income (loss) to average net assets (c) (.56%)* 0.22%* Portfolio turnover rate 110%* 173%* Net assets at end of period (in millions) $63 $34 ==========================================================================================================
(a) In accordance with a requirement by the Securities and Exchange Commission, this ratio reflects total expenses prior to the reduction of custodian fees for cash balances it maintains with the custodian ("custodian fees paid indirectly"). This ratio net of custodian fees paid indirectly would have been 1.35% for the period ended June 30, 1999 and December 31, 1998. (b) Net investment income (loss) per share was based upon the average shares outstanding during the period. (c) Acorn Twenty was reimbursed by the Advisor for certain net expenses from November 23, 1998 through June 30, 1999. Without the reimbursement, the ratio of expenses (prior to custodian fees paid indirectly) to average net assets and the ratio of net investment income (loss) to average net assets would have been 1.42% and (.63%), respectively, for the period ended June 30, 1999, and 1.83% and (.21%), respectively, for the period ended December 31, 1998.
6 months Inception 11/23 Acorn Foreign Forty ended 6/30, through 12/31, - --------------------------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period 1999 1998 Net Asset Value, beginning of period $11.00 $10.00 Income From Investment Operations Net investment income/(loss) (c) .07 (.01) Net realized and unrealized gain on investments 2.04 1.01 - --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.11 1.00 Less Distributions Dividends from net investment income -- -- Distributions from net realized and unrealized gains reportable for federal income taxes (.03) -- - --------------------------------------------------------------------------------------------------------------------------------- Total distributions (.03) -- - --------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, end of period $13.08 $11.00 ================================================================================================================================= Total Return 19.2% 10.0% Ratios/Supplemental Data Ratio of expenses to average net assets (a) (c) 1.54%* 1.73%* Ratio of net investment income (loss) to average net assets (c) 1.25%* (.78%)* Portfolio turnover rate 77%* 90%* Net assets at end of period (in millions) $45 $16 =================================================================================================================================
(a) In accordance with a requirement by the Securities and Exchange Commission, this ratio reflects total expenses prior to the reduction of custodian fees for cash balances it maintains with the custodian ("custodian fees paid indirectly"). This ratio net of custodian fees paid indirectly would have been 1.45% for the period ended June 30, 1999 and December 31, 1998. (b) Net investment income (loss) per share was based upon the average shares outstanding during the period. (c) Acorn Foreign Forty was reimbursed by the Advisor for certain net expenses from November 23, 1998 through June 30,1999. Without the reimbursement, the ratio of expenses to average net assets and the ratio of net investment income/(loss) to average net assets would have been 1.80% and 90%, respectively, for the period ended June 30, 1999, and 2.70% and (1.75%), respectively, for the period ended December 31, 1998. * Annualized See accompanying notes to financial statements 48 Acorn Family of Funds .Notes to Financial Statements (unaudited) 1. Nature of Operations Acorn Fund, Acorn International, Acorn USA, Acorn Twenty and Acorn Foreign Forty (the "Funds") are series of Acorn Investment Trust (the "Trust"), an open-end management investment company organized as a Massachusetts business trust. The investment objective of each Fund is to seek long-term growth of capital. 2. Significant Accounting Policies .Security valuation Investments are stated at current value. Securities traded on securities exchanges or in over-the-counter markets in which transaction prices are reported are valued at the last sales price at the time of valuation. Securities for which there are no reported sales on the valuation date are valued at the mean of the latest bid and ask quotation or, if there is no ask quotation, at the most recent bid quotation. Money market instruments having a maturity of 60 days or less from the valuation date are valued on an amortized cost basis. Securities for which quotations are not available and any other assets are valued at a fair value as determined in good faith by the Board of Trustees. .Foreign currency translations Values of investments denominated in foreign currencies are converted into U.S. dollars using the spot market rate of exchange at the time of valuation. Purchases and sales of investments and dividend and interest income are translated into U.S. dollars using the spot market rate of exchange prevailing on the respective dates of such transactions. The gain or loss resulting from changes in foreign exchange rates is included with net realized and unrealized gain or loss from investments, as appropriate. .Security transactions and investment income Security transactions are accounted for on the trade date (date the order to buy or sell is executed) and dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as soon as the information is available to the Funds. Interest income is recorded on the accrual basis and includes amortization of discounts on money market instruments and long-term debt instruments when required for federal income tax purposes. Realized gains and losses from security transactions are reported on an identified cost basis. .Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. .Financial instruments Each Fund may purchase or sell exchange-traded financial futures contracts, which are contracts that obligate that Fund to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Funds enter into such contracts to hedge a portion of their portfolio. Gains and losses are reflected as "Net Realized Gain (Loss) on Futures" in the Statements of Operations. Additionally, each Fund may engage in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell foreign currencies. The Statements of Operations reflect gains and losses as realized for closed forward foreign currency contracts and unrealized for open contracts. A Fund bears the market risk that arises from changes in the value of financial instruments and securities indices (futures contracts) or from changes in foreign currency rates (forward foreign currency contracts) and the credit risk should a counterparty fail to perform under such contracts. None of the funds had futures contracts open at June 30, 1999. Acorn Fund and Acorn International entered into forward contracts to sell foreign currency, as described below:
Acorn Fund Foreign Settlement U.S. Dollar Unrealized Gain Amount (000) Currency Date Proceeds (000) (Loss) (000) - ------------------------------------------------------------------------------------- 78,085 Hong Kong Dollar 1/10/00 $10,007 $ (3) ============ Acorn International Foreign Settlement U.S. Dollar Unrealized Gain Amount (000) Currency Date Proceeds (000) (Loss) (000) - ------------------------------------------------------------------------------------- 23,000 British Pound 9/24/99 $36,612 $ 331 155,000 Hong Kong Dollar 1/10/00 19,501 (370) 1,789,200 Japanese Yen 9/16/99 15,168 210 4,735,000 Japanese Yen 9/24/99 40,219 587 ------------ Total Unrealized Gain $ 758 ============
49 .Fund share valuation Fund shares are sold and redeemed on a continuing basis at net asset value. Net asset value per share is determined daily as of the close of trading on the New York Stock Exchange on each day the Exchange is open for trading by dividing the total value of each Fund's investments and other assets, less liabilities, by the respective number of Fund shares outstanding. .Federal income taxes, dividends and distributions to shareholders Each Fund has complied with the special provisions of the Internal Revenue Code available to investment companies. Acorn Fund, Acorn International and Acorn Foreign Forty have elected to mark-to-market their investments in Passive Foreign Investment Companies ("PFICs") for Federal income tax purposes. A summary of transactions relating to PFICs for Acorn International is as follows: Acorn International (000) - -------------------------------------------------------------------------------- Cumulative net unrealized appreciation recognized in prior years at December 31, 1998 $ 311 Unrealized appreciation recognized through June 30, 1999 0 Cumulative net unrealized appreciation recognized in prior years on PFICS sold through June 30, 1999 (37) ----- Cumulative net unrealized appreciation recognized in prior years at June 30, 1999 274 ----- A summary of transactions relating to PFICS during 1998 follows: Unrealized appreciation recognized 231 Distributions to shareholders from net investment income relating to PFICs 0 At June 30, 1999, Acorn Fund had no cumulative net unrealized appreciation on PFICs. In 1998, the Fund recognized unrealized appreciation of $232,000 and also had losses on the sale of PFICs of $2,483,000. At June 30, 1999, Acorn Foreign Forty had cumulative net unrealized appreciation on PFICS of $19,000, all of which was recognized in 1998. Distributions relating to PFICs are treated as ordinary income for Federal income tax purposes. Acorn International and Acorn Twenty intend to utilize provisions of the federal tax law that allow them to carry a realized capital loss forward for eight years following the year of the loss and offset such losses against future realized gains. At December 31, 1998, Acorn International and Acorn Twenty had capital loss carryforwards of $16,804,000 and $246,000, respectively, which will expire December 31, 2006. Dividends payable to shareholders are recorded by the Funds on the ex- dividend date. 3. Transactions with Affiliates The Funds' investment advisor, Wanger Asset Management, L.P. ("WAM") furnishes continuing investment supervision to the Funds and is responsible for the overall management of the Funds' business affairs. Under the Funds' investment management agreement, fees are accrued daily and paid monthly to WAM at the annual rates shown in the table below for each fund. Acorn Fund - -------------------------------------------------------------------------- Net asset value: For the first $700 million .75% Next $1.3 billion .70% Net assets in excess of $2 billion .65% Acorn International - -------------------------------------------------------------------------- Net asset value: For the first $100 million 1.20% Next $400 million .95% Net assets in excess of $500 million .75% Acorn USA - -------------------------------------------------------------------------- Net asset value: For the first $200 million .95% Net assets in excess of $200 million .90% Acorn Twenty - -------------------------------------------------------------------------- On average daily net assets .90% Acorn Foreign Forty - -------------------------------------------------------------------------- On average daily net assets .95% WAM has also contracted to provide administrative services to each Fund at an annual rate of .05% of average daily net assets. 50 Acorn Family of Funds .Notes to Financial Statements (unaudited) continued Certain officers and trustees of the Trust are also principals of WAM. The Trust makes no direct payments to its officers and trustees who are affiliated with WAM. Acorn Fund paid trustees' fees and expenses of the following:
6 months ended 6/30, - -------------------------------------------------- (in thousands) 1999 1998 Acorn Fund $140 $211 Acorn International 69 94 Acorn USA 11 11 Acorn Twenty 1 -- Acorn Foreign Forty 1 -- ------------- $222 $316 -------------
WAM advanced Acorn USA $107,000 in connection with the organization and initial registration of the Fund. These costs are being amortized and reimbursed to WAM over the period September 1996 through August 2001. WAM paid all of the organization costs associated with the organization fo Acorn Twenty and Acorn Foreign Forty. These costs amounted to $92,000. WAM will not be reimbursed for these costs by the Funds. WAM Brokerage Services, L.L.C., a wholly owned subsidiary of WAM, is the distributor of the Funds' shares and receives no compensation for its services. 4. Borrowing Arrangements The trust participates in a $250,000,000 credit facility which was entered into to facilitate portfolio liquidity. No amounts have been borrowed under this facility. 5. Fund Share Transactions Proceeds and payments on Fund shares as shown in the Statements of Changes in Net Assets are in respect of the following numbers of shares:
6 months Acorn Fund ended 6/30, - ------------------------------------------------------------------ (in thousands) 1999 1998 Shares sold 10,094 28,471 Shares issued in reinvestment of dividend and capital gain distributions 2,081 12,814 ---------------- 12,175 41,285 Less shares redeemed 39,663 47,224 ---------------- Net decrease in shares outstanding (27,488) (5,939) - ------------------------------------------------------------------
6 months Acorn International ended 6/30, - ----------------------------------------------------------------- (in thousands) 1999 1998 Shares sold 9,769 19,818 Shares issued in reinvestment of dividend and capital gain distributions 445 1,540 ---------------- 10,214 21,358 Less shares redeemed 15,166 26,757 ---------------- Net decrease in shares outstanding (4,952) (5,399) - -----------------------------------------------------------------
6 months Acorn USA ended 6/30, - ----------------------------------------------------------------- (in thousands) 1999 1998 Shares sold 4,532 11,062 Shares issued in reinvestment of dividend and capital gain distributions 46 1,270 ---------------- 4,578 12,332 Less shares redeemed 3,994 5,558 ---------------- Net increase in shares outstanding 584 6,774 - ------------------------------------------------------------------
6 months Acorn Twenty ended 6/30, - ------------------------------------------------------------------ (in thousands) 1999 1998 Shares sold 1,979 3,176 Less shares redeemed 321 26 ---------------- Net increase in shares outstanding 1,658 3,150 - ------------------------------------------------------------------
6 months Acorn Foreign Forty ended 6/30, - ------------------------------------------------------------------ (in thousands) 1999 1998 Shares sold 864 1,453 Less shares redeemed 15 18 ---------------- Net increase in shares outstanding 849 1,435 - ------------------------------------------------------------------
6. Investment Transactions Investment Transactions (excluding money market instruments) for each of the Funds are as follows:
6 months Acorn Fund ended 6/30, - ---------------------------------------------------------------- (in thousands) 1999 1998 Investment securities: Purchases $553,191 $ 830,390 Proceeds from sales 981,142 1,048,096 ================================================================
6 months Acorn International ended 6/30, - ---------------------------------------------------------------- (in thousands) 1999 1998 Investment securities: Purchases $433,766 $570,304 Proceeds from sales 425,671 709,630 - ----------------------------------------------------------------
6 months Acorn USA ended 6/30, - ---------------------------------------------------------------- (in thousands) 1999 1998 Investment securities: Purchases $76,468 $178,181 Proceeds from sales 68,204 95,639 - ----------------------------------------------------------------
6 months Acorn Twenty ended 6/30, - ---------------------------------------------------------------- (in thousands) 1999 1998 Investment securities: Purchases $44,022 $34,025 Proceeds from sales 25,599 4,483 - ----------------------------------------------------------------
6 months Acorn Foreign Forty ended 6/30, - ---------------------------------------------------------------- (in thousands) 1999 1998 Investment securities: Purchases $32,000 $13,984 Proceeds from sales 9,409 974 - ----------------------------------------------------------------
51 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 Steven A. Radis Vice President and Secretary 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 52 Directions to 1999 Annual Shareholder Meeting Bank One Auditorium (formerly First Chicago) is located on the Plaza Level of the Bank One building. The Bank One building is located in the center of the Loop, bordered by Dearborn Street on the east, Madison Street on the north, Clark Street on the west and Monroe Street on the south. From the south: Take I-57 (which merges with I-94, also known as the Dan Ryan Expressway). Take the Dan Ryan into Chicago. Follow the signs for the Kennedy Expressway West. Travel on the Kennedy and exit using the Monroe Street exit. Turn right (east) from the exit onto Monroe Street. Proceed east on Monroe Street to Dearborn. From the north: Take the Kennedy Expressway (I-90/94) south to Chicago. Exit in the city at Monroe Street. Turn left (east) from the exit onto Monroe Street. Proceed east on Monroe Street to Dearborn. From the west: Take the Eisenhower Expressway (I-290) from the west. This becomes Congress Street in the city. Take Congress east to Dearborn Street. Turn left (north) on Dearborn to Monroe Street. From the southwest: Take the Stevenson Expressway (I-55). Exit to the Kennedy Expressway (North- Wisconsin). Travel on the Kennedy and exit using the Monroe Street exit. Turn right (east) from the exit onto Monroe Street. Proceed east on Monroe Street to Dearborn. TURN OVER FOR PARKING INFORMATION Parking information for 1999 Annual Shareholder Meeting Private lot (indoor) located in the Bank One building. Entrance is at 40 South Clark (directly across from the Bank One building). Clark is one-way south. Space is limited. Cost: $$$$ Public lot located 1/2 block east of Bank One on Madison Street. Limited spaces. Entrance on the south side of Madison between Dearborn and State Streets. Madison is one-way west. Cost: $$$ Mid Continental Plaza Parking located on Monroe Street 2-1/2 blocks east of the Bank One building. Entrance is on the south side (right) of Monroe between Wabash and Michigan Avenues. Monroe is one-way east. Cost: $$$ Grant Park Underground (indoor) located 3-1/2 blocks east of the Bank One building on Monroe Street. Entrance is on the north side of Monroe Street between Columbus Drive and Lake Shore Drive. Monroe is two-way between Lake Shore Drive and Michigan Avenue. West of Michigan, Monroe is one-way east. Cost: $$ CTA Cost $ Cost Key - -------- Most expensive $$$$ Least expensive $ The discussions in this report of portfolio companies are for illustration only and are not recommendations of individual stocks. The information is believed to be accurate, but the information and the views of the portfolio managers may change. The Acorn funds invest in the stocks of small and midsized companies that may be more volatile than the stocks of larger companies. [PICTURE APPEARS HERE] The Acorn - ------------------------ Family of Funds WAM Brokerage Services, L.L.C. P.O. Box 8502 Boston, MA 02266-8502 FIRST CLASS PRE-SORT U.S. POSTAGE PAID CHICAGO, IL PERMIT NO. 1200 -----END PRIVACY-ENHANCED MESSAGE-----