-----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, DNaaHb1abM+juhB6zAWe6nBhGVtxEwtdYNMLeq1X4atpm5nLJko1HrcgMFH2wJ+n LgJRCFscOsvOEo3qRk8spw== 0000950131-99-006232.txt : 19991115 0000950131-99-006232.hdr.sgml : 19991115 ACCESSION NUMBER: 0000950131-99-006232 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACORN INVESTMENT TRUST CENTRAL INDEX KEY: 0000002110 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 362692100 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30B-2 SEC ACT: SEC FILE NUMBER: 811-01829 FILM NUMBER: 99748464 BUSINESS ADDRESS: STREET 1: 227 W MONROE STE 3000 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3126349200 MAIL ADDRESS: STREET 1: 227 W MONROE ST STE 3000 STREET 2: ATTN: BRUCE LAUER CITY: CHICAGO STATE: IL ZIP: 60606 FORMER COMPANY: FORMER CONFORMED NAME: ACORN FUND INC DATE OF NAME CHANGE: 19920703 N-30B-2 1 3RD QUARTER REPORT ACORN FAMILY OF FUNDS Acorn Family of Funds 3 Third Quarter Report September 30, 1999 Managed by Wanger Asset Management, L.P. [ACORN ARTWORK APPEARS HERE] Y2K Year 2000 Update The Challenge Computer programs throughout the world historically have used two digits instead of four to identify the year. With a new millennium approaching, these programs had to be modified so computers would read 00 as the year 2000 and not 1900. For the Acorn Funds, and other investment firms that are dependent on date-specific information for recordkeeping, Y2K ranks as a top business priority. Y2K Readiness at Acorn Funds The safety of our shareholders' assets is always of paramount importance to us. That's why Acorn Funds has been working since 1997 to prepare our systems and hardware to meet the Year 2000 challenge. Our goal: to conduct normal business with our shareholders before, during and after the turn of the century. As of August 31, 1999, our Y2K efforts are complete and our critical systems are Y2K compliant. Acorn's Y2K readiness project involved assessment of our Y2K exposure, remediation, testing, and contingency planning. The project was completed in six phases: Phase 1: Creation of a Y2K committee, November 1997. Phase 2: Establish monitoring process. Phase 3: Inventory and itemize all systems and obtain information from external vendors on potential exposure. Phase 4: Examine all potential exposure points to determine if they present Y2K problems. Obtain surveys/formal response of Y2K plans from external vendors. Phase 5: Remediation. Systems are changed to be Y2K compliant. Phase 6: Testing. Identify problems, fix and retest. All six phases of our plan were successful in their mission. From now through the end of the year, our focus is on updating contingency plans. If something unforeseen or beyond our control should occur, we'll have plans in place so that we can service our shareholders in the best and fastest way possible. What You Can Expect on Y2K Weekend As January 1, 2000 is celebrated at various times around the globe, media coverage of the New Year countdown will be intense. How investors react to Y2K- related developments as the calendar turns may influence financial markets. The New York Stock Exchange and the Nasdaq will be open until 1 p.m. EST, six hours after the year 2000 begins in countries just west of the international date line. January 1, 2000 is forecast to be one of the biggest telephone calling days in history. Your attempts to communicate with Acorn Funds and others -- whether by phone or the Internet -- may be hindered by overloaded telephone systems and host computer servers. If you experience problems, they may result from strained communications systems in response to large call volume, rather than from Y2K- related computer glitches. We're All in This Together As the Acorn Funds count down to the new millennium, we are confident that our systems and those of vital business partners are ready. We think January 1, 2000 will be business as usual. At the same time, we recognize that computer systems are interdependent and that one company's non-compliance could affect the operations of other businesses, so we can't guarantee a problem-free Y2K passing -- no one can. We are however encouraged that we are part of an industry that has substantial experience dealing with large-scale computer operations. A good sign: anecdotally, credit cards, which we've all had for some months now with `00' expiration dates, seem to be problem-free. Meanwhile, in a U.S. Senate Year 2000 Committee report (2/24/99) on the impact of the Year 2000 Problem, the U.S. securities industry was praised as having done more to prepare for Y2K than any other business sector. Steps You Can Take: An Investor Checklist for Y2K There are a number of simple activities you can do to prepare for the year 2000. Review your investment plan. In our view, events alone shouldn't cause investors to abandon their long-term investment program. History has proven that it's almost impossible to time the market. By altering your investment approach in advance of December 31, you run the risk of missing out on opportunities and unintentionally incurring transaction costs and potential unfavorable tax consequences. Any modifications you decide are appropriate should be made gradually over time. Maintain good records. Keeping good records is always important. Keep all of your account statements together in a safe place. Keep your third quarter account statement and confirmations for any transactions in your account between October 1 and December 31, 1999. Review statements and transaction records you receive after December 31, 1999, to reassure yourself of their accuracy. Check your own computer. Make sure that your personal computer system can handle the Year 2000 date rollover. Check with the manufacturers of your hardware and software to determine your computer system's Y2K readiness. The PC Year 2000 Alliance web site at www.pcy2000.org can provide you with direct links to the web sites of a number of computer suppliers. Ask questions. Visit www.acornfunds.com to review frequently asked Y2K questions or www.nasdr.com/3600_inv_kit.htm for a free Year 2000 Investor Kit created by the securities industry and the National Association of Securities Dealers, Inc. See www.acornfunds.com for additional information on Y2K. THIS MATERIAL CONTAINS YEAR 2000 READINESS DISCLOSURES WITHIN THE MEANING OF THE YEAR 2000 INFORMATION AND READINESS DISCLOSURE ACT Acorn Family of Funds Third Quarter Report 1999 Table of Contents
Squirrel Chatter: A Really Big Bull 2 Acorn Twenty In a Nutshell 4 Performance at a Glance 5 Major Portfolio Changes 14 Statement of Investments 15 Acorn Foreign Forty In a Nutshell 6 Performance at a Glance 7 Major Portfolio Changes 16 Statement of Investments 17 Portfolio Diversification 18 Acorn USA In a Nutshell 8 Performance at a Glance 9 Major Portfolio Changes 19 Statement of Investments 20 Acorn International In a Nutshell 10 Performance at a Glance 11 Major Portfolio Changes 22 Statement of Investments 24 Portfolio Diversification 28 Acorn Fund In a Nutshell 12 Performance at a Glance 13 Major Portfolio Changes 29 Statement of Investments 31 Foreign Portfolio Diversification 37 Trustees, Officers and Contact Information 38
.Year-End Distribution Estimates The following table details the Funds' year-end distribution estimates. These are preliminary estimates and subject to change.
Acorn Fund Acorn International Acorn USA Acorn Twenty Acorn Foreign Forty - -------------------------------------------------------------------------------------------------------- Long-term Capital Gains $3.40 $1.60 $1.30 $0.00 $0.00 - -------------------------------------------------------------------------------------------------------- Short-term Capital Gains $0.00 $0.00 $0.02 $0.14 $0.00 - --------------------------------------------------------------------------------------------------------
1 .Squirrel Chatter: A Really Big Bull [RALPH WANGER PHOTO APPEARS HERE] The new South Park movie, "Bigger, Larger, and Uncut," I have not yet seen. Judging by the title, it no doubt refers to the stock market. How much bigger can it get, and how much longer can it go? A pair of academics have made a stir by writing an article "Dow 36,000."/1/ They suggest that the current market cycle will be as big and as long a thing as any bull could hope for. Most reviewers treat the article as outrageous nonsense and try to refute "Dow 36,000." Could the authors' audacious forecast possibly come to pass? The Dow is bound to reach 36,000 sooner or later. After all, the Dow was under 1000 in 1982, and is now over 10,000, up ten-fold in 18 years. So another mere quadrupling is bound to happen. If the market was to go up 8% per year, a quadrupling would take another 18 years, perhaps a good result, but not exciting enough to make you buy a book about it in 1999. Could we do it in six years? That would require 25% returns. We just finished a four-year run at that level of growth (1995-1998), so another long run of high returns would be unprecedented but not unimaginable. How could the market quadruple again? The whole argument of James Glassman and Kevin Hassett, authors of "Dow 36,000," boils down to "the risk premium on equities should be zero." This sounds like an academic argument, but the authors are academics, so what can you expect? Their theoretical framework is a standard dividend discount model (DDM). This is a simple algebraic model, but it can be pushed to some strained conclusions, as we shall see. A DDM computes the value of a stock as the sum of all of the future dividends you will get from owning it, each dividend discounted to its present value. One simple DDM equation for the market is: Risk Premium (RP) = Growth Rate (GR) -- Risk Free Rate (RF) -- Dividend Yield (Y). The growth rate is the long-term future growth of the Dow-Jones dividend stream. Dividends have had an average growth rate of 4.7% since 1915; 5.4% since 1949. Earnings have grown faster than dividends over the last 50 years--7.3% growth per year for corporate earnings as a whole--matching the growth in GDP over this period. Since 1991, the economy has been relatively strong and non- inflationary, and GDP has grown at 5.5% per year. Dividends aren't likely to grow faster than GDP for the long-term. That would mean corporate profits would be growing faster than the overall economy, which is against the rules of economics and politics. We don't know exactly what the future growth rate of dividends will be (start with guessing real GDP growth, inflation, corporate profit margins, and the payout ratio of dividends to earnings), but let us assume that it will be 6%. This is near the rate for the last 50 years, and using it simplifies the math. The risk free rate in our equation can be represented by a five-year government bond, now a little over 6%. Going back to our DDM, you can see that we take the GR-RF; if both = 6%, they cancel out, simplifying our equation to: RP = Y (approximately). Most of the time from 1915 to 1990, yield averaged 4%. /2/ After 1990, the dividend yield started to shrink, and is now at an all-time low of 1 1/2%. Our equation says that the risk premium has dropped that much too. Risk Premium is the Key The risk premium measures the amount of risk you are willing to assume by owning stocks vs. owning government bonds. "The customary way to find the value of a risky security has always been to add a premium for risk to the pure interest rate, and then use the sum as the interest rate for discounting future receipts."/3/ The "Dow 36,000" argument rests explicitly on the risk premium dropping even further. Are you a "New Era" believer? If, in five years, the Dow-Jones dividend is $222, up from $171 now, and the risk premium is down to 0.62%, then the formula says the Dow-Jones triples to 36,000. If, however, the risk premium returns to its long-term mean at 4%, the Dow would be only 5,550, only half its current level, a fierce bear market. Who will be right? No one knows, but "New Era" thinkers have appeared in past bull markets only to be discredited. The next section will give reasons why the market can go much higher, followed by a section that says it won't. The Bullish Argument The "Dow 36,000" theory argues that stocks are no riskier than bonds. This is a defensible argument (even though many experts disagree). Academics measure risk by short-term volatility, and bonds have been volatile. One leading textbook/4/ shows that bonds were more volatile 2 than stocks in the 1976-87 period. In fact, bonds were extremely volatile between 1979-1983, when the Iraq-Iran War caused oil prices to jump and inflation to go to high levels, while interest rates soared to 14%. This was an unusual period, but there is no reason it couldn't happen again, so we shouldn't throw out the data from 1979-83. As investors realized that the equity risk premium was too high, they have pushed it lower, and this trend isn't over yet. To keep the bull market going, earnings and dividends need to keep growing, and the risk premium needs to keep shrinking. The argument put forth in "Dow 36,000" is that the historic market risk premium of 4% is way too high, because in the long run (any twenty-year period) stocks have made money. The risk premium is trending down because investors now realize that stocks are not riskier than bonds. The risk premium was about 6 1/2 in 1990, down to 3% in 1992, and has kept on shrinking since then, it is now 1 1/2%, and may well continue lower. If it gets down to 0.6%, then the Dow Jones will in fact be at 36,000. At that point, stocks will be selling at 80-100 times earnings, four times the present multiple. That sounds outlandish, but Japan was there in 1989. Consider this: the Russell 2000 P/E is 61x and the Nasdaq (over-the-counter) market, influenced by Internet stocks, is 158x right now! The Bearish Argument The eminent publication The Economist (September 25, 1999, pg. 17) argues that the American market is a financial bubble. "History shows that markets do overshoot and that bubbles can persist for some time--indeed, that is their nature. It also shows that the bigger a bubble gets, the greater the excesses it creates in the economy--and the bigger the bang when it eventually pops." If the U.S. market bubble pops, the Dow P/E ratio can shrink from 27x, where it is now, back down to 16x (the long-term average P/E), and easily go below the mean to 13x. That halves current values, so "Dow 5,000" could be the bears' book. A second bearish argument is that the risk premium ought to be 2-4%, not below 1%, because in fact stocks are riskier than bonds. The third bearish argument is that "Dow 36,000" is based on a dividend discount model that is a static model because a DDM does not require any history to explain its result. In the real world, a market that reached 80-100x earnings would have a dynamic interaction with the economy. When you have very high stock prices, you have very low cost of equity capital. Any machine is worth ordering, any building is worth building, any scheme is worth promoting--exactly what we see in Internet stocks today. The overexpansion that would result would kill profits and the market. Example: Japan's bubble popped in 1989 and was followed by an eight-year bear market. There is no theoretical reason that the Dow cannot get to 36,000 in a few years, but the boom would necessarily create the bust that would follow. We could get there but not stay there. Is There an Answer? If the best our mathematical model can do is tell us that the Dow should sell five years from now somewhere between 5000 and 36,000, have we said anything at all? Perhaps not. The future course of the stock market is not any more predictable than this 5000-36,000 result. The "Dow 36,000" theory is based on a near-zero risk premium, meaning that stocks are no riskier than bonds. However, history shows there have been some very long bear markets. These bear markets should be evidence of a risk premium more than zero. I believe that the "Dow 36,000" argument is too optimistic. The range of future prices is still very wide, at least 50% in either direction, in a range of 8000-18000. That ought to be enough volatility to suit anyone. /s/ Ralph Wanger Ralph Wanger Chief Investment Officer, Wanger Asset Management Lead Portfolio Manager, Acorn Fund - -------------------------------------------------------------------------------- /1/ James Glassman & Kevin Hassett, Dow 36,000, The Atlantic Monthly, September 1999. /2/ Ned Davis Research, Chart #S616 /3/ Williams, John Burr, The Theory of Investment Value, Harvard University Press, 1938: reprinted by Fraser Publishing Company, Burlington, VT 05402 in 1997. /4/ Bodie, Kane, Marcus, Investments: Second Edition, p. 471. Irwin, Burr Ridge, IL, 1993. The period 1976-87 included the 1979-83 years of very high inflation. High inflation makes bonds go down in a volatile manner. 3 Acorn Twenty >In a Nutshell [JOHN H. PARK PHOTO APPEARS HERE] [MARK H. YOST PHOTO APPEARS HERE] The third quarter was challenging. Acorn Twenty was off 7.1%, its first down quarter. On a relative basis, Acorn Twenty stayed ahead of its benchmark, the S&P MidCap 400 Index, which was off 8.4%, but fell slightly behind the S&P 500's negative 6.2% return. A top-performing stock held by your Fund has been Telephone & Data Systems (see inset). Recommended by Acorn Fund co-manager Chuck McQuaid, TDS was up 22% for the quarter and is up 98% for the year (111% since the Fund bought it on 11/23/98). Two newer positions, McLeod USA and Herman Miller, were up 17% and 14%, respectively, from the time of purchase through quarter end. McLeod is a competitive local exchange carrier (CLEC) whose stock went up after its announcement of a $1 billion investment by Forstmann Little, a private equity investment firm. Herman Miller is an office furniture manufacturer whose stock rose following better than expected third quarter earnings. Two stocks delivered particularly disappointing returns. Progressive Corporation fell 44% due to pricing pressure from increased competition in the insurance industry. Progressive, one of the dominant industry players, has been driving this pricing pressure and we feel over the long term it will emerge as a better-positioned company. National Data Corporation was down 40% because earnings were below analysts' estimates last quarter. We continue to believe National Data is a flourishing information company with promising potential. With the Fund's one-year anniversary approaching on November 23, Acorn Twenty is up 21.1% from inception through September 30, 1999 vs. the S&P MidCap 400's 8.8% gain, and the S&P 500's 11.5% return. We thank you for making the Fund's first year a successful one. With the Fund's one-year anniversary approaching on November 23, Acorn Twenty is up 21.1% from inception through September 30, 1999, vs. the S&P MidCap 400's 8.8% gain, and the S&P 500's 11.5% return. /S/ John H. Park /S/ Mark H. Yost John H. Park Mark H. Yost Co-Portfolio Manager Co-Portfolio Manager Wireless is More Telephone & Data Systems (TDS) has been in Acorn Twenty since the Fund's inception. TDS is comprised of three companies: (1) its wholly owned telecommunications company, TDS Telecommunications; (2) 81% ownership of U.S. Cellular, a provider of cellular phone service in small cities and rural areas; and (3) 82% ownership of Aerial Communications, a start-up PCS (personal communications service) company. Rapid growth in U.S. Cellular's business over the past several years has been hidden by start-up losses at Aerial. Acorn Fund co-manager Chuck McQuaid identified TDS as a growing business selling at a steep discount to its true value by looking beyond Aerial's negative impact on TDS' earnings. In December 1998, TDS management announced it would spin off Aerial to TDS shareholders.TDS stock rose 80% in the first nine months of 1999. In September, TDS revised its plan, deciding to sell Aerial to Voicestream Wireless at a fancy price. The increase in Aerial's value added even more value to TDS. 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 9/30/99: $59.4 million - -------------------------------------------------------------------------------- . Acorn Twenty Top 10 Holdings
Telephone & Data Systems 9.0% Cellular & Telephone Services Americredit 6.4% Auto Lending UICI 6.2% Insurance/Specialty Finance MidAmerican Energy 5.9% Growth Utility RCN 5.7% Metro Market CLEC: Voice, Video & Internet Services AES Corporation 5.6% Power Plants Liberty Media Group, AT&T 5.1% Cable Satellite Programming McLeod USA 4.9% Super Regional CLEC: Local, Long Distance & Internet Services ServiceMaster 4.9% Facilities Management SEI Investments 4.7% Mutual Fund Administration
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 9/30/99 [PIE CHART APPEARS HERE]
Information Finance Energy/Minerals Industrial Goods/Services 4.0% Health Care Consumer Goods/Services Other* 8.9%
* Other includes "Cash and other assets less liabilities" of 8.1%.
Relative Performance - ------------------------------------------------------------ 3rd quarter Year to Date Life of Fund* 1999 Acorn Twenty -7.1% 13.1% 21.1% S&P MidCap 400 -8.4% -2.1% 8.8% Russell 2000 -6.3% 2.4% 9.7% S&P 500 -6.2% 5.4% 11.5%
*Life of Fund performance is from Acorn Twenty's inception 11/23/98 through 9/30/99. Net Asset Value Per Share 9/30/99: $12.11 - ----------------------------------------- The Value of a $10,000 Investment in Acorn Twenty - -------------------------------------------------------------------------------- .November 23, 1998 through September 30, 1999 [GRAPH APPEARS HERE]
ACORN TWENTY S&P MIDCAP 400 11/23/98 10000 10000 12/31/98 10710 11109 1/31/99 11000 10676 2/28/99 10710 10117 3/31/99 11480 10400 4/30/99 12710 11220 5/31/99 12730 11270 6/30/99 13040 11872 7/30/99 13190 11620 8/31/99 12060 11222 9/30/99 12110 10875
Total Return Life of Fund 21.1% 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 PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. 5 Acorn Foreign Forty . In a Nutshell [MARCEL P. HOUTZAGER PHOTO APPEARS HERE] Acorn Foreign Forty rose 3.9% in the third quarter. This figure is slightly better than the Lipper International Funds Index, but lagged the 5.3% gain of the Salomon Smith Barney Cap Range $2-10 Billion Index. As Y2K fears diminished, our best sector was information technology services. Logica, Atos, Getronics, and Sema were all up 20% or better. Softbank kept up its stellar rise as the market continued to recognize the strength of its Internet portfolio. Softbank is a stock that we have been telling Acorn Foreign Forty shareholders about since the inception of the Fund due to its domination of the Internet in Japan. On the downside, the telecommunications sector underperformed substantially on concerns over rising capital costs (new telecommunications companies require large sums of capital in order to finance their sophisticated new equipment). Despite the sometimes volatile nature of these stocks, we believe that these "new telcos" can deploy state-of-the-art technology to provide lower cost and higher quality services (see inset). These companies are a creative and entrepreneurial force that is changing the communications world. We believe they also have the potential to make Acorn Foreign Forty shareholders a lot of money if they continue to grow. With the Fund's one-year anniversary approaching on November 23, Acorn Foreign Forty is up 36.2% from inception through September 30, 1999 vs. 15.3% for the Salomon Smith Barney Cap Range $2-10 Billion, and the EAFE Index gain of 13.0%. We thank you for making the Fund's first year a successful one. Softbank kept up its stellar rise as the market continued to recognize the strength of its Internet portfolio. Softbank is a stock that we have been telling Acorn Foreign Forty shareholders about since the inception of the Fund due to its domination of the Internet in Japan. /S/ MARCEL P. HOUTZAGER Marcel P. Houtzager Portfolio Manager Moving the Bytes Around One of our favorite long-term themes is the "new telcos," or telecommunications companies that use new technology to manage the huge growth in Internet data traffic and company data networks. An example is Energis. This company recently won a long-term contract to manage Sainsbury's--the United Kingdom's largest supermarket chain--data network. This network will manage the information (credit checks, stock control and data from point-of-sale terminals) flowing between 900 stores and five data centers. 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 9/30/99: $56.7 million - ---------------------------------------------------------------- .Acorn Foreign Forty Top 10 Holdings Softbank Japan 4.7% Internet Services/Investment Holding Atos France 4.1% Computer Services/Transaction Processing Celestica Canada 3.9% Electronic Manufacturing Services Getronics Netherlands 3.8% Computer Services Logica United Kingdom 3.5% Computer Software & Services Energis United Kingdom 3.4% Services Nintendo Japan 3.4% Video Games Mapfre Vida Spain 3.1% Life Insurance & Mutual Funds Venture Manufacturing Singapore 3.1% Electronic Manufacturing Services Banca Fideuram Italy 3.0% Life Insurance & Mutual Funds
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 9/30/99 [PIE CHART APPEARS HERE] Health Care 5.3% Energy/Minerals 4.8% Other* 5.2% Consumer Goods/Services 8.5% Industrial Good/Services 10.8% Finance 15.0% Information 50.4%
* Other includes "Cash and other assets less liabilities" of 1.0%.
Relative Performance - ------------------------------------------------------------------------ 3rd quarter Year to Date Life of Fund* 1999 Acorn Foreign Forty 3.9% 23.8% 36.2% EAFE 4.4% 8.5% 13.0% SSB Cap Range $2-10B 5.3% 11.5% 15.3% Lipper Int'l Funds Average 3.4% 10.6% NA
*Life of Fund performance for Acorn Foreign Forty is from inception 11/23/98 through 9/30/99. Net Asset Value Per Share 9/30/99: $13.59 - ----------------------------------------- The Value of a $10,000 Investment in Acorn Foreign Forty - -------------------------------------------------------- .November 23, 1998 through September 30, 1999 [GRAPH APPEARS HERE]
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 5/30/99 12,170 10,418 6/30/99 13,110 10,825 7/31/99 13,511 11,146 8/30/99 13,771 11,187 9/30/99 13,621 11,300
Total Return Life of Fund 36.2% 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 2 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 International 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 643 funds for the third 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 [ROBERT A. MOHN PHOTO APPEARS HERE] Acorn USA was off 4.4% in the third quarter, but stayed ahead of the 6.3% loss posted by the Russell 2000, the Fund's benchmark. We also did better than the S&P 500 Index, as we did in the second quarter as well. We hope this momentum continues. The Fund passed an important milestone in the third quarter. On September 4, Acorn USA reached its third year of operation, a time period widely used to judge the performance success of new mutual funds. We are proud of the excellent results we have delivered to shareholders. For the three years ended September 30, 1999, the Fund's annualized return was 16.3% vs. 8.7% for the Russell 2000 and 6.5% for the Lipper Small Cap Funds Index. Wall Street's technology obsession continued this quarter. Technology stocks, with their extraordinary revenue growth, dominated the market and posted strong results. Our technology stocks ran with the rest, especially our larger positions in Micros (hotel information systems), Aspect (call center software) and IntelliQuest (Internet market research). These stocks delivered returns between 20% and 70%. But honors for the quarter belong to your Fund's telephone stocks. Chuck McQuaid, co-manager of Acorn Fund, recommended two new cellular stocks, TDS and Price Communications, to the Fund this year. Both have been big winners. Host Marriott Services (airport food concessionaire) deserves special mention as a non-technology, non-telecom winner. It nearly doubled last quarter after a takeover by Autogrill, an Italian restaurateur. Host Marriott Services stays in the family, as Acorn International owns stock in Autogrill. National Data (health claims processor), on the other hand, committed the sin of missing its earnings estimate by an entire penny and dropped 40%. We continue to believe National Data is a flourishing information company with promising potential. /s/ Robert A. Mohn - ---------------------- Robert A. Mohn Lead Portfolio Manager On September 4, Acorn USA reached its third year of operation, a time period widely used to judge the performance success of new mutual funds. We are proud of the excellent results we have delivered to shareholders. For the three years ended September 30, 1999, the Fund's annualized return was 16.3% vs. 8.7% for the Russell 2000 and 6.5% for the Lipper Small Cap Funds Index. Tech Smart vs. Street Smart Americredit lends money to borrowers with poor credit histories to purchase used automobiles. Five years ago, when Americredit entered the business, other sub- prime auto lenders relied on street smarts and intuition to lend money. Gut instinct lending worked when competition was scarce and loan yields were high. Half the sub-prime auto lenders open for business two years ago have gone bust. Americredit has the sophisticated computer-based underwriting, risk management and pricing models to compete well in a tough business, and it now dominates this rapidly growing industry. 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 9/30/99: $310.7 million - ---------------------------------------------------------------------
. Acorn USA Top 10 Holdings MidAmerican Energy 8.1% Growth Utility Micros Systems 6.4% Information Systems for Restaurants & Hotels Telephone & Data Systems 5.8% Cellular & Telephone Services UICI 5.0% Insurance/Specialty Finance Americredit 3.0% Auto Lending Lincare Holdings 2.9% Home Health Care Services Sykes Enterprises 2.7% Call Center Services RCN 2.6% Metro Market CLEC: Voice, Video & Internet Services First Health 2.5% PPO Network Tesoro Petroleum 2.5% Oil Refinery/Gas Reserves
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 9/30/99 Health Care 7.4% Consumer Goods/Services 2.7% Industrial Goods/Services 8.3% Information 38.3% Energy/Minerals 15.2% Finance 15.0% Other* 13.1%
*Other includes "Cash and other assets less liabilities" of 12.6% Relative Performance - ---------------------------------------------------------------------- 3rd quarter Year to Date Last 12 mos. 1999 Acorn USA -4.4% 3.4% 19.2% Russell 2000 -6.3% 2.4% 19.1% Lipper Small-Cap Funds Avg. 2.9% 5.7% 26.9% S&P MidCap 400 -8.4% -2.1% 25.5% S&P 500 -6.2% 5.4% 27.8% Net Asset Value Per Share 9/30/99: $15.27 - ----------------------------------------- The Value of a $10,000 Investment in Acorn USA - ----------------------------------------------- . September 4, 1996 through September 30, 1999
Date Acorn USA Russell 2000 9/4/96 10,000 10,000 9/96 10,720 10,360 12/96 11,650 10,899 3/97 11,480 10,335 6/97 13,320 12,011 9/97 15,340 13,798 12/97 15,413 13,335 3/98 17,401 14,678 6/98 17,525 13,993 9/98 14,151 11,174 12/98 16,305 12,997 3/99 15,016 12,292 6/99 17,650 14,203 9/99 16,866 13,305
Average Annual Total Return 1 Year 19.2% Life of Fund 18.6% 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 643, 619 and 579 for the third quarter, year to date 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 [LEAH JOY ZELL PHOTO APPEARS HERE] [MARGARET M. FORSTER PHOTO APPEARS HERE] Acorn International gained 8.3% in the third quarter, bringing the year-to-date return to 26.5%. These returns reflect the fact that small-cap international assets were ripe for a rebound. A year ago, stock prices were weak due to the Russian crisis. Since the crisis subsided, world markets have been strong, led by small-company stocks. The return of foreign capital to Asia has been key. A year ago, eight out of Acorn International's top 10 positions were in Europe; today, that number has dropped to six, and the Asian names on the list all have moved up in rank. The three stocks that made the most money for us this quarter were in Australia (ERG), Singapore (Star Cruises) and Japan (Ryohin Keikaku). Acorn International gained 8.3% in the third quarter, bringing the year-to-date return to 26.5%. These returns reflect the fact that small-cap international assets were ripe for a rebound. As always, we are working hard to improve the portfolio. Twelve months ago, our largest stock was 4.6% of the Fund and the top 25 positions totaled 38% of the Fund's total net assets. Today, our number one position is only 3.3%, but the top 25 positions add up to 44% of the Fund's net assets. In other words, we have more medium-sized investments, with less of a spread from largest to smallest. We believe this shift keeps us adequately diversified, while assuring that we put weight behind the ideas in which we have the most conviction. With regard to themes, we continue to like the computer services/consulting sector. However, we have taken some investment dollars out of Scandinavia and moved them to companies with exciting prospects that are less well recognized by the market. One example is Dimension Data, the South African-based parent of network systems integrator Datacraft Asia. Another is Amdocs, the global leader in customer care and billing software for telecommunications based in Israel. We have also expanded the information technology theme to smartcards. These credit card look alikes have an embedded microchip that can store and process large amounts of data. Smartcards will be central to secure payment for many goods and services (see inset). /s/ Leah Joy Zell - ----------------------- Leah Joy Zell Lead Portfolio Manager /s/ Margaret M. Forster - ----------------------- Margaret M. Forster Co-Portfolio Manager Smart Money Take the subway in Hong Kong and watch people pay with a wave of their wallet or purse. They carry a new type of credit card, one that automatically deducts the fare from their bank account without touching the turnstile. The same card works for the bus, pay telephone, even newspapers. More than six million are in circulation after only two years. Hong Kong's success has persuaded Singapore, Rome and San Francisco to order their own installations, making system designer ERG the best-performing stock in Australia this year. 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 9/30/99: $1,973.6 million - ---------------------------------------------------------------------- . Acorn International Top 10 Holdings WM Data Nordic Sweden 3.3% Computer Services/Consulting Star Cruises Singapore 2.9% Cruise Line Venture Manufacturing Singapore 2.9% Electronic Manufacturing Services Atos France 2.6% Computer Services/Transaction Processing NTL United Kingdom 2.4% Voice, Video & Data Services Li and Fung Hong Kong 2.3% Sourcing of Consumer Goods Serco Group United Kingdom 2.3% Facilities Management Rhoen Klinikum Germany 2.1% Hospital Management TietoEnator Finland 2.0% Computer Services/Consulting Datacraft Asia Singapore 1.9% Network Integrator
The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings.
Acorn International Portfolio Diversification - -------------------------------------------------- . as a % of net assets, as of 9/30/99 [PIE CHART APPEARS HERE] Health Care 3.9% Finance 6.2% Other 9.3% Industrial Goods/Services 11.3% Energy/Minerals 2.7% Information 46.2% Consumer Goods/Services 20.4%
* Other include "Cash and other assets less liabilities" 5.5%.
Relative Performance - ---------------------------------------------------------------------- 3rd quarter Year to Date Last 12 mos. 1999 Acorn International 8.3% 26.5% 44.3% EMI (World ex-U.S.) 5.1% 13.1% 28.0% IFCI Composite -3.2% 33.0% 57.0% Lipper Int'l Small-Cap Funds Index 7.8% 27.0% 40.6% Lipper Int'l Funds Index 3.4% 10.5% 27.6%
Net Asset Value Per Share 9/30/99: $26.18
The Value of a $10,000 Investment in Acorn International - ---------------------------------------------------------------------- . September 23, 1992 through September 30, 1999 [GRAPH APPEARS HERE] ACORN INT'L EMI (World ex-U.S.) - ------------------------------------------------- Sep-1992 10000 10000 Dec-1992 10679 9590.49 Dec-1993 15924 12573.13 Dec-1994 15319 13639.59 Dec-1995 16686 14355.04 Dec-1996 20170 15392.73 Dec-1997 20190 13946.49 Dec-1998 23305 15641.12 Jun-1999 27222 16839 Sep-1999 29486 17694
This graph compares the results of $10,000 invested in Acorn International on September 23, 1992 (the date Fund shares were first offered to the public), with all dividends and capital gains reinvested, with the EMI (World ex-U.S.). EMI World ex-U.S. is Salomon Brothers' index of the bottom 20% of institutionally investable capital of countries, as selected by Salomon, excluding the U.S. The 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 [RALPH WANGER PHOTO APPEARS HERE] [CHARLES P. McQUAID PHOTO APPEARS HERE] Acorn Fund fell 2% in the third quarter, but we were able to beat the Russell 2000 and the S&P 500 indexes, which both dropped more than 6%. As the table on page 13 indicates, your Fund has outperformed these indexes year to date and over the last twelve months. Buyouts buoyed the Fund during the quarter. Host Marriott Services sold to Autogrill, World Color Press was acquired by Quebecor, and Compass International Services navigated its way into the arms of NCO Group. In each case, these buyouts produced big profits for us. We bought some small-cap biotech stocks a while ago, knowing that the industry was out of favor and at some point could provide some excitement. That point occurred in the quarter, as many of these stocks delivered returns between 30% and 90%. There are some technology ideas outside the Internet! The Internet is still potent. Our biggest dollar winner in the quarter was Softbank. This Japanese-based company dominates the Internet in Japan and has major equity positions in Yahoo!, E*Trade and many start-up companies. Softbank jumped 88% in the third quarter and is up about 350% over our cost in less than a year. As you would expect, earnings concerns caused our largest losses. While FPIC Insurance and Labor Ready achieved their earnings targets, investors became concerned about their future earnings. FPIC released more reserves than usual while Labor Ready's growth slowed--to "merely" 33% in July and August. As a result, FPIC declined 75% while Labor Ready was off 54%. We are proud of our results for the first nine months of 1999, a period when the majority of stocks have gone down, with a few strong companies keeping the averages in positive territory. /s/ Ralph Wanger /s/ Charles P. McQuaid Ralph Wanger Charles P. McQuaid Lead Portfolio Manager Co-Portfolio Manager We are proud of our results for the first nine months of 1999, a period when the majority of stocks have gone down, with a few strong companies keeping the averages in positive territory. - ------------------------------------------------------------------------------- Playing for Fun and Profit We've liked entertainment software stocks for a long time. Improving technology vastly enhances video games--just compare Madden NFL 2000's graphics and artificial intelligence to Pong's dots and lines. Because play value is constantly improving, unit volumes are surging. Software manufacturing costs have plunged as games switch from cartridges to CD-ROMs and DVDs. Unlike Hollywood, video game sequels often outsell their prequels, creating enduring franchises for publishers. During the quarter, 3DO blasted an 85% gain, THQ raced up 50% and electronic Arts scored a 33% return. - ------------------------------------------------------------------------------- 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 9/30/99: $3,288.5 million - ----------------------------------------------- . Acorn Fund Top 10 Holdings Softbank 2.7% Internet Services/Investment Holdings Liberty Media Group, AT&T 2.6% Cable Satellite Programming AES Corporation 2.1% Power Plants Carnival 2.0% Largest Cruise Line Lincare Holdings 1.9% Home Health Care Services Harley Davidson 1.9% Motorcycles & Related Merchandise NTL 1.9% Voice, Video & Data Services RCN 1.9% Metro Market CLEC: Voice, Video & Internet Services Solectron 1.7% Electronic Manufacturing Services Americredit 1.6% 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 9/30/99 [PIE CHART APPEARS HERE]
Consumer Industrial *Other Goods/ Health Goods/ Energy Foreign Industries Services Care Services Information Finance Minerals - ------- ---------- -------- ------ ---------- ----------- ------- -------- 14.1% 12.0% 8.7% 6.3% 7.7% 28.8% 13.7% 8.7%
* Other includes "Cash and other assets less liabilities" of 7.5%. Relative Performance - -------------------------------------------------------------------------------
3rd quarter Year to Date Last 12 mos. 1999 Acorn Fund -2.0% 9.4% 29.0% S&P 500 -6.2% 5.4% 27.8% Russell 2000 -6.3% 2.4% 19.1% Lipper Small-Cap Funds Index -2.2% 7.0% 26.8% S&P MidCap 400 -8.4% -2.1% 25.5%
Acorn Fund NAV as of 9/30/99: $18.21 - ------------------------------------ The Value of a $10,000 Investment in Acorn Fund - ------------------------------------------------------------------------------- . June 10, 1970 through September 30, 1999 [GRAPH APPEARS HERE]
ACORN FUND S&P 500 ---------- ------- 6/10/70 10,000 10,000 70 13,587 12,676 71 17,828 14,490 72 19,368 17,242 73 14,765 14,709 74 10,691 10,816 75 13,945 14,842 76 23,045 18,394 77 27,168 17,077 78 31,777 18,200 79 47,790 21,586 80 62,594 28,602 81 58,005 27,195 82 68,208 33,054 83 85,389 40,510 84 89,045 43,051 85 117,142 56,710 86 136,843 67,295 87 142,923 70,828 88 178,370 82,591 89 222,681 108,761 90 183,674 105,386 91 270,641 137,492 92 336,210 147,928 93 444,889 162,882 94 411,750 165,032 95 497,407 227,047 96 609,569 279,177 97 761,852 372,320 98 807,685 478,724 6/30/99 901,844 537,999 9/30/99 883,409 504,404
Average Annual Total Returns - ---------------------------- 1 Year 29.0% 5 Years 15.4% 10 Years 14.6% Life of Fund 16.5% This graph compares the results of $10,000 invested in the Acorn Fund on June 10, 1970 (the date the Fund shares were first offered to the public), with the S&P 500 Stock Index with dividends reinvested. The S&P 500 is a broad market-weighted average of U.S. blue-chip companies. The 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 . Major Portfolio Changes in the Third Quarter Number of Shares ----------------- 6/30/99 9/30/99 Additions - -------------------------------------------------------- Information McLeod USA 0 68,000 Telephone & Data Systems 51,000 60,000 - -------------------------------------------------------- Health Care First Health 0 60,000 St. Jude Medical 0 45,000 - -------------------------------------------------------- Consumer Goods/Services Costco 0 21,000 Herman Miller 63,800 110,000 Jones Apparel 65,000 95,000 - -------------------------------------------------------- Finance UICI 120,000 143,000 - -------------------------------------------------------- Energy/Minerals MidAmerican Energy 85,000 118,000 - -------------------------------------------------------- Sales Information Acxiom 105,000 0 Keane 100,000 0 PRIMEDIA 235,800 0 Sterling Commerce 65,000 0 - -------------------------------------------------------- Other Industries The Rouse Company 116,000 21,400 14 Acorn Twenty .Statement of Investments (Unaudited) September 30, 1999
Number of Shares Value (000) - -------------------------------------------------------------------------------- Common Stocks: 91.9% - -------------------------------------------------------------------------------- Information: 32.4% .Television Programming: 5.1% 82,000 Liberty Media Group, AT&T $ 3,044 Cable & Satellite Programming .Telephone Services: 10.5% 82,000 RCN 3,362 Metro Market CLEC: Voice, Video & Internet Services 68,000 McLeod USA 2,894 Super Regional CLEC: Local, Long Distance & Internet Services - -------------------------------------------------------------------------------- 6,256 .Mobile Communications: 9.0% 60,000 Telephone & Data Systems 5,329 Cellular & Telephone Services .Transaction Processors: 3.2% 72,000 National Data 1,872 Credit Card & Health Claims Processor .Business Information: 4.6% 63,000 H&R Block 2,737 Tax Preparation - -------------------------------------------------------------------------------- Information: Total 19,238 - -------------------------------------------------------------------------------- Health Care: 7.0% .Medical Equipment: 2.4% 45,000 St. Jude Medical 1,418 Heart Valves, Pacemakers, Defibrillators & Cathators .Services: 4.6% 52,000 Lincare Holdings 1,386 Home Health Care Services 60,000 First Health 1,346 PPO Network - -------------------------------------------------------------------------------- 2,732 --------- Health Care: Total 4,150 - -------------------------------------------------------------------------------- Consumer Goods/Services: 16.2% .Cruise Lines: 4.6% 60,400 Royal Caribbean Cruises 2,718 Cruises to Caribbean & Alaska .Furniture & Manufacturers: 11.6% 95,000 Jones Apparel 2,731 Women's Apparel 110,000 Herman Miller 2,630 Office Furniture 21,000 Costco 1,512 Warehouse Superstores - -------------------------------------------------------------------------------- 6,873 --------- Consumer Goods/Services: Total 9,591 - -------------------------------------------------------------------------------- Finance: 19.2% .Finance Companies: 6.4% 255,000 Americredit $ 3,809 Auto Lending .Money Management: 4.7% 31,500 SEI Investments 2,812 Mutual Fund Administration .Insurance: 8.1% 143,000 UICI 3,656 Insurance/Specialty Finance 14,100 Progressive 1,152 Auto Insurance - -------------------------------------------------------------------------------- 4,808 --------- Finance: Total 11,429 - -------------------------------------------------------------------------------- Industrial Goods/Services: 4.9% .Other Industrial Services: 4.9% 180,000 ServiceMaster 2,891 Facilities Management --------- Industrial Goods/Services: Total 2,891 - -------------------------------------------------------------------------------- Energy/Minerals: 11.4% .Independent Power: 11.4% 118,000 MidAmerican Energy 3,481 Growth Utility 56,000 AES Corporation 3,304 Power Plants --------- Energy/Minerals: Total 6,785 - -------------------------------------------------------------------------------- Real Estate: 0.8% 21,400 The Rouse Company 492 Regional Shopping Malls --------- Total Common Stocks: 91.9% 54,576 Short-Term Obligations: 8.4% 4,990 --------- Total Investments: 100.3% 59,566 Cash and Other Assets less Liabilities: (0.3%) (165) --------- Total Net Assets: 100% $59,401 - --------------------------------------------------------------------------------
15 Acorn Foreign Forty .Major Portfolio Changes in the Third Quarter Number of Shares
---------------------- 6/30/99 9/30/99 Additions - ------------------------------------------------------------ Europe .Germany GFK 0 1,400 .Sweden NetCom 30,000 40,000 .France/Belgium Audiofina (Belgium) 0 32,000 Atos 13,000 18,000 .United Kingdom Carlton Communications 0 85,000 Capita Group 0 80,000 Energis 35,000 82,000 Hays 80,000 100,000 Logica 60,000 150,000 Sema Group 35,000 120,000 St. James Capital 0 250,000 WPP Group 10,000 170,000 .Switzerland Pargesa Holdings 600 800 .Italy Banca Fideuram 150,000 300,000 Saipem 150,000 250,000 .Spain Indra Sistemas 90,000 110,000 Mapfre Vida 40,000 60,000 .Netherlands Getronics 30,064 40,000 Hunter Douglas 30,487 60,000 - ------------------------------------------------------------ Asia .Japan Nintendo 10,000 12,000 .Singapore Venture Manufacturing 0 200,000 - ------------------------------------------------------------ Other Countries .Canada Celestica 20,000 45,000 .Israel Amdocs 30,000 65,000 .United States Global TeleSystems 8,000 70,000 (includes effect of 2 for 1 stock split) Sales - ------------------------------------------------------------ Europe .Germany MobilCom 12,000 0 Stinnes 49,500 0 .Denmark ISS International System 10,000 0 .Finland TietoEnator 20,000 0 (formerly known as Tieto Corporation) .France SITA 5,000 0 .United Kingdom Smith & Nephew 200,000 0 .Italy Autogrill 30,000 0 Olivetti 170,000 0 - ------------------------------------------------------------ Asia .Japan NuSkin Enterprises 45,000 0 .Singapore Natsteel Electronics 200,000 0
16 Acorn Foreign Forty . Statement of Investments (Unaudited) September 30, 1999 Number of Shares Value (000) - ------------------------------------------------------------------------- Common Stocks: 99.0% - ------------------------------------------------------------------------- Europe: 67.2% . Germany: 2.1% 10,000 Rhoen Klinikum $1,140 Hospital Management 1,400 GFK 36 Market Research Services - ------------------------------------------------------------------------- 1,176 . Sweden: 2.6% 40,000 Netcom 1,483 Telecommunication Services . France/Belgium: 6.9% 18,000 Atos 2,308 Computer Services/Transaction Processing 32,000 Audiofina (Belgium) 1,619 Media Conglomerate - ------------------------------------------------------------------------- 3,927 . United Kingdom: 29.2% 150,000 Logica 1,984 Computer Software & Services 82,000 Energis 1,935 Telecommunication Services 170,000 WPP Group 1,582 Advertising 120,000 Sema Group 1,469 Computer Software & Services 15,000 NTL 1,441 Voice, Video & Data Services 225,000 Bodycote 1,221 Materials Technology & Metal Processing 100,000 Hays 1,082 Outsourcing Services 90,000 SSL International 1,065 Medical & Footcare Products 300,000 NFC 1,057 Logistics & Moving Services 250,000 St James Capital 953 Life Insurance 80,000 Capita Group 921 Outsourcing Services 30,000 Serco Group 674 Facilities Management 85,000 Carlton Communications 643 Media & Communications 79,000 Airtours 503 Packaged Tour Vacations - ------------------------------------------------------------------------- 16,530 . Switzerland: 3.7% 800 Pargesa Holdings $1,317 Industrial & Media Conglomerate 390 Cie Fin Richemont 790 Luxury Goods, Tobacco & Pay TV - ------------------------------------------------------------------------- 2,107 . Italy: 8.8% 300,000 Banca Fideuram 1,700 Life Insurance & Mutual Funds 250,000 Saipem 1,078 Offshore Construction 600,000 SEAT Pagine Gialle 877 Yellow Pages Publishers 42,000 Editoriale L'Espresso 783 Newspapers & Magazines 70,000 Mediolanum 536 Life Insurance & Mutual Funds - ------------------------------------------------------------------------- 4,974 . Spain: 6.5% 60,000 Mapfre Vida 1,764 Life Insurance & Mutual Funds 110,000 Indra Sistemas 1,147 Computer Services 45,000 Aguas de Barcelona 754 Water Utility - ------------------------------------------------------------------------- 3,665 . Netherlands: 7.4% 40,000 Getronics 2,158 Computer Services 60,000 Hunter Douglas 1,623 Decorative Window Coverings 6,501 ASR Verzekeringsgroep 405 Insurance - ------------------------------------------------------------------------- 4,186 ------- Europe: Total 38,048 - ------------------------------------------------------------------------- Asia: 16.1% . Hong Kong: 1.7% 324,900 SmarTone Telecom 1,000 Mobile Telecommunications Provider . Japan: 11.3% 7,000 Softbank 2,663 Internet Services/Investment Holdings 12,000 Nintendo 1,914 Video Games 6,000 Takefuji 999 Unsecured Consumer Loans 60,000 Olympus Optical 811 Photographic & Medical Equipment - ------------------------------------------------------------------------- 6,387 . Singapore: 3.1% 200,000 Venture Manufacturing 1,741 Electronic Manufacturing Services ------ Asia: Total 9,128 17 Acorn Foreign Forty .Statement of Investments, continued
Number of Shares Value (000) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Other Countries: 15.7% .Canada: 8.2% 45,000 Celestica $ 2,215 Electronic Manufacturing Services 70,000 Canadian Natural Resources 1,639 Oil & Gas Producer 50,000 Power Financial 810 Financial Services Holding Company - -------------------------------------------------------------------------------- 4,664 .Israel: 2.4% 65,000 Amdocs 1,365 Telecommunications Billing & Customer Care Software .United States: 5.1% 70,000 Global TeleSystems 1,380 Telecommunications Provider 32,600 MIH 941 Pay-TV Number of Shares Value (000) - -------------------------------------------------------------------------------- 32,400 Azurix $ 557 Owner/Operator of Water Utilities - -------------------------------------------------------------------------------- 2,878 ------- Other: Total 8,907 ------- Total Common Stocks: 99.0% 56,083 Cash and Other Assets Less Liabilities: 1.0% 595 ------- Total Net Assets: 100% $56,678 ================================================================================
.Portfolio Diversication At September 30, 1999 the Fund's portfolio of investments as a percent of net assets was diversified as follows:
Value (000) Percent - -------------------------------------------------------------------------------- .Information Computer Services $ 7,955 14.0% Telephone Services 6,675 11.8 Publishing 3,446 6.1 CATV 2,382 4.2 Broadcasting 2,262 4.0 Contract Manufacturing 1,741 3.1 Advertising 1,582 2.8 Business Software 1,365 2.4 Business Information 1,147 2.0 - -------------------------------------------------------------------------------- 28,555 50.4 .Health Care Hospital Management 1,140 2.0 Health Care Services 1,065 1.9 Medical Equipment 811 1.4 - -------------------------------------------------------------------------------- 3,016 5.3 .Consumer Goods/Services Consumer Software 1,914 3.4 Durable Goods 1,623 2.8 Entertainment 790 1.4 Travel 503 0.9 - -------------------------------------------------------------------------------- 4,830 8.5 .Finance Insurance 3,932 6.9 Money Management 2,236 4.0 Closed-End Funds 1,317 2.3 Savings & Loans 999 1.8 - -------------------------------------------------------------------------------- 8,484 15.0 .Industrial Goods/Services Outsourcing Services $ 2,677 4.7% Electrical Components 2,215 3.9 Industrial Materials 1,221 2.2 - -------------------------------------------------------------------------------- 6,113 10.8 .Energy/Minerals Oil/Gas Producers 1,639 2.9 Oil Services 1,078 1.9 - -------------------------------------------------------------------------------- 2,717 4.8 .Other Industries Regulated Utilities 1,311 2.3 Transportation 1,057 1.9 - -------------------------------------------------------------------------------- 2,368 4.2 ------------------ Total Common Stocks: 56,083 99.0% Cash and Other Assets Less Liabilities: 595 1.0 ------------------ Net Assets: $56,678 100.0% ================================================================================
18 Acorn USA . Major Portfolio Changes in the Third Quarter Number of Shares ---------------------- 6/30/99 9/30/99 Purchases - ---------------------------------------------------------------- Information Applied Power Inc 0 74,000 Computer Task Group 119,000 171,700 National Data 278,300 298,300 Price Communications 0 132,450 (includes effect of 5% stock dividend) Project Software 0 65,500 Sykes Enterprises 296,500 340,500 Telephone & Data Systems 120,000 204,000 West TeleServices 0 80,000 - ---------------------------------------------------------------- Consumer Goods/Services Bally Total Fitness 0 55,000 - ---------------------------------------------------------------- Finance Americredit 543,500 633,500 UICI 580,700 613,700 - ---------------------------------------------------------------- Energy/Minerals Devon Energy Corp 0 9,000 Sales - ---------------------------------------------------------------- Information Activision 75,500 34,500 InfoUSA 26,800 0 Kronos 148,500 45,100 Pinnacle Holdings 50,000 0 Systems & Computer Technology 170,400 73,400 - ---------------------------------------------------------------- Health Care Lincare Holdings 382,200 341,400 - ---------------------------------------------------------------- Consumer Goods/Services Host Marriott Services 930,600 0 - ---------------------------------------------------------------- Finance AmerUs Life Holdings 93,500 0 Coast Contingency Rights 156,500 0 - ---------------------------------------------------------------- Industrial Goods/Services Compass International Services 186,900 0 Schnitzer Steel 27,300 0 - ---------------------------------------------------------------- Energy/Minerals Atmos Energy 283,000 248,000 - ---------------------------------------------------------------- Other Industries Forest City Enterprises Cl. A 28,400 0 19 Acorn USA .Statement of Investments (Unaudited) September 30, 1999
Number of Shares Value (000) - ------------------------------------------------------------------------------------------------------------ Common Stocks: 87.4% - ------------------------------------------------------------------------------------------------------------ Information: 38.3% .Broadcasting: 2.2% 209,100 Data Transmission Network $ 5,214 Data Services for Farmers 32,500 Young Broadcasting 1,702 Television Stations - ------------------------------------------------------------------------------------------------------------ 6,916 .Television Programming: 2.4% 87,000 TV Guide 7,316 TV Program Guides & Programming .Telephone Services: 2.6% 196,300 RCN 8,048 Metro Market CLEC: Voice, Video & Internet Services .Mobile Communications: 7.7% 204,000 Telephone & Data Systems 18,118 Cellular & Telephone Services 132,450 Price Communications 3,319 Cellular Telephone Services 121,800 COMARCO 2,406 Wireless Network Testing - ------------------------------------------------------------------------------------------------------------ 23,843 .Telecommunications Equipment: 1.9% 354,100 Aspect Telecommunications 6,009 Call Center Equipment .Gaming Equipment: 0.9% 146,000 International Game Technology 2,628 Slot Machines & Progressive Jackpots .Computer Services: 3.9% 340,500 Sykes Enterprises 8,406 Call Center Services 171,700 Computer Task Group 2,533 Application Development & Staffing Services 434,700 Aztec Technology Partners 747 Application Development & Maintenance Services 63,000 IMR Global 520 Application Development & Maintenance Services - ------------------------------------------------------------------------------------------------------------ 12,206 .Consumer Software: 0.2% 34,500 Activision 608 Entertainment Software .Business Software: 2.2% 65,500 Project Software 3,504 Enterprise Maintenance Software 214,000 JDA Software 2,501 Applications/Software & Services for Retailers 73,400 Systems & Computer Technology 922 Enterprise Software & Services - ------------------------------------------------------------------------------------------------------------ 6,927 .Transaction Processors: 2.5% 298,300 National Data 7,756 Credit Card & Health Claims Processor .Business Information/Marketing Services: 4.2% 483,100 IntelliQuest Information 5,254 Technology Market Research 206,000 CACI International 4,390 Technology Services for Government 169,000 PRIMEDIA 2,366 Specialty Magazines & Other Publications 80,000 West TeleServices 830 Customer Care & Sales Support - ------------------------------------------------------------------------------------------------------------ 12,840 .Contract Manufacturing: 0.7% 74,000 Applied Power 2,248 Electronic Enclosures & Industrial Products .Computer Hardware/Related Systems: 6.9% 491,500 Micros Systems 19,906 Information Systems for Restaurants & Hotels 45,100 Kronos 1,655 Labor Management Solutions - ------------------------------------------------------------------------------------------------------------ 21,561 ---------- Information: Total 118,906 - ------------------------------------------------------------------------------------------------------------ Health Care: 7.4% .Biotechnology/Drug Delivery: 0.1% 78,000 Synaptic Pharmaceuticals 390 Receptor Targeted Drug Design .Services: 7.3% 341,400 Lincare Holdings 9,100 Home Health Care Services 352,000 First Health 7,898 PPO Network 781,100 Magellan Health Services 5,712 Mental Health Services - ------------------------------------------------------------------------------------------------------------ 22,710 ---------- Health Care: Total 23,100 - ------------------------------------------------------------------------------------------------------------ Consumer Goods/Services: 2.7% .Consumer Services: 1.2% 157,600 NuSkin Enterprises 2,128 Personal Care/Herbal Products 55,000 Bally Total Fitness 1,681 Fitness Centers - ------------------------------------------------------------------------------------------------------------ 3,809 .Retail: 1.5% 74,000 Whole Foods Market 2,421 Natural Food Supermarkets 345,000 Gadzooks 2,286 Teen Apparel Retailer - ------------------------------------------------------------------------------------------------------------ 4,707 ---------- Consumer Goods/Services: Total 8,516
20
Number of Shares Value (ooo) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Finance: 15.0% .Banks: 1.5% 93,500 Chittenden $ 2,665 Vermont & West Massachusetts Bank 44,000 TCF Financial 1,257 Great Lakes Bank 34,000 Texas Regional Bancshares 841 TexMex Bank - ------------------------------------------------------------------------------- 4,763 .Finance Companies: 4.1% 633,500 Americredit 9,463 Auto Lending 590,000 World Acceptance 3,171 Personal Loans - ------------------------------------------------------------------------------- 12,634 .Money Management: 0.7% 163,000 Phoenix Investment Partners 1,365 Mutual Fund & Pension Manager 52,800 Pioneer Group 792 Equity Mutual Funds - ------------------------------------------------------------------------------- 2,157 .Insurance: 8.7% 613,700 UICI 15,688 Insurance/Specialty Finance 392,100 Acceptance Insurance 4,999 Crop Insurance 13,800 Markel 2,512 Specialty Insurance 93,000 Leucadia National 1,953 Insurance Holding Company 66,000 Protective Life 1,914 Life/Dental Insurance - ------------------------------------------------------------------------------- 27,066 ---------- Finance: Total 46,620 - ------------------------------------------------------------------------------- Industrial Goods/Services: 8.3% .Steel: 0.3% 79,000 Atchison Casting 726 Steel Foundries .Industrial Distribution: 0.3% 70,000 Vallen 1,015 Safety Products Distribution .Machinery: 0.1% 45,700 Farr Company 423 Filters .Specialty Chemicals: 1.0% 225,600 Lilly Industries, Cl. A 3,074 Industrial Coatings .Other Industrial Services: 6.6% 346,000 Hub Group 7,071 Truck & Rail Freight Forwarder 402,500 Wackenhut, Cl. B 6,037 Prison Management 347,400 Insurance Auto Auctions $ 5,168 Auto Salvage Services 210,000 Labor Ready 2,113 Temporary Manual Labor - ------------------------------------------------------------------------------- 20,389 ---------- Industrial Goods/Services: Total 25,627 - ------------------------------------------------------------------------------- Energy/Minerals: 15.2% .Independent Power: 8.1% 855,400 MidAmerican Energy 25,234 Growth Utility .Oil/Gas Producers: 2.6% 473,800 Tesoro Petroleum 7,818 Oil Refinery/Gas Reserves 9,000 Devon Energy 373 Oil & Gas Producer - ------------------------------------------------------------------------------- 8,191 .Distribution/Marketing/Refining: 4.5% 248,000 Atmos Energy 5,983 Natural Gas Utility 208,400 Dynegy 4,311 Natural Gas & Electric Processing & Marketing 92,300 Equitable Resources 3,490 Natural Gas Utility & Producer - ------------------------------------------------------------------------------- 13,784 ------------ Energy/Minerals: Total 47,209 - ------------------------------------------------------------------------------- Real Estate: 0.5% 47,000 The Rouse Company 1,081 Regional Shopping Malls 18,100 Gaylord Entertainment 534 Opryland Hotel & Other Assets ------------ Real Estate: Total 1,615 ------------ Total Common Stocks: 87.4% 271,593 Short-Term Obligations: 12.4% 38,495 ------------ Total Investments: 99.8% 310,088 Cash and Other Assets Less Liabilities: 0.2% 594 ------------ Total Net Assets: 100% $310,682 - -------------------------------------------------------------------------------
21 Acorn International .Major Portfolio Changes in the Third Quarter
Number of Shares ------------------------- 6/30/99 9/30/99 Additions - ----------------------------------------------------------------------- Europe .Germany EM.TV & Merchandising 7,100 240,000 (includes effect of 25 for 1 stock split) Fresenius, Pfd. 40,000 50,000 GFK 0 30,000 .Finland Talentum 1,400,000 1,500,000 .Sweden Information Highway 0 150,000 Mandator 1,000,000 1,200,000 .United Kingdom/Ireland Baltimore Technologies 300,000 500,000 Bodycote 1,750,000 2,000,000 Capita Group 1,870,000 2,000,000 Esat Telecom (Ireland) 205,000 225,000 Flextech 205,000 450,000 NFC 2,000,000 2,500,000 St James Capital 0 500,000 .Italy Banca Fideuram 3,000,000 3,500,000 Class Editori 1,000,000 1,500,000 .Spain/Portugal Aguas de Barcelona 125,000 400,000 Cortefiel 400,000 450,000 - --------------------------------------------------------------------- Asia .Hong Kong Pacific Century 0 7,500,000 .Japan Fuji Software ABC 150,000 180,000 JAFCO 125,000 140,000 Nintendo 144,000 150,000 Otsuka Kagu 25,000 30,000 Taiyo Ink 65,000 80,000 Trans Cosmos 95,000 110,000 .Taiwan Chroma Ate 2,599,500 2,999,500 Phoenixtec Power 0 2,000,000 Systex 0 2,000,000 .Malaysia Unisem 504,000 2,000,000 .South Korea S1 Corporation 50,000 65,000 (includes effect of 3.7% stock dividend) - --------------------------------------------------------------------- Latin America .Mexico Corp Interamericana de Entretenimiento 3,600,000 5,000,000 .Brazil Embratel 620,000 775,000 TeleSudeste Celular 100,000 400,000 - --------------------------------------------------------------------- Other Countries .Australia ERG 6,500,000 7,500,000 .Canada Leitch Technology 300,000 400,000 .Israel Amdocs 420,000 750,000 Galileo Technology 250,000 550,000 (includes effect of 2 for 1 stock split) Gilat Satellite Network 25,000 170,000 .South Africa Dimension Data 5,000,000 6,000,000 .United States Global TeleSystems 165,000 450,000 (includes effect of 2 for 1 stock split)
22
Number of Shares ---------------------- 6/30/99 9/30/99 Sales - -------------------------------------------------------------------------------- Europe .Germany/Austria Kamps 47,400 0 MobilCom 30,000 0 Merck KGA 175,000 0 Sixt 70,000 0 Stinnes 400,000 0 .Denmark Kompan International 44,000 0 Vest Wood 50,000 0 .Finland TietoEnator 1,500,000 1,250,000 (formerly known as Tieto Corporation) .Sweden Autoliv 250,000 0 Bure Investment 950,000 0 WM Data Nordic 1,650,000 1,500,000 .France Imetal 10,000 0 Spir Communications 95,000 0 SITA 45,000 0 .United Kingdom/Ireland Atkins 1,350,000 1,000,000 Icon (Ireland) 74,000 0 Saville Systems ADR (Ireland) 400,000 0 Serco Group 2,100,000 2,000,000 .Switzerland Societe Generale d'Affichage 18,000 12,000 Pargesa Holdings 3,200 0 Phoenix Mecano 33,000 30,000 .Italy/Greece Attica Enterprises (Greece) 1,200,000 700,000 Banca Pop Commercia e Industria 500,000 0 .Hungary Matav 55,000 0 - -------------------------------------------------------------------------------- Asia .Hong Kong Varitronix International 5,000,000 1,645,000 .Japan Benesse 50,000 40,000 Nemic Lambda 48,000 0 Kadokawa Shoten 60,000 30,000 Nichii Gakkan 60,000 0 OBIC 35,000 36,000 (includes effect of 20% stock dividend) Olympus Optical 500,000 0 Ryohin Keikaku 100,000 90,000 Takefuji 80,000 0 .Malaysia Malaysian Oxygen 576,000 0 .Thailand United Broadcasting 885,900 0 .Singapore Datacraft Asia 9,000,000 8,500,000 - -------------------------------------------------------------------------------- Latin America .Mexico Nadro, Series L 8,940,000 0 .Brazil Elevadores Atlas 380,000 0 - -------------------------------------------------------------------------------- Other Countries .Australia Ecorp 2,500,000 0 .Canada Northstar Energy 100,000 0
23 Acorn International .Statement of Investments (Unaudited) September 30, 1999
Number of Shares Value (000) - ------------------------------------------------------------------------------------------------------------------------------------ Common Stocks and Other Equity-Like Securities: 94.5% - ------------------------------------------------------------------------------------------------------------------------------------ Europe: 50.5% .Germany/Austria: 4.0% 200,000 Rhoen Klinikum Pfd. $24,069 160,000 Rhoen Klinikum 18,233 Hospital Management 240,000 EM.TV & Merchandising 10,454 Children's Media Production, Merchandising & Distribution 140,000 UnitedGlobalCom (Austria) 10,028 Cable Television for Europe, Israel & Australia 50,000 Fresenius, Pfd. 8,680 Dialysis Equipment & Solutions 165,000 Flughafen Wien (Austria) 6,584 Vienna Airport Authority 30,000 GFK 783 Market Research Services - ------------------------------------------------------------------------------------------------------------------------------------ 78,831 .Denmark: 0.2% 75,000 ISS International System 4,201 Cleaning Services .Finland: 3.6% 1,250,000 TietoEnator (formerly known as Tieto Corporation) 39,538 Computer Services/Consulting 1,500,000 Talentum 21,087 Trade Journals & Internet Services 500,000 Fiskars, Series A 7,775 Scissors & Gardening Tools 95,400 Spar Finland 2,695 Grocery/Convenience Stores - ------------------------------------------------------------------------------------------------------------------------------------ 71,095 .Norway: 0.1% 654,750 Atex Media Solutions 1,182 Print Media Software .Sweden: 4.7% 1,500,000 WM Data Nordic 64,955 Computer Services/Consulting 350,000 Modern Times Group 10,673 TV, Newspapers & Electronic Commerce 1,200,000 Mandator 8,417 Computer Services/Consulting 150,000 Information Highway 4,885 Internet Consulting 135,000 IBS 2,487 Enterprise Software 250,000 Sigma 2,028 Technical Consulting - ------------------------------------------------------------------------------------------------------------------------------------ 93,445 .France: 4.3% 400,000 Atos 51,290 Computer Services/Transaction Processing 62,000 NRJ 16,838 Radio Network 60,000 Fininfo 11,949 Data Feeds for French Banks & Brokers 19,000 Penauille Polyservice 5,261 Industrial Cleaning/Airport Services - ------------------------------------------------------------------------------------------------------------------------------------ 85,338 .United Kingdom/Ireland: 15.6% 500,000 NTL 48,047 Voice, Video & Data Services 2,000,000 Serco Group 44,960 Facilities Management 2,000,000 Capita Group 23,024 Outsourcing Services 13,000,000 Electronics Boutique 19,911 Video Game Retailer 510,000 Euro Money Publications 14,972 Financial Publications 1,250,000 SSL International 14,791 Medical & Footcare Products 1,700,000 Rotork 12,067 Valve Actuators for Oil & Water Pipelines 2,000,000 Bodycote 10,853 Materials Technology & Metal Processing 3,500,000 Taylor Nelson 10,375 Market Research Services 500,000 Baltimore Technologies 9,984 Security Software 1,250,000 ITNET 9,933 Outsourcing Services 225,000 Esat Telecom (Ireland) 8,944 Telecommunications Provider 2,500,000 NFC 8,811 Logistics 2,000,000 Oriflame International 8,366 Cosmetics Sold Door-to-Door 1,000,000 Atkins 8,358 Facilities Management 600,000 Logica 7,935 Computer Services/Consulting 2,500,000 Smith & Nephew 7,874 Medical Equipment & Supplies 2,000,000 Photobition Group 7,576 Production of Graphics for Exhibits 450,000 Flextech 7,000 Cable Channels 3,400,000 HALMA 6,495 Fire, Burglary & Flooding Detection Devices 1,500,000 Hogg Robinson 5,842 Corporate Travel Management 715,000 Fairey Group 4,963 Electronic Products
24 Number of Shares Value (000) - -------------------------------------------------------------------------------- 300,000 Ocean Group $ 4,610 Freight Forwarder 500,000 St James Capital 1,906 Life Insurance - -------------------------------------------------------------------------------- 307,597 .Switzerland: 4.8% 12,500 Cie Fin Richemont 25,307 Luxury Goods, Tobacco & Pay TV 65,000 Selecta Group 25,123 Vending Machine Owner/Operator 30,000 Phoenix Mecano 14,094 Electrical Components Manufacturer 15,000 Bon Appetit 11,695 Wholesale Food Distributor and Speciality Restaurant/Retail Outlets 6,500 Sarasin & Cie Bank 11,435 Private Banking 12,000 Societe Generale d'Affichage 7,005 Billboard Advertising - -------------------------------------------------------------------------------- 94,659 .Italy/Greece: 7.5% 1,800,000 Editoriale L'Espresso 33,548 Newspapers & Magazines 2,900,000 Autogrill 32,429 Restaurants & Catering for Travelers 3,500,000 Banca Fideuram 19,830 Life Insurance & Mutual Funds 700,000 Attica Enterprises (Greece) 17,153 Ferry Line 1,500,000 Class Editori 12,860 Newspapers & On-Line Financial Data 1,400,000 Mediolanum 10,720 Life Insurance & Mutual Funds 1,400,000 Aeroporti di Roma 10,407 Airport Management 4,000,000 SEAT Pagine Gialle 5,845 Yellow Pages Publisher 1,250,000 Saipem 5,392 Offshore Construction - -------------------------------------------------------------------------------- 148,184 .Spain/Portugal: 2.1% 400,000 Mapfre Vida 11,758 Life Insurance & Mutual Funds 450,000 Cortefiel 11,694 Apparel Retailer 400,000 Aguas de Barcelona 6,701 Water Utility 650,000 Prosegur 5,711 Security Guards 425,000 Filmes Lusomundo (Portugal) 5,649 Newspapers, Radio, Video, Film Distribution - -------------------------------------------------------------------------------- 41,513 .Netherlands: 2.7% 500,000 Getronics 26,971 Computer Services/Consulting 420,000 Kempen 19,771 Stock Brokerage/Investment Management 950,000 Scala Business Solutions 6,071 95,775 Scala Business Solutions Warrants 3/31/01 9 Enterprise Software - -------------------------------------------------------------------------------- 52,822 .Hungary: 0.5% 1,200,000 Matav 6,592 Telecommunications Provider 100,000 Gedeon Richter 4,009 Pharmaceuticals - -------------------------------------------------------------------------------- 10,601 --------- Europe: Total 989,468 - -------------------------------------------------------------------------------- Asia: 26.8% .Hong Kong: 3.6% 14,999,000 Li and Fung 45,377 Sourcing of Consumer Goods 3,000,000 SmarTone Telecom 9,230 Mobile Telecommunications Provider 2,000,000 TVB 8,548 Television Broadcasting 7,500,000 Pacific Century 4,055 Life Insurance 1,645,000 Varitronix International 3,590 LCD Manufacturer - -------------------------------------------------------------------------------- 70,800 .India: 0.0% 1,998,000 Zurich India Quantum 561 (formerly known as Centurion Quantum Growth) Closed-End Fund .Japan: 11.6% 150,000 Nintendo 23,922 Video Games 175,000 Orix 21,515 Finance Leasing 120,000 Aiful 20,456 Consumer Lending 90,000 Ryohin Keikaku 18,174 90,000 Ryohin Keikaku New 18,089 Own Brand Specialty Retailer 36,000 OBIC 16,822 Computer Integrator 180,000 Fuji Software ABC 15,334 Computer Services/Consulting 75,000 Nidec 14,194 Spindle Motor Manufacturer 110,000 Trans Cosmos 13,741 Information Technology Services & Investments 20,000 Bellysystem 24 13,431 Telemarketing 140,000 JAFCO 11,769 Venture Capital Fund
25
Number of Shares Value (000) - -------------------------------------------------------------------------------------- 80,000 Taiyo Ink $ 11,271 Speciality Chemicals 30,000 Otsuka Kagu 8,735 Furniture Retailer 40,000 Benesse 7,961 Correspondence Courses 30,000 Kadokawa Shoten 7,608 Magazine/Book Publisher 385,000 NuSkin Enterprises 5,197 Personal Care/Herbal Products - -------------------------------------------------------------------------------------- 228,219 .Taiwan: 1.4% 2,000,000 Hitron Technology 8,589 Network Integration & Internet Services 2,999,500 Chroma Ate 7,927 Test & Measurement Instruments 2,000,000 Systex 6,292 Systems Integrator & Internet Services 2,000,000 Phoenixtec Power 4,153 Uninterruptable Power Supply Manufacturer - -------------------------------------------------------------------------------------- 26,961 .Malaysia: 0.4% 2,000,000 Unisem 8,158 Semiconductor Assembly .Philippines: 0.3% 75,000,000 Int'l Container Terminal Services 7,152 Container Handling Terminals & Port Management .South Korea: 0.6% 65,000 S1 Corporation 10,927 Home/Business Security Services .Singapore: 8.9% 9,500,000 Star Cruises 57,000 Cruise Line 6,500,000 Venture Manufacturing 56,572 Electronic Manufacturing Services 8,500,000 Datacraft Asia 37,400 Network Integrator 6,500,000 Natsteel Electronics 24,272 Electronic Manufacturing Services - -------------------------------------------------------------------------------------- 175,244 -------- Asia: Total 528,022 - -------------------------------------------------------------------------------------- Latin America: 3.9% .Mexico: 2.3% 7,000,000 Grupo Industrial Bimbo 14,664 Bread, Baked Goods & Snacks 3,500,000 Kimberly Clark de Mexico 12,358 Paper Products 5,000,000 Corp Interamericana de Entretenimiento 12,117 Special Events & Live Entertainment 4,600,000 Grupo Continental $ 5,561 Beverages - -------------------------------------------------------------------------------------- 44,700 .Brazil: 0.9% 775,000 Embratel 8,864 Long Distance Telecommunications Provider 400,000 TeleSudeste Celular 8,600 Cellular Operator - -------------------------------------------------------------------------------------- 17,464 .Argentina: 0.5% 400,000 IRSA GDS 11,250 Real Estate Management & Development .Peru: 0.2% 7,000,000 Enrique Ferreyros 4,149 Heavy Machinery Dealer -------- Latin America: Total 77,563 - -------------------------------------------------------------------------------------- Other Countries: 13.7% .Australia: 3.5% 7,500,000 ERG 30,835 Smart Card Systems for Public Transportation 5,000,000 AAPT 15,979 Telecommunications Provider 1,000,000 Computershare 12,013 Financial Software/Services 2,000,000 KeyCorp 9,841 Smart Card Technology - -------------------------------------------------------------------------------------- 68,668 .Canada: 4.5% 650,000 Celestica 32,002 Electronic Manufacturing Services 720,000 Canadian Natural Resources 16,855 Oil & Gas Producer 500,000 Penn West Petroleum 10,616 Oil & Gas Producer 600,000 Power Financial 9,718 Financial Services Holding Company 400,000 Leitch Technology 6,261 Television Production Equipment 1,200,000 Bracknell 5,104 Electrical Contractor & Facilities Management 600,000 LGS Group 4,083 Computer Systems Integrator 4,000,000 Dundee Realty 3,539 Real Estate - -------------------------------------------------------------------------------------- 88,178 .Israel: 2.3% 750,000 Amdocs 15,750 Telecommunications Billing & Customer Care Software 550,000 Galileo Technology 13,750 Communications Semiconductors
26
Principal Amount of Number of Shares Value (cont'd) - ------------------------------------------------------------------------ 170,000 Gilat Satellite Network $ 9,116 Satellite Communications Equipment 300,000 ECI Telecom 7,406 Telecommunications Equipment - ------------------------------------------------------------------------ 46,022 .South Africa: 1.2% 6,000,000 Dimension Data 23,850 Networks & Computer Services .Russia: 0.0% $1,500,000 Khanty Mansiysk 10% Notes 750 3,917 Khanty Mansiysk 131 Oil Production in Russia - ------------------------------------------------------------------------ 881 .United States: 2.2% 325,000 AES Corporation 19,175 Power Plants 375,000 MIH 10,828 Pay-TV 450,000 Global TeleSystems 8,873 Telecommunications Provider 190,000 Azurix 3,266 Owner & Operator of Water Utilities - ------------------------------------------------------------------------ 42,142 ---------- Other: Total 269,741 Total Common Stocks and Other ---------- Equity-Like Securities: 94.5% 1,864,794 Short-Term Obligations: 5.6% 110,979 ---------- Total Investments: 100.1% 1,975,773 Cash and Other Assets Less Liabilities: (0.1%) (2,218) ---------- Total Net Assets: 100% $1,973,555 ========================================================================
27 Acorn International .Portfolio Diversication At September 30, 1999, the Fund's portfolio of investments as a percent of net assets was diversified as follows:
Value (000) Percent - ----------------------------------------------------- . Information Computer Services $ 286,037 14.6% Publishing 101,569 5.1 Telephone Services 93,060 4.7 Contract Manufacturing 80,844 4.1 CATV 75,903 3.8 Transaction Processors 52,689 2.7 Business Software 35,483 1.8 Instrumentation 31,079 1.6 Semiconductors 21,908 1.1 Programming 21,127 1.1 Business Information 20,308 1.0 Computer Hardware 18,347 0.9 Radio 16,838 0.9 Broadcasting 14,809 0.8 Marketing 10,375 0.5 Telephone Equipment 9,116 0.5 Mobile Communications 8,600 0.4 Advertising 7,005 0.4 Internet 4,885 0.2 - ---------------------------------------------------- 909,982 46.2 . Health Care Hospital Management 42,302 2.2 Services 14,791 0.7 Medical Equipment 8,680 0.4 Hospital/Laboratory Supplies 7,874 0.4 Pharmaceuticals 4,009 0.2 - ---------------------------------------------------- 77,656 3.9 . Consumer Goods/Services Consumer Services 87,556 4.5 Retail 64,909 3.3 Travel 62,842 3.2 Entertainment 62,707 3.2 Nondurables 33,696 1.7 Restaurants 32,429 1.6 Food 26,359 1.3 Consumer Software 23,922 1.2 Beverages 5,561 0.3 Consumer Goods Distribution 2,695 0.1 - ---------------------------------------------------- 402,676 20.4 . Finance Finance Companies $ 33,284 1.7% Money Management 30,550 1.5 Insurance 27,437 1.4 Brokerage 19,771 1.0 Banks 11,435 0.6 Closed-End Funds 561 0.0 - ---------------------------------------------------- 123,038 6.2 . Industrial Goods/Services Outsourcing Services 125,920 6.4 Electrical Components 49,686 2.5 Machinery Processing 16,216 0.8 Speciality Chemicals 11,271 0.6 Industrial Materials 10,853 0.5 Industrial Services 9,714 0.5 - ---------------------------------------------------- 223,660 11.3 . Energy/Minerals Oil/Gas Producers 28,352 1.4 Independent Power 19,175 1.0 Oil Services 5,392 0.3 - ---------------------------------------------------- 52,919 2.7 . Other Industries Transportation 50,107 2.5 Real Estate 14,789 0.8 Regulated Utilities 9,967 0.5 - ---------------------------------------------------- 74,863 3.8 Total Common Stocks and -------------------- Other Equity-Like Securities 1,864,794 94.5 Short-Term Obligations 110,979 5.6 -------------------- Total Investments 1,975,773 100.1 Cash and Other Assets Less Liabilities (2,218) (0.1) -------------------- Net Assets $1,973,555 100.0% - ----------------------------------------------------
28 Acorn Fund .Major Portfolio Changes in the Third Quarter
Number of Shares -------------------- 6/30/99 9/30/99 Additions - ------------------------------------------------------------------- Information 3DO Company 0 218,000 Applied Power 0 350,000 Corus Entertainment (Canada) 0 219,500 Entra Data (Sweden) 20,000 100,000 Musicmaker.com 0 290,000 Oak Industries 350,000 450,000 Playboy Enterprises 150,000 345,000 Price Communications 0 420,000 (includes effect of 5% stock dividend) Project Software 0 54,000 Shop at Home 0 300,000 Sykes Enterprises 670,000 724,000 West TeleServices 267,000 425,000 - ------------------------------------------------------------------- Health Care Orthofix International 232,000 407,000 - ------------------------------------------------------------------- Consumer Goods/Services Bally Total Fitness 480,000 540,000 Gadzooks 425,000 715,000 Herman Miller 336,000 473,000 ITT Educational Services 187,000 319,000 Jones Apparel 630,000 730,000 Station Casinos 250,000 400,000 - ------------------------------------------------------------------- Finance Ace Cash Express 204,000 390,000 Americredit 3,267,000 3,632,000 FPIC Insurance 220,000 340,000 Protective Life 400,000 600,000 Terra Nova Bermuda 0 252,000 - ------------------------------------------------------------------- Industrial Goods/Services Airnet Systems 650,000 860,000 AK Steel 0 450,000 Forward Air 120,000 200,000 RPM 0 732,000 - ------------------------------------------------------------------- Energy/Minerals Canadian Natural Resources (Canada) 500,000 585,000 Cross Timbers Oil 481,000 1,400,000 Dynegy 1,000,000 1,200,000 Precision Drilling (Canada) 0 139,100 Ulster Petroleums (Canada) 0 200,000 - ------------------------------------------------------------------- Other Industries Consolidated Tomoka 0 150,000 General Growth Properties 0 200,000 Security Capital European Realty 770,312 823,437 Utilicorp United 0 200,000
29 Acorn Fund . Major Portfolio Changes in the Third Quarter, continued
Number of Shares -------------------- 6/30/99 9/30/99 Sales - ---------------------------------------------------------- Information Aspect Telecommunications 864,000 284,000 BISYS 195,000 141,000 Choicepoint 210,000 178,000 Dunn Computer 39,000 0 Electronic Arts 350,000 200,000 Jabil Circuit 475,000 300,000 Keane 275,000 75,000 Kent Electronics 400,000 300,000 Liberty Media Group, AT&T 2,600,000 2,300,000 Macrovision 150,000 0 Mettler Toledo 591,000 480,000 Sanmina Corporation 200,000 150,000 Solectron 890,000 800,000 Structural Dynamics 310,000 0 World Color Press 1,240,000 140,000 - ---------------------------------------------------------- Health Care Hillenbrand Industries 91,000 0 Lincare Holdings 2,572,000 2,374,000 Thermedics 7,000 0 - ---------------------------------------------------------- Consumer Goods/Services Airtours (United Kingdom) 1,650,000 1,322,600 Hollywood Park 500,000 300,000 Host Marriott Services 911,000 0 Just For Feet 600,000 0 Kimberly Clark de Mexico (Mexico) 3,300,000 0 St. John Knits 429,000 0 Thor Industries 474,000 341,000 - ---------------------------------------------------------- Finance CNB Bancshares 170,000 0 Coast Contingency Rights 554,000 0 Foremost 430,000 77,000 Washington Mutual 62,000 0 - ---------------------------------------------------------- Industrial Goods/Services A M Castle 345,000 245,000 Cambrex 600,000 300,000 Compass International Services 736,000 0 Expeditors International of Washington 1,890,000 1,500,000 HA.LO Industries 1,001,000 626,000 Intermet Holdings 400,000 260,000 Varitronix International (Hong Kong) 4,500,000 1,795,000 Worthington Industries 700,000 0 - ---------------------------------------------------------- Energy/Minerals AES Corporation 1,264,000 1,164,000 Atmos Energy 1,000,000 800,000 Atwood Oceanics 225,000 0 Canadian 88 Energy (Canada) 475,000 0 Devon Energy 900,000 630,000 Equitable Resources 1,000,000 900,000 Evergreen Resources 300,000 250,000 - ---------------------------------------------------------- Other Industries Forest City Enterprises, Cl. A 370,000 0 Weingarten Realty Investors 165,000 0
30 Acorn Fund .Statement of Investments (Unaudited) September 30, 1999
Number of Shares Value (000) - ------------------------------------------------------------------------- Common Stocks and Other Equity-Like Securities: 92.5% - ------------------------------------------------------------------------- Information: 28.8% Media .Broadcasting: 2.1% 695,000 Young Broadcasting $ 36,401 Television Stations 819,000 Data Transmission Network 20,424 Data Services for Farmers 558,000 Granite Broadcasting 6,208 Television Stations 150,000 Cumulus Media 4,903 Radio Stations 300,000 Shop at Home 2,700 Television Home Shopping Network - ------------------------------------------------------------------------- 70,636 .Television Programming: 3.3% 2,300,000 Liberty Media Group, AT&T 85,387 Cable & Satellite Programming 366,000 TV Guide 14,320 TV Program Guides & Programming 345,000 Playboy Enterprises 9,207 CATV & Satellite Programming, Publishing - ------------------------------------------------------------------------- 108,914 Telecommunications .Telephone Services: 2.4% 1,484,000 RCN 60,844 Metro Market CLEC: Voice, Video & Internet Services 354,000 Commonwealth Telephone 15,576 Rural Market CLEC: Local, Long Distance & Internet Services 140,000 Startec Global Communications 1,925 International Telecommunications - ------------------------------------------------------------------------- 78,345 .Mobile Communications: 2.5% 580,000 Telephone & Data Systems 51,511 Cellular & Telephone Services 500,000 Pinnacle Holdings 13,063 Towers for Cellular, PCS & Paging 420,000 Price Communications 10,526 Cellular Telephone Services 355,000 COMARCO 7,011 Wireless Network Testing - ------------------------------------------------------------------------- 82,111 .Telecommunications Equipment: 0.3% 284,000 Aspect Telecommunications 4,819 Call Center Equipment 262,000 REMEC 3,603 Telecommunication Equipment for Defense & Commercial 36,000 Comverse Technology 3,395 Voicemail & Other Enhanced Services Equipment - ------------------------------------------------------------------------- 11,817 Computer Related Hardware .Computer Hardware/Related Systems: 2.1% 903,000 Kronos 33,129 Labor Management Solutions 700,000 Micros Systems 28,350 Information System for Restaurants & Hotels 350,000 American Power Conversion 6,650 Uninterruptable Power Systems - ------------------------------------------------------------------------- 68,129 .Semiconductors/Related Equipment: 0.5% 450,000 Oak Industries 15,300 Communications Components .Gaming Equipment: 2.1% 2,342,000 International Game Technology 42,156 Slot Machines & Progressive Jackpots 450,000 Anchor Gaming 26,775 Slot Machines & Casinos - ------------------------------------------------------------------------- 68,931 .Contract Manufacturing: 2.9% 800,000 Solectron 57,450 Electronic Manufacturing Services 300,000 Jabil Circuit 14,850 Electronic Manufacturing Services 150,000 Sanmina 11,606 Backplanes & Electronic Manufacturing Services 350,000 Applied Power 10,631 Electronic Enclosures & Industrial Products - ------------------------------------------------------------------------- 94,537 .Instrumentation: 1.0% 480,000 Mettler Toledo 14,220 Laboratory Products 613,000 Thermoquest 6,207 $1,500,000 Thermoquest, 5% Note Due 8/15/00 1,455 Mass Spectrometry & Chromatography $5,000,000 Thermo Optek, 5% Note Due 10/15/00 4,850 265,000 Thermo Optek 2,236 Elemental & Molecular Spectroscopy 266,122 Onix Systems 1,480 Field Measurement & Sensor Equipment 232,000 Metrika Systems 1,334 Gamma Ray Instrumentation - ------------------------------------------------------------------------- 31,782 .Business Software: 0.7% 1,075,000 Systems & Computer Technology 13,505 Enterprise Software & Services 650,000 JDA Software Group 7,597 Applications/Software & Services for Retailers 54,000 Project Software 2,889 Enterprise Maintenance Software - ------------------------------------------------------------------------- 23,991 .Consumer Software: 1.2% 200,000 Electronic Arts 14,475 Entertainment Software 200,000 THQ 8,625 Entertainment Software
31 Acorn Fund .Statement of Investments, continued
Principal Amount or Number of Shares Value (000) - ---------------------------------------------------------------------------- $6,500,000 Activision, 6.75% Note Due 1/1/05 $ 7,280 410,000 Activision 7,226 Entertainment Software 218,000 3DO Company 2,194 Entertainment Software - ---------------------------------------------------------------------------- 39,800 .Computer Services: 1.6% 724,000 Sykes Enterprises 17,874 Call Center Services 790,000 Computer Task Group 11,652 Application Development & Staffing Services 642,000 RCM Technologies 6,902 Technology Staffing Services 141,000 BISYS 6,614 Processing for Banks 400,000 IMR Global 3,300 Application Development & Maintenance Services 214,000 Analysts International 2,220 Technology Staffing Services 75,000 Keane 1,711 Application Development & Maintenance Services 987,000 Aztec Technology Partners 1,696 Application Development & Maintenance Services - ---------------------------------------------------------------------------- 51,969 Software/Services .Business Information/ Marketing Services/Publishing: 3.0% 800,000 Getty Images 19,300 Photographs for Publications & Electronic Media 1,100,000 PRIMEDIA 15,400 Specialty Magazines & Other Publications 178,000 Choicepoint 11,993 Fraud Protection Information 1,400,000 InfoUSA, Cl. A 9,450 1,000,000 InfoUSA, Cl. B 6,875 Business Data for Sales Leads 403,000 ACNielsen 9,143 Market Research, Information & Analysis 450,000 Information Holdings 8,747 Scientific & Medical Publications, Patent Information 350,000 Acxiom 6,880 Database Marketing Services 140,000 World Color Press 5,215 Web-Offset Printing 425,000 West Teleservices 4,409 Customer Care & Sales Support - ---------------------------------------------------------------------------- 97,412 .Internet: 0.9% 200,000 RSA Security 5,313 Enterprise Security Software 280,000 Sterling Commerce 5,198 Electronic Commerce Software & Services 310,000 Online Resources 4,301 Internet Banking Technology 2,683 Bigfoot International 4,024 Internet Direct Marketing 135,000 AppNet Systems 3,696 Internet Application Development 290,000 Musicmaker.com 2,991 Make Your Own Music CD 250,000 NeoPlanet, Series A 2,000 Cool Web Browser 342,855 GIGA 1,414 29,714 GIGA Warrants 4 Data on Information Technology - ---------------------------------------------------------------------------- 28,941 .Electronics Distribution: 0.5% 790,000 Pioneer-Standard Electronics 11,406 Component & Computer Distribution 300,000 Kent Electronics 5,550 Component Distribution & Contract Assembly - ---------------------------------------------------------------------------- 16,956 .Transaction Processors: 1.7% 1,874,000 National Data 48,724 Credit Card & Health Claims Processor 450,000 Concord EFS 9,281 Credit Card Processor - ---------------------------------------------------------------------------- 58,005 ------- Information: Total 947,576 - ---------------------------------------------------------------------------- Health Care: 6.3% .Biotechnology/Drug Delivery: 2.0% 450,000 Inhale Therapeutic Systems 13,669 Pulmonary Drug Delivery 329,000 Protein Design Labs 11,885 Computer Designed Monoclonal Antibodies 525,000 Myriad Genetics 8,925 Gene Discovery & Diagnostic Products 915,000 Microcide Pharmaceuticals 6,405 Antibiotics 351,000 Guilford Pharmaceuticals 5,353 Drug Delivery & Neurology Drugs 1,508,000 Corvas International 4,241 Rational Drug Design 768,000 Synaptic Pharmaceuticals 3,840 Receptor Targeted Drug Design 160,000 Incyte Pharmaceutical 3,700 Gene Sequencing 230,000 CuraGen 3,047 Genomics 529,000 NPS Pharmaceuticals 3,042 Small Molecule Drugs 664,000 Genome Therapeutics 2,656 Gene Discovery Services - ---------------------------------------------------------------------------- 66,763 32
Number of Shares Value (000) - ---------------------------------------------------------------------------- .Medical Equipment: 0.8% 299,000 Wesley Jessen Vision $ 9,325 Contact Lenses 443,000 Acuson 5,648 Ultrasound Devices 407,000 Orthofix International 5,545 Bone Fixation & Stimulation Devices 541,000 Respironics 4,463 Respiratory Devices - --------------------------------------------------------------------------- 24,981 .Services: 3.5% 2,374,000 Lincare Holdings 63,282 Home Health Care Services 1,952,000 First Health 43,798 PPO Network 1,180,000 Magellan Health Services 8,629 Mental Health Services 43,000 Spectrum Health Solutions 11 Workman's Compensation - --------------------------------------------------------------------------- 115,720 ------- Health Care: Total 207,464 - --------------------------------------------------------------------------- Consumer Goods/Services: 8.7% Goods .Leisure Vehicles: 2.2% 1,260,000 Harley-Davidson 63,079 Motorcycles & Related Merchandise 341,000 Thor Industries 8,696 Busses & RVs - --------------------------------------------------------------------------- 71,775 .Furniture: 0.3% 473,000 Herman Miller 11,308 Office Furniture .Nondurables: 0.1% 401,000 First Years 4,110 Infant & Toddler Products .Apparel Manufacturers: 0.9% 730,000 Jones Apparel 20,987 Women's Apparel 600,000 Unifi 6,600 Polyester & Nylon Fabrics 140,000 Gildan Activewear 2,415 Cotton T-Shirts 504,000 Sirena Apparel 8 Bathing Suits & Lingerie - --------------------------------------------------------------------------- 30,010 Services .Retail: 1.6% 1,600,000 Borders Group 23,500 Bookstores 400,000 Whole Foods Market 13,088 Natural Food Supermarkets 590,000 Nautica Enterprises 9,514 Men's Casual Apparel 715,000 Gadzooks $ 4,737 Teen Apparel Retailer 400,000 Panera Bread 2,650 Bakery & Deli Restaurants - --------------------------------------------------------------------------- 53,489 .Consumer Services: 0.8% 540,000 Bally Total Fitness 16,504 Fitness Centers 319,000 ITT Educational Services 6,220 Technology Oriented Postsecondary Degree Programs 75,000 Steiner Leisure 1,875 Spas & Hair/Skin Products on Cruise Ships - --------------------------------------------------------------------------- 24,599 .Casinos: 0.6% 400,000 Station Casinos 9,300 Casinos & Riverboats 300,000 Hollywood Park 4,612 Casinos 535,000 Monarch Casino & Resort 3,477 Casino/Hotel in Reno 63,000 Lakes Gaming 606 Hotel & Casino in Biloxi & Gulfport - --------------------------------------------------------------------------- 17,995 .Cruise Lines: 2.2% 1,500,000 Carnival 65,250 Largest Cruise Line 120,000 Royal Caribbean Cruises 5,400 Cruises to Caribbean & Alaska 410,000 Royal Olympic Cruise 1,025 Cruises in Mediterranean - --------------------------------------------------------------------------- 71,675 ------- Consumer Goods/Services: Total 284,961 - --------------------------------------------------------------------------- Finance: 13.7% .Banks: 1.7% 799,000 TCF Financial 22,821 Great Lakes Bank 612,000 Texas Regional Bancshares 15,147 TexMex Bank 414,000 Chittenden 11,799 Vermont & West Massachusetts Bank 400,000 Eldorado Bancshares 3,425 California Bank 138,000 Peoples Heritage Financial 2,294 New England Bank - --------------------------------------------------------------------------- 55,486 .Savings & Loans: 2.0% 1,602,000 Peoples Bank Bridgeport 37,847 Connecticut Savings & Loan 782,000 Washington Federal 18,133 Washington State Savings & Loan 622,000 Commonwealth Bancorp 10,613 Philadelphia Savings & Loan - --------------------------------------------------------------------------- 66,593
33 Acorn Fund .Statement of Investments, continued
Number of Shares Value (000) - -------------------------------------------------------------------------- .Insurance: 3.7% 1,155,000 UICI $ 29,525 Insurance/Specialty Insurance 600,000 Protective Life 17,400 Life/Dental Insurance 78,000 Markel 14,201 Specialty Insurance 511,000 Leucadia National 10,731 Insurance Holding Company 488,000 Baldwin & Lyons, Cl. B 10,034 Trucking Insurance 252,000 Terra Nova Bermuda 8,048 Specialty Re-Insurance 612,000 Acceptance Insurance 7,803 Crop Insurance 293,000 United Fire & Casualty 6,739 Property & Casualty 320,000 HCC Insurance Holdings 5,380 Aviation Insurance 340,000 FPIC Insurance 5,121 Medical & Dental Malpractice Insurance 210,000 StanCorp Financial 4,699 Group Life, Disability & 401K 77,000 Foremost 1,848 Mobile Home & RV Insurance - ------------------------------------------------------------------------- 121,529 .Money Management: 3.3% 539,000 SEI Investments 48,123 Mutual Fund Administration 2,679,000 Phoenix Investment Partners 22,437 Mutual Fund & Pension Manager 1,034,000 Pioneer Group 15,510 Equity Mutual Funds 1,063,000 Baker Fentress 14,816 Closed-End Investment Company 300,000 Affiliated Managers Group 8,175 Mutual Fund & Pension Manager - ------------------------------------------------------------------------- 109,061 .Finance Companies: 3.0% 3,632,000 Americredit 54,253 Auto Lending 525,000 Creditrust 11,780 Buys Defaulted Credit Card Paper 600,000 DVI Health Services 9,825 Leases for Big Medical Equipment 1,820,000 World Acceptance 9,783 Personal Loans 1,375,000 Capital Trust 6,789 Mortgage Loans 390,000 Ace Cash Express 5,655 Check Cashing Stores - ------------------------------------------------------------------------- 98,085 ------- Finance: Total 450,754 Industrial Goods/Services: 7.7% .Steel: 1.1% 820,000 Gibraltar Steel $ 17,271 Steel Processing 450,000 AK Steel 8,212 Carbon & Stainless Steel Producer 420,000 Atchison Casting 3,859 Steel Foundries 245,000 A M Castle 3,093 Steel Distribution 260,000 Intermet Holdings 2,202 Ductile Iron & Aluminum Foundries - ------------------------------------------------------------------------- 34,637 .Industrial Goods: 0.9% 1,000,000 Clarcor 16,812 Filters 538,000 Applied Industrial Technologies 9,684 Industrial Components Distribution 550,000 Advanced Lighting Technologies 3,850 Metal Halide Lighting - ------------------------------------------------------------------------- 30,346 .Specialty Chemicals & Industrial Materials: 1.1% 1,100,000 Lilly Industries, Cl. A 14,987 Industrial Coatings 732,000 RPM 8,921 Specialty Coatings & Paint 300,000 Cambrex 7,931 Pharmaceutical & Other Specialty Chemicals 100,000 Spartech 2,931 Plastics Distribution & Compounding 445,000 SYMEX 2,003 Combinatorial Materials 100,000 Brunswick Technologies 400 Fiberglass Fabric for Composites - ------------------------------------------------------------------------- 37,173 .Outsourcing Services & Training: 0.9% 2,220,000 Labor Ready 22,339 Temporary Manual Labor 600,000 GP Strategies 6,750 Training Programs 500,000 International Total Services 1,000 Aviation Services - ------------------------------------------------------------------------- 30,089 .Logistics: 2.8% 1,500,000 Expeditors International of Washington 48,141 International Freight Forwarder 759,000 Hub Group 15,513 Truck & Rail Freight Forwarder 426,000 C H Robinson 14,351 Truck Freight Forwarder
34
Number of Shares Value(000) - ------------------------------------------------------------------------------- 860,000 Airnet Systems $ 7,847 Check & Other Small Package Shipment 200,000 Forward Air 4,725 Freight Transportation Between Airports - ------------------------------------------------------------------------------- 90,577 .Other Industrial Services: 0.9% 1,326,000 Wackenhut, Cl. B 19,890 31,000 Wackenhut, Cl. A 612 Prison Management 294,000 Mobile Mini 6,431 Leases Portable Storage Units 626,000 HA.LO Industries 3,912 Distributor of Advertising & Promotional Products - ------------------------------------------------------------------------------- 30,845 -------- Industrial Goods/Services: Total 253,667 - ------------------------------------------------------------------------------- Energy/Minerals: 8.7% .Independent Power: 3.4% 1,164,000 AES Corporation 68,676 1,852 AES Corporation Warrants 166 Power Plants 1,500,000 MidAmerican Energy 44,250 Growth Utility - ------------------------------------------------------------------------------- 113,092 .Oil/Gas Producers: 2.8% 2,100,000 Tesoro Petroleum 34,650 Oil Refinery/Gas Producer 630,000 Devon Energy 26,106 Oil & Gas Producer 1,400,000 Cross Timbers Oil 18,900 Oil & Gas Producer 250,000 Evergreen Resources 6,016 Oil & Gas Producer 175,000 Basin Exploration 4,200 Oil & Gas Producer 800,000 Tipperary 1,250 Oil & Gas Producer - ------------------------------------------------------------------------------- 91,122 .Distribution/Marketing/Refining: 2.4% 900,000 Equitable Resources 34,031 Natural Gas Utility & Producer 1,200,000 Dynegy 24,825 Natural Gas & Electric Processing, Production & Marketing 800,000 Atmos Energy 19,300 Natural Gas Utility - ------------------------------------------------------------------------------- 78,156 .Oil Services: 0.1% 125,000 Hanover Compressor 3,977 Natural Gas Compressor Rental -------- Energy/Minerals: Total 286,347 Other Industries: 4.5% .Real Estate: 3.8% 968,000 The Rouse Company 22,264 Regional Shopping Malls 823,437 Security Capital European Realty 16,469 Strategic Real Estate Investments 820,000 Cornerstone Properties 12,505 Downtown Office Buildings 500,000 First Industrial Realty Trust 12,375 Industrial Properties 466,000 Forest City Enterprises, Cl. B 11,766 Shopping Malls 260,000 Equity Residential Properties Trust 11,017 Nationwide Apartments 400,000 Macerich Company 9,250 Regional Shopping Malls 699,000 LaSalle Hotel Properties 9,043 Upscale/Full Service Hotels 385,000 First Washington Realty Trust 8,085 120,000 First Washington Realty Trust, Cv. Pfd. 3,323 Community Shopping Centers 200,000 General Growth Properties 6,300 Shopping Malls REIT 150,000 Consolidated Tomoka 2,025 16,000 Acres of Florida Land - ------------------------------------------------------------------------------- 124,422 .Waste Management: 0.1% 152,000 Stericycle 2,233 Medical Waste Disposal .Regulated Utilities: 0.6% 700,000 Unisource Energy 8,269 Electric Utility in Tuscon 130,000 Central Hudson Gas & Electric 5,119 Electric Utility 283,000 Azurix 4,864 Owner & Operator of Water Utilities 200,000 Utilicorp United 4,213 - ------------------------------------------------------------------------------- Global Utility 22,465 -------- Other Industries: Total 149,120 - ------------------------------------------------------------------------------- Foreign Securities: 14.1% .Canada: 0.7% 585,000 Canadian Natural Resources 13,694 Oil & Gas Producer 219,500 Corus Entertainment 3,548 CATV Programming & Radio Stations 139,100 Precision Drilling 3,218 Oil & Gas Well Driller 200,000 Ulster Petroleums 2,157 Oil & Gas Producer - ------------------------------------------------------------------------------- 22,617
35 Acorn Fund .Statement of Investments, continued
Number of Shares Value (000) - ----------------------------------------------------------------------- .Australia: 0.3% 927,959 Aristocrat Leisure $ 9,629 Slot Machines .United Kingdom: 3.4% 644,000 NTL 61,884 Voice, Video & Data Services 1,200,000 Serco Group 26,976 Facilities Management 1,250,000 Edinburgh Fund Managers 9,037 Investment Management 1,322,600 Airtours 8,430 Packaged Tour Vacations 1,100,000 N. Brown Group 5,942 Mail Order Clothing in Large Sizes - ----------------------------------------------------------------------- 112,269 .Germany/Austria: 0.4% 180,000 Flughafen Wien (Austria) 7,183 Vienna Airport Authority 23,000 Binding-Brauerei 5,095 Brewery - ----------------------------------------------------------------------- 12,278 .Sweden: 1.4% 1,000,000 WM Data Nordic 43,303 Computer Services/Consulting 100,000 Entra Data 1,732 Business Software - ----------------------------------------------------------------------- 45,035 .Netherlands: 0.8% 152,380 ASR Verzekeringsgroep 9,486 Insurance 171,084 Getronics 9,229 Computer Services/Consulting 312,439 Hunter Douglas 8,452 Decorative Window Coverings - ----------------------------------------------------------------------- 27,167 .France: 0.9% 230,000 Atos 29,492 Computer Services/Transaction Processing .Italy: 0.8% 1,500,000 Banca Fideuram 8,499 Life Insurance & Mutual Funds 1,000,000 Aeroporti di Roma 7,434 Airport Management 1,970,000 Ducati Motor 6,252 Motorcycles 1,250,000 Saipem 5,392 Offshore Construction - ----------------------------------------------------------------------- 27,577 .Malaysia: 0.1% 750,000 Resorts World Berhad $ 1,717 Casino/Hotel Resort 590,000 Berjaya Sports Toto 1,250 Lottery/Gaming - ----------------------------------------------------------------------- 2,967 .Hong Kong: 0.1% 1,795,000 Varitronix International 3,917 LCD Manufacturer .China: 0.1% 200,000 The Investment Company of China 1,100 Closed-End Fund .Singapore: 1.7% 8,130,000 Star Cruises 48,780 Cruise Line 2,000,000 Natsteel Electronics 7,468 Electronic Manufacturing Services - ----------------------------------------------------------------------- 56,248 .Japan: 2.8% 235,000 Softbank Corporation 89,391 Internet Services/Investment Holdings 300,000 Olympus Optical 4,057 Photographic & Medical Equipment - ----------------------------------------------------------------------- 93,448 .Mexico: 0.2% 7,350,000 Nadro, Series L 6,212 Pharmaceutical Distributor .Other Latin America: 0.4% 407,124 IRSA (Argentina) 11,450 Real Estate Management & Development 50,000 Tele Celular Sul (Brazil) 947 Cellular Operator - ----------------------------------------------------------------------- 12,397 ---------- Foreign: Total 462,353 Total Common Stocks and Other ---------- Equity-Like Securities: 92.5% $3,042,242 Short-Term Obligations: 7.4% 242,109 ---------- Total Investments: 99.9% 3,284,351 Cash and Other Assets Less Liabilities: 0.1% 4,167 ---------- Total Net Assets: 100% $3,288,518 - -----------------------------------------------------------------------
36 Acorn Fund .Foreign Portfolio Diversification At September 30, 1999 Acorn Fund's foreign portfolio of investments as a percent of net assets was diversified as follows:
Value (000) Percent - ----------------------------------------------------- .Information Business Information/Publishing $ 89,391 2.7% Computer Services 82,024 2.5 Cable Television 65,432 2.0 Semiconductors & Related Equipment 26,976 0.8 Contract Manufacturing 7,468 0.2 Business Software 1,732 0.1 Mobile Communications 947 0.0 - ---------------------------------------------------- 273,970 8.3 .Health Care Medical Equipment 4,057 0.1 - ---------------------------------------------------- 4,057 0.1 .Consumer Goods/Services Travel 57,210 1.7 Beverages 13,547 0.4 Gaming 10,879 0.3 Leisure Vehicles 6,252 0.2 Consumer Goods Distribution 6,212 0.2 Retail 5,942 0.2 Entertainment 1,717 0.1 - ---------------------------------------------------- 101,759 3.1 .Finance Money Management $ 17,536 0.6% Insurance 9,486 0.3 Closed-End Funds 1,100 0.0 - ---------------------------------------------------- 28,122 0.9 .Industrial Goods/Services Electrical Components 3,917 0.1 - ---------------------------------------------------- 3,917 0.1 .Energy/Minerals Oil/Gas Producers 19,069 0.6 Oil Services 5,392 0.2 - ---------------------------------------------------- 24,461 0.8 .Other Industries Transportation 14,617 0.5 Real Estate 11,450 0.3 - ---------------------------------------------------- 26,067 0.8 --------- ------- Total Foreign Portfolio $462,353 14.1% ====================================================
37 The Acorn - ----------------------- Family of Funds Trustees Irving B. Harris Chairman James H. Lorie Vice Chairman Leo A. Guthart Jerome Kahn, Jr. Steven N. Kaplan David C. Kleinman Charles P. McQuaid Roger S. Meier Allan B. Muchin Robert E. Nason Katherine Schipper Ralph Wanger Officers Ralph Wanger President 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) 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. Our e-mail address is: acorn@wanger.com Find out what's new - visit our web site at: www.acornfunds.com 38 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. [ACORN ARTWORK APPEARS HERE] The Acorn - ------------------------------ Family of Funds WAM Brokerage Services, L.L.C. P.O. Box 8502 Boston, MA 02266-8502 -----END PRIVACY-ENHANCED MESSAGE-----