<PAGE>
[ART WORK APPEARS HERE]
Acorn
The Acorn Family of Funds
Semi-Annual Report
------------------------------
June 30, 1998
Managed by Wanger Asset Management, L.P.
<PAGE>
Acorn Family of Funds Semi-Annual Report 1998
>Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Squirrel Chatter
.Why is the Stock Market so High? 1
.Meet the Trustees 3
Acorn USA
.In a Nutshell 4
.Performance at a Glance 5
.Major Portfolio Changes 10
.Statement of Investments 11
Acorn Fund
.In a Nutshell 6
.Performance at a Glance 7
.Major Portfolio Changes 14
.Statement of Investments 16
.Foreign Portfolio Diversification 25
Acorn International
.In a Nutshell 8
.Performance at a Glance 9
.Major Portfolio Changes 26
.Statement of Investments 28
.Portfolio Diversification 34
Acorn Family of Funds
.Statements of Assets and Liabilities 35
.Statements of Operations 36
.Statements of Changes in Net Assets 37
.Financial Highlights 38
.Notes to Financial Statements 40
</TABLE>
.Mid-Year Distributions
The following table details the funds' mid-year distributions. The record date
was June 22, 1998, the ex-dividend date was June 23, 1998, and the payable date
was June 26, 1998.
<TABLE>
<CAPTION>
Acorn Fund Acorn Int'l Acorn USA
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Ordinary Income $0.03/share $0.15/share N/A
Short-Term Capital Gain N/A N/A $0.06/share
Long-Term Capital Gain $0.23/share $0.27/share $0.04/share
Reinvestment Price $18.18 $21.49 $16.79
</TABLE>
<PAGE>
.Squirrel Chatter: Why is the Stock Market so High?
At the end of June, the S&P 500 index was 1134N--28 times earnings. Over the
long-term, the average price-to-earnings ratio for the S&P 500 has been only 15
times earnings. For the last couple of years, market commentators repeatedly
have warned that the market is too high, but the market keeps going up anyway.
Why?
Markets are rather like bathtubs. In a tub, the water level rises when
water flows in faster than it drains out. Markets rise when money flows in from
investors faster than investment bankers can invent new securities. Mutual fund
investors have been a very important source of new money, but not the only one.
Foreign impact is amazingly large. ($290 billion would buy all of Merck plus all
of IBM). Where is this money going?
Another driving force is investment by foreigners in the U.S. stock and
bond markets. There have been two massive changes in the last five years, both
in the direction of increasing foreign ownership. First, the United States has
been running a large balance of trade deficit with the rest of the world since
the mid-1980s. The balance of trade deficit has run from $60 billion to $180
billion per year over this entire period, but the last few years have shown the
largest deficits. When several Asian economies blew up in the last half of 1997,
our balance of trade deficit got a lot worse. Asians stopped buying U.S.
exports, and the U.S. is taking even more imports from these countries, because
their currencies have depreciated and their goods have become cheaper. In 1997
the balance of trade deficit was about $180 billion, and it may reach $240
billion this year. Our balance of payments is made up of our large balance of
trade deficit and a smaller service income surplus. Our service income is $70-80
billion, which reduces our balance of payments deficit but does not come close
to eliminating it. The effect of a large balance of payments deficit is to put
dollar claims in the hands of foreign companies and individuals. This means that
foreigners who end up with our dollars have to buy American stocks, bonds, or
real estate with this money. The foreign dollar holders can sell dollars to
someone else, of course, but this only transfers the bucks to a different person
who still must own U.S. financial assets. In many cases, the final holder is a
bank that prefers to own short-term treasury bills. All this buying of U.S.
assets by foreigners is recorded as a large capital inflow into the U.S. over
this period.
The second massive change has been in the U.S. government deficit. From 1984
to 1987 we ran a large deficit every year, running from $110 to $320 billion per
year. A large federal deficit means that the U.S. government has to issue
treasury bonds for that amount of money. Much of that imbalance of trade results
in foreign-purchased U.S. treasury securities. Since foreigners have to buy U.S.
assets with their balance of trade deficit dollars, the two dollar figures from
trade imbalance and new treasury issues pretty much offset each other so that
from 1993-1996, for instance, the net swing between these two numbers was less
than $50 billion dollars. This means that (from 1993-1996) foreigners shipped us
VCRs and automobiles and shoes and we paid them with government bonds, and the
net effect on financial prices was basically zero because the two more or less
balanced out. This year we have a big change in the federal deficit. Instead of
having an enormous deficit as we did a couple of years ago, we now have a slight
surplus. This means that net new issues of government bonds have not been
available, so all of the financial flows that have been going overseas can no
longer be neutralized by offsetting government bond issuance. Therefore, instead
of
[PHOTO OF RALPH WANGER APPEARS HERE]
1
<PAGE>
Markets are rather like bathtubs. In a tub, the water level rises when water
flows in faster than it drains out.
foreign money exerting a neutral effect on U.S. asset prices, there is now an
enormous net buying of existing financial assets (both bonds and stocks) with
foreign money, which will amount to $250 billion-$300 billion this year, up from
$180 billion in 1997. In 1992, just the opposite happened: the U.S. sold $241
billion more bonds than it received in goods, so the budget deficit had a large
net drag on U.S. financial markets. So if you look at the swing over a 6-year
period, our balance of trade minus bonds issued has gone from minus $241 billion
to plus $290 billion--about a $530 billion per year swing.
<TABLE>
<CAPTION>
Foreign Impact on U.S. Market
(Billions of dollars) 1992 1997 1998 est
<S> <C> <C> <C>
Trade Deficit 84 180 240
U.S. Govt. Deficit (Surplus) 325 0 (50)
- -----------------------------------------------------------------
Foreign Impact -241 180 290
</TABLE>
Foreign impact is amazingly large. ($290 billion would buy all of Merck
plus all of IBM). Where is this money going? Most goes into short- and long-term
government bonds. Some goes into the stock market ($65 billion in 1997). Now, if
foreign capital was affecting the market, how would it show up? The first thing
that would happen is that foreigners buying U.S. bonds would buy taxable bonds
and ignore municipals because the tax-exempt feature of municipal bonds is of no
use to a foreign holder. Therefore, you should see a decrease in the yield
spread between treasuries and municipals. That is occurring.
In the stock market, we would expect foreigners to favor blue chip U.S.
companies over small companies, and therefore one would see the Russell 1000
(the largest companies) do better than the Russell 2000 (much smaller
companies). This also has been happening. Of course, a third effect would be a
rising level of U.S. stock and bond prices, which is quite obviously happening,
although mutual fund inflows and corporate stock repurchases help push the stock
market higher, too. No one should argue that what happens in the U.S. financial
markets is driven by any one single factor, but I do contend that the enormous
increase in the amount of money invested by foreigners in U.S. financial assets
is one major factor in the extraordinary rise in stock and bond prices that we
have seen over the last year.
How long can this go on? The amount of money that foreigners will have to
invest in excess of new bond issues is going to go on for some period of time.
It can be ended if the U.S. government goes back into a substantial annual
deficit position, or if imports into the U.S. should decline dramatically. The
most likely cause of these events would be a recession within the U.S., which is
undoubtedly going to occur at some time within the next few years. A recession
would cause a decline in corporate profits. Imports would fall, reducing our
balance of trade deficit. So if there was a weak market associated with a
recession, it could be made worse by a drop in foreign inflows. Until that
recession occurs--and there is no sign of it yet--we expect that foreign inflows
will continue to be huge. So, for now, get used to "high" stock prices.
The market emphasis on blue-chip stocks has pushed the valuation of big
companies to high levels. Small company stocks have not gone up as much (compare
the Russell 2000 with the S&P 500). Our Acorn stocks now represent excellent
value as compared with the S&P 500.
Best Regards,
/s/ Ralph Wanger
Ralph Wanger
Chief Investment Officer, Wanger Asset Management
Lead Portfolio Manager, Acorn Fund
2
<PAGE>
[PHOTO APPEARS HERE]
Irving B. Harris
Chairman, Acorn Investment Trust
.Meet the Trustees
Acorn's board of trustees has overall responsibility for the funds. The trustees
are experienced business people with diverse backgrounds, who bring their
judgement and expertise to the oversight of the funds. We thought you would be
interested in learning more about your funds' board members. Beginning with this
report, we will introduce our distinguished trustees to you.
In 1969, Irving Harris met with the representatives of several Chicago families
who wanted him to supervise their personal holding company. Mr. Harris suggested
that a mutual fund would be a better vehicle for the family than continuing the
personal holding company. Harris added funds of his own to the mutual fund
making a total of $7 million for the newly created Acorn Fund. He made the fund
investor-friendly with low-fees and no loads. More unusually, the Fund
concentrated its investments in issues of smaller companies. Today, with over
600 small-cap funds, that doesn't sound like a novel concept, but in 1969 there
was no such category as "Small Company Growth Fund." Harris' young, very able
associate, Ralph Wanger, was made portfolio manager.
In addition to his financial interests, Irving Harris has also devoted a
good deal of time and money to philanthropic activities. His special interest
has been early childhood education, on the sensible theory that children cannot
become effective adults unless their early years give them the right start in
life. The Erikson Institute, Yale University, and the University of Chicago have
received major funding from the Harris Foundation.
Before and since establishing the Acorn Fund, Irving Harris has been a
successful business entrepreneur. He and his brother developed the Toni Home
Permanent Wave Company ("Which Twin Has the Toni?") many years ago. After it was
sold to the Gillette Company, they developed the Pittway Corporation into a very
successful leader in the security business--both home security and industrial
security. In the case of both Pittway and the Acorn Funds, the interests of
shareholders have always been of primary concern to Irving Harris. From the
beginning, Acorn's board has carefully monitored the management of the Acorn
funds, and has kept the fees, expenses and charges to shareholders as low as
possible, consistent with the Funds' ability to attract the most qualified
security analysts. More than two-thirds of the trustees are unaffiliated with
the Acorn funds or their advisor, and have never shared in the advisor's fees,
profits or losses. Acorn Fund's policy of investing in international securities
as well as U.S. securities was board initiated. Trustees and their families are
and have been substantial investors in the funds, so their interest in keeping
expenses low and optimizing shareholders' results are in their own personal
interests as well as that of all shareholders.
Adolph Meyer, Jr. has also had a long-term impact on Acorn's operations. A
representative of the family whose tannery business profits contributed to Acorn
Fund's creation, he is not only one of the Fund's earliest shareholders, but
also one of three trustees who have served on Acorn's board since its inception.
Mr. Meyer is President of Gulco Corporation, a Chicago-based leather
manufacturer, and an avid fisherman. At the end of 1998, he will retire from his
position as trustee. We extend our gratitude to him for his years of service,
and wish him well.
3
<PAGE>
Acorn USA
.In a Nutshell
[PHOTO OF ROBERT A. MOHN APPEARS HERE]
Last quarter, mass mattered. Big stocks jumped (S&P 500 gained +3.3%), and
small-caps capsized (Russell 2000 sank -4.7%). Acorn USA dodged the general
small-cap drubbing, gaining +0.7% for the quarter. Over the past year, Acorn USA
has returned +31.6%, well ahead of its small-cap peers (Lipper small-cap fund
average rose +17.7%), and better than the average S&P 500 leviathan (+30.2%).
Your Fund experienced perfect symmetry last quarter--34 stocks went up and
34 fell down. Each industry group had its pair of have and have-not stocks. In
telecommunications, Centennial (cellular) soared, but RCN (new-wave telephone
entrepreneur) soured. In health care, Lincare (oxygen therapist) bubbled, but
Respironics (oxygen therapy equipment maker) stumbled. In transportation, autos
hummed (Insurance Auto Auctions), but trains wrecked (Hub Group's rail freight
agency). In energy, geothermal power was hot (CalEnergy), but oil and gas were
not (Tesoro).
The stock market's speculative bubble of the moment is the Internet.
Excitable chat room junkies talk of nothing but 'Net. Yes, it's real. The
Internet will transform the way the world communicates and recreates. But the
stock market has stretched this insight to the point of absurdity. Internet
stocks trade in a topsy-turvy world where "profit" is a pejorative and companies
are worth more money the more money they choose to lose. Their valuations are
fantastic, their fans hyperbolic, their charts parabolic. In a word, we think
they're "icky."
We will own Internet stocks once saner prices prevail. Meantime, our
Internet deficiency hasn't been a handicap. Acorn USA's total return ranked 22nd
out of the 526 small-cap growth funds tracked by Lipper over the past twelve
Internet-obsessed months.
/s/Robert A. Mohn
Robert A. Mohn
Lead Portfolio Manager
Fund Assets as of 6/30/98: $282.7 million
.Acorn USA Top 10 Holdings
<TABLE>
<CAPTION>
<S> <C>
CalEnergy 5.3%
Power Plants
Micros Systems 5.0%
Information Systems for Restaurants & Hotels
Host Marriott 4.3%
Fast Food Kiosks in Airports
Magellan Health Services 4.1%
Mental Health Services
Lincare Holdings 4.1%
Home Health Care Services
Acceptance Insurance 3.4%
Crop Insurance
Centennial Cellular 3.3%
Cellular Franchises
UICI 3.1%
Health Insurance
Data Transmission 3.0%
Data Services for Farmers
Mecklermedia 2.9%
Internet Trade Shows & Magazines
</TABLE>
The Fund's top 10 holdings and portfolio diversification vary with changes
in portfolio investments. See the Statement of Investments for a complete list
of the Fund's holdings.
Hot
Centennial Cellular provides wireless phone service to the Chicago/Detroit
corridor, parts of Louisiana, Northern California and Puerto Rico. Early last
year, cellular stocks were in the dumps as investors fretted over the threat
posed by a new wireless phone technology called PCS. But the PCS players were
targeting densely populated cities, not Centennial's rural outposts. Centennial
was adding subscribers at a furious 40% annual rate, but was trading at a
throwaway price of 7 times cash flow when the going rate was 11 times. Our
communications champ, Chuck McQuaid, started scooping up shares last June at
$14. A year later, Centennial has a takeover offer at $43.50, and we have a
bicentennial return.
4
<PAGE>
.Performance at a Glance
The Value of a $10,000 Investment in Acorn USA
.September 4, 1996 through June 30, 1998
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Average Annual Total Return
- ------------------------------------
1 Year Life of Fund
31.6% 36.1%
<S> <C> <C>
9/04/96 10,000 10,000
9/30/96
+7.2% 10,720 10,360
12/31/96
+8.7% 11,650 10,899
3/31/97
-1.5% 11,480 10,335
6/30/97
+16.0% 13,320 12,011
9/30/97
+15.2% 15,340 13,798
12/31/97
+0.5% 15,413 13,335
3/31/98
+12.9% 17,401 14,678
6/30/98
+0.7% 17,525 13,993
</TABLE>
This graph compares the results of $10,000 invested in Acorn USA on September 4,
1996 (the date Fund shares were first offered to the public), with the Russell
2000 Stock Index with dividends reinvested. Past performance does not guarantee
future results. The investment return and principal value of an investment in
the Fund will fluctuate so that Fund shares, when redeemed, may be worth more or
less than their original cost.
Acorn USA Portfolio Diversification
.as a % of net assets, at 6/30/98
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
Information 36.2%
Finance 14.6%
Energy/Minerals 14.4%
Industrial Goods/Services 12.7%
Health Care 10.2%
Consumer Goods/Services 4.3%
Other Industries 1.8%
Cash and other assets less liabilities 5.8%
-----
100.0%
</TABLE>
<TABLE>
<CAPTION>
Relative Performance
- ------------------------------------------------------------------
2nd quarter Year to date Last 12 mos.
1998 1998
<S> <C> <C> <C>
Acorn USA 0.7% 13.7% 31.6%
Russell 2000 -4.7% 4.9% 16.5%
Lipper Small Cap
Funds Avg. -4.1% 6.5% 17.7%
S&P MidCap 400 -2.1% 8.6% 27.2%
S&P 500 3.3% 17.7% 30.2%
</TABLE>
The Russell 2000 is formed by taking the 3,000 largest U.S. companies and then
eliminating the largest 1,000 leaving a good small company index. The Lipper
Small Cap Funds Avg. is an average of all U.S. small-cap funds tracked by
Lipper, which consisted of 636, 623 and 526 funds for the 2nd qtr., YTD and 12-
mos. periods above. The S&P MidCap 400 is a market value-weighted index of 400
stocks that are in the next tier down from the S&P 500. The S&P 500 is a broad
market-weighted average of U.S. blue-chip companies. All indexes are unmanaged
and returns include reinvested dividends.
Net Asset Value Per Share 6/30/98: $17.09
- -----------------------------------------
5
<PAGE>
Acorn Fund
.In a Nutshell
[PHOTO OF RALPH WANGER AND CHARLES P. MCQUAID APPEARS HERE.]
Acorn Fund lost 0.3% in the second quarter, beating the Lipper Small Cap Funds
Average, which lost 4.1%, and the Russell 2000, which lost 4.7%. Large-caps once
again outperformed small-caps, as the S&P 500 rose 3.3%.
Computer service stocks continued to do well in both the U.S. and Europe.
Atos, headquartered in France, computed a 44% jump. Sweden's WM Data, a long-
time Acorn holding, calculated a 32% rise. Back in the USA, Systems and Computer
Technology resumed its run, growing 31%.
Media and communications stocks were fueled by takeovers. Centennial
Cellular and Young Broadcasting announced intentions to "explore strategic
alternatives," encouraging their stocks to explore new highs, gaining 42% and
30%, respectively. Cablevision Systems wired a 27% hike.
Special situations often provide excitement for Acorn. Labor Ready, a
temporary help provider, readily provided a 42% gain. Americredit, an auto loan
company, credited a 30% gain.
The market penalized bad news. Respironics halved due to disappointing
earnings caused by Medicare changes. Energy stocks were weak as oil prices
collapsed. Pride International, EVI, and Atwood each slipped more than 20%.
Some price declines, however, produce opportunities. Many real estate
stocks are down year-to-date, creating good values. We bought LaSalle Hotel
Properties and First Industrial Realty Trust.
We are happy to announce that Ben Andrews has joined us to follow consumer
companies and special situations. Ben has five years experience as a securities
analyst, and was most recently with Rothschild Investment in Chicago.
/s/ Ralph Wanger /s/ Charles P. McQuaid
Ralph Wanger Charles P. McQuaid
Lead Portfolio Manager Co-Portfolio Manager
A
Fund Assets as of 6/30/98: $3,968.7 million
.Acorn Fund Top 10 Holdings
<TABLE>
<CAPTION>
<S> <C>
Liberty Media 3.4%
CATV Programming
AES Corporation 3.0%
Global Power Producer
Carnival 2.8%
Cruise Ship Line
Lincare Holdings 2.6%
Home Health Care Services
Harley Davidson 2.1%
Motorcycle Manufacturer
National Data 1.8%
Credit Card Processing
HBO and Co. 1.8%
Health Care Information Systems
Borders 1.6%
Bookstores
Cablevision Systems 1.6%
Cable TV
International Game Technology 1.3%
Gaming Equipment
</TABLE>
The Fund's top 10 holdings and portfolio diversification vary with changes in
portfolio investments. See the Statement of Investments for a complete list of
the Fund's holdings.
Blockbuster
- --------------------------------------------------------------------------------
Sequel
Cablevision Systems (CVC) catapulted into our top 10 list this quarter. We
initially bought the stock in 1991, and profited in 1994 when we sold 80% of our
stake near our target price. Last summer, CVC engaged in a series of complex
transactions which concentrated its CATV franchises, enhanced its programming,
cleaned up its balance sheet, and sold a 36% stake to TCI. We calculated how
much value was enhanced and quadrupled our holdings. Acorn earned $40 million
when CVC stock subsequently tripled.
6
<PAGE>
.Performance at a Glance
The Value of a $10,000 Investment in Acorn Fund
.June 10, 1970 through June 30, 1998
[LINE GRAPH APPEARS HERE]
Average Annual Total Return
-------------------------------------
1 Year 5 Years 10 Years Life of Fund
26.1% 16.7% 17.5% 17.2%
<TABLE>
<CAPTION>
Date Acorn Fund($) S & P($)
- ---- ------------- --------
<S> <C> <C>
6/10/70 10,000 10,000
1970 13,587 12,676
1971 17,828 14,490
+31%
1972 19,368 17,242
+9%
1973 14,765 14,709
- -24%
1974 10,691 10,816
- -28%
1975 13,945 14,842
+30%
1976 23,045 18,394
+65%
1977 27,168 17,077
+18%
1978 31,777 18,200
+17%
1979 47,790 21,586
+50%
1980 62,594 28,602
+31%
1981 58,005 27,195
-7%
1982 68,208 33,054
+18%
1983 85,389 40,510
+25%
1984 89,045 43,051
+4%
1985 117,142 56,710
+32%
1986 136,843 67,295
+17%
1987 142,923 70,828
+4%
1988 178,370 82,591
+25%
1989 222,681 108,761
+25%
1990 183,674 105,386
- -18%
1991 270,641 137,492
+47%
1992 336,210 147,928
+24%
1993 444,889 162,882
+32%
1994 411,750 165,032
-7%
1995 497,407 227,047
+21%
1996 609,569 279,177
+23%
1997 761,852 372,320
+25%
6/30/98 850,978 438,266
11.7%
</TABLE>
This graph compares the results of $10,000 invested in Acorn Fund on June 10,
1970 (the date Fund shares were first offered to the public), with all dividends
and capital gains reinvested, with the Standard & Poor's 500 Stock Index with
dividends reinvested. Past performance does not guarantee future results. The
investment return and principal value of an investment in the Fund will
fluctuate so that Fund shares, when redeemed, may be worth more or less than
their original cost.
Acorn Fund Portfolio Diversification
.as a % of net assets, at 6/30/98
<TABLE>
<CAPTION>
Relative Performance
- ------------------------------------------------------------------
2nd quarter Year to date Last 12 mos.
1998 1998
<S> <C> <C> <C>
Acorn Fund -0.3% 11.7% 26.1%
S&P 500 3.3% 17.7% 30.2%
Russell 2000 -4.7% 4.9% 16.5%
Lipper Small Cap
Funds Avg. -4.1% 6.5% 17.7%
S&P MidCap 400 -2.1% 8.6% 27.2%
Dow-Jones 1.7% 13.2% 16.7%
</TABLE>
The S&P 500 is a broad market-weighted average of U.S. blue-chip companies. The
Russell 2000 is formed by taking the 3,000 largest U.S. companies and then
eliminating the largest 1,000, leaving a good small company index. The Lipper
Small Cap Funds Avg. is an average of all U.S. small-cap funds tracked by
Lipper, which consisted of 636, 623 and 526 for the 2nd qtr., YTD and 12-mos.
periods above. The S&P MidCap 400 is a market value-weighted index of 400 stocks
that are in the next tier down from the S&P 500. The Dow Jones Industrial
Average includes 30 large companies. All indexes are unmanaged and returns
include reinvested dividends.
[PIE CHART APPEARS HERE]
Net Asset Value Per Share 6/30/98: $18.71
- -----------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Information 30.3%
Finance 11.8%
Energy/Minerals 9.2%
Industrial Goods/Services 9.9%
Health Care 8.6%
Consumer Goods/Services 10.3%
Other Industries 4.2%
Foreign 11.3%
Cash and other assets less liabilities 4.4%
------
100.0%
</TABLE>
7
<PAGE>
Acorn International
.In a Nutshell
[PHOTO OF LEAH JOY ZELL APPEARS HERE.]
Acorn International rose 2% in the second quarter, a fine return over a period
when the average equity mutual fund lost money. Beneath the headline numbers,
actual returns by individual markets varied enormously. Finland, France and
Germany all rose between 10-15%, extending Europe's bull run. At the other
extreme, emerging markets posted their worst quarter in ten years, with Latin
America down 19% and Asia down 36%.
In viewing some of the sharper market declines, a reasonable shareholder
might well ask why we don't just avoid bear markets altogether. The simplest
answer is that predicting when a market will turn is difficult, if not
impossible. It could be very costly if we sold many of our positions in a hurry,
and there would be no guarantee that we could get them back at attractive levels
later.
A better answer is that poor markets often create opportunities to buy good
companies at prices that have the potential to produce returns in the future.
Precisely because we cannot know whether or when a given stock will go up in
price, we like to spread our bets. Holding positions that are out of favor,
together with those that are in demand, helps smooth returns and reduce risk.
A leading measurement of risk is volatility, expressed by the degree to
which a series of data points diverges from the mean. On that score, Acorn
International's record is outstanding, with a lower standard deviation than
either EAFE or EMI (or the S&P 500!). We consider the fund's low volatility one
of its key attractions.*
On another subject, we are pleased to announce that Michael King has joined
the international team. Michael has an MBA from the University of Chicago and is
fluent in Japanese. We welcome him and look forward to his contribution.
With best wishes for the summer season,
/s/ Leah Joy Zell
Leah Joy Zell
Lead Portfolio Manager
Fund Assets as of 6/30/98: $1,861.3 million
.Acorn International Top 10 Holdings
<TABLE>
<CAPTION>
<S> <C> <C>
Tieto Corporation Finland 5.4%
Computer Services/Consulting
WM Data Sweden 3.7%
Computer Services/Consulting
Serco Group United Kingdom 2.5%
Facilities Management
Kempen Netherlands 2.4%
Stock Brokerage/
Investment Management
Atos France 2.3%
Computer Services
Rhoen Klinikum Germany 1.8%
Hospital Management
Banca Fideuram Italy 1.7%
Life Insurance/Mutual Funds
Getronics Netherlands 1.6%
Computer Services
NTL United Kingdom 1.3%
Cable TV/Telephone System
Phoenix Mecano Switzerland 1.3%
Electrical Components Manufacturer
</TABLE>
The Fund's top 10 holdings and portfolio diversification vary with changes
in portfolio investments. See the Statement of Investments for a complete list
of the Fund's holdings.
I
The Color
Kempen, a Dutch merchant bank, took control of the Orange Fund in early 1995.
Marcel Houtzager, a partner of Wanger Asset Management and a Dutchman by birth,
had visited the Orange Fund six months earlier. His information led us to
acquire a significant stake in Kempen after the deal. Kempen has subsequently
grown its assets from 500 million to 10 billion guilders, to become the largest
independent mutual fund manager in the Netherlands. Acorn International's
investment in Kempen has appreciated six-fold since purchase, and the stock is
now the #4 position in the Fund.
* Standard deviation was calculated by Wanger Asset Management based on 5 years
of monthly performance data, ending June 30, 1998. The standard deviations
are: Acorn Int'l 10.99; EAFE 12.97; EMI (Ex-US) 11.89; S&P 500 11.03.
8
<PAGE>
.Performance at a Glance
The Value of a $10,000 Investment in Acorn International
.September 23, 1992 through June 30, 1998
[LINE GRAPH APPEARS HERE]
Average Annual Total Return
-------------------------------------
1 Year 5 Years Life of Fund
11.6% 13.5% 16.6%
<TABLE>
<CAPTION>
Date Acorn Int'l ($) EAFE ($)
---- --------------- --------
<S> <C> <C> <C>
9/23/92 10,000 10,000
12/31/92 10,690 9,614
+6.8%
12/31/93 15,940 12,745
+49.1%
12/31/94 15,334 13,736
-3.8%
12/31/95 16,703 15,275
+8.9%
12/31/96 20,133 16,199
+20.7%
12/31/97 20,170 16,487
+0.2%
6/30/98 24,310 19,113
+20.5%
</TABLE>
This graph compares the results of $10,000 invested in Acorn International on
September 23, 1992 (the date Fund shares were first offered to the public), with
all dividends and capital gains reinvested, with Morgan Stanley's Europe,
Australasia Far East Index (EAFE). The beginning value of EAFE is as of 9/30/92.
Past performance does not guarantee future results. The investment return and
principal value of an investment in the Fund will fluctuate so that Fund shares,
when redeemed, may be worth more or less than their original cost.
Acorn International Portfolio Diversification
.as a % of net assets, at 6/30/98
[PIE CHART APPEARS HERE.]
<TABLE>
<CAPTION>
<S> <C>
Information 28.3%
Finance 12.1%
Energy/Minerals 3.5%
Industrial Goods/Services 14.9%
Health Care 5.8%
Consumer Goods/Services 19.7%
Other Industries 5.0%
Cash and other assets less liabilities 10.7%
-----
100.0%
</TABLE>
<TABLE>
<CAPTION>
Relative Performance
- ---------------------------------------------------------------------
2nd quarter Year to date Last 12 mos.
1998 1998
<S> <C> <C> <C>
Acorn International 2.0% 20.5% 11.6%
EAFE 1.1% 15.9% 6.1%
EMI (World ex-U.S.) -0.4% 16.8% 0.6%
Lipper Int'l Small Cap
Funds Avg. 3.3% 22.2% 11.2%
Lipper Int'l Funds Avg. 0.7% 15.5% 8.2%
</TABLE>
EAFE is Morgan Stanley's Europe, Australasia Far East Index, an unmanaged index
of companies throughout the world in proportion to world stock market
capitalization, excluding the U.S. and Canada. The EMI is Salomon Brothers'
index of the bottom 20% of institutionally investable capital of countries, as
selected by Salomon, excluding the U.S. The Lipper Int'l Small Cap Funds Avg. is
calculated from the performance of a group of small-cap int'l funds, including
Acorn Int'l. For the 2nd qtr., YTD and 12-mos. periods above, the group
consisted of 56, 56 and 37 funds, respectively. The Lipper Int'l Funds Avg. is
an average of all int'l funds tracked by Lipper, excluding the Int'l Small Cap
Funds. This group consisted of 570, 544 and 480 funds for the 2nd qtr., YTD and
12-mos. periods above, respectively. All indexes are unmanaged and returns
include reinvested dividends.
Net Asset Value Per Share 6/30/98: $21.74
- -----------------------------------------
9
<PAGE>
Acorn USA
.Major Portfolio Changes in the Second Quarter
<TABLE>
<CAPTION>
Number of Shares
------------------------
3/31/98 6/30/98
Additions
- --------------------------------------------------------------------------------
<S> <C> <C>
Information
American Business
Information, Cl. B 26,000 125,400
CMP Media 0 50,000
IntelliQuest Information 124,000 396,200
International Game Technology 0 48,000
Mecklermedia 285,000 364,000
Mettler Toledo 0 93,000
Micros Systems 160,600 430,000
(includes effect of 2 for 1 stock split)
National Data 144,100 182,100
Startec Global Communications 87,000 137,000
Sykes Enterprises 0 138,800
Thermoquest 95,400 181,000
- --------------------------------------------------------------------------------
Health Care
Magellan Health Services 196,000 458,000
- --------------------------------------------------------------------------------
Consumer Goods/Services
Host Marriott Services 523,200 842,100
- --------------------------------------------------------------------------------
Finance
UICI 0 322,000
- --------------------------------------------------------------------------------
Industrial Goods/Services
Atchison Casting 88,000 166,000
Hub Group 19,000 336,000
Insurance Auto Auctions 245,100 322,100
- --------------------------------------------------------------------------------
Energy/Minerals
CalEnergy Company 419,000 503,000
Equitable Resources 81,000 114,000
Tesoro Petroleum 367,700 463,500
- --------------------------------------------------------------------------------
Sales
- --------------------------------------------------------------------------------
Information
Aspect Telecommunications 156,000 137,100
Cable Michigan 73,300 35,100
Cablevision Systems 106,000 32,000
Harte Hanks Communications 16,000 0
United Video Satellite Group 189,000 156,000
Wonderware 346,100 0
- --------------------------------------------------------------------------------
Health Care
Lincare Holdings 197,000 275,200
(includes effect of 2 for 1 stock split)
Respironics 107,000 0
- --------------------------------------------------------------------------------
Consumer Goods/Services
Royal Caribbean Cruises 101,000 0
Windmere Durable Holdings 25,000 0
- --------------------------------------------------------------------------------
Finance
H.F. Ahmanson 128,000 89,000
</TABLE>
10
<PAGE>
Acorn USA
.Statement of Investments (unaudited) June 30, 1998
<TABLE>
<CAPTION>
Number of Shares Value (000)
- --------------------------------------------------------------------------------
Common Stocks and Other
Equity-Like Securities: 94.2%
- --------------------------------------------------------------------------------
<S> <C> <C>
Information: 36.2%
.Broadcasting: 3.0%
209,100 Data Transmission Network (b) $ 8,364
Data Services for Farmers
.Television Programming: 3.6%
156,000 United Video Satellite Group (b) 6,182
CATV & Satellite Dish Programming
106,000 Liberty Media Group,
Tele-Communications (b) 4,114
CATV & Satellite Dish Programming
- --------------------------------------------------------------------------------
10,296
.Cable Television: 1.4%
32,000 Cablevision Systems (b) 2,672
Cable TV
35,100 Cable Michigan (b) 1,369
Cable TV
- --------------------------------------------------------------------------------
4,041
.Telephone Services: 2.9%
269,400 RCN (b) 5,220
Metro Market:Voice, Video & Data Services
137,000 Startec Global Communications (b) 1,575
International Telecommunications
54,000 Commonwealth Telephone (b) 1,424
Rural Market:Local, Long Distance
& Internet Access
- --------------------------------------------------------------------------------
8,219
.Mobile Communications: 4.3%
254,000 Centennial Cellular (b) 9,477
Cellular Franchises
121,800 COMARCO (b) 2,603
Wireless Network Testing
- --------------------------------------------------------------------------------
12,080
.Telecommunications Equipment: 1.3%
137,100 Aspect Telecommunications (b) 3,753
Call Center Equipment
.Gaming Equipment: 0.4%
48,000 International Game Technology 1,164
Slot Machines & Progressive Jackpots
.Computer Services: 1.0%
138,800 Sykes Enterprises (b) 2,785
Call Center Services
.Transaction Processors: 2.8%
182,100 National Data 7,967
Credit Card & Health Claims Processor
.Instrumentation: 1.6%
181,000 Thermoquest (b) 2,704
Mass Spectrometry
93,000 Mettler Toledo (b) 1,866
Laboratory Products
- --------------------------------------------------------------------------------
4,570
.Internet: 2.9%
364,000 Mecklermedia (b) 8,144
Internet Trade Shows & Magazines
.Business Information/
Marketing Services: 4.0%
396,200 IntelliQuest Information (b) 3,962
Technology/Market Research
90,000 World Color Press (b) 3,150
Web-Offset Printing
125,400 American Business
Information, Cl. B (b) 2,006
82,000 American Business
Information, Cl. A (b) 1,250
Business Data for Sales Leads
50,000 CMP Media (b) 875
Technology Trade Journals
- --------------------------------------------------------------------------------
11,243
.Computer Hardware/
Related Systems: 7.0%
430,000 Micros Systems (b) 14,230
Information Systems for Restaurants & Hotels
152,100 Kronos (b) 5,514
Time Accounting Software & Clocks
- --------------------------------------------------------------------------------
19,744
----------
Information: Total 102,370
- --------------------------------------------------------------------------------
Health Care: 10.2%
.Biotechnology/Drug Delivery: 0.4%
78,000 Synaptic Pharmaceuticals (b) 1,092
Receptor Targeted Drug Design
.Medical Equipment: 0.1%
9,600 Cardiac Pathways (b) 68
Heart Surgery Device
.Services: 9.7%
275,200 Lincare Holdings (b) 11,576
Home Health Care Services
</TABLE>
See accompanying notes to financial statements
11
<PAGE>
Acorn USA
.Statement of Investments (unaudited)
<TABLE>
<CAPTION>
Number of Shares Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
458,000 Magellan Health Services (b) $11,622
Mental Health Services
152,000 First Health (b) 4,332
PPO Network
- --------------------------------------------------------------------------------
27,530
------
Health Care: Total 28,690
- --------------------------------------------------------------------------------
Consumer Goods/Services: 4.3%
.Retail: 4.3%
842,100 Host Marriott Services (b) 12,263
Fast Food Kiosks in Airports
------
Consumer Goods/Services: Total 12,263
- --------------------------------------------------------------------------------
Finance: 14.6%
.Savings & Loans: 3.1%
89,000 H.F. Ahmanson 6,319
California Savings & Loan
159,000 Coast Contingency Rights (b) 2,405
Litigation Claim Against US Government
- --------------------------------------------------------------------------------
8,724
.Finance Companies: 1.2%
590,000 World Acceptance (b) 3,356
Personal Loans
.Insurance: 10.3%
392,100 Acceptance Insurance (b) 9,631
Crop Insurance
322,000 UICI (b) 8,775
Health Insurance
187,500 AmerUs Life Holdings 6,070
Annuities/Life Insurance
93,000 Leucadia National 3,075
Insurance Holding Company
53,000 Penn Treaty American (b) 1,669
Nursing Home Insurance
- --------------------------------------------------------------------------------
29,220
------
Finance: Total 41,300
- --------------------------------------------------------------------------------
Industrial Goods/Services: 12.7%
.Steel: 2.0%
166,000 Atchison Casting (b) 2,967
Steel Foundries
97,300 Schnitzer Steel 2,299
Scrap Steel Processor
28,000 Gibraltar Steel (b) 574
Steel Processing
- --------------------------------------------------------------------------------
5,840
.Industrial Distribution: 0.5%
70,000 Vallen (b) 1,391
Safety Products Distribution
.Machinery: 1.1%
251,250 Farr Company (b) 3,094
Filters
.Specialty Chemicals: 1.8%
232,000 Lilly Industries, Cl. A 5,017
Industrial Coatings
.Outsourcing Services: 0.3%
31,500 Labor Ready (b) 951
Temporary Manual Labor
.Other Industrial Services: 7.0%
336,000 Hub Group (b) 7,098
Truck & Rail Freight Forwarder
328,100 Wackenhut, Cl. B 7,054
Prison Management
322,100 Insurance Auto Auctions (b) 4,550
Auto Salvage Services
83,000 Compass International Services (b) 788
Collection Agencies
51,000 Trailer Bridge (b) 204
Tug & Barge Transportation
- --------------------------------------------------------------------------------
19,694
------
Industrial Goods/Services: Total 35,987
- --------------------------------------------------------------------------------
Energy/Minerals: 14.4%
.Independent Power: 5.3%
503,000 CalEnergy (b) 15,121
Power Plants
.Oil/Gas Producers: 2.6%
463,500 Tesoro Petroleum (b) 7,358
Oil Refinery/Gas Reserves
.Distribution/Marketing/Refining: 4.9%
242,000 Atmos Energy 7,381
Natural Gas Utility
114,000 Equitable Resources 3,477
Gas Utility & Gas Producer
228,400 Dynegy (formerly known as NGC) 2,855
Gas Processing/Marketing
- --------------------------------------------------------------------------------
13,713
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
.Oil Services: 1.6%
252,000 GeoScience (b) 2,835
Offshore Seismic Equipment Company
41,100 J Ray McDermott (b) 1,706
Offshore Construction Company
- --------------------------------------------------------------------------------
4,541
--------
Energy/Minerals: Total 40,733
- --------------------------------------------------------------------------------
Other Industries: 1.8%
.Real Estate: 1.8%
50,700 Forest City Enterprises Cl. A 3,001
Shopping Centers
47,500 Gaylord Entertainment 1,532
Opryland Hotel & Other Assets
22,000 Cornerstone Properties 388
Downtown Office Buildings
- --------------------------------------------------------------------------------
4,921
--------
Other Industries: Total 4,921
Principal Amount Value (000)
- --------------------------------------------------------------------------------
Total Common Stocks and
--------
Other Equity-Like Securities: 94.2% 266,264
(Cost: $225,569)
Short-Term Obligations: 7.2%
Yield 5.67%-5.75%
Due 7/2-7/6/98
$9,002 Prudential Funding 8,995
$7,196 Ford Motor Credit 7,195
$4,132 Commercial Credit 4,132
- --------------------------------------------------------------------------------
(Amortized Cost: $20,322) 20,322
--------
Total Investments: 101.4% 286,586
(Cost: $245,891)
--------
Cash and Other Assets Less Liabilities: (1.4%) (3,960)
--------
Total Net Assets: 100% $282,626
================================================================================
</TABLE>
.Notes to Statement of Investments
(a) At June 30, 1998, for federal income tax purposes cost of investments was
$245,905,000 and net unrealized appreciation was $40,680,000, consisting of
gross unrealized appreciation of $49,821,000 and gross unrealized depreciation
of $9,141,000.
(b) Non-income producing security.
13
<PAGE>
Acorn Fund
.Major Portfolio Changes in the Second Quarter
<TABLE>
<CAPTION>
Number of Shares
------------------------
3/31/98 6/30/98
Additions
- --------------------------------------------------------------------------------
<S> <C> <C>
Information
American Business
Information, Cl. A 1,035,000 1,200,000
Bigfoot International 1,350 2,683
BRC Holdings 254,000 567,000
(includes the effect of 2 for 1 stock split)
CMP Media 0 400,000
Computer Task Group 340,000 475,000
Dunn Computer 0 250,000
International Game Technology 2,110,000 2,158,000
Jabil Circuit 300,000 350,000
Mettler Toledo 0 570,000
National Data 1,510,000 1,672,000
Natsteel Electronics (Singapore) 0 1,500,000
RCM Technologies 0 390,000
RCN 564,000 1,298,000
(includes the effect of 2 for 1 stock split)
Richardson Electronics 0 157,000
Startec Global Communications 0 90,000
Sykes Enterprises 0 670,000
- --------------------------------------------------------------------------------
Health Care
Innovasive Devices 275,000 475,000
Magellan Health Services 1,220,000 1,410,000
- --------------------------------------------------------------------------------
Consumer Goods/Services
Airtours (United Kingdom) 990,000 1,350,000
Autoliv (Sweden) 254,000 320,000
Host Marriott Services 731,000 911,000
Hunter Douglas (Netherlands) 270,000 305,000
Industrie Natuzzi (Italy) 260,000 300,000
Kimberly Clark de Mexico (Mexico) 3,100,000 3,400,000
Nintendo (Japan) 145,000 180,000
Protection One 0 770,000
St. John Knits 0 296,000
Windmere Durable Holdings 228,000 300,000
- --------------------------------------------------------------------------------
Finance
Baker Fentress 974,000 1,063,000
Capital Trust 345,000 745,000
Pioneer Group 620,000 673,000
UICI 0 800,000
- --------------------------------------------------------------------------------
Industrial Goods/Services
AirNet Systems 200,000 500,000
Brunswick Technologies 0 100,000
Clarcor 181,000 431,000
(includes effect of 3 for 2 stock split)
Expeditors International
of Washington 775,000 900,000
Hub Group 709,000 759,000
Intermet 200,000 300,000
International Total Services 0 400,000
Labor Ready 385,000 670,000
(includes effect of 3 for 2 stock split)
Lilly Industries, Cl. A 900,000 1,000,000
Spectra Physics Lasers 223,000 298,000
- --------------------------------------------------------------------------------
Energy/Minerals
Equitable Resources 500,000 800,000
Evergreen Resources 0 250,000
Tesoro Petroleum 1,600,000 2,000,000
- --------------------------------------------------------------------------------
Real Estate
Cornerstone Properties 350,000 820,000
First Industrial Realty Trust 0 485,000
IRSA (Argentina) 250,000 320,000
La Salle Hotel Properties 0 1,025,000
Security Capital Global 0 398,437
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
------------------------
3/31/98 6/30/98
Sales
- --------------------------------------------------------------------------------
<S> <C> <C>
Information
American Management Systems 225,000 125,000
CACI International 83,000 0
Cellular Communications
International (Italy) 300,000 110,000
(includes effect of 3 for 2 stock split)
Centennial Cellular 600,000 450,000
Compuware 400,000 300,000
Keane 200,000 120,000
Peterson Companies 50,000 0
Playboy Enterprises 50,000 0
PriCellular 450,000 0
Solectron 1,025,000 1,000,000
Source Informatics Cv. Pfd. 208,333 0
Systems & Computer Technology 430,000 760,000
(includes effect of 2 for 1 stock split)
TCA Cable TV 180,000 0
TVB (Hong Kong) 1,800,000 0
United Video Satellite Group 850,000 500,000
USA Networks 500,000 0
Vanguard Cellular Systems 200,000 0
Verilink 393,000 282,000
WM Data Nordic (Sweden) 1,340,000 1,300,000
Wonderware 608,000 0
- --------------------------------------------------------------------------------
Health Care
Respironics 812,000 650,000
- --------------------------------------------------------------------------------
Consumer Goods/Services
Amway Asia Pacific (Hong Kong) 185,000 60,000
Bally Total Fitness 200,000 0
Borders Group 1,960,000 1,750,000
Carnival 1,400,000 2,760,000
(includes effect of 2 for 1 stock split)
Esselte, Series A (Sweden) 260,000 125,000
Fred Meyer Holdings 911,000 871,000
Newell 540,000 480,000
- --------------------------------------------------------------------------------
Finance
Amvescap (United Kingdom) 445,000 0
Baldwin & Lyons, Cl. B 823,000 723,000
Banca Fideuram (Italy) 3,325,000 3,000,000
Formosa Growth Fund (Taiwan) 150,000 0
Highlands Insurance 210,000 81,000
Housing Development
Finance (India) 39,373 0
Nichiei (Japan) 27,500 0
United Asset Management 641,000 0
Washington Mutual 116,000 66,000
(includes effect of 3 for 2 stock split)
- --------------------------------------------------------------------------------
Industrial Goods/Services
Hein-Werner 198,000 0
Steel Dynamics 500,000 300,000
Steven Myers & Associates 350,000 40,000
Stevens International, Cl. A 410,000 0
Stevens International, Cl. B 19,000 0
Valmont Industries 270,000 150,000
- --------------------------------------------------------------------------------
Energy/Minerals
Atwood Oceanics 516,000 398,000
Costilla Energy 165,000 0
EVI 700,000 500,000
J Ray McDermott 500,000 350,000
Perez Companc (Argentina) 510,000 0
PetSec Energy ADR (Australia) 260,000 141,000
Saipem (Italy) 1,800,000 1,500,000
Southern Union 400,000 0
- --------------------------------------------------------------------------------
Other Industries
Gaylord Entertainment 100,000 13,000
</TABLE>
15
<PAGE>
Acorn Fund
.Statement of Investments (unaudited) June 30, 1998
<TABLE>
<CAPTION>
Number of Shares Value (000)
- --------------------------------------------------------------------------------
Common Stocks and Other
Equity-Like Securities: 95.6%
- --------------------------------------------------------------------------------
<S> <C> <C>
Information: 30.3%
Media
.Broadcasting: 1.7%
819,000 Data Transmission Network (b)(c) $32,760
Data Services for Farmers
465,000 Young Broadcasting (b) 30,225
Television Stations
370,000 Granite Broadcasting (b) 4,394
Television Stations
- --------------------------------------------------------------------------------
67,379
.Cable Television: 1.8%
700,000 Cablevision Systems (b) 58,450
100,000 Cablevision Systems, Pfd. 6,394
Cable TV
140,000 Cable Michigan (b) 5,460
Cable TV
- --------------------------------------------------------------------------------
70,304
.Television Programming: 4.8%
3,500,000 Liberty Media Group,
Tele-Communications (b) 135,844
CATV & Satellite Dish Programming
420,000 BET Holdings, Cl. A (b) 26,434
CATV & Satellite Dish Programming
500,000 United Video Satellite Group (b) 19,813
CATV & Satellite Dish Programming
280,000 Macrovision (b) 6,685
Copyright Protection for Video Tapes & DVDs
- --------------------------------------------------------------------------------
188,776
Telecommunications
.Telephone Services: 0.9%
1,298,000 RCN (b) 25,149
Metro Market: Voice, Video & Data Services
374,000 Commonwealth Telephone (b) 9,864
Rural Market: Local, Long Distance
& Internet Access
90,000 Startec Global Communications (b) 1,035
International Telecommunications
- --------------------------------------------------------------------------------
36,048
.Mobile Communications: 1.6%
865,000 SkyTel Communications (b) 20,246
Nationwide Paging
500,000 Telephone and Data Systems 19,688
Cellular & Telephone Franchises
450,000 Centennial Cellular (b) 16,791
Cellular Franchises
355,000 COMARCO (b)(c) 7,588
Wireless Network Testing
- --------------------------------------------------------------------------------
64,313
.Telecommunications Equipment: 0.6%
714,000 Aspect Telecommunications (b) 19,546
Call Center Equipment
577,000 Larscom (b) 4,075
Digital Access Equipment
282,000 Verilink (b) 2,327
Integrated Access Devices
- --------------------------------------------------------------------------------
25,948
Computer Related Hardware
.Computer Hardware/
Related Systems: 1.7%
900,000 Micros Systems (b)(c) 29,784
Information System for Restaurants & Hotels
650,000 Kronos (b)(c) 23,563
Time Accounting Software & Clocks
503,000 American Power Conversion (b) 15,090
Uninterruptable Power Systems
- --------------------------------------------------------------------------------
68,437
.Semiconductors/
Related Equipment: 0.4%
350,000 Oak Industries (b) 12,381
CATV Coax Connectors
125,000 Electro Scientific Industries (b) 3,945
DRAM Repair Equipment
- --------------------------------------------------------------------------------
16,326
.Gaming Equipment: 1.4%
2,158,000 International Game Technology 52,332
Slot Machines & Progressive Jackpots
406,000 Acres Gaming (b) 2,030
Manufacturer of Casino Systems
- --------------------------------------------------------------------------------
54,362
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Amount or
Number of Shares Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
.Contract Manufacturing: 1.7%
1,000,000 Solectron (b) $ 42,063
Equipment Manufacturing Services
350,000 Jabil Circuit (b) 11,572
Equipment Manufacturing Services
200,000 Sanmina (b) 8,675
Backplanes & Equipment Manufacturing Services
285,000 Altron (b) 3,669
Backplanes & Equipment Manufacturing Services
- --------------------------------------------------------------------------------
65,979
.Instrumentation: 2.1%
1,085,000 Thermo Instrument Systems (b) 28,481
Scientific & Industrial Instruments
570,000 Mettler Toledo (b) 11,436
Laboratory Products
613,000 Thermoquest (b) 9,157
$1,500,000 Thermoquest, 5% Note Due 8/15/00 1,688
Mass Spectrometry & Chromatography
450,000 IFR Systems (c) 8,100
Test Instruments for Communications
$5,000,000 Thermo Optek, 5% Note Due 10/15/00 5,488
265,000 Thermo Optek (b) 3,925
Elemental & Molecular Spectroscopy
330,000 Itron (b) 4,208
Remote-Readable Electric Meters
232,000 Metrika Systems (b) 3,886
Gamma Ray Instrumentation
200,000 Thermo Bio Analysis (b) 3,625
Biochemical Instruments
234,122 Onix Systems (b) 3,014
Field Measurement & Sensor Equipment
- --------------------------------------------------------------------------------
83,008
.Business Software: 1.3%
760,000 Systems & Computer Technology (b) 20,520
Enterprise Software
300,000 Compuware (b) 15,337
Software Tools & Services
266,000 National Instruments (b) 9,510
Virtual Instruments
160,000 Sterling Commerce (b) 7,760
Electronic Commerce Software & Services
- --------------------------------------------------------------------------------
53,127
- --------------------------------------------------------------------------------
.Consumer Software: 0.6%
350,000 Electronic Arts (b) 18,900
Entertainment Software
$6,500,000 Activision, 6.75% Note Due 1/1/05 5,590
Entertainment Software
220,000 MicroProse (b) 976
Entertainment Software
- --------------------------------------------------------------------------------
25,466
.Computer Services: 2.1%
475,000 Computer Task Group 15,912
Application Development & Maintenance Services
670,000 Sykes Enterprises (b) 13,442
Call Center Services
427,000 Analysts International 12,116
Technology Staffing Services
567,000 BRC Holdings (b) 10,879
Technology Outsourcing for Local Governments
231,000 BISYS Group (b) 9,471
Processing for Banks
390,000 RCM Technologies (b) 7,922
Technology Staffing Services
120,000 Keane (b) 6,720
Application Development & Maintenance Services
125,000 American Management Systems (b) 3,742
Systems Integration
250,000 Dunn Computer (b) 2,062
Custom Computer Systems for Government
- --------------------------------------------------------------------------------
82,266
Software/Services
.Business Information/
Marketing Services/Publishing: 4.5%
1,185,000 World Color Press (b) 41,475
Web-Offset Printing
1,300,000 ACNielsen (b) 32,824
Retail Measurement
411,000 Choicepoint (b) 20,807
Fraud Protection Information
1,200,000 American Business
Information, Cl. A (b) 18,300
1,000,000 American Business
Information, Cl. B (b) 16,000
Business Data for Sales Leads
600,000 Harte Hanks Communications 15,488
Direct Marketing Services
</TABLE>
See accompanying notes to financial statements
17
<PAGE>
Acorn Fund
.Statement of Investments (unaudited)
<TABLE>
<CAPTION>
Number of Shares Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
500,000 Getty Images (b) $ 11,125
Photographs for Publications & Media
300,000 Acxiom (b) 7,481
Database Marketing Services
400,000 CMP Media (b) 7,000
Technology Trade Journals
107,955 Cognizant (b) 6,801
Healthcare Data Services
- --------------------------------------------------------------------------------
177,301
.Internet: 0.4%
300,000 Mecklermedia (b) 6,713
Internet Trade Shows & Magazines
2,683 Bigfoot International (b)(c) 4,024
Internet Direct Marketing
885,714 GIGA Series B. Cv. Pfd. (b)(c) 3,100
71,429 GIGA Series D. Cv. Pfd. (b)(c) 500
300,000 GIGA Partnership (FBR Information
Investors, L.P.) (b) 300
Data on Information Technology
- --------------------------------------------------------------------------------
14,637
.Electronics Distribution: 0.7%
600,000 Kent Electronics (b) 10,988
Component Distribution & Contract Assembly
1,090,000 Pioneer-Standard Electronics 10,491
Component & Computer Distribution
450,000 Richey Electronics (b) 3,516
Component Distribution & Contract Assembly
157,000 Richardson Electronics 2,120
Electron Tube & Semiconductor Distribution
- --------------------------------------------------------------------------------
27,115
.Transaction Processors: 2.0%
1,672,000 National Data 73,150
Credit Card & Health Claims Processor
300,000 Concord EFS (b) 7,837
Credit Card Processor
- --------------------------------------------------------------------------------
80,987
---------
Information: Total 1,201,779
- --------------------------------------------------------------------------------
Health Care: 8.6%
.Biotechnology/Drug Delivery: 0.8%
450,000 Inhale Therapeutic Systems (b) 11,138
Pulmonary Drug Delivery
680,000 Synaptic Pharmaceuticals (b)(c) 9,520
Receptor Targeted Drug Design
790,000 Microcide Pharmaceuticals (b)(c) 5,283
Antibiotics
800,000 Corvas International (b) 3,300
800,000 Corvas International Warrants (b) 800
Rational Drug Design
- --------------------------------------------------------------------------------
30,041
.Medical Equipment: 0.5%
650,000 Respironics (b) 10,116
Sleep Apnea Products
300,000 Affymetrix (b) 7,219
Diagnostic Development
475,000 Innovasive Devices (b)(c) 4,453
Soft Tissue Bone Anchors
- --------------------------------------------------------------------------------
21,788
.Hospital/Laboratory Supplies: 0.8%
273,000 Hillenbrand Industries 16,380
Hospital Beds & Coffins
644,000 Sybron International (b) 16,261
Laboratory Supplies
- -------------------------------------------------------------------------------
32,641
.Services: 6.5%
2,470,000 Lincare Holdings (b) 103,894
Home Health Care Services
1,992,000 HBO & Company 70,218
Hospital Computer Services
1,700,000 First Health Group (b) 48,450
PPO Network
1,410,000 Magellan Health Services (b) 35,779
Mental Health Services
43,000 Spectrum Health Solutions (b) 11
Workman's Compensation
- --------------------------------------------------------------------------------
258,352
---------
Health Care: Total 342,822
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Amount or
Number of Shares Value (000)
- ------------------------------------------------------------------
Consumer Goods/Services: 10.3%
Goods
.Leisure Vehicles: 2.5%
<S> <C> <C>
2,200,000 Harley-Davidson $85,250
Motorcycles & Related Merchandise
480,000 Thor Industries 13,290
Mobile Homes & RV's
- ------------------------------------------------------------------
98,540
.Hardware/Appliances: 0.9%
480,000 Newell 23,910
Household Appliances
300,000 Windmere Durable Holdings (b) 10,744
Household Appliances
- ------------------------------------------------------------------
34,654
.Manufacturers: 0.3%
296,000 St. John Knits 11,433
Upscale Knitwear
Services
.Retail: 3.1%
1,750,000 Borders Group (b) 64,750
Bookstores
871,000 Fred Meyer Holdings (b) 37,017
Supermarkets in the West
911,000 Host Marriott Services (b) 13,266
Fast Food Kiosks in Airports
634,000 Au Bon Pain (b)(c) 6,974
Bakery & Deli Restaurants
- ------------------------------------------------------------------
122,007
.Consumer Services: 0.2%
770,000 Protection One 8,422
Security Alarm Monitoring
.Casinos: 0.3%
290,000 Rio Hotel & Casino (b) 5,474
Casino/Hotel in Las Vegas
392,000 Hollywood Park 4,949
Race Track & Casino
535,000 Monarch Casino & Resort (b)(c) 3,411
Casino/Hotel in Reno
$6,250,000 Grand Palais Casino 14%
Note Due 2/25/98 (b) 313
New Orleans Casino
- ------------------------------------------------------------------
14,147
.Cruise Lines: 3.0%
2,760,000 Carnival 109,365
Largest Cruise Line
120,000 Royal Caribbean Cruises 9,540
Cruises to Caribbean & Alaska
130,000 Royal Olympic Cruise (b) 1,300
Cruises in Mediterranean
- ------------------------------------------------------------------
120,205
----------
Consumer Goods/Services: Total 409,408
- ------------------------------------------------------------------
Finance: 11.8%
.Banks: 1.5%
570,000 Texas Regional Bancshares 18,668
Tex Mex Bank
285,000 Union Planters 16,762
Confederate States Bank
510,000 TCF Financial 15,045
Great Lakes Bank
162,000 CNB Bancshares 7,776
Indiana Bank
- ------------------------------------------------------------------
58,251
.Savings & Loans: 3.1%
1,267,000 Peoples Bank Bridgeport 43,870
Connecticut Savings & Loan
435,000 H F Ahmanson 30,885
California Savings & Loan
738,000 Washington Federal 20,387
Washington State Savings & Loan
538,000 Commonwealth Bancorp 12,340
Philadelphia Savings & Loan
554,000 Coast Contingency Rights (b) 8,379
Litigation Claim Against US Government
275,000 Imperial Thrift & Loan (b) 5,706
California Thrift & Loan
66,000 Washington Mutual 2,867
West Coast Savings & Loan
- ------------------------------------------------------------------
124,434
</TABLE>
See accompanying notes to financial statements
19
<PAGE>
Acorn Fund
.Statement of Investments (unaudited)
<TABLE>
<CAPTION>
Number of Shares Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
.Insurance: 3.4%
800,000 UICI (b) $ 21,800
Health Insurance
741,000 Foremost 17,877
Mobile Home & RV Insurance
511,000 Leucadia National 16,895
Insurance Holding Company
723,000 Baldwin & Lyons, Cl. B 16,810
Trucking Insurance
612,000 Acceptance Insurance (b) 15,032
Crop Insurance
460,000 AmerUs Life Holdings 14,892
Annuities/Life Insurance
400,000 Protective Life 14,675
Life/Dental Insurance
351,000 United Fire & Casualty 13,755
Property & Casualty
81,000 Highlands Insurance (b) 1,499
Property & Casualty Insurance
- --------------------------------------------------------------------------------
133,235
.Money Management: 2.3%
618,000 SEI Investments 38,316
Mutual Fund Administration
1,063,000 Baker Fentress 19,466
Closed-End Investment Company
673,000 Pioneer Group 17,708
Investment Management
1,728,000 Phoenix Investment Partners 15,012
Mutual Fund & Pension Manager
60,000 Affiliated Managers Group (b) 2,227
Mutual Fund & Pension Manager
- --------------------------------------------------------------------------------
92,729
.Finance Companies: 1.5%
935,000 Americredit (b) 33,368
Auto Lending
1,820,000 World Acceptance (b)(c) 10,351
Personal Loans
340,000 DVI Health Services (b) 8,670
Leases for Big Medical Equipment
745,000 Capital Trust (b) 7,171
Whole Mortgage Loans
- --------------------------------------------------------------------------------
59,560
--------
Finance: Total 468,209
Industrial Goods/Services: 9.9%
.Steel: 1.8%
1,295,000 Worthington Industries 19,506
Steel Processing
805,000 Gibraltar Steel (b)(c) 16,502
Steel Processing
350,000 A M Castle 7,700
Steel Distribution
420,000 Atchison Casting (b)(c) 7,507
Steel Foundries
300,000 Intermet 5,438
Ductile Iron & Aluminum Castings
190,000 Schnitzer Steel 4,489
Scrap Steel Processor
400,000 Metal Management (b) 4,275
Scrap Steel Collection & Processing
300,000 Steel Dynamics (b) 4,163
Flat Rolled Steel Production
- --------------------------------------------------------------------------------
69,580
.Machinery: 1.3%
1,071,000 Baldor Electric 26,106
Electric Motors
431,000 Clarcor 9,051
Filters
365,000 Applied Industrial Technologies 7,505
Industrial Components Distribution
196,000 Applied Power 6,737
Hydraulic Tools
150,000 Valmont Industries 2,995
Irrigation, Lighting & Communication Structures
- --------------------------------------------------------------------------------
52,394
.Conglomerates: 0.8%
900,000 Thermo Electron (b) 30,769
Instrumentation, Biomedical &
Industrial Products
.Specialty Chemicals: 2.4%
900,000 Unifi 30,825
Polyester & Nylon Texturizing
1,000,000 Lilly Industries, Cl. A 21,625
Industrial Coatings
295,000 H B Fuller 16,354
Adhesives, Sealants & Coatings
610,000 Cambrex 16,012
Pharmaceutical & Other Specialty Chemicals
600,000 MA Hanna 10,988
Supplies Resins, Colorant & Rubber
- --------------------------------------------------------------------------------
95,804
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
.Electrical Components/
Industrial Materials: 0.1%
298,000 Spectra Physics Lasers (b) $ 2,719
Lasers Manufacturer
100,000 Brunswick Technologies (b) 1,325
Fiberglass Fabric for Composites
- --------------------------------------------------------------------------------
4,044
.Outsourcing Services/Training: 0.7%
670,000 Labor Ready (b) 20,226
Temporary Manual Labor
355,000 GP Strategies (b) 5,192
Training Programs
400,000 International Total Services (b)(c) 2,800
Aviation Services
40,000 Steven Myers & Associates (b) 770
Proposal Management
- --------------------------------------------------------------------------------
28,988
.Logistics: 1.9%
900,000 Expeditors International
of Washington 39,600
International Air Freight Forwarder
759,000 Hub Group (b) 16,034
Truck & Rail Freight Forwarder
400,000 C H Robinson 9,950
Truck Freight Forwarder
500,000 Airnet Systems (b) 8,062
Check & Other Small Package Shipment
- --------------------------------------------------------------------------------
73,646
.Other Industrial Services: 0.9%
1,051,000 Wackenhut, Cl. B 22,597
45,000 Wackenhut, Cl. A 1,018
Prison Management
210,000 HA*LO Industries 6,536
Distributor of Specialty Products
627,000 Compass International Services (b)(c) 5,956
Collection Agencies
421,000 Trailer Bridge (b) 1,684
Tug & Barge Transportation
37,791
- --------------------------------------------------------------------------------
Industrial Goods/Services: Total 393,016
---------
Energy/Minerals: 9.2%
.Independent Power: 4.0%
2,230,000 AES Corporation (b) 117,214
1,852 AES Corporation Warrants (b) 144
Power Plants
1,420,000 CalEnergy (b) 42,689
Power Plants
- --------------------------------------------------------------------------------
160,047
.Oil/Gas Producers: 1.6%
2,000,000 Tesoro Petroleum (b)(c) 31,750
Oil Refinery/Gas Reserves
1,550,000 Seagull Energy (b) 25,672
Oil & Gas Producer
250,000 Evergreen Resources (b) 4,687
Coalseam Gas Production
1,031,000 Tipperary (b)(c) 2,964
Oil & Gas Producer
- --------------------------------------------------------------------------------
65,073
.Distribution/Marketing/Refining: 1.5%
800,000 Equitable Resources 24,400
Gas Utility & Gas Producer
560,000 Atmos Energy 17,080
Natural Gas Utility
240,000 KN Energy 13,005
Unregulated Gas Gatherer & Processor
520,000 Dynegy (formerly known as NGC) 6,500
Gas Processing/Marketing
- --------------------------------------------------------------------------------
60,985
.Oil Services: 1.7%
500,000 EVI (b) 18,562
Drill Pipe
1,000,000 Pride International (b) 16,938
Offshore/Onshore Drilling
398,000 Atwood Oceanics (b) 15,845
Offshore Drilling
350,000 J Ray McDermott (b) 14,525
Offshore Construction Company
- --------------------------------------------------------------------------------
65,870
.Mining: 0.4%
800,000 Zeigler Coal Holding 13,700
Coal Mining
---------
Energy/Minerals: Total 365,675
</TABLE>
See accompanying notes to financial statements
21
<PAGE>
Acorn Fund
.Statement of Investments (unaudited)
<TABLE>
<CAPTION>
Number of Shares Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Other Industries: 4.2%
.Real Estate: 4.2%
829,000 The Rouse Company $26,062
Shopping Malls
1,025,000 LaSalle Hotel Properties (b)(c) 17,361
Upscale/Full Service Hotels
485,000 First Industrial Realty Trust 15,429
Industrial Properties
820,000 Cornerstone Properties 14,452
Downtown Office Buildings
233,000 Forest City Enterprises, Cl. B 13,747
185,000 Forest City Enterprises, Cl. A 10,950
Shopping Centers
260,000 Equity Residential Properties Trust 12,334
Nationwide Apartments
400,000 Macerich Company 11,725
Regional Shopping Malls
945,000 Homestead Village (b) 11,222
Extended Stay Hotels
398,437 Security Capital Global (b) 7,969
101,000 Security Capital Group, Cl. B (b) 2,689
18,000 Security Capital Warrants (b) 6
Strategic Real Estate Investments
350,000 Security Capital Atlantic 7,809
Moderate Income Apartments
165,000 Weingarten Realty Investors 6,899
Community Shopping Centers
190,000 First Washington Realty Trust 4,417
120,000 First Washington Realty Trust, Cv. Pfd. 3,476
Community Shopping Centers
13,000 Gaylord Entertainment 419
Opryland Hotel & Other Assets
- --------------------------------------------------------------------------------
Other Industries: Total 166,966
-------
166,966
- --------------------------------------------------------------------------------
Foreign Securities: 11.3%
.Canada: 0.2%
520,000 Shaw Industries, Cl. A 6,223
Oil Field Services
- --------------------------------------------------------------------------------
.United Kingdom: 2.5%
1,200,000 Serco Group 27,630
Facilities Management
400,000 NTL (b) 21,400
Cable TV & Telephone Systems
650,000 Comcast UK Cable Partners (b) 10,197
Cable TV & Telephone Systems
1,350,000 Airtours 10,159
Tour Operator
3,300,000 Medeva 9,415
Drugs for Hyperactive Children
1,100,000 N. Brown Group 6,644
Mail Order Clothing in Large Sizes
600,000 Edinburgh Fund Managers 5,786
Investment Management
700,000 Oriflame 5,197
Natural Cosmetics Sold Door-to-Door
1,050,000 Powerscreen International 1,621
Mobile Crushing & Screening Equipment
1,200,000 Ethical Holdings ADR (b)(c) 450
Drug Delivery
- --------------------------------------------------------------------------------
98,499
.Germany/Austria: 0.6%
552,000 United International
Holdings (Austria) (b) 8,832
Cable Television for Austria & Other Countries
180,000 Flughafen Wien (Austria) 8,632
Vienna Airport Authority
23,000 Binding-Brauerei 6,945
Brewery
- --------------------------------------------------------------------------------
24,409
.Sweden: 1.8%
1,300,000 WM Data Nordic 45,154
Computer Services/Consulting
650,000 Getinge Industrier 13,285
Sterilization & Disinfection Equipment
320,000 Autoliv 10,120
Seatbelts & Airbags
125,000 Esselte, Series A 2,774
Office Supplies & Related Equipment
80,000 Lifco (b) 391
Dental Supplies & Health Food
- --------------------------------------------------------------------------------
71,724
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
.Netherlands: 1.0%
305,000 Hunter Douglas $ 16,568
Decorative Window Coverings
161,000 ASR Verzekeringsgroep 13,661
Insurance
167,000 Getronics 8,661
Computer Services
- --------------------------------------------------------------------------------
38,890
.Switzerland: 0.4%
11,000 Cie Fin Richemont 14,395
Luxury Goods & Tobacco
.France: 0.7%
115,000 Atos (b) 27,580
Computer Services/Transaction Processing
.Portugal: 0.1%
374,000 Filmes Lusomundo (b)(c) 5,568
Newspapers, Radio, Video, Film Distribution
.Italy/Greece: 1.3%
3,000,000 Banca Fideuram 17,105
Life Insurance & Mutual Funds
300,000 Industrie Natuzzi 7,800
Leather Couches
250,000 Hellenic Bottling (Greece) 7,723
Coca-Cola Bottler
1,500,000 Saipem 7,704
Pipeline Construction & Drilling Contractor
1,000,000 Aeroporti di Roma 6,295
Airport Management
110,000 Cellular Communications
International (b) 5,486
Mobile Telephone Network
- --------------------------------------------------------------------------------
52,113
.Malaysia: 0.1%
2,150,000 Berjaya Sports Toto 3,188
Lottery/Gaming
.Hong Kong: 0.2%
4,500,000 Varitronix International 9,002
LCD Manufacturer
60,000 Amway Asia Pacific 784
Personal Care Products
- --------------------------------------------------------------------------------
9,786
.China: 0.0%
200,000 The Investment Company of China (b) 1,112
Closed-End Fund
.Singapore: 0.4%
7,250,000 Star Cruises (b) 13,848
Cruise Line
1,500,000 Natsteel Electronics 2,513
Contract Electronics Manufacturer
- --------------------------------------------------------------------------------
16,361
.Japan: 0.8%
180,000 Nintendo 16,666
Video Games
60,000 Rohm 6,161
Semiconductors & Electronic Components
20,000 Shohkoh Fund 4,914
Short-Term Loans for Small Businesses
174,000 Noritsu Koki 3,887
Photo Processing Lab Manufacturer
- --------------------------------------------------------------------------------
31,628
.Australia/New Zealand: 0.2%
1,700,000 Sky City (New Zealand) 4,192
Casino & Hotel
141,000 PetSec Energy ADR (b) 2,282
540,000 PetSec Energy (b) 1,772
Oil & Gas Producer
- --------------------------------------------------------------------------------
8,246
.Mexico: 0.4%
3,400,000 Kimberly Clark de Mexico 12,013
Paper Products
5,960,000 Nadro, Series L (b) 3,635
Pharmaceutical Distributor
- --------------------------------------------------------------------------------
15,648
.Other Latin America: 0.6%
320,000 IRSA (Argentina) 9,320
Real Estate Management & Development
2,800,000 Siderca (Argentina) 4,760
Steel Pipe Producer
150,000 Banco Latinoamericano
de Exportaciones (Panama) 4,613
Trade Financing
140,750,000 Cemig (Brazil) 4,381
Electric Utility
- --------------------------------------------------------------------------------
23,074
</TABLE>
See accompanying notes to financial statements
23
<PAGE>
Acorn Fund
.Statement of Investments (unaudited)
<TABLE>
<CAPTION>
Principal Amount Value (000)
- -------------------------------------------------------------------------------
<S> <C>
----------
Foreign: Total 448,444
Total Common Stocks and Other ----------
Equity-Like Securities: 95.6% 3,796,319
(Cost: $2,065,310)
Short-Term Obligations: 4.4%
Yield 4.815%--5.650%
Due 7/1--7/30/98
$43,056 GTE 42,975
$41,124 Baxter International 41,009
$29,842 American General Finance 29,803
$19,334 GMAC 19,313
$17,760 Hertz 17,760
$12,000 US Treasury Bill 11,987
$10,670 General Electric 10,650
- -------------------------------------------------------------------------------
(Amortized Cost: $173,497) 173,497
----------
Total Investments: 100.0% 3,969,816
(Cost: $2,238,807)
----------
Cash and Other Assets Less Liabilities: 0.0% (1,126)
----------
Total Net Assets: 100% $3,968,690
===============================================================================
</TABLE>
- --------------------------------------------------------------------------------
.Notes to Statement of Investments
(a) At June 30, 1998, for federal income tax purposes cost of investments was
$2,241,556,000 and net unrealized appreciation was $1,728,260,000, consisting of
gross unrealized appreciation of $1,837,923,000 and gross unrealized
depreciation of $109,663,000.
(b) Non-income producing security.
(c) On June 30, 1998, the Fund held the following percentages of the
outstanding voting shares of the affiliated companies (ownership of at least 5%)
listed below:
Bigfoot International.....................................................10.00%
World Acceptance...........................................................9.58%
Ethical Holdings...........................................................8.04%
Tipperary..................................................................7.85%
Kronos.....................................................................7.83%
COMARCO....................................................................7.52%
Data Transmission Network..................................................7.23%
Microcide Pharmaceuticals..................................................7.20%
LaSalle Hotel Properties...................................................6.73%
Gibraltar Steel............................................................6.45%
Synaptic Pharmaceuticals...................................................6.35%
Tesoro Petroleum...........................................................6.31%
Filmes Lusomundo...........................................................6.20%
Au Bon Pain................................................................6.18%
International Total Services...............................................6.00%
Monarch Casino & Resort....................................................5.67%
Micros Systems.............................................................5.61%
IFR Systems................................................................5.49%
Innovasive Devices.........................................................5.17%
Atchison Casting...........................................................5.13%
Giga.......................................................................5.10%
Compass International Services.............................................5.07%
The aggregate cost and value of investments in these companies at June 30, 1998,
was $186,614,000 and $240,271,000, respectively. The market value of these
securities represents 6.05% of the total net assets at June 30, 1998. During the
period ended June 30, 1998, cost of purchases and proceeds from sales in
affiliated companies was $65,217,000 and $20,178,000, respectively. Net realized
gain on sales of investments in such companies amounted to $5,848,000. There
were no dividends received from these companies during the six months ended June
30, 1998.
24
<PAGE>
Acorn Fund
.Foreign Portfolio Diversification
At June 30, 1998 Acorn Fund's foreign portfolio of investments as a percent of
net assets was diversified as follows:
<TABLE>
<CAPTION>
Value (000) Percent
- --------------------------------------------------------------------------------
<S> <C> <C>
.Information
Computer Services $ 81,395 2.1%
Cable Television 40,429 1.0
Semiconductors &
Related Equipment 33,791 0.9
Business Information/Publishing 5,568 0.1
Mobile Communications 5,486 0.1
Contract Manufacturing 2,513 0.1
- --------------------------------------------------------------------------------
169,182 4.3
.Health Care
Hospital Services 13,285 0.3
Pharmaceuticals 9,415 0.2
Biotechnology/Drug Delivery 450 0.0
Medical Equipment 391 0.0
- --------------------------------------------------------------------------------
23,541 0.5
.Consumer Goods/Services
Travel 24,007 0.6
Nondurable Goods 19,984 0.5
Consumer Software 16,666 0.4
Beverages 14,668 0.4
Furniture & Textiles 7,800 0.2
Gaming 7,380 0.2
Retail 6,644 0.2
Consumer Goods Distribution 3,635 0.1
Consumer Services 784 0.0
Other Durable Goods 26,688 0.7
Other Entertainment 14,395 0.4
- --------------------------------------------------------------------------------
142,651 3.7
.Finance
Money Management 22,891 0.6
Insurance 13,661 0.4
Finance Companies 4,914 0.1
Banks 4,613 0.1
Closed-End Funds 1,112 0.0
- --------------------------------------------------------------------------------
47,191 1.2
.Industrial Goods/Services
Electrical Components 9,002 0.2
Machinery 5,508 0.1
Steel 4,760 0.1
- --------------------------------------------------------------------------------
19,270 0.4
.Energy/Minerals
Oil Services 13,927 0.4
Oil/Gas Producers 4,054 0.1
- --------------------------------------------------------------------------------
17,981 0.5
.Other Industries
Transportation 14,927 0.4
Real Estate 9,320 0.2
Utilities 4,381 0.1
- --------------------------------------------------------------------------------
28,628 0.7
Total Foreign Portfolio $448,444 11.3%
================================================================================
</TABLE>
25
<PAGE>
Acorn International
.Major Portfolio Changes in the Second Quarter
<TABLE>
<CAPTION>
Number of Shares
--------------------------
3/31/98 6/30/98
Additions
Europe
<S> <C> <C>
.Germany
Merck KGA 0 75,000
Rhoen Klinikum 135,000 150,000
.Austria
Scala Business Solutions 250,000 900,000
.Denmark
Vest Wood 0 50,000
.Finland
Elcoteq Network 507,000 750,000
KCI Konecranes International 55,000 125,000
.United Kingdom
Computacenter 0 75,000
Dialog Corporation 1,200,000 1,600,000
Professional Staff 0 230,000
.Switzerland
Cie Fin Richemont 13,000 16,000
Pargesa Holdings 0 3,200
Phoenix Mecano 33,000 36,000
Sarasin & Cie Bank 0 5,000
.Greece
Ergo Bank 20,000 70,000
.Spain
Prosegur 0 375,000
Sol Melia 0 150,000
.Hungary
Pick Szeged 0 30,000
Gedeon Richter 40,000 80,000
- --------------------------------------------------------------------------------
Asia
.Taiwan
Chroma Ate 250,000 700,000
.Singapore
Datacraft Asia 3,300,000 4,150,000
Natsteel Electronics 4,400,000 5,725,000
- --------------------------------------------------------------------------------
Latin America
.Mexico
Grupo Industrial Bimbo 6,000,000 6,500,000
Grupo Continental 1,570,000 2,000,000
Kimberly Clark de Mexico 3,300,000 3,600,000
.Brazil
Cemig 150,000,000 220,000,000
(includes effect of 22.4%
stock dividend)
.Argentina
Perez Companc 1,200,000 1,400,000
.Panama
Panamerican Beverage 120,000 200,000
- --------------------------------------------------------------------------------
Other Countries
.Australia
AAPT 0 2,720,000
Coca Cola Amatil 900,000 1,400,000
Tyndall Australia 4,600,000 5,626,307
.Canada
Celestica 0 175,000
LGS Group 170,000 300,000
LGS Group Warrants 0 80,000
Power Financial 150,000 220,000
Ventra Group 0 1,800,000
.South Africa
Persetel Q Data 0 750,000
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
---------------------
<S> <C> <C>
3/31/98 6/30/98
Sales
- -----------------------------------------------------------------------
Europe
.Germany
Pfleiderer 260,000 0
Rofin Sinar 110,000 0
Schaltbau 7,000 0
.Finland
Tieto Corporation, Cl. B
(formerly known as TT Tieto) 500,000 1,310,000
(includes effect of 200% stock dividend)
.Sweden
WM Data Nordic 2,100,000 2,000,000
.France
Groupe Partouche 50,000 0
.United Kingdom
Eurotherm 600,000 0
Hozelock Group 450,000 0
St. James Place 4,000,000 0
Vosper Thornycroft Holdings 700,000 430,000
.Switzerland
PubliGroupe 40,000 5,000
.Italy
Banca Fideuram 6,025,000 5,430,000
Cellular Communications
International 120,000 55,000
(includes effect of 3 for 2 stock split)
Saipem SPA 1,800,000 1,500,000
.Portugal
Lusotur 180,000 101,000
.Netherlands
Fugro NV 200,000 100,000
Telegraaf Holdings 240,000 80,000
- -----------------------------------------------------------------------
Asia
.Hong Kong
China HK Photo Products 5,200,000 0
Dickson Concepts 1,400,000 0
.India
Tube Investment GDR 810,000 0
.Japan
Aderans 370,000 0
Aeon Credit Service 165,000 0
Aiful 90,000 10,000
Asatsu 10,000 0
Jafco 99,000 0
Jusco 200,000 0
Keyence 40,000 0
Mirai Industry 275,000 113,000
Nichiei 68,000 0
NuSkin Asia Pacific 160,000 0
Shohkoh Fund 40,000 15,000
.Malaysia
Berjaya Sports Toto 1,400,000 0
Malaysian Oxygen 2,350,000 1,850,000
Oriental Holdings 265,000 0
Technology Resources 1,000,000 0
.Thailand
Bangkok Insurance 320,000 0
Telecom Asia 12,800,000 0
- -----------------------------------------------------------------------
Latin America
.Panama
Banco Latinoamericano
de Exportaciones 195,000 165,000
- -----------------------------------------------------------------------
Other Countries
.Australia
PetSec Energy 1,400,000 900,000
Publishing & Broadcasting 1,000,000 0
Siddons Ramset 690,000 0
Sonic Healthcare 5,200,000 0
.Canada
Shaw Industries 520,000 1,280,000
(includes effect of 3 for 1 stock split)
.Israel
ZAG Industries 350,000 253,000
.South Africa
Energy Africa 930,000 500,000
</TABLE>
27
<PAGE>
Acorn International
.Statement of Investments (unaudited) June 30, 1998
<TABLE>
<CAPTION>
Number of Shares Value (000)
- ---------------------------------------------------------------------------
<S> <C> <C>
Common Stocks and Other
Equity-Like Securities: 89.3%
- ---------------------------------------------------------------------------
Europe: 63.5%
.Germany/Austria: 5.3%
200,000 Rhoen Klinikum Pfd. $ 19,280
150,000 Rhoen Klinikum 14,834
Hospital Management
375,000 IVG Holdings 17,244
Real Estate
900,000 Scala Business Solutions (Austria) (b)(c) 13,466
95,775 Scala Business Solutions
Warrants 3/31/99 (b) 603
95,775 Scala Business Solutions
Warrants 3/31/01 (b) 453
ERP Software
190,000 Flughafen Wien (Austria) 9,112
Vienna Airport Authority
473,000 United International
Holdings (Austria) (b) 7,568
Cable Television for Austria &
Other Countries
212,000 Berzelius Umwelt 4,369
Industrial Waste Recycling
21,000 Cewe Color Holding 4,363
Photographic Developing & Printing
100,000 Boewe Systec 4,017
Envelope Stuffing Machines
75,000 Merck KGA 3,361
Pharmaceuticals
- ---------------------------------------------------------------------------
98,670
.Denmark: 0.5%
50,000 Vest Wood 4,871
Furniture
44,000 Kompan International (c) 3,679
Playground Equipment
- ---------------------------------------------------------------------------
8,550
.Finland: 7.7%
1,310,000 Tieto Corporation, Cl. B 99,566
Computer Services/Consulting
80,000 Fiskars, Series A 11,373
Scissors & Gardening Tools
750,000 Elcoteq Network (c) 9,227
Contract Electronics Manufacturer
550,000 Talentum (c) 8,822
Trade Journals & Multimedia
100,000 Spar Finland (c) 7,427
Grocery/Convenience Stores
125,000 KCI Konecranes International 6,334
Industrial Equipment
- ---------------------------------------------------------------------------
142,749
.Norway: 0.1%
500,000 Atex Media Solutions (b) $ 1,010
Print Media Software
.Sweden: 7.1%
2,000,000 WM Data Nordic 69,468
Computer Services/Consulting
1,000,000 Getinge Industrier 20,439
Sterilization & Disinfection Equipment
700,000 Bure Investment 11,147
Health Care Services & Investments
350,000 Autoliv 11,069
Seatbelts & Airbags
525,000 Atle 9,151
Investment Company
315,000 Esselte, Series A 6,991
Office Supplies & Related Equipment
360,000 Segerstrom & Svensson 2,957
Contract Electronics Manufacturer
120,000 Lifco (b) 587
Dental Supplies & Health Food
- ---------------------------------------------------------------------------
131,809
.France: 4.4%
180,000 Atos (b) 43,169
Computer Services/Transaction Processing
60,000 Fininfo 10,619
Data Feeds for French Banks & Brokers
62,000 NRJ 9,886
Radio Network
95,000 Spir Communications 7,729
Regional Newspapers
52,500 Virbac 4,185
Veterinary Medicine
13,000 Penauille Polyservice 3,752
Industrial Cleaning
50,000 Assystem 2,067
Nuclear Energy Consulting
- ---------------------------------------------------------------------------
81,407
.United Kingdom: 14.5%
2,000,000 Serco Group 46,051
Facilities Management
467,000 NTL (b) 24,984
Cable TV & Telephone System
510,000 Euro Money Publications 20,359
Financial Publications
13,000,000 Electronics Boutique (b) 19,196
Videogame/Computer Software Stores
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
1,500,000 Seton Scholl Healthcare (formerly
known as Seton Healthcare Group) $ 18,833
Pharmaceuticals
2,000,000 Capita Group 17,202
Outsourcing Services
2,000,000 Oriflame International 14,850
Natural Cosmetics
4,400,000 City Centre Restaurants 10,829
Fast Food Restaurants
1,700,000 Rotork 10,211
Valve Actuators for Oil & Water Pipelines
1,000,000 Atkins 9,903
Outsourcing Services
950,000 Edinburgh Fund Managers 9,162
Investment Management
3,200,000 Medeva 9,130
Drugs for Hyperactive Children
600,000 AEA Technology 9,085
Nuclear Energy Consulting
1,500,000 N. Brown Group 9,060
Mail Order Clothing in Large Sizes
3,400,000 HALMA 7,063
Fire Detection Devices
2,000,000 Shanks & McEwan 6,007
Landfills & Waste Incinerators
430,000 Vosper Thornycroft Holdings 5,919
Naval Shipbuilding
1,300,000 Dorling Kindersley 4,577
Reference Books & CD-ROMs
1,000,000 Hogg Robinson 4,530
Corporate Travel Management
1,600,000 Dialog Corporation (b) 4,071
Online Business Information
600,000 Fairey Group 3,279
Electronic Products
230,000 Professional Staff (b) 3,162
Specialist Temporary Staffing
1,500,000 Powerscreen International 2,315
Mobile Crushing & Screening Equipment
75,000 Computacenter (b) 938
Computer Desktop Support Services
- --------------------------------------------------------------------------------
270,716
.Switzerland: 5.4%
36,000 Phoenix Mecano 23,259
Electrical Components Manufacturer
16,000 Cie Fin Richemont 20,939
Luxury Goods & Tobacco
60,000 Selecta Group 12,816
Vending Machines
13,500 Bon Appetit 8,838
12,500 Bon Appetit Warrants 10/29/98 (b) 251
Cash & Carry Stores/Specialty Restaurants
5,000 Sarasin & Cie Bank 8,768
Private Banking
12,000 Hero 8,149
Packaged Foods
18,000 Societe Generale d'Affichage 7,832
Billboard Advertising
3,200 Pargesa Holdings 5,686
Industrial & Media Conglomerate
1,000 Julius Baer Holdings 3,128
Private Banking & Brokerage
5,000 PubliGroupe 1,549
Advertising
- --------------------------------------------------------------------------------
101,215
.Italy/Greece: 9.4%
5,430,000 Banca Fideuram 30,960
Life Insurance & Mutual Funds
650,000 Mediolanum 20,624
Life Insurance & Mutual Funds
2,750,000 Autogrill Finanziari 19,431
Tollway Restaurants
2,000,000 Editoriale L'Espresso 16,596
Newspapers & Magazines
700,000 Banca Popolare Di Bergamo 14,413
Regional Bank
600,000 Gewiss 12,590
Electrical Plugs & Switches
500,000 Banco Pop Commercia e Industria 8,495
Regional Bank
576,000 Attica Enterprises (Greece) 8,310
Ferry Line
300,000 Industrie Natuzzi ADR 7,800
Leather Couches
250,000 Hellenic Bottling (Greece) 7,723
Coca-Cola Bottler
1,500,000 Saipem SPA 7,704
Pipeline Construction &
Drilling Contractor
</TABLE>
See accompanying notes to financial statements
29
<PAGE>
Acorn International
.Statement of Investments (unaudited)
<TABLE>
<CAPTION>
Number of Shares Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
1,000,000 Aeroporti di Roma $ 6,295
Airport Management
70,000 Ergo Bank (Greece) 5,982
Commercial Bank
325,000 Saes Getters 4,607
Getters used in TV's/PC's
55,000 Cellular Communications
International (b) 2,743
Cellular Franchises
- --------------------------------------------------------------------------------
174,273
.Spain/Portugal: 2.1%
300,000 Mapfre Vida 14,345
Life Insurance & Mutual Funds
150,000 Sol Melia 7,153
Hotel Management
220,000 Cortefiel 4,814
Apparel Retailer
375,000 Prosegur (b) 4,470
Security Guards
144,300 Estoril Sol (Portugal) 3,750
Casino Resort
149,000 Filmes Lusomundo (Portugal) (b) 2,218
Newspapers, Radio, Video, Film Distribution
101,000 Lusotur (Portugal) (b) 1,394
Real Estate/Resort Developer
87,500 Televisao Independente (Portugal) (b) 197
Television Station
- --------------------------------------------------------------------------------
38,341
.Netherlands: 6.6%
580,000 Kempen (c) 44,907
Stock Brokerage/Investment Management
560,000 Getronics 29,043
Computer Services
275,000 Hunter Douglas 14,938
Decorative Window Coverings
151,000 ASR Verzekeringsgroep 12,812
Insurance
320,000 DOCdata (b) 9,171
Audio CD & CD-Rom Replication
310,000 Wegener Arcade NV 6,157
Newspaper
100,000 Fugro NV 3,982
Consulting & Surveying
80,000 Telegraaf Holdings 1,927
Newspaper
- --------------------------------------------------------------------------------
122,937
.Hungary: 0.3%
80,000 Gedeon Richter $ 6,436
Generic Drugs
30,000 Pick Szeged 1,754
Salami Producer
- --------------------------------------------------------------------------------
8,190
.Poland: 0.1%
200,000 Best Company Series D (c) 694
Electronics Retailer
140,000 Bank Komunalny (b) 458
Gdansk - Area Bank
- --------------------------------------------------------------------------------
1,152
---------
Europe: Total 12.3% 1,181,019
- --------------------------------------------------------------------------------
Asia: 12.3%
.Hong Kong: 2.8%
14,050,000 Li and Fung 22,665
Sourcing of Consumer Goods
8,500,000 Varitronix International 17,003
LCD Manufacturer
3,500,000 TVB 9,260
Television Broadcasting
16,000,000 Vanda Systems 2,891
Systems Integrator
51,819
- --------------------------------------------------------------------------------
.India: 0.3%
82,682 Housing Development Finance 5,840
Mortgage Lender
2,000,000 Centurion Quantum Growth (b) 217
Closed-End Fund
- --------------------------------------------------------------------------------
6,057
.Japan: 5.1%
390,000 Meitec 13,488
Engineering Outsourcing
130,000 Nintendo 12,037
Video Games
125,000 Nidec 8,538
Spindle Motor Manufacturer
250,000 Fuji Software ABC 8,502
Computer Services/Consulting
300,000 Hokuto 8,430
Mushroom Grower
85,000 Ryohin Keikaku 8,146
Designer & Retailer of Muji Brand
Specialty Consumer Goods
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Principal Amount or
Number of Shares Value (000)
- --------------------------------------------------------------------------------
<S> <C>
90,000 Orix Corporation $ 6,076
Leasing Company
270,000 Noritsu Koki 6,031
Photo Processing Lab Manufacturer
204,000 People 4,851
Sports Clubs
40,000 Rohm 4,107
Semiconductors & Electronic Components
15,000 Shohkoh Fund 3,686
Short-Term Loans for Small Businesses
310,000 Shinki 3,440
Corporate & Consumer Lending
161,000 Lasertec 3,306
Manufacturer of LCD &
Photomask Defect Detectors
210,000 Arrk Corporation 2,875
Industrial Modeling
113,000 Mirai Industry 949
Manufacturer of Plastic Housing Components
10,000 Aiful 488
Consumer Lending
80,000 Central Uni 337
Health Care/Medical Equipment
- --------------------------------------------------------------------------------
95,287
.Taiwan: 0.1%
700,000 Chroma Ate (b) 2,170
Measuring Instruments
.Malaysia: 0.2%
1,850,000 Malaysian Oxygen 4,104
Industrial Gases
.Indonesia: 0.0%
3,000,000 Mustika Ratu (b) 304
Traditional Cosmetics
1,750,000 Medco Energi 272
Oil & Gas Drilling & Production
- --------------------------------------------------------------------------------
576
.Philippines: 0.8%
$ 8,750,000 Int'l Container Terminal Services
Cv. 1.75% 3/13/04 7,612
52,840,000 Int'l Container Terminal Services (b) 6,019
Container Handling Terminals & Port Management
3,985,000 Philippine Savings Bank (b) 1,696
Banking
- --------------------------------------------------------------------------------
15,327
</TABLE>
<TABLE>
<CAPTION>
Number of Shares Value (000)
- --------------------------------------------------------------------------------
<S> <C>
.Singapore: 3.0%
8,300,000 Star Cruises (b) 15,853
Cruise Line
7,000,000 Venture Manufacturing 13,258
Contract Electronics Manufacturer
4,150,000 Datacraft Asia 9,960
Network Integration
5,725,000 Natsteel Electronics 9,590
Contract Electronics Manufacturer
4,247,000 Electronic Resources 2,891
5,015,000 Electronic Resources
Warrants 7/17/01 (b) 1,128
Distribution of Electronic Components
16,900,000 Genting International (b) 1,775
Investment Holding
- --------------------------------------------------------------------------------
54,455
--------
Asia: Total 229,795
- --------------------------------------------------------------------------------
Latin America: 6. 4%
.Mexico: 2.7%
6,500,000 Grupo Industrial Bimbo 13,165
Bread, Baked Goods & Snacks
3,600,000 Kimberly Clark de Mexico 12,720
Paper Products
2,000,000 Grupo Continental 6,677
Beverages
510,000 Tubos de Acero de Mexico ADR 6,534
Seamless Pipe for Oil Wells
8,940,000 Nadro, Series L (b) 5,452
Pharmaceutical Distributor
1,900,000 Corp Interamericana de Entretenimiento 5,286
Special Events & Live Entertainment
- --------------------------------------------------------------------------------
49,834
.Brazil: 0.9%
470,000 Elevadores Atlas 7,924
Elevator Installation & Maintenance
220,000,000 Cemig Pfd. 6,848
Electric Utility
181,000 Bompreco GDS 2,624
Supermarket Chain
- --------------------------------------------------------------------------------
17,396
</TABLE>
See accompanying notes to financial statements
31
<PAGE>
Acorn International
.Statement of Investments (unaudited)
<TABLE>
<CAPTION>
Number of Shares Value (000)
- --------------------------------------------------------------------------------
<S> <C>
.Argentina: 1.5%
500,000 IRSA GDS $ 14,562
Real Estate Management & Development
1,400,000 Perez Companc 7,029
Oil & Gas Producer
3,600,000 Siderca 6,121
Steel Pipe Producer
- --------------------------------------------------------------------------------
27,712
.Peru: 0.7%
6,000,000 Enrique Ferreyros 8,083
Heavy Machinery Dealer
250,000 Telefonica del Peru 5,109
Telecommunications
- --------------------------------------------------------------------------------
13,192
.Panama: 0.6%
200,000 Panamerican Beverage 6,287
Coca-Cola Bottler
165,000 Banco Latinoamericano
de Exportaciones 5,074
Trade Financing
- --------------------------------------------------------------------------------
11,361
-----------
Latin America: Total 119,495
- --------------------------------------------------------------------------------
Other Countries: 7.1%
.Australia/New Zealand: 2.0%
1,400,000 Coca Cola Amatil 9,364
Coca-Cola Bottler
5,626,307 Tyndall Australia 7,317
562,630 Tyndall Australia New Shares 697
Money Management & Insurance
3,000,000 Anaconda Nickel (b) 7,060
Nickel Mining
2,720,000 AAPT (b) 5,222
Telephone Services
1,750,000 Sky City (New Zealand) 4,315
Casino & Hotel
900,000 PetSec Energy (b) 2,954
Oil & Gas Producer
- --------------------------------------------------------------------------------
36,929
</TABLE>
<TABLE>
<CAPTION>
Principal Amount or
Number of Shares Value (000)
- --------------------------------------------------------------------------------
<S> <C>
.Canada: 2.6 %
1,280,000 Shaw Industries 15,319
Oil Field Services
220,000 Power Financial 10,285
Financial Services Holding Company
1,700,000 Bracknell (b)(c) 6,416
Electrical Contractor & Facilities Management
1,800,000 Ventra Group (b) 4,529
Auto Parts for Europe & North America
300,000 LGS Group (b) 3,366
80,000 LGS Group Warrants (b) 898
Computer Systems Integration
175,000 Celestica (b) 3,302
Contract Electronics Manufacturer
1,600,000 Dundee Realty Special Warrants (b) 2,829
900,000 Dundee Realty (b) 1,591
Real Estate
- --------------------------------------------------------------------------------
48,535
.Israel: 0.7%
350,000 Blue Square Israel ADR 5,403
Supermarkets & Department Stores
100,000 Orbotech (b) 3,637
Printed Circuit Board Manufacturing Equipment
253,000 ZAG Industries (b) 3,546
Plastic Hardwares
- --------------------------------------------------------------------------------
12,586
.South Africa: 0.4%
750,000 Persetel Q Data 6,749
Networks & Computer Systems
500,000 Energy Africa (b) 1,677
Oil & Gas Producer
- --------------------------------------------------------------------------------
8,426
.Russia: 0.1%
$1,500,000 Khanty Mansiysk 10% Notes 1,500
152 Khanty Mansiysk 68
Oil Production in Russia
- --------------------------------------------------------------------------------
1,568
.United States: 1.3%
322,000 Carnival 12,759
Largest Cruise Line
203,000 AES Corporation (b) 10,670
Electric Generating Plants
- --------------------------------------------------------------------------------
23,429
-----------
Other: Total 131,473
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Principal Amount or
Number of Shares Value (000)
- --------------------------------------------------------------------------------
<S> <C>
240 Miscellaneous Securities: 0.0% $ 1
-----------
Total Common Stocks and Other
Equity-Like Securities: 89.3% 1,661,783
(Cost: $1,062,811)
Short-Term Obligations: 9.5%
Yield 5.53%-5.70%
Due 7/1-7/16/98
$37,836 Hertz 37,803
$31,388 Cargill Finance 31,329
$21,116 GE Capital 21,093
</TABLE>
<TABLE>
<CAPTION>
Principal Amount Value (000)
- --------------------------------------------------------------------------------
<S> <C>
$19,135 Commercial Credit $ 19,108
$18,169 GTE 18,169
$17,900 AON 17,878
$15,770 Aetna Services 15,768
$15,017 Cigna 14,982
- --------------------------------------------------------------------------------
(Amortized Cost: $176,130) 176,130
-----------
Total Investments: 98.8% 1,837,913
(Cost: $1,238,941)
-----------
Cash and Other Assets Less Liabilities: 1.2% 23,372
-----------
Total Net Assets: 100% $ 1,861,285
================================================================================
</TABLE>
- --------------------------------------------------------------------------------
.Notes to Statement of Investments
Notes to Statement of Investments:
(a) At June 30, 1998, for federal income tax purposes cost of investments was
$1,245,875,000 and net unrealized appreciation was $592,038,000 consisting of
gross unrealized appreciation of $705,384,000 and gross unrealized depreciation
of $113,346,000.
(b) Non-income producing security.
(c) On June 30, 1998, the Fund held the following percentages of the outstanding
voting shares of the affiliated companies (ownership of at least 5%) listed
below:
<TABLE>
<S> <C>
Kompan International (Denmark)............................................ 9.36%
Best Company (Poland)..................................................... 9.09%
Spar Finland (Finland).................................................... 8.80%
Talentum (Finland)........................................................ 6.89%
Bracknell (Canada)........................................................ 6.47%
Elcoteq Network (Finland)................................................. 5.89%
Scala Business Solutions (Austria)........................................ 5.68%
Kempen (Netherlands)...................................................... 5.49%
</TABLE>
The aggregate cost and value of investments in these companies at June 30, 1998,
was $33,187,327 and $71,945,000 respectively. The market value of these
securities represents 3.87% of the total net assets at June 30, 1998. During the
six months ended June 30, 1998, the cost of purchases was $12,823,000. There
were no sales of these affiliated companies during this period. Dividends net of
foreign taxes withheld received from these companies amounted to $1,083,000.
33
<PAGE>
Acorn International
.Portfolio Diversification
At June 30, 1998, the Fund's portfolio of investments as a percent of net assets
was diversified as follows:
<TABLE>
<CAPTION>
Value (000) Percent
- -----------------------------------------------------
<S> <C> <C>
. Information
Computer Services $ 274,549 14.8%
Publishing 68,384 3.7
Contract Manufacturing 38,278 2.1
CATV 32,552 1.8
Instrumentation 17,118 0.9
Business Software 15,531 0.8
Computer Hardware 15,482 0.8
Business Information 14,690 0.8
Telephone Services 10,331 0.6
Radio 9,885 0.5
Broadcasting 9,457 0.5
Advertising 9,382 0.5
Semiconductors 4,107 0.2
Electronics Distribution 4,019 0.2
Mobile Communications 2,743 0.1
- -----------------------------------------------------
526,508 28.3
. Health Care
Pharmaceuticals 41,946 2.3
Hospital Management 34,114 1.8
Hospital/Laboratory Supplies 20,439 1.1
Services 11,147 0.6
Medical Equipment 924 0.0
- -----------------------------------------------------
108,570 5.8
. Consumer Goods/Services
Retail 59,027 3.2
Travel 42,069 2.3
Nondurables 39,247 2.1
Food 31,498 1.7
Restaurants 30,260 1.6
Beverages 30,051 1.6
Cruise Lines 14,533 0.8
Consumer Goods Distribution 12,879 0.7
Furniture & Textiles 12,672 0.7
Consumer Software 12,037 0.6
Leisure Products 8,530 0.5
Casinos 8,065 0.4
Other Durable Goods 34,082 1.8
Other Entertainment 26,225 1.4
Other Consumer Services 20,931 1.1
- -----------------------------------------------------
367,573 19.7
. Finance
Money Management 68,760 3.8
Banks 48,015 2.6
Brokerage 44,907 2.4
Insurance 37,442 2.0
Finance Companies 19,042 1.0
Closed-End Funds 5,903 0.3
Savings & Loans 488 0.0
- -----------------------------------------------------
224,557 12.1
. Industrial Goods/Services
Outsourcing Services 129,280 6.9
Electrical Components 62,080 3.3
Machinery Processing 42,909 2.3
Industrial Services 16,029 0.9
Steel 12,655 0.7
Conglomerates 9,151 0.5
Speciality Chemicals 4,104 0.2
Construction 948 0.1
- -----------------------------------------------------
277,156 14.9
. Energy/Minerals
Oil Services 27,005 1.4
Oil/Gas Producers 20,491 1.1
Independent Power 10,670 0.6
Non-Ferrous Metals 7,060 0.4
- -----------------------------------------------------
65,226 3.5
. Other Industries
Transportation 37,349 2.0
Real Estate 37,620 2.0
Waste Management 10,376 0.6
Regulated Utilities 6,848 0.4
- -----------------------------------------------------
92,193 5.0
Total Common Stocks and
Other Equity-Like Securities 1,661,783 89.3
=====================================================
Short-Term Obligations 176,130 9.5
Total Investments 1,837,913 98.8
=====================================================
Cash and Other Assets less
Liabilities 23,372 1.2
---------------------
Net Assets $1,861,285 100.0%
=====================================================
</TABLE>
34
<PAGE>
Acorn Family of Funds
.Statements of Assets and Liabilities (unaudited)
<TABLE>
<CAPTION>
Acorn
(in thousands) Acorn Fund International Acorn USA
- ----------------------------------------------------------------------------------------------------------------------
6/30/98
<S> <C> <C> <C>
Assets
Investments, at value (cost: Acorn Fund $2,238,807;
Acorn International $1,238,941; Acorn USA $245,891) $3,969,816 $1,837,913 $286,586
Cash 51 1,600 -
Net unrealized appreciation on futures and foreign forward currency contracts 68 1,740 -
Organization costs - - 68
Receivable for:
Securities sold 15,074 25,378 530
Fund shares sold 5,018 2,997 685
Dividends and interest 1,920 3,418 19
Other assets 75 36 3
- ----------------------------------------------------------------------------------------------------------------------
Total assets 3,992,022 1,873,082 287,891
Liabilities and Net Assets
Payable for:
Securities purchased 21,623 9,760 4,580
Fund shares redeemed 962 918 506
Organization costs - - 68
Other 747 1,119 111
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities 23,332 11,797 5,265
Net assets applicable to Fund shares outstanding $3,968,690 $1,861,285 $282,626
- ----------------------------------------------------------------------------------------------------------------------
Fund shares outstanding 212,102 85,629 16,537
- ----------------------------------------------------------------------------------------------------------------------
Pricing of Shares
Net asset value, offering price and redemption price per share $ 18.71 $ 21.74 $ 17.09
- ----------------------------------------------------------------------------------------------------------------------
Analysis of Net Assets
Paid-in capital $2,066,902 $1,261,635 $223,219
Accumulated net realized gain on sales of investments, futures
and foreign currency transactions 170,974 40 19,259
Net unrealized appreciation of investments and other assets (net of unrealized
PFIC gains of $1,485 for Acorn Fund and $3,335 for Acorn International) 1,729,585 597,320 40,695
Undistributed net investment income (loss) 1,229 2,290 (547)
- ----------------------------------------------------------------------------------------------------------------------
Net assets applicable to Fund shares outstanding $3,968,690 $1,861,285 $282,626
======================================================================================================================
</TABLE>
See accompanying notes to financial statements
35
<PAGE>
Acorn Family of Funds
.Statements of Operations (unaudited)
<TABLE>
<CAPTION>
Acorn
Acorn Fund International Acorn USA
6 months Year 6 months Year 6 months Year
(in thousands) ended 6/30, ended 12/31, ended 6/30, ended 12/31, ended 6/30, ended 12/31,
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1998 1997 1998 1997 1998 1997
Investment Income:
Dividends $ 16,705 $ 28,012 $ 19,455 $ 27,667 $ 417 $ 568
Interest 6,598 15,566 3,174 8,098 457 470
- ----------------------------------------------------------------------------------------------------------------------------------
23,303 43,578 22,629 35,765 874 1,038
Foreign taxes withheld (397) (797) (1,909) (2,912) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total investment income 22,906 42,781 20,720 32,853 874 1,038
Expenses:
Investment advisory 13,073 14,349 7,192 16,235 1,114 1,199
Administration 954 -- 438 -- 59 --
Custodian 508 1,034 1,024 2,489 20 24
Transfer and dividend disbursing agent 730 1,328 715 1,882 131 164
Reports to shareholders 295 564 270 841 51 85
Legal and audit 125 287 57 221 14 29
Registration and blue sky 30 273 32 73 18 72
Trustees' and other 176 441 77 364 17 56
- ----------------------------------------------------------------------------------------------------------------------------------
Total expenses 15,891 18,276 9,805 22,105 1,424 1,629
Custodian fees paid indirectly -- -- -- -- (3) (2)
- ----------------------------------------------------------------------------------------------------------------------------------
Net expenses 15,891 18,276 9,805 22,105 1,421 1,627
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 7,015 24,505 10,915 10,748 (547) (589)
Net Realized and Unrealized Gain (Loss) on Investments,
Futures and Foreign Currency Transactions:
Net realized gain on sales of investments 186,950 361,502 3,035 76,648 19,318 5,521
Net realized gain on foreign currency
transactions -- -- 15,480 22,816 -- --
Net realized gain (loss) on futures (13,999) (16,098) 1,516 -- -- --
Change in net unrealized appreciation of
investments and foreign currency transactions 241,698 356,307 287,282 (99,759) 9,329 27,198
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments,
futures and foreign currency transactions 414,649 701,711 307,313 (295) 28,647 32,719
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $421,664 $726,216 $318,228 $ 10,453 $28,100 $ 32,130
==================================================================================================================================
</TABLE>
See accompanying notes to financial statements
36
<PAGE>
Acorn Family of Funds
. Statements of Changes in Net Assets (unaudited)
<TABLE>
<CAPTION>
Acorn
Acorn Fund International Acorn USA
<S> <C> <C> <C> <C> <C> <C>
6 months Year 6 months Year 6 months inception 9/4
ended ended ended ended ended through
(in thousands) 6/30, 12/31, 6/30, 12/31, 6/30, 12/31,
- --------------------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997 1998 1997
From Operations:
Net investment income (loss) $ 7,015 $ 24,505 $ 10,915 $ 10,748 $ (547) $ (589)
Net realized gain on sales of investments,
futures and foreign currency transactions 172,951 345,404 20,031 99,464 19,318 5,521
Change in net unrealized appreciation of
investments and foreign currency transactions 241,698 356,307 287,282 (99,759) 9,329 27,198
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 421,664 726,216 318,228 10,453 28,100 32,130
Distributions to Shareholders From:
Net investment income (a) (6,284) (31,681) (12,611) (33,072) -- --
Net realized gain (48,180) (320,289) (22,701) (77,970) (1,640) (3,351)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (54,464) (351,970) (35,312) (111,042) (1,640) (3,351)
From Fund Share Transactions:
Reinvestment of dividends and capital
gain distributions 49,163 320,054 33,102 104,129 1,491 3,178
Proceeds from other shares sold 271,357 711,329 234,333 468,766 106,806 133,753
- --------------------------------------------------------------------------------------------------------------------------------
320,520 1,031,383 267,435 572,895 108,297 136,931
Payments for shares redeemed (400,487) (566,224) (312,005) (621,910) (36,755) (34,171)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
Fund share transactions (79,967) 465,159 (44,570) (49,015) 71,542 102,760
- --------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 287,233 839,405 238,346 (149,604) 98,002 131,539
Net Assets:
Beginning of period 3,681,457 2,842,052 1,622,939 1,772,543 184,624 53,085
- --------------------------------------------------------------------------------------------------------------------------------
End of period (b) $3,968,690 $3,681,457 $1,861,285 $1,622,939 $282,626 $184,624
================================================================================================================================
</TABLE>
(a) Includes distributions of unrealized PFIC gains of $7,674 for Acorn Fund
and $24,166 for Acorn International in 1997.
(b) Includes undistributed net investment income (loss) of $1,229 at June 30,
1998 and $498 at December 31, 1997 for Acorn Fund, $2,290 at June 30, 1998
and $3,986 at December 31, 1997 for Acorn International and $(547) at June
30, 1998 and $0 at December 31, 1997 for Acorn USA.
See accompanying notes to financial statements
37
<PAGE>
Acorn Family of Funds
.Financial Highlights (unaudited)
<TABLE>
<CAPTION>
6 months Years
Acorn Fund ended 6/30, ended 12/31,
- -----------------------------------------------------------------------------------------------------------------------------------
For a share outstanding throughout each period 1998 1997
<S> <C> <C>
Net Asset Value, beginning of period $16.99 $15.04
Income From Investment Operations
Net investment income .03 .15
Net realized and unrealized gain (loss) on investments, foreign currency and futures 1.95 3.57
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.98 3.72
Less Distributions
Dividends from net investment income (0.03) (0.16)
Distributions from net realized and unrealized gains reportable for federal income taxes (0.23) (1.61)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.26) (1.77)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $18.71 $16.99
===================================================================================================================================
Total Return 11.7% 25.0%
Ratios/Supplemental Data
Ratio of expenses to average net assets .83%* .56%
Ratio of net investment income to average net assets .37%* .75%
Portfolio turnover rate 25%* 32%
Net assets at end of period (in millions) $3,969 $3,681
</TABLE>
<TABLE>
<CAPTION>
6 months Years
Acorn International ended 6/30, ended 12/31,
- -----------------------------------------------------------------------------------------------------------------------------------
For a share outstanding throughout each period 1998 1997
<S> <C> <C>
Net Asset Value, beginning of period $18.39 $19.61
Income From Investment Operations
Net investment income (loss) .13 .40
Net realized and unrealized gain (loss) on investments, foreign currency and futures 3.64 (.34)
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.77 .06
Less Distributions
Dividends from net investment income (.15) (.38)
Distributions from net realized and unrealized gains reportable for federal income taxes (.27) (.90)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.42) (1.28)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $21.74 $18.39
===================================================================================================================================
Total Return 20.5% 0.2%
Ratios/Supplemental Data
Ratio of expenses to average net assets 1.11%* 1.19%
Ratio of net investment income (loss) to average net assets 1.23%* .58%
Portfolio turnover rate 38%* 39%
Net assets at end of period (in millions) $1,861 $1,623
</TABLE>
<TABLE>
<CAPTION>
6 months Years
Acorn USA ended 6/30, ended 12/31,
- -----------------------------------------------------------------------------------------------------------------------------------
For a share outstanding throughout each period 1998 1997
<S> <C> <C>
Net Asset Value, beginning of period $15.12 $11.65
Income From Investment Operations
Net investment loss (b) (.04) (.07)
Net realized and unrealized gain on investments 2.11 3.83
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.07 3.76
Less Distributions
Dividends from net investment income -- --
Distributions from net realized and unrealized gains reportable for federal income taxes (.10) (.29)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.10) (.29)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $17.09 $15.12
===================================================================================================================================
Total Return 13.7% 32.3%
Ratios/Supplemental Data
Ratio of expenses to average net assets (a) 1.20%* 1.35%
Ratio of net investment loss to average net assets (.46%)* (.49%)
Portfolio turnover rate 49%* 33%
Net assets at end of period (in millions) $ 283 $ 185
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
$13.60 $12.24 $13.95 $11.06 $ 9.32 $ 6.51 $ 8.58 $7.27
.09 .11 .06 .04 .07 .11 .12 .13
2.93 2.42 (1.10) 3.50 2.16 2.95 (1.62) 1.65
- ----------------------------------------------------------------------------------
3.02 2.53 (1.04) 3.54 2.23 3.06 (1.50) 1.78
(.11) (.09) (.11) (.06) (.08) (.10) (.13) (.11)
(1.47) (1.08) (.56) (.59) (.41) (.15) (.44) (.36)
- ----------------------------------------------------------------------------------
(1.58) (1.17) (.67) (.65) (.49) (.25) (.57) (.47)
- ----------------------------------------------------------------------------------
$15.04 $13.60 $12.24 $13.95 $11.06 $ 9.32 $ 6.51 $8.58
- ----------------------------------------------------------------------------------
22.6% 20.8% (7.4%) 32.3% 24.2% 47.3% (17.5%) 24.8%
.57% .57% .62% .65% .67% .72% .82% .73%
.53% .89% .55% .30% .72% 1.30% 1.60% 1.59%
33% 29% 18% 20% 25% 25% 36% 26%
$2,842 $2,399 $1,983 $2,035 $1,449 $1,150 $ 767 $ 855
Inception 9/23
through 12/31,
- -------------------------------------------------------
1996 1995 1994 1993 1992
$16.59 $15.24 $15.94 $10.69 $10.00
.13 .16 .07 - (.03)
3.29 1.20 (.67) 5.25 .72
- -------------------------------------------------------
3.42 1.36 (.60) 5.25 .69
(.12) - - - -
(.28) (.01) (.10) - -
- -------------------------------------------------------
(.40) (.01) (.10) - -
- -------------------------------------------------------
$19.61 $16.59 $15.24 $15.94 $10.69
- -------------------------------------------------------
20.7% 8.9% (3.8%) 49.1% 6.9%
1.17% 1.22% 1.24% 1.21% 2.35%*
.51% .90% .48% .06% (1.37%)*
34% 26% 20% 19% 20%*
$1,773 $1,276 $1,363 $ 907 $ 30
Inception 9/4
through 12/31,
- --------------
1996
$10.00
(.02)
1.67
------
1.65
-
-
------
-
------
$11.65
------
16.5%
1.85%*
(.99%)*
20%*
$53
</TABLE>
- --------------------------------------------------------------------------------
(a) In accordance with a requirement by the Securities and Exchange Commission,
the Acorn USA ratio reflects gross custodian fees. This ratio net of custodian
fees paid indirectly would have been 1.79% for the period ended December 31,
1996.
(b) Net investment loss per share was based upon the average shares outstanding
during each period.
*Annualized
See accompanying notes to financial statements
39
<PAGE>
Acorn Family of Funds
.Notes to Financial Statements (unaudited)
1. Nature of Operations
Acorn Fund, Acorn International and Acorn USA (the "Funds") are series of Acorn
Investment Trust (the "Trust"), an open-end management investment company
organized as a Massachusetts business trust. The investment objective of each
Fund is to seek long-term growth of capital.
2. Significant Accounting Policies
.Security valuation
Investments are stated at current value. Securities traded on securities
exchanges or in over-the-counter markets in which transaction prices are
reported are valued at the last sales price at the time of valuation. Securities
for which there are no reported sales on the valuation date are valued at the
mean of the latest bid and ask quotation or, if there is no ask quotation, at
the most recent bid quotation. Money market instruments having a maturity of 60
days or less from the valuation date are valued on an amortized cost basis.
Securities for which quotations are not available and any other assets are
valued at a fair value as determined in good faith by the Board of Trustees.
.Foreign currency translations
Values of investments denominated in foreign currencies are converted into U.S.
dollars using the spot market rate of exchange at the time of valuation.
Purchases and sales of investments and dividend and interest income are
translated into U.S. dollars using the spot market rate of exchange prevailing
on the respective dates of such transactions. The gain or loss resulting from
changes in foreign exchange rates is included with net realized and unrealized
gain or loss from investments, as appropriate.
.Security transactions and investment income
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend date,
except that certain dividends from foreign securities are recorded as soon as
the information is available to the Funds. Interest income is recorded on the
accrual basis and includes amortization of discounts on money market instruments
and long-term debt instruments when required for federal income tax purposes.
Realized gains and losses from security transactions are reported on an
identified cost basis.
.Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results may differ from those estimates.
.Financial instruments
Each Fund may purchase or sell exchange-traded financial futures contracts,
which are contracts that obligate that Fund to make or take delivery of a
financial instrument or the cash value of a securities index at a specified
future date at a specified price. The Funds enter into such contracts to hedge a
portion of their portfolios. Gains and losses are reflected as "Net Realized
Gain (Loss) on Futures" in the Statements of Operations. Additionally, each Fund
may engage in portfolio hedging with respect to changes in currency exchange
rates by entering into forward foreign currency contracts to purchase or sell
foreign currencies. The Statements of Operations reflect gains and losses as
realized for closed forward foreign currency contracts and unrealized for open
contracts. A Fund bears the market risk that arises from changes in the value of
financial instruments and securities indices (futures contracts) or from changes
in foreign currency rates (forward foreign currency contracts) and the credit
risk should a counterparty fail to perform under such contracts.
40
<PAGE>
There were no futures contracts open at June 30, 1998 in Acorn Fund. Acorn
Fund entered into forward contracts to sell foreign currency, settling November
20, 1998, as described below:
<TABLE>
<CAPTION>
Foreign U.S. Dollar Unrealized
Amount Currency Proceeds (000) Gain (000)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
78,460,000 Hong Kong Dollar $10,000 $68
</TABLE>
Acorn International had the following open foreign index futures contract at
June 30, 1998:
<TABLE>
<CAPTION>
Number of Contract Value Expiration Unrealized
Contracts (000) Date Gain (000)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hong Kong
Hang Seng Index
(Short) 171 $ 9,512 7/98 $2
</TABLE>
Acorn International also entered into forward contracts to sell foreign
currency, settling July 15 through September 28, 1998, as described below:
<TABLE>
<CAPTION>
U.S.Dollar Unrealized Gain
Foreign Amount Currency Proceeds (000) (Loss) (000)
- --------------------------------------------------------------------------------
<C> <S> <C> <C>
84,000,000 Swiss Franc $56,834 $ 967
175,000,000 German Mark $98,203 744
200,000,000 French Franc $33,523 272
310,000,000 Hong Kong Dollar $39,675 (279)
82,405,280,000 Italian Lira $46,848 416
9,335,000,000 Japanese Yen $68,589 456
482,000,000 Swedish Krone $60,152 (504)
50,000,000 Singapore Dollar $29,135 (334)
-------
$1,738
</TABLE>
Acorn USA did not enter into any futures or forward foreign currency contracts
during the period ended June 30, 1998.
.Fund share valuation
Fund shares are sold and redeemed on a continuous basis at net asset value. Net
asset value per share is determined daily as of the close of trading on the New
York Stock Exchange on each day the Exchange is open for trading by dividing the
total value of each Fund's investments and other assets, less liabilities, by
the respective number of Fund shares outstanding.
.Federal income taxes, dividends and distributions to shareholders
Each Fund has complied with the special provisions of the Internal Revenue Code
available to investment companies. Dividends payable to shareholders are
recorded by the Funds on the ex-dividend date.
Acorn and Acorn International have elected to mark-to-market their
investments in Passive Foreign Investment Companies ("PFICs") for federal income
tax purposes. A summary of transactions relating to PFICs is as follows:
<TABLE>
<CAPTION>
Acorn Fund (000)
- --------------------------------------------------------------------------------
<S> <C>
Cumulative net unrealized appreciation
recognized in prior years at December 31, 1997 $ 2,804
Unrealized appreciation recognized through
June 30, 1998 --
Cumulative net unrealized appreciation recognized
in prior years on PFICs sold through June 30, 1998 (1,319)
---------
Cumulative net unrealized appreciation recognized
in prior years at June 30, 1998 1,485
A summary of transactions relating to PFICs
during 1997 follows:
Unrealized appreciation recognized 2,483
Distributions to shareholders from net investment
income relating to PFICs 7,674
</TABLE>
<TABLE>
<CAPTION>
Acorn International (000)
- --------------------------------------------------------------------------------
<S> <C>
Cumulative net unrealized appreciation
recognized in prior years at December 31, 1997 $ 16,193
Unrealized appreciation recognized through
June 30, 1998 --
Cumulative net unrealized appreciation recognized
in prior years on PFICs sold through June 30, 1998 (12,858)
---------
Cumulative net unrealized appreciation recognized
in prior years at June 30, 1998 3,335
A summary of transactions relating to PFICs
during 1997 follows:
Unrealized appreciation recognized 15,105
Distributions to shareholders from net investment
income relating to PFICs 24,166
</TABLE>
Distributions relating to PFICs are treated as ordinary income for federal
income tax purposes.
41
<PAGE>
Acorn Family of Funds
.Notes to Financial Statements (unaudited)
3. Transactions With Affiliates
The Funds' investment advisor, Wanger Asset Management, L.P. ("WAM") furnishes
continuing investment supervision to the Funds and is responsible for the
overall management of the Funds' business affairs.
Under the Funds' investment management agreements which were in effect for
1997 each fund paid WAM an annual management fee, payable monthly, at the rates
set forth below. The fees for Acorn Fund and Acorn International were determined
at the beginning of each calendar quarter and the fees for Acorn USA were
determined and accrued daily:
<TABLE>
<CAPTION>
Acorn Fund
- --------------------------------------------------------------------------------
<S> <C>
Net asset value:
For the first $100 million .75%
Next $1.4 billion .50%
Net assets in excess of $1.5 billion .40%
Acorn International
- --------------------------------------------------------------------------------
Net asset value:
For the first $100 million 1.25%
Next $400 million 1.00%
Net assets in excess of $500 million .80%
Acorn USA
- --------------------------------------------------------------------------------
Net asset value:
For the first $200 million 1.00%
Net assets in excess of $200 million .95%
</TABLE>
Beginning in 1998, each Fund's management agreement was replaced with a new
investment management agreement and a separate administrative service agreement.
Under the new administrative services agreement, WAM provides administrative
services to each Fund at an annual rate of .05% of average daily net assets.
Under the new investment management agreement, fees are accrued daily and paid
monthly to WAM at the annual rates shown in the table below for each fund.
<TABLE>
<CAPTION>
Acorn Fund
- --------------------------------------------------------------------------------
<S> <C>
Net asset value:
For the first $700 million .75%
Next $1.300 billion .70%
Net assets in excess of $2 billion .65%
Acorn International
- --------------------------------------------------------------------------------
Net asset value:
For the first $100 million 1.20%
Next $400 million .95%
Net assets in excess of $500 million .75%
Acorn USA
- --------------------------------------------------------------------------------
Net asset value:
For the first $200 million .95%
Net assets in excess of $200 million .90%
</TABLE>
Certain officers and trustees of the Trust are also principals of WAM. The
Trust makes no direct payments to its officers and trustees who are affiliated
with WAM. Acorn Fund paid trustees' fees and expenses of $84,000 in 1998 and
$196,000 in 1997; Acorn International paid $53,000 in 1998 and $118,700 in 1997
and Acorn USA paid $2,800 in 1998 and $6,900 in 1997 to trustees not affiliated
with WAM.
WAM advanced Acorn USA $107,000 in connection with the organization and
initial registration of the Fund. These costs are being amortized and reimbursed
to WAM over the period September 1996 though August 2001.
WAM Brokerage Services, L.L.C., a wholly-owned subsidiary of WAM, is the
distributor of the Funds' shares and receives no compensation for its services.
4. Borrowing Arrangements
The trust participates in a $250,000,000 credit facility which was entered into
to facilitate portfolio liquidity. No amounts have been borrowed under this
facility.
42
<PAGE>
5. Fund Share Transactions
Proceeds and payments on Fund shares as shown in the Statements of Changes in
Net Assets are in respect of the following numbers of shares:
<TABLE>
<CAPTION>
6 months
Acorn Fund ended 6/30,
- --------------------------------------------------------------------------------
(in thousands) 1998 1997
<S> <C> <C>
Shares sold 14,971 42,779
Shares issued in reinvestment of
dividend and capital gain distributions 2,704 19,004
---------------------------
17,675 61,783
Less shares redeemed 22,218 34,056
---------------------------
Net increase (decrease) in shares outstanding (4,543) 27,727
===============================================================================
<CAPTION>
6 months
Acorn International ended 6/30,
- --------------------------------------------------------------------------------
(in thousands) 1998 1997
Shares sold 11,167 23,235
Shares issued in reinvestment of
dividend and capital gain distributions 1,540 5,501
---------------------------
12,707 28,736
Less shares redeemed 15,351 30,846
---------------------------
Net decrease in shares outstanding (2,644) (2,110)
================================================================================
<CAPTION>
6 months
Acorn USA ended 6/30,
- --------------------------------------------------------------------------------
(in thousands) 1998 1997
Shares sold 6,461 9,880
Shares issued in reinvestment of
dividend and capital gain distributions 90 212
---------------------------
6,551 10,092
Less shares redeemed 2,226 2,436
---------------------------
Net increase in shares outstanding 4,325 7,656
================================================================================
</TABLE>
6. Investment Transactions
<TABLE>
<CAPTION>
6 months
Acorn Fund ended 6/30,
- --------------------------------------------------------------------------------
(in thousands) 1998 1997
<S> <C> <C>
Investment securities (excluding
Money Market instruments):
Purchases $473,646 $ 928,010
Proceeds from sales 449,198 1,084,981
<CAPTION>
6 months
Acorn International ended 6/30,
- --------------------------------------------------------------------------------
(in thousands) 1998 1997
Investment securities (excluding
Money Market instruments):
Purchases $304,730 $ 656,789
Proceeds from sales 364,062 824,939
<CAPTION>
6 months
Acorn USA ended 6/30,
- --------------------------------------------------------------------------------
(in thousands) 1998 1997
Investment securities (excluding
Money Market instruments):
Purchases $117,277 $ 126,503
Proceeds from sales 50,161 36,965
================================================================================
</TABLE>
43
<PAGE>
The Acorn
- --------------------------
Family of Funds
.Trustees
Irving B. Harris
Chairman
James H. Lorie
Vice Chairman
Leo A. Guthart
Jerome Kahn, Jr.
David C. Kleinman
Charles P. McQuaid
Roger S. Meier
Adolph Meyer, Jr.
Ralph Wanger
.Officers
Ralph Wanger
President
Marcel P. Houtzager
Vice President
Kenneth A. Kalina
Assistant Treasurer
Merrillyn J. Kosier
Senior Vice President and Secretary
Bruce H. Lauer
Vice President and Treasurer
Charles P. McQuaid
Senior Vice President
Robert A. Mohn
Vice President
John H. Park
Vice President
Leah J. Zell
Vice President
.Investment Advisor
Wanger Asset Management, L.P.
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606
1-800-9-ACORN-9
(1-800-922-6769)
e-mail: [email protected]
web site: www.wanger.com
www.acornfunds.com
.Distributor
WAM Brokerage Services, L.L.C.
P.O. Box 8502
Boston, Massachusetts 02266-8502
.Transfer Agent, Dividend Disbursing Agent
and Custodian
State Street Bank and Trust Company
Attention: Acorn Family of Funds
P.O. Box 8502
Boston, Massachusetts 02266-8502
1-800-962-1585
.Legal Counsel
Bell, Boyd & Lloyd
Chicago, Illinois
This report, including the unaudited schedules of investments, is submitted for
the general information of the shareholders of Acorn Investment Trust. This
report is not authorized for distribution unless preceded or accompanied by a
prospectus.
44
<PAGE>
Wanger Asset Management, L.P. ("WAM") is one of the leading global small-cap
equity managers in the U.S., with over 28 years of small-cap investment
experience. WAM manages over $7 billion in equities and is also the investment
advisor for Wanger Advisors Trust, and separately managed accounts for
institutions and high net worth individuals.
<PAGE>
[ART WORK APPEARS HERE]
The Acorn
- ----------------------------------
Family of Funds
WAM Brokerage Services, L.L.C.
P.O. Box 8502
Boston, MA 02266-8502
