N-CSR 1 file001.txt LIBERTY ACORN TRUST UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-01829 --------------------- Liberty Acorn Trust ------------------------------------------------------------------------------ (Exact name of registrant as specified in charter) One Financial Center, Boston, Massachusetts 02111 ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip code) Russell L. Kane, Esq. Columbia Management Group, Inc. One Financial Center Boston, MA 02111 ------------------------------------------------------------------------------ (Name and address of agent for service) Registrant's telephone number, including area code: 1-617-426-3363 ------------------- Date of fiscal year end: December 31, 2003 ------------------ Date of reporting period: June 30, 2003 ----------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. LOOK ON PAGE 5 FOR A LETTER FROM NEWLY NAMED CIO CHUCK MCQUAID. LIBERTY ACORN FAMILY OF FUNDS CLASS Z SHARES SEMIANNUAL REPORT JUNE 30, 2003 MANAGED BY LIBERTY WANGER ASSET MANAGEMENT, L.P. 2 [Photo of acorns] LIBERTY ACORN FUND LIBERTY ACORN INTERNATIONAL LIBERTY ACORN USA LIBERTY ACORN FOREIGN FORTY LIBERTY ACORN TWENTY COLUMBIA THERMOSTAT FUND Liberty Acorn Family of Funds Semiannual Report 2003 Table of Contents The Liberty Acorn Family of Funds Performance At A Glance 2 Squirrel Chatter: Energy Resources In 2030 3 From the Desk of Chuck McQuaid 5 LIBERTY ACORN FUND In a Nutshell 6 At a Glance 7 Major Portfolio Changes 18 Statement of Investments 21 LIBERTY ACORN INTERNATIONAL In a Nutshell 8 At a Glance 9 Major Portfolio Changes 31 Statement of Investments 33 Portfolio Diversification 37 LIBERTY ACORN USA In a Nutshell 10 At a Glance 11 Major Portfolio Changes 38 Statement of Investments 39 LIBERTY ACORN FOREIGN FORTY In a Nutshell 12 At a Glance 13 Major Portfolio Changes 43 Statement of Investments 44 Portfolio Diversification 46 LIBERTY ACORN TWENTY In a Nutshell 14 At a Glance 15 Major Portfolio Changes 47 Statement of Investments 48 COLUMBIA THERMOSTAT FUND In a Nutshell 16 At a Glance 17 Statement of Investments 64 Statement of Assets and Liabilities 65 Statement of Operations 66 Statement of Changes in Net Assets 67 Financial Highlights 69 Notes to Financial Statements 70 LIBERTY ACORN FAMILY OF FUNDS Statements of Assets and Liabilities 50 Statements of Operations 51 Statements of Changes in Net Assets 52 Financial Highlights 56 Notes to Financial Statements 60 Liberty Acorn Family of Funds Information 72 Board of Trustees and Management of Acorn 76 > Mid-Year Distributions The following table details the funds' mid-year distributions. Liberty Acorn Fund, Liberty Acorn USA and Liberty Acorn Twenty had no distributions. The record date was June 2, 2003 and the payable date was June 5, 2003. Liberty Acorn Liberty Acorn Columbia rounded to nearest cent International Foreign Forty Thermostat Fund ------------------------------------------------------------------------------ Long-term Capital Gains None None $0.00* ------------------------------------------------------------------------------ Short-term Capital Gains None None $0.00* ------------------------------------------------------------------------------ Ordinary Income $0.08 $0.01 $0.00* ------------------------------------------------------------------------------ Reinvestment Price $17.05 $11.32 $11.23 ------------------------------------------------------------------------------ * Rounds to less than $0.01 per share. THE DISCUSSION IN THIS REPORT OF PORTFOLIO COMPANIES IS FOR ILLUSTRATION ONLY AND IS NOT A RECOMMENDATION OF INDIVIDUAL STOCKS. THE INFORMATION IS BELIEVED TO BE ACCURATE, BUT THE INFORMATION AND THE VIEWS OF THE PORTFOLIO MANAGERS MAY CHANGE AT ANY TIME WITHOUT NOTICE. 1 Liberty Acorn Family of Funds >Performance At A Glance Class Z Average Annual Total Returns Through 6/30/03
2nd* Year to* 1 3 5 10 Life Quarter Date year years years years of Fund -------------------------------------------------------------------------------------------- LIBERTY ACORN FUND (6/10/70) 20.01% 16.84% 4.99% 6.27% 8.41% 12.47% 15.79% -------------------------------------------------------------------------------------------- S&P 500 15.39% 11.76% 0.25% -11.20% -1.61% 10.04% 11.84% -------------------------------------------------------------------------------------------- Russell 2500 21.91% 16.92% 1.41% -1.36% 3.65% 10.27% NA -------------------------------------------------------------------------------------------- Russell 2000 23.42% 17.88% -1.64% -3.30% 0.97% 8.24% NA -------------------------------------------------------------------------------------------- Lipper Small-Cap Core Funds Index 20.56% 14.33% -2.37% -0.86% 2.98% 9.68% NA -------------------------------------------------------------------------------------------- Lipper Mid-Cap Core Funds Index 18.63% 14.11% 1.72% -4.87% 3.94% 10.25% NA -------------------------------------------------------------------------------------------- LIBERTY ACORN INTERNATIONAL (9/23/92) 21.50% 13.69% -5.68% -14.47% 0.65% 6.88% 8.93% -------------------------------------------------------------------------------------------- Citigroup EMI Global ex-US 23.19% 17.80% 1.88% -6.25% -0.46% 2.22% 3.90% -------------------------------------------------------------------------------------------- MSCI EAFE 19.27% 9.47% -6.46% -13.57% -3.99% 2.78% 4.15% -------------------------------------------------------------------------------------------- Lipper Int'l Small- Cap Funds Index 23.77% 18.39% 1.94% -8.41% 2.67% NA NA -------------------------------------------------------------------------------------------- LIBERTY ACORN USA (9/4/96) 23.22% 20.03% 2.39% 8.16% 3.98% -- 11.72% -------------------------------------------------------------------------------------------- Russell 2000 23.42% 17.88% -1.64% -3.30% 0.97% -- 5.79% -------------------------------------------------------------------------------------------- Lipper Small-Cap Core Funds Index 20.56% 14.33% -2.37% -0.86% 2.98% -- 7.33% -------------------------------------------------------------------------------------------- S&P 500 15.39% 11.76% 0.25% -11.20% -1.61% -- 7.58% -------------------------------------------------------------------------------------------- LIBERTY ACORN FOREIGN FORTY (11/23/98) 19.71% 10.28% -4.32% -16.58% -- -- 3.13% -------------------------------------------------------------------------------------------- Citigroup World ex-US Cap Range $2-10B 19.97% 12.81% -3.02% -6.26% -- -- 0.83% -------------------------------------------------------------------------------------------- MSCI EAFE 19.27% 9.47% -6.46% -13.57% -- -- -4.21% -------------------------------------------------------------------------------------------- Lipper International Funds Index 19.72% 9.18% -6.40% -12.28% -- -- -2.00% -------------------------------------------------------------------------------------------- LIBERTY ACORN TWENTY (11/23/98) 14.41% 16.52% 13.06% 7.81% -- -- 13.54% -------------------------------------------------------------------------------------------- S&P MidCap 400 17.63% 12.41% -0.71% 0.99% -- -- 8.09% -------------------------------------------------------------------------------------------- Lipper Mid-Cap Growth Index 17.68% 15.78% 0.22% -19.30% -- -- 1.79% -------------------------------------------------------------------------------------------- S&P 500 15.39% 11.76% 0.25% -11.20% -- -- -2.43% -------------------------------------------------------------------------------------------- COLUMBIA THERMOSTAT FUND (9/25/02) 11.36% 9.01% -- -- -- -- 13.48%* -------------------------------------------------------------------------------------------- S&P 500 15.39% 11.76% -- -- -- -- 20.65%* -------------------------------------------------------------------------------------------- Lehman U.S Govt. Intermediate Bond Index 1.69% 2.63% -- -- -- -- 4.03%* -------------------------------------------------------------------------------------------- Lehman U.S. Credit Intermediate Bond Index 4.02% 6.36% -- -- -- -- 9.63%* -------------------------------------------------------------------------------------------- Lipper Flexible Portfolio Funds Index 12.05% 9.73% -- -- -- -- 16.09%* --------------------------------------------------------------------------------------------
*Not annualized. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Mutual fund performance changes over time. Please visit libertyfunds.com for daily performance updates. The investment return and principal value of an investment in any Liberty Acorn Fund will fluctuate so that fund shares, when redeemed, may be worth more or less than their original cost. DESCRIPTION OF INDEXES: S&P 500 is a broad, market-weighted average of U.S. blue-chip company stock performance. S&P MIDCAP 400 is a broad market-weighted index of 400 stocks that are in the next size/tier down from the S&P 500. RUSSELL 2000 is an unmanaged, market-weighted index of 2000 smaller U.S. companies, formed by taking the largest 3,000 companies and eliminating the largest 1,000. RUSSELL 2500 is the smallest 2,500 U.S. companies from this same group. CITIGROUP EMI GLOBAL EX-US is an index of the bottom 20% of institutionally investable capital of developed and emerging countries, selected by index sponsor, outside the U.S. MSCI EAFE is Morgan Stanley's Europe, Australasia and Far East Index, an unmanaged, widely recognized international benchmark that comprises 20 major markets in proportion to world stock market capitalization. CITIGROUP WORLD EX-US CAP RANGE $2-10B is a subset of the Broad Market Index,representing a mid-cap developed market index excluding the U.S. LIPPER INDEXES include the largest funds tracked by Lipper, Inc. in the named category. LIPPER MID-CAP GROWTH INDEX -- 30 mid-cap growth funds; LIPPER MID-CAP CORE FUNDS INDEX -- 30 mid-cap core funds; LIPPER INTERNATIONAL FUNDS INDEX -- 30 largest non-U.S. funds, not including non-U.S. small cap funds; LIPPER INTERNATIONAL SMALL-CAP FUNDS INDEX -- 10 largest non-U.S. funds investing in small cap companies, including Liberty Acorn International; LIPPER SMALL-CAP CORE FUNDS INDEX -- 30 largest small cap core funds, including Liberty Acorn Fund. LIPPER FLEXIBLE PORTFOLIO FUNDS INDEX is an equal dollar weighted index of the 30 largest mutual funds within the Flexible Portfolio fund classification, as defined by Lipper. LEHMAN U.S. GOVERNMENT INTERMEDIATE BOND INDEX is made up of 1 to 10 year treasury and agency bonds, excluding targeted investor notes and state and local government series bonds. The LEHMAN U.S. CREDIT INTERMEDIATE BOND INDEX is the intermediate component of the U.S. Credit Index. The U.S. Credit Index includes publicly issued U.S. corporate and foreign debentures and secured notes that meet specified maturity, liquidity, and quality requirements. All indexes are unmanaged and returns include reinvested distributions. A more complete description of each index is included in the Fund's statement of additional information. It is not possible to invest directly in an index. 2 > Squirrel Chatter: ENERGY RESOURCES IN 2030 Photo of: Ralph Wanger "I sell here, Sir, what all the world desires to have - Power." This epigram was told to James Boswell (yes, Samuel Johnson's Boswell) by Matthew Boulton, British inventor and partner in the steam engine business with James Watt. Boulton's steam engine fired up the industrial revolution. The last 200 years has seen vast increases in energy use and dramatic changes in every category of power. John Maynard Keynes wrote an essay in 1930 based on a 100-year forecast of the future. We analyzed that forecast in the 2002 Annual Report, and made some forecasts of social changes due to demographics and family structure in the 2003 First Quarter Report. This "Squirrel Chatter" considers the prospects for energy in 2030. Today, energy sources are mainly fossil fuels. We get three-eighths of our energy from petroleum, one-fourth from natural gas, one-fourth coal, and one-eighth from all other sources (hydro, nuclear, and renewables such as solar and wind power). All of these sources are useful, and each has problems. For instance, petroleum, natural gas, and coal often have sulphur content that has to be removed before the fuel can be used. All three fuels produce carbon dioxide, a greenhouse gas believed to cause global warming. Hydro sites are rare, and spoil the ecology in a river basin. Nuclear power is in decline due to popular hostility. Solar and wind power only work intermittently. We must expand the 1% share of solar and wind power, but it is hard to project more than 8% of the total energy supply coming from renewables by 2030. Energy sources are always in the wrong place, so energy has to be transported to where we want to use it. Electricity, for instance, is not an energy source (there are no electric mines) but is an excellent way to get coal or hydro energy transported to our houses. Fertilizer can be thought of as a way to transport energy (sourced from natural gas) delivered to farms. There is a lot of excitement today about using hydrogen to run fuel cells for automobiles and other uses. There are no hydrogen mines either, so hydrogen is an energy transport system rather than an energy source. President Bush spent years in the oil industry, and I knew Secretary of Commerce Don Evans when he ran the Tom Brown oil company for 16 years. Why are these oilmen pushing hydrogen as a vehicle fuel? After all, gasoline is a great vehicle fuel, with high energy per cubic foot of gas tank, easily handled (you pump your own gas very nicely), and the infrastructure of pipelines, refineries, and filling stations is in place. It will cost hundreds of billions of dollars to switch to hydrogen fuel. We are many years away from having hydrogen-powered fuel cells as automobile power. Fuel cells are still way too costly to be practical. Lots of research and development money and time will be needed to make fuel cell cars as cheap and reliable as the gas buggies we have now. Hydrogen is very hard to handle, because it is the smallest molecule in the universe. Hydrogen will leak through very small holes in pipes or tanks; leaks obviously waste fuel and create fire hazards. Storing hydrogen in a car means keeping it under very high pressure in a tank made largely out of carbon fiber. That kind of tank is expensive and subject to sudden rupture that would blow up the car. There are other alternatives for hydrogen storage (we own Millennium Cell1, a company that has a proprietary system for transporting hydrogen as sodium borohydride, a solid fuel) but these alternatives are not cost-effective at the present time. We see many stories claiming that hydrogen is a good fuel because it produces only water as a combustion product, and no carbon dioxide, a bad greenhouse gas. The authors of these stories, however, tend to skip over the fact that hydrogen, as explained above, is only an energy transport mechanism, not an energy source. Coal, oil, or gas would be burned to make the hydrogen, creating carbon dioxide at the hydrogen refinery. The only large-scale alternative to making hydrogen without fossil fuels would be to build more nuclear plants, and no one wants to go down that road at this time. Alternatives such as solar and wind aren't expected to be of sufficient scale to run the vehicle fuel system by 2030. What problem does the government foresee that creates a need for a whole new system for fuel refining and delivery? I think that the administration wants hydrogen fuel-cell cars to be common by 2030 not to reduce carbon dioxide but for another reason; we won't have enough gasoline. By our target forecast date, 2030, the world petroleum industry will not be completely out of oil, but production levels will be dropping each year. The demand for oil, if unconstrained, is going to rise every year. Increased demand is expected to be slower in the United States, Europe and Japan (perhaps as low as 0.7% per year vs. 1.2% per year in the 1990s), but the rest of the world will want to use more oil at a growth rate of at least 2%. Think about 800 million Chinese and Indians entering the middle class and desiring cars and air conditioners. The demand for oil will be constrained, either by government rationing or by very high price. The American geologist King Hubbert did studies in the 1950s showing that U.S. oil production would peak around 1970, and it did. The same math tells us that world oil production will peak too. Various experts pick different years; a few have guessed it will happen before 2010 but most energy experts think this is too pessimistic. The Hubbert's Peak advocates include lots of academics, 3 ecologists, and bureaucrats, but they aren't the only ones who agree with his predictions. I have talked to experienced financial analysts who have followed the oil and gas industry for decades, and they believe that an oil production peak is going to occur before 2030. Petroleum supplies will be augmented by other sources of liquid hydrocarbons. Natural gas liquids are important, and high-cost liquids (deep ocean floor oil, tar sands) are another. Including these, total available oil ever on the planet was about 2,500 to 3,000 billion barrels. If the total is around 2,700, the oil industry divides neatly; 900 billion barrels produced in all the years up to now, 900 billion barrels to be produced in the next 30 years, and 900 billion for all the future after that. By 2030, oil production will be no higher than it is today, despite the many more people who would like to use it. By 2050, oil will be very scarce, and much more valuable as a chemical raw material than as a fuel. How about natural gas? There is a lot of gas in the world, but natural gas production has already gone into decline in the United States and Canada. We will start importing much bigger quantities of liquified natural gas, a lot from Russia. We need more gas, but world natural gas production is also likely to peak by 2030. Can we discover enough new oil to extend the peak production year beyond 2020? Most experts think not. Oil exploration has been active the last few years, but we are using up 28 billion barrels per year and only finding 10 billion. CONSEQUENCES After 2010, the sources of oil are likely to shift. Non-OPEC production has already peaked (USA, North Sea, Indonesia) or will soon. Even Russian oil, with all that prospective land in Siberia, appears to have peaked due to very bad field management during the Soviet era. The swing producers (that should be able to expand production in the 2010-2020 decade) are Saudi Arabia, Iraq, Iran, Kuwait, and United Arab Emirates. Whoever controls production from those five Persian Gulf countries will have enormous economic power. (This has NOTHING to do with the conflict in Iraq.) The first oil reserves to be exploited are those with shallow fields that flow to the surface easily. As these fields are used up, we have to spend more money to develop deeper or less productive deposits. In other words, more capital is needed per barrel. Oil service companies will do well as agents to build capital-intensive production systems, such as deep-sea production. We will make fuels out of tar sands in Canada and Venezuela. One can make gasoline out of coal or oil shale -- at a hefty cost. All of these schemes to make oil from low-grade sources are much more like the mining business than the oil business. The way civilized societies live has depended on the ever-increasing use of Power, in Boulton's sense. Changing the way we live is going to be a challenge. Houses being built now will still be in use in 2030. Airliners being built now will still be in the fleet in 2030. Will soaring energy prices make these houses and planes obsolete in the 2030s? Our fastest-growing cities, such as Phoenix and Las Vegas, are being built in the desert, requiring massive use of automobiles, airlines, and air conditioning to be livable. If gasoline becomes very expensive and almost unattainable, we have a lot of changes to make before the world of 2030. Can we maintain a high-tech society with economic growth but that uses less energy? These potential crises are still 30 years away but our children and grandchildren will live in that world. Let's hope a new age industrial revolution emerges. /s/ Ralph Wanger Ralph Wanger Chief Investment Officer, Liberty Wanger Asset Management, L.P. Lead Portfolio Manager, Liberty Acorn Fund -------------------------------------------------------------------------------- 1 As of June 30, 2003, Millennium Cell was 0.02% of assets in Liberty Acorn Fund. Because the funds are actively managed, fund holdings will vary with changes in portfolio investments. The opinions expressed are those of the contributor and are subject to change. Since economic and market conditions change frequently, there can be no assurance that the trends described here will continue or that the forecasts will come to pass. 4 > FROM THE DESK OF CHUCK MCQUAID Photo of: Charles P. McQuaid Dear Shareholders, I look forward to assuming the roles of chief investment officer of Liberty Wanger Asset Management, L.P, and lead manager of Liberty Acorn Fund when Ralph Wanger steps down on September 30, 2003. My association with Ralph dates back to 1978 when I joined him on the investment team of what is now Liberty Acorn Fund. I remember reading one of Ralph's early shareholder reports, which featured a "vice vs. virtue" portfolio comparison (vice, a portfolio that included names like Playboy and U.S. Tobacco, won). At that point I knew I was not working for an ordinary money manager and subsequently realized I had hitched my wagon to a star. Be assured that as I take on this new responsibility not much will change. I'm in the fortunate position of being named head coach of an exceptional team with a winning record. Ralph Wanger created the Liberty Acorn Funds' investment process more than three decades ago and it's worked time and again. Over the last 33 years, we've seen other highly rated, small-cap funds come and go. We believe what sets us apart and has allowed us to succeed where others have failed is our team-oriented investment process. We don't just have one or two analysts or managers looking for winning stocks in a hot industry. That method may bring in assets for a while but may be doomed to fail when the market inevitably shifts. Instead, we have a team of analysts, each responsible for knowing the ins and outs of specific industries or international regions. Our senior analysts in effect run sub portfolios of Liberty Acorn Fund and Liberty Acorn International within their areas of expertise and have the authority to buy and sell stocks within our guidelines. Portfolio managers control industry, region and cash allocations and monitor all trades to confirm they are in line with our process and strategy. In my role as chief investment officer, I will become directly responsible for our international investment team. Leah Zell steps down from this position at the end of September. I became more involved with the international management team at the beginning of the year as part of our succession planning. I spent considerable time studying the international stocks held in Liberty Acorn Fund and across our international products. I liked what I found -stocks in what we believe to be growing, smaller companies that we can hold for a while. While we won't be altering our approach to investing in international markets, we have already begun to fine-tune our research on earnings drivers for foreign stocks. On May 1, Zach Egan and Louis Mendes became co-portfolio managers of Liberty Acorn International. Leah will act as an advisor after September 30. Zach and Louis are well trained in the Wanger investment approach and bring more than 15 years of combined, international investing experience to the Fund. Both have spent a portion of their careers living and working overseas. Zach and Louis are part of a nine-person international investment team that works together to put what we believe to be the best stock ideas into our portfolios. Each of our international analysts speak several languages and has a first-hand understanding of the cultural, political and economic issues that color the diverse, international investment universe. In addition to serving as an advisor, Leah will continue to co-manage an offshore fund investing in European stocks, so she will continue to interact with the analyst team, discussing stock ideas and regional issues. Having served as co-manager since 1995, I will move into the lead portfolio manager position of Liberty Acorn Fund. Rob Mohn and John Park were named co-managers on the fund as of May 1. Both Rob and John will also continue as lead managers of the funds they currently manage - Rob on Liberty Acorn USA and John on Liberty Acorn Twenty. Rob has been with the firm since 1992 and John came on board a year later in 1993. As a combined management team, we will each continue in our role of analyst as part of the 11-person domestic team and will confer on any strategic decisions related to the fund. As Ralph previously mentioned, he will keep his office with us and serve as an advisor. We expect to be frequently in touch with him. I would like to thank you for the confidence you have shown in the Liberty Acorn Funds and assure you that, thanks to Ralph's genius and the firm's strong leadership, we will continue to operate using an investment process that has been successful over the long-term. /s/ Charles P. McQuaid Charles P. McQuaid Chief Investment Officer, Liberty Wanger Asset Management, L.P., effective October 1, 2003 5 Liberty Acorn Fund > In a Nutshell Photo of: Ralph Wanger Photo of: Charles P. McQuaid Photo of: Robert A. Mohn Photo of: John H. Park Liberty Acorn Fund jumped 20.01% in the second quarter, slightly less than its small-cap benchmarks (see Page 2 for performance data) and somewhat more than the large-cap S&P 500, up 15.39%. Year-to-date the Fund is up 16.84%, performing in line with the Russell 2500's 16.92% return but slightly behind the Russell 2000's 17.88% gain. Tiny stocks and turn-around situations did the best in the second quarter. A Prudential Financial report calculated that within the Russell 2000, stocks of the smallest fifth in market capitalization gained an average of 47%, while stocks of more speculative companies returned 38%. An example of this trend in Liberty Acorn can be seen with auto lender AmeriCredit. The Fund's position in AmeriCredit, a turnaround situation, jumped over 150%. In previous reports we have stated that we bought some speculative stocks because we believed we were being compensated to take risk. Several of these stocks paid off in the quarter. Western Wireless, a cellular telephone company serving rural areas, doubled on improved cash flow. Ciphergen Biosystems, a provider of protein analysis equipment, gained 82% on surging product sales and the resolution of a lawsuit. We've also mentioned that we have been building our technology weighting in the Fund, and tech stocks did beat the market during the quarter. Video-editing equipment supplier Avid Technology, e-learning company Skillsoft Publishing, and enterprise resource provider Lawson Software, saw gains in the 50% to 90% range over the three months. Retail stocks also did well in the quarter and the Fund's holdings in the sector were no exception. Christopher & Banks beat earnings expectations and its stock doubled. Michaels Stores rang up a 50% gain on solid results, while Coach bagged a 30% rise on rapid sales and earnings growth. Foreign stocks have underperformed for several years, causing some of these stocks to become relatively cheap. Calling on our international team, we rebuilt Liberty Acorn's foreign position to 10% of net assets. The Fund's foreign holdings jumped 27% in the quarter. Perbio Science, a Swedish supplier to the biotech industry, surged 54% on a takeover attempt. France's Neopost, a postage meter company, stamped out a 52% gain as it integrated acquisitions, cut on-line losses, and made its earnings estimates. /s/ Ralph Wanger /s/ Charles P. McQuaid Ralph Wanger Charles P. McQuaid Lead Portfolio Manager Co-Portfolio Manager /s/ Robert A. Mohn /s/ John H. Park Robert A. Mohn John H. Park Co-Portfolio Manager Co-Portfolio Manager WIRING HOME THE MONEY -------------------------------------------------------------------------------- We began buying Western Wireless in early 2002 as part of a package of what we believed to be high potential, albeit high-risk telecom stocks. We believed it had a fine business model - serving under penetrated rural wireless markets via cellular licenses at 850 MHz, which allow signals to travel long distances. Only one competitor existed in over 60% of its area. We thought growth would improve once it rolled out digital phones and renewed its roaming contracts. Risk was high due to a poor balance sheet, but the stock, down over 90% from its all time high of $75, had lots of upside. We added to the Fund's position as the stock collapsed further. Growth subsequently resumed, and the company is cleaning up its balance sheet and its distracting foreign operations. While risk remains, the stock jumped to over $13 as of early July. -------------------------------------------------------------------------------- Small-cap stocks are often more volatile and less liquid than the stocks of larger companies. Small companies may have a shorter history of operations than larger companies and may have a less diversified product line, making them more susceptible to market pressure. Investments in foreign securities have special risks, including political or economic instability, higher costs, different regulations, accounting standards, trading practices and levels of information, and currency exchange rate fluctuations. As of 6/30/03, the Fund's positions in the holdings mentioned were: Americredit, 0.6%; Western Wireless, 0.4%; Ciphergen Biosystems, 0.2%; Avid Technology, 0.7%; Skillsoft Publishing, 0.7%; Lawson Software, 0.3%; Christopher & Banks, 1.0%; Michaels Stores, 0.8%; Coach, 0.9%; Perbio Science, 0.3%; Neopost, 0.2%. 6 Liberty Acorn Fund >AT A GLANCE Ticker Symbol: ACRNX PRETAX AND AFTER-TAX AVERAGE ANNUAL TOTAL RETURNS (CLASS Z) --------------------------------------------------------------------- >through June 30, 2003 Year to Date* 1 Year 5 Years 10 Years ----------------------------------------------- Returns before taxes 16.84% 4.99% 8.41% 12.47% --------------------------------------------------------------------- Returns after taxes 16.84 4.99 6.54 10.27 on distributions --------------------------------------------------------------------- Returns after taxes 10.34 3.06 6.55 9.81 on distributions and sale of fund shares --------------------------------------------------------------------- Russell 2500 (pretax) 16.92 1.41 3.65 10.27 --------------------------------------------------------------------- Russell 2000 (pretax) 17.88 -1.64 0.97 8.24 --------------------------------------------------------------------- S&P 500 (pretax) 11.76 0.25 -1.61 10.04 --------------------------------------------------------------------- Past performance, before and after taxes, cannot predict future investment results. After-tax returns are calculated using the highest historical individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns are shown for class Z shares only; after-tax returns for other share classes will vary. Indexes do not reflect any deduction for fees, expenses or taxes. Investment returns and principal value may fluctuate, resulting in a gain or loss on sale. *Year to date data not annualized. --------------------------------------------------------------------- LIBERTY ACORN FUND PORTFOLIO DIVERSIFICATION --------------------------------------------------------------------- >as a % of net assets, as of June 30, 2003 [PIE CHART] Information 26.8% Software/Services 13.1% Computer Related Hardware 9.2% Media 2.7% Telecommunications 1.8% Real Estate 4.9% Energy/Minerals 7.0% Health Care 10.1% Consumer Goods/Services 19.6% Finance 13.2% Industrial Goods/Services 11.8% Other* 6.6% *Other includes cash and other assets less liabilities of 6.0%. Foreign equities within the portfolio were 10.3% diversified by country as follows: 6.5% Europe; 1.3% Canada; 1.5% Asia without Japan; 0.3% Australia; 0.4% Japan; 0.1% Latin America; 0.2% New Zealand. --------------------------------------------------------------------- THE VALUE OF $10,000 INVESTMENT IN LIBERTY ACORN FUND (CLASS Z) --------------------------------------------------------------------- >June 10, 1970 THROUGH JUNE 30, 2003 This graph compares the results of $10,000 invested in Liberty Acorn Fund at inception on June 10, 1970 to the S&P 500 Stock Index, a broad, market-weighted average of U.S. blue-chip company stock performance. The index is unmanaged and returns for both the index and the Fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. The graph and table do not reflect tax deductions that a shareholder would pay on Fund distributions or the sale of Fund shares. 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. PERFORMANCE CHANGES OVER TIME. VISIT LIBERTYFUNDS.COM FOR DAILY UPDATES. LIBERTY ACORN FUND NAV ON 6/30/03: $18.11 TOTAL NET ASSETS: $7,564.8 MILLION [Line Graph] AVERAGE ANNUAL TOTAL RETURN ----------------------------------------- 1 YEAR 5 YEARS 10 Years LIFE OF Fund 4.99% 8.41% 12.47% 15.79% LIBERTY ACORN FUND S&P 500 6/10/70 $10,000 $10,000 9,695 9,820 10,517 10,575 11,223 11,081 12,023 11,481 11,916 11,386 12,169 11,962 13,587 12,676 14,953 13,225 15,838 13,378 17,021 13,906 18,230 14,446 17,276 13,882 71 17,397 13,928 17,289 13,389 17,640 13,908 17,571 13,846 16,516 13,304 15,678 13,307 17,828 14,490 18,652 14,788 19,649 15,197 20,119 15,323 20,673 15,427 20,825 15,731 20,562 15,425 19,521 15,498 19,130 16,070 18,962 16,029 18,920 16,219 19,745 17,001 19,368 17,242 18,270 16,985 16,883 16,386 16,563 16,399 15,055 15,374 13,638 15,515 73 13,638 15,453 15,215 16,081 14,555 15,533 16,825 16,196 17,469 16,223 14,877 14,424 14,770 14,709 15,111 14,604 15,188 14,593 15,018 14,294 13,824 13,781 12,925 13,365 12,507 13,213 11,718 12,366 10,622 11,176 9,697 9,889 12,016 11,551 11,436 10,987 10,684 10,816 12,371 12,191 12,896 12,969 13,023 13,299 13,642 13,976 14,928 14,642 75 15,945 15,342 15,106 14,353 14,224 14,100 13,647 13,661 14,160 14,554 14,224 14,964 13,951 14,842 16,286 16,649 17,971 16,509 18,959 17,065 18,943 16,933 19,462 16,745 20,499 17,487 19,796 17,403 19,862 17,371 20,727 17,819 19,927 17,488 21,217 17,417 23,047 18,394 24,091 17,524 23,235 17,205 23,910 17,024 24,486 17,095 24,980 16,759 77 26,609 17,587 26,442 17,369 25,778 17,071 25,629 17,097 24,667 16,431 26,740 16,950 27,171 17,077 25,529 16,097 25,781 15,771 26,754 16,235 28,919 17,699 30,094 17,862 30,094 17,617 32,150 18,643 35,492 19,204 34,746 19,143 28,519 17,474 30,827 17,848 31,777 18,200 33,357 19,006 32,584 18,396 36,376 19,493 36,505 19,617 37,057 19,189 79 40,132 20,024 41,505 20,293 44,852 21,464 45,299 21,555 42,063 20,175 45,615 21,134 47,790 21,586 50,478 22,928 50,602 22,927 42,258 20,697 44,557 21,655 47,393 22,769 49,112 23,490 52,127 25,123 54,233 25,378 56,697 26,125 57,876 26,653 61,794 29,493 62,594 28,602 61,405 27,406 61,125 27,882 65,119 28,997 65,446 28,437 66,637 28,510 81 64,185 28,331 61,688 28,389 57,934 26,750 54,132 25,432 57,601 26,804 58,955 27,911 58,005 27,195 55,855 26,840 54,397 25,339 53,546 25,207 55,248 26,346 54,300 25,448 53,692 25,066 52,746 24,620 55,713 27,609 56,586 27,953 62,596 31,170 67,559 32,430 68,208 33,054 71,999 34,283 75,491 35,069 77,580 36,365 80,463 39,229 85,066 38,888 83 87,777 40,401 85,604 39,209 83,886 39,799 85,389 40,347 82,357 39,881 85,255 40,722 85,389 40,510 82,836 40,284 79,614 38,866 80,298 39,539 80,213 39,914 77,304 37,705 79,417 38,524 78,264 38,046 87,575 42,248 87,719 42,258 87,978 42,421 87,402 41,946 89,045 43,051 98,794 46,406 100,452 46,974 99,746 47,005 99,838 46,961 105,733 49,674 85 107,107 50,452 108,625 50,379 107,665 49,948 103,142 48,386 107,696 50,621 114,788 54,092 117,142 56,710 119,848 57,027 126,521 61,289 132,668 64,709 134,936 63,980 139,176 67,383 141,429 68,523 134,782 64,690 138,982 69,487 132,005 63,743 134,914 67,418 136,502 69,096 136,843 67,295 147,564 76,357 157,864 79,373 160,298 81,664 155,055 80,938 158,913 81,640 87 164,942 85,763 170,980 90,107 179,878 93,470 180,519 91,420 135,087 71,732 133,089 65,827 142,923 70,828 147,022 73,808 158,881 77,248 159,366 74,861 163,642 75,689 161,394 76,343 169,946 79,848 171,144 79,544 167,856 76,844 173,543 80,118 174,832 82,349 172,344 81,175 178,370 82,591 185,925 88,639 189,702 86,431 192,253 88,447 200,936 93,039 208,099 96,803 89 204,223 96,255 215,945 104,944 221,422 106,997 226,493 106,562 213,358 104,089 217,568 106,211 222,681 108,761 208,258 101,460 210,852 102,766 217,234 105,490 210,956 102,858 226,002 112,887 229,686 112,125 226,379 111,766 195,903 101,664 175,081 96,716 170,959 96,304 177,743 102,529 183,674 105,386 194,615 109,975 210,518 117,839 219,033 120,693 226,082 120,979 236,741 126,198 91 226,533 120,416 237,001 126,029 245,977 129,014 246,204 126,856 253,986 128,561 246,772 123,381 270,641 137,492 285,157 134,930 295,551 136,684 293,460 134,018 284,576 137,954 285,796 138,630 278,828 136,567 289,313 142,146 284,681 139,238 289,723 140,877 305,027 141,361 322,837 146,174 336,210 147,928 350,678 149,205 349,705 151,239 368,610 154,429 359,370 150,697 388,973 154,728 93 393,411 155,182 391,413 154,556 417,246 160,421 429,428 159,193 445,772 162,484 428,938 160,935 444,889 162,882 447,121 168,418 441,700 163,847 420,332 156,704 423,840 158,714 419,057 161,318 404,705 157,364 417,781 162,532 437,059 169,194 431,588 165,057 429,979 168,765 413,243 162,619 411,750 165,032 404,013 169,311 417,133 175,910 423,188 181,101 427,897 186,433 441,017 193,884 95 458,846 198,388 481,143 204,967 486,243 205,482 496,104 214,155 475,362 213,389 488,963 222,756 497,407 227,047 505,453 234,775 525,203 236,952 535,444 239,232 563,972 242,760 584,087 249,020 572,749 249,970 543,209 238,927 563,988 243,967 584,766 257,697 581,798 264,805 598,124 284,821 609,569 279,177 631,050 296,619 622,944 297,752 594,573 286,661 597,816 303,775 645,235 322,269 97 674,822 336,708 709,392 363,498 712,680 343,135 767,344 361,926 744,739 349,840 744,739 366,035 761,852 372,320 748,400 376,439 803,106 403,589 853,328 424,257 865,884 428,524 833,150 421,159 850,978 438,266 802,766 433,600 656,313 370,910 684,967 394,671 719,533 426,775 749,097 452,640 807,685 478,724 807,206 498,743 770,776 483,242 778,925 502,576 842,677 522,039 856,098 509,711 99 901,844 537,999 914,942 521,200 888,260 518,622 883,409 504,404 910,091 536,324 974,612 547,226 1,077,260 579,455 1,051,090 550,342 1,129,000 539,924 1,081,910 592,744 1,044,700 574,911 1,022,610 563,116 1,062,100 576,998 1,066,420 567,977 1,144,140 603,257 1,163,260 571,409 1,133,650 568,993 1,074,000 524,134 1,185,610 526,699 1,207,650 545,386 1,177,340 495,657 1,124,300 464,257 1,223,500 500,334 1,275,170 503,686 01 1,293,240 491,427 1,268,730 486,590 1,218,320 456,128 1,053,070 419,295 1,097,880 427,290 1,182,610 460,066 1,258,360 464,097 1,246,390 457,324 1,230,910 448,504 1,320,990 465,372 1,318,180 437,158 1,278,770 433,937 1,214,020 403,024 1,070,450 371,610 1,079,600 374,050 1,015,550 333,398 1,058,480 362,743 1,126,750 384,093 1,090,860 361,529 1,065,520 352,058 1,048,630 346,776 1,062,000 350,143 1,154,200 378,984 1,236,540 398,952 6/30/03 1,274,543 404,041 --------------------------------------------------------------------- LIBERTY ACORN FUND TOP 10 HOLDINGS (AS A % OF NET ASSETS) --------------------------------------------------------------------- 1. INTERNATIONAL GAME Technology 3.0% Slot Machines & Progressive Jackpots 2. XTO ENERGY 1.7% Natural Gas Producer 3. FIRST HEALTH GROUP 1.6% PPO Network 4. EXPEDITORS INTERNATIONAL OF WASHINGTON 1.3% International Freight Forwarder 5. CHRISTOPHER & BANKS 1.0% Women's Apparel Retailer 6. LINCARE HOLDINGS 1.0% Home Health Care Services 7. SEI INVESTMENTS 0.9% Mutual Fund Administration & Investment Management 8. COACH 0.9% Designer & Retailer of Branded Leather Accessories 9. HARLEY-DAVIDSON 0.9% Motorcycles & Related Merchandise 10.ITT EDUCATIONAL SERVICES 0.9% Post-secondary Degree Programs 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. --------------------------------------------------------------------- 7 Liberty Acorn International >In a Nutshell Photo of: Leah Joy Zell Photo of: P. Zachary Egan Photo of: Louis J. Mendes III Liberty Acorn International soared 21.50% in the three months from March through June. This represents the second best quarterly performance in the Fund's history. It was a particularly good period for international small-cap stocks, with the Citigroup EMI Global ex-US Index up 23.19%, against a 19.27% gain for the larger cap MSCI EAFE Index. Year-to-date, the Fund is up 13.69% vs. a 17.80% return for the Citigroup EMI Global ex-US Index. Several trends converged to drive stock prices higher globally. The quick end to the war in Iraq, accompanied by a drop in oil prices, lowered the perceived risk in owning equities. Simultaneously, the Federal Reserve Bank and central banks elsewhere dropped interest rates to record levels in order to pump liquidity into the world financial system. With equities deeply oversold by mid-March, the strong stimulus sparked a powerful rally in share prices. At the company level, we have not seen a convincing improvement in corporate fundamentals as yet but sentiment has clearly turned more positive. Several of our holdings, from Sky City Entertainment in New Zealand to Givaudan in Switzerland, have announced large share buybacks. At the end of June, Perbio Science of Sweden received a takeover offer from U.S.-based Fisher Scientific. After quarter end, another of our names, JCG Holding in Hong Kong, announced it is in talks to go private. This flurry of corporate activity is in sharp contrast to the subdued environment of the last three years. Our core strategy of owning companies with what we believe to be solid business models at reasonable prices remains in place. The appreciation of the euro against the dollar has tilted our geographic weighting temporarily toward Europe, but we are finding many good opportunities in Asia to redress the balance. Favored Asian themes include domestic demand driven stories such as Housing Development Finance (Indian mortgage bank) and Zhejiang Expressway (Chinese toll road operator). In Europe, the Fund is overweight in companies that may potentially benefit from regulatory change, such as Rhoen-Klinikum (German health care privatization) and Tomra Systems (Norwegian reverse vending machines for returnable beverage containers). /s/ Leah Joy Zell /s/ Louis J. Mendes III Leah Joy Zell Louis J. Mendes III Lead Portfolio Manager Co-Portfolio Manager /s/ P. Zachary Egan P. Zachary Egan Co-Portfolio Manager -------------------------------------------------------------------------------- Ralph Wanger on China: --------------------------- New Leadership at Bat New leaders have been appointed in China, from the "fourth Generation" of Party leaders. The two most prominent were both born in 1942, are technocrats who spent many years in remote provinces, and worked their way upward in the Communist Party. Although there is no change in the idea that the Party has a tight monopoly on political power, the new leaders will build a more open and modern economy. Hu Jintao is the new President of China, and Wen Jiabao has been made Premier of the State Council. Most of us are not sure whether a Premier outranks a President or vice-versa. The answer: When they line up in order of rank, Wen is on second. Hu's on first. Imagine the routine Abbott and Costello could have developed if American intellectuals James Watt and Irving Howe joined Wen and Hu in a game of baseball... Perbio Cultivates Growth --------------------------- One of the best performers in the quarter was Perbio Science. Perbio is a world-class player in the field of cell cultures used to develop medicines based on human proteins. A recent addition to the Fund, Perbio quickly became our seventh largest position after a takeover bid lifted the shares 54%. -------------------------------------------------------------------------------- Investments in foreign securities have special risks, including political or economic instability, higher costs, different regulations, accounting standards, trading practices and levels of information, and currency exchange rate fluctuations. Small-cap stocks are often more volatile and less liquid than the stocks of larger companies. Small companies may have a shorter history of operations than larger companies and may have a less diversified product line, making them more susceptible to market pressure. As of 6/30/03, the fund's positions in the holdings mentioned were: Sky City Entertainment, 0.7%; Givaudan, 0.9%; Perbio Science, 1.2%; Fisher Scientific, 0.0%; Jcg Holding, 0.4%; Housing Development Finance, 1.3%; Zhejiang Expressway, 0.3%; Rhoen-klinikum, 1.8%; Tomra Systems, 0.3%. 8 Liberty Acorn International >At a Glance Ticker Symbol: ACINX PRETAX AND AFTER-TAX AVERAGE ANNUAL TOTAL RETURNS (CLASS Z) --------------------------------------------------------------------- >through June 30, 2003 Year to date* 1 Year 5 Years 10 Years ----------------------------------------------- Returns before taxes 13.69% -5.68% 0.65% 6.88% --------------------------------------------------------------------- Returns after taxes 13.49 -5.93 -0.49 5.97 on distributions --------------------------------------------------------------------- Returns after taxes 8.40 -3.49 0.67 5.77 on distributions and sale of fund shares --------------------------------------------------------------------- Citigroup EMI Global 17.80 1.88 -0.46 2.22 ex-US (pretax) --------------------------------------------------------------------- Past performance, before and after taxes, cannot predict future investment results. After-tax returns are calculated using the highest historical individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns are shown for class Z shares only; after-tax returns for other share classes will vary. Indexes do not reflect any deduction for fees, expenses or taxes. Investment returns and principal value may fluctuate, resulting in a gain or loss on sale. * Year to date data not annualized. --------------------------------------------------------------------- LIBERTY ACORN INTERNATIONAL PORTFOLIO DIVERSIFICATION --------------------------------------------------------------------- >as a % of net assets, as of June 30, 2003 [Pie Chart] Industrials 20.8% Technology Services 1.4% Utilities 3.3% Real Estate 3.4% Broadcasting/Media Content 5.8% Business Services 7.9% Financials 8.4% Consumer Goods/Services 20.8% Health Care 10.2% Other* 9.4% Energy 8.6% *Other includes cash and other assets less liabilities of 4.0%. --------------------------------------------------------------------- THE VALUE OF A $10,000 INVESTMENT IN LIBERTY ACORN INTERNATIONAL (CLASS Z) --------------------------------------------------------------------- >September 23, 1992 through June 30, 2003 This graph compares the results of $10,000 invested in Liberty Acorn International at inception on September 23, 1992 to the Citigroup EMI Global ex-US, Citigroup's index of the bottom 20% of institutionally investable capital of developed and emerging countries, as selected by Citigroup, excluding the U.S. The index is unmanaged and returns for both the index and Fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. The graph and table do not reflect tax deductions that a shareholder would pay on Fund distributions or the sale of Fund shares. 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. PERFORMANCE CHANGES OVER TIME. VISIT LIBERTYFUNDS.COM FOR DAILY UPDATES. LIBERTY ACORN INTERNATIONAL NAV AS OF 6/30/03: $17.43 TOTAL NET ASSETS: $1,374.9 MILLION [Line Graph] AVERAGE ANNUAL TOTAL RETURN ------------------------------------------ 1 YEAR 5 YEARS 10 YEARS LIFE OF FUND -5.68% 0.65% 6.88% 8.93% LIBERTY ACORN INTERNATIONAL CITIGROUP EMI GLOBAL EX-US 9/23/92 $10,000 $10,000 10,010 10,000 10,380 9,384 10,570 9,404 10,690 9,538 10,780 9,623 11,460 9,965 12,000 10,969 12,450 11,976 12,910 12,611 93 12,920 12,127 12,920 12,500 13,760 13,145 13,910 12,871 14,560 12,826 14,620 11,753 15,940 12,509 16,630 13,760 16,570 13,856 15,850 13,629 15,960 14,037 15,870 13,834 94 15,550 14,123 15,980 14,289 16,481 14,452 16,491 14,040 16,522 14,278 15,606 13,454 15,334 13,538 14,640 12,974 14,550 12,760 14,811 13,251 15,264 13,663 15,505 13,488 95 15,727 13,339 16,582 14,086 16,411 13,753 16,824 13,845 16,300 13,431 16,069 13,547 16,703 14,056 17,357 14,388 17,881 14,556 18,203 14,863 18,787 15,629 19,341 15,507 96 19,593 15,500 18,968 14,898 19,240 15,046 19,362 15,130 19,553 15,033 20,088 15,293 20,153 14,906 20,636 14,691 20,893 14,986 20,585 14,800 20,287 14,599 21,170 15,460 97 21,808 15,853 21,951 15,700 20,788 15,012 21,660 15,253 20,487 14,513 20,269 13,841 20,190 13,553 20,476 13,978 22,123 15,035 23,857 15,762 24,351 15,890 24,769 16,025 98 24,335 15,460 24,491 15,362 21,368 13,343 20,428 13,048 21,111 13,947 22,309 14,427 23,305 14,733 23,842 14,630 23,126 14,356 23,574 14,978 24,984 15,892 25,141 15,501 99 27,222 16,104 28,191 16,623 29,002 16,916 29,486 16,839 30,759 16,686 35,365 17,286 41,761 18,462 41,607 18,110 48,298 18,807 46,808 18,891 41,359 17,650 38,286 17,281 00 40,171 18,331 39,669 17,723 40,563 18,231 38,494 17,295 35,630 16,248 32,730 15,532 33,402 16,139 34,915 16,440 32,408 15,801 29,285 14,577 30,419 15,531 30,223 15,500 01 28,747 14,974 27,591 14,535 27,035 14,495 23,354 12,608 24,467 13,120 25,850 13,660 26,350 13,772 25,708 13,523 25,636 13,749 26,977 14,645 27,862 14,950 27,748 15,428 02 26,646 14,827 23,854 13,560 23,496 13,478 21,406 12,234 21,492 12,511 22,150 12,978 22,107 12,824 21,562 12,608 20,988 12,383 20,686 12,263 22,567 13,419 24,433 14,562 6/30/03 25,134 15,106 --------------------------------------------------------------------- LIBERTY ACORN INTERNATIONAL TOP 10 HOLDINGS (AS A % OF NET ASSETS) --------------------------------------------------------------------- 1. RHOEN-KLINIKUM (Germany) 1.8% Hospital Management 2. NEOPOST (France) 1.6% Postage Meter Machines 3. ANGLO IRISH BANK (Ireland) 1.5% Corporate Lending: Private Banking 4. KERRY GROUP (Ireland) 1.5% Food Ingredients 5. HUNTER DOUGLAS (Netherlands) 1.3% Decorative Window Coverings 6. HOUSING DEVELOPMENT 1.3% FINANCE (India) Mortgage Loan Provider in India 7. PERBIO SCIENCE (Sweden) 1.2% Consumables to Biotech/Pharmaceutical Industries 8. CORUS ENTERTAINMENT (Canada) 1.2% CATV Programming 9. TALISMAN ENERGY (Canada) 1.2% Oil & GAS PRODUCER 10.SYNTHES-STRATEC (Switzerland) 1.1% Products for Orthopedic Surgery 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. --------------------------------------------------------------------- 9 Liberty Acorn USA >In a Nutshell Photo of: Robert A. Mohn Liberty Acorn USA was up 23.22% for the second quarter, performing in line with the 23.42% gain of the Russell 2000. Year-to-date, the Fund is up 20.03%, outperforming a 17.88% gain for the benchmark. Western Wireless was 2003's top performer through June 30. Up over 117% year-to-date, this rural cellular service provider is adding new subscribers at a fast pace and is operating with positive free cash flow, a rarity in the cellular business. Technology winners included software companies Micros Systems and Kronos, and Integrated Circuit Systems, a manufacturer of silicon timing devices used in computers. In our current economic environment, 10% revenue growth for a technology stock is considered to be very strong and Kronos and Integrated Circuit Systems are both growing at better than a 10% rate. Fund returns were also boosted by the strong performance of companies perceived to benefit from economic growth. Auto lender AmeriCredit and loan provider World Acceptance were among the top contributors to the Fund. After several quarters of dismal performance, AmeriCredit came back strong with a 161% rebound in Liberty Acorn USA for the quarter. Year-to-date, the stock moved into positive territory as well, up 11%. World Acceptance saw an 81% quarterly increase and is up nearly 114% so far in 2003. After a rough first quarter, biotechnology stocks rebounded in the second quarter. Nektar Therapeutics was up 46% for the three months on positive news related to its development of inhaled insulin. Techne supplies reagents used in the biotech industry so it benefited by association during the quarter's biotech uptick. Women's fashion retailer Christopher & Banks also provided strong year-to-date and second quarter returns. Up 78% for the six months and 109% this last quarter, the market responded favorably to continued strong sales within this growing franchise. Despite mixed signals on the economy, the perception that a recovery is imminent fueled the quarter's rally in more speculative names. We are pleased that the Fund matched the benchmark rise without having a portfolio loaded with fundamentally questionable stocks. The Fund's stocks have real earnings or fill a niche that we believe is primed for future success. The majority of the companies in Liberty Acorn USA's portfolio have been generating real value even during the downturn of the last three years. /s/ Robert A. Mohn Robert A. Mohn Lead Portfolio Manager -------------------------------------------------------------------------------- Zebra Technologies Earns --------------------------- Its Stripes Zebra Technologies is the leading provider of bar code printers, which are used in a variety of industries to produce labels for inventory tracking. We liked Zebra's stock due to the company's respectable financial performance during the tech meltdown and solid growth prospects. Although bar coding was already widely used, Zebra's increased investment in R&D and marketing began to create opportunities in under-served market segments. One example is healthcare, where bar coding is being implemented to reduce costs and errors in ordering and administering drugs. Zebra is also a leader in plastic card printers, a business that should benefit as organizations spend more on personal identification and security. Finally, we believe Zebra is well-positioned in radio-frequency identification (RFID). Zebra's stock appreciated 31% year-to-date. -------------------------------------------------------------------------------- Small-cap stocks are often more volatile and less liquid than the stocks of larger companies. Small companies may have a shorter history of operations than larger companies and may have a less diversified product line, making them more susceptible to market pressure. As of 6/30/03, the Fund's positions in the holdings mentioned were: Western Wireless, 2.5%; Micros Systems, 4.1%; Kronos, 2.6%; Integrated Circuit Systems, 1.3%; Americredit, 1.9%; World Acceptance, 2.1%; Nektar Therapeutics, 1.6%; Techne, 1.6%; Christopher & Banks, 1.8%; Zebra Technologies, 2.3%. 10 Liberty Acorn USA >At a Glance Ticker Symbol: AUSAX PRETAX AND AFTER-TAX AVERAGE ANNUAL TOTAL RETURNS (CLASS Z) --------------------------------------------------------------------- >through June 30, 2003 Year Life of to date* 1 Year 5 Years Fund ---------------------------------------------- Returns before taxes 20.03% 2.39% 3.98% 11.72% --------------------------------------------------------------------- Returns after taxes 20.03 2.39 3.10 10.88 on distributions --------------------------------------------------------------------- Returns after taxes 12.30 1.47 3.02 9.63 on distributions and sale of fund shares --------------------------------------------------------------------- Russell 2000 (pretax) 17.88 -1.64 0.97 5.79 --------------------------------------------------------------------- Past performance, before and after taxes, cannot predict future investment results. After-tax returns are calculated using the highest historical individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns are shown for class Z shares only; after-tax returns for other share classes will vary. Indexes do not reflect any deduction for fees, expenses or taxes. Investment returns and principal value may fluctuate, resulting in a gain or loss on sale. *Year to date data not annualized. --------------------------------------------------------------------- LIBERTY ACORN USA PORTFOLIO DIVERSIFICATION --------------------------------------------------------------------- >as a % of net assets, as of June 30, 2003 [Pie Chart] Information 39.1% Software/Services 22.4% Telecommunications 6.9% Media 3.6% Computer Related Hardware 6.2% Industrial Goods/Services 5.0% Energy/Minerals 5.5% Finance 11.2% Health Care 17.2% Consumer Goods/Services 13.8% Other* 8.2% *Other includes cash and other assets less liabilities of 7.4%. --------------------------------------------------------------------- THE VALUE OF A $10,000 INVESTMENT IN LIBERTY ACORN USA (CLASS Z) --------------------------------------------------------------------- >September 4, 1996 through June 30, 2003 This graph compares the results of $10,000 invested in Liberty Acorn USA at inception on September 4, 1996 to the Russell 2000 Index, a market-weighted index of 2,000 smaller U.S. companies formed by taking the largest 3,000 U.S. companies and eliminating the largest 1,000. The index is unmanaged and returns for both the index and the Fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. The graph and table do not reflect tax deductions that a shareholder would pay on Fund distributions or the sale of Fund shares. 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. PERFORMANCE CHANGES OVER TIME. VISIT LIBERTYFUNDS.COM FOR DAILY UPDATES. LIBERTY ACORN USA NAV AS OF 6/30/03: $17.14 TOTAL NET ASSETS: $424.9 MILLION [Line Graph] AVERAGE ANNUAL TOTAL RETURN --------------------------------- 1 YEAR 5 YEARS LIFE OF FUND 2.39% 3.98% 11.72% LIBERTY ACORN USA RUSSELL 2000 9/4/96 $10,000 $10,000 10,720 10,360 10,810 10,200 11,260 10,621 12/96 11,650 10,899 12,210 11,117 11,920 10,847 11,480 10,335 11,420 10,364 12,510 11,517 6/97 13,320 12,011 14,000 12,570 14,350 12,857 15,340 13,798 15,140 13,192 15,170 13,107 12/97 15,413 13,336 15,077 13,126 16,320 14,096 17,401 14,678 17,992 14,759 17,228 13,964 6/98 17,525 13,993 16,592 12,861 13,936 10,363 14,151 11,174 14,654 11,630 15,402 12,239 12/98 16,305 12,997 15,776 13,169 14,895 12,103 15,016 12,292 16,096 13,393 16,735 13,589 6/99 17,650 14,203 18,048 13,814 16,822 13,302 16,866 13,305 17,860 13,359 18,810 14,157 12/99 20,059 15,759 19,053 15,506 19,867 18,067 19,820 16,876 17,568 15,860 16,526 14,936 6/00 16,834 16,238 16,748 15,715 17,765 16,915 17,643 16,417 17,655 15,685 16,626 14,075 12/00 18,255 15,283 19,407 16,079 19,370 15,024 18,905 14,289 21,196 15,407 22,384 15,786 6/01 23,009 16,331 23,254 15,447 22,617 14,948 19,346 12,936 19,395 13,693 20,546 14,753 12/01 21,770 15,663 22,031 15,500 21,286 15,075 23,100 16,287 23,448 16,436 22,131 15,706 6/02 20,801 14,927 17,968 12,672 17,707 12,640 16,390 11,732 17,173 12,109 18,664 13,189 12/02 17,744 12,455 17,483 12,110 17,247 11,744 17,284 11,895 18,974 13,023 20,963 14,421 6/30/03 21,298 14,682 --------------------------------------------------------------------- LIBERTY ACORN USA TOP 10 HOLDINGS (AS A % OF NET ASSETS) --------------------------------------------------------------------- 1. FIRST HEALTH GROUP 4.2% PPO Network 2. MICROS SYSTEMS 4.1% Information Systems for Restaurants & Hotels 3. ITT EDUCATIONAL SERVICES 3.0% Post-secondary Degree Programs 4. KRONOS 2.6% Labor Management Solutions 5. JDA SOFTWARE 2.6% Applications/Software & Services for Retailers 6. EDWARDS LIFESCIENCES 2.5% Heart Valves 7. WESTERN WIRELESS 2.5% Phone Services 8. HCC INSURANCE HOLDINGS 2.4% Aviation Insurance 9. COMMONWEALTH TELEPHONE 2.4% Rural Phone Franchises & CLEC 10.ZEBRA TECHNOLOGIES 2.3% Bar Code Printers 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. --------------------------------------------------------------------- 11 Liberty Acorn Foreign Forty >In A Nutshell Photo of: Todd M. Narter Photo of: Christopher J. Olson Liberty Acorn Foreign Forty rose 19.71% for the quarter, performing better than the MSCI EAFE and slightly less than its Citigroup benchmark. The MSCI EAFE Index rose 19.27% and the Citigroup World ex-US Cap Range $2-10B Index rose 19.97% over the three months. The markets have rebounded strongly for the quarter and year so far and the Fund has performed roughly in-line. Year-to- date, the Fund is up 10.28%, vs. 9.47% for the MSCI EAFE Index and 12.81% for the benchmark. Germany was one of the best-performing developed markets in the second quarter, up 27%. The Fund was not only overweighted in Germany, but our German stocks performed better than the strong German market. Rhoen-Klinikum, a hospital management company that is one of the Fund's largest holdings, rebounded nicely from a weak first quarter that saw the share price slide 7%. In the second quarter, the shares increased 32%. Deutsche Boerse, the German stock exchange, benefited from the strong stock market and finished the quarter up 37%. On the downside, the Fund's weakest performing holdings for the quarter were based in Japan. Orix, a financial services firm that provides loans, insurance and banking services throughout the world, was our worst performer, down 13%. Oriental Land, a Disney theme park operator in Tokyo, continued to suffer from the impact of bad weather and light foot traffic into the park. The shares were off 6% in the second quarter. We opted to sell both of these stocks in the quarter. Liberty Acorn Foreign Forty has been underweight in Japan vs. the benchmark for quite some time. So far, we have been right to be underweight, as Japan has been in a market for the last 10 years. We have not seen a positive change in the Japanese economic outlook, and better ideas have been found elsewhere. /s/ Todd M. Narter /s/ Christopher J. Olson Todd M. Narter Christopher J. Olson Co-Portfolio Manager Co-Portfolio Manager -------------------------------------------------------------------------------- What's A Franking Machine? ------------------------- A franking machine is an electronic postage meter. Perhaps you've seen one in the mailroom of your firm. They're great to have around because mail can be sent out faster and more efficiently. The machines are also more secure, eliminating the need to keep large amounts of stamps or petty cash around; and they help save money because the postage paid is the exact amount necessary, not the fixed rate of postage stamps. Neopost is the world's second largest supplier of franking machines. With high barriers to entry, a consolidating industry and huge recurring revenues (60% of sales) we believe Neopost is a good business. For the quarter, the stock was up 52% in Liberty Acorn Foreign Forty. -------------------------------------------------------------------------------- Mid-cap stocks tend to be more volatile and may be less liquid than the stocks of larger companies. Investments in foreign securities have special risks, including political or economic instability, higher costs, different regulations, accounting standards, trading practices and levels of information, and currency exchange rate fluctuations. As of 6/30/03, the Fund's positions in the holdings mentioned were: Rhoen-Klinikum, 3.6%; Deutsche Boerse, 2.7%; Orix, 0.0%; Oriental Land, 0.0%; Neopost, 3.2%. 12 Liberty Acorn Foreign Forty >At a Glance Ticker Symbol: ACFFX PRETAX AND AFTER-TAX AVERAGE ANNUAL TOTAL RETURNS (CLASS Z) --------------------------------------------------------------------- >through June 30, 2003 Year Life to date* 1 Year 3 Years of Fund --------------------------------------------- Returns before taxes 10.28% -4.32% -16.58% 3.13% --------------------------------------------------------------------- Returns after taxes 10.25 -4.34 -16.62 3.02 on distributions --------------------------------------------------------------------- Returns after taxes 6.31 -2.65 -12.74 2.51 on distributions and sale of fund shares --------------------------------------------------------------------- Citigroup World 12.81 -3.02 -6.26 0.83 ex-US Cap Range $2-10B (pretax) --------------------------------------------------------------------- Past performance, before and after taxes, cannot predict future investment results. After-tax returns are calculated using the highest historical individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns are shown for class Z shares only; after-tax returns for other share classes will vary. Indexes do not reflect any deduction for fees, expenses or taxes. Investment returns and principal value may fluctuate, resulting in a gain or loss on sale. *Year to date data not annualized. --------------------------------------------------------------------- LIBERTY ACORN FOREIGN FORTY PORTFOLIO DIVERSIFICATION --------------------------------------------------------------------- >as a % of net assets, as of June 30, 2003 [Pie Chart] Information Technology 28.1% Energy/Minerals 6.7% Finance 11.6% Health Care 13.5% Consumer Goods/Services 16.6% Industrial Goods/Services 14.9% Other* 8.6% *Other includes cash and other assets less liabilities of 4.7%. --------------------------------------------------------------------- THE VALUE OF A $10,000 INVESTMENT IN LIBERTY ACORN FOREIGN FORTY (CLASS Z) --------------------------------------------------------------------- >November 23, 1998 through June 30, 2003 This graph compares the results of $10,000 invested in Liberty Acorn Foreign Forty at inception on November 23, 1998 to the Citigroup World ex-US Cap Range $2-10B Index, a subset of Citigroup's Broad Market Index, representing a mid-cap developed market index excluding the U.S. The index and Fund returns include reinvested dividends and capital gains. It is not possible to invest directly in an index. The graph and table do not reflect tax deductions that a shareholder would pay on Fund distributions or the sale of Fund shares. 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. PERFORMANCE CHANGES OVER TIME. VISIT LIBERTYFUNDS.COM FOR DAILY UPDATES. LIBERTY ACORN FOREIGN FORTY NAV ON 6/30/03: $11.34 TOTAL NET ASSETS: $33.6 MILLION [Line Graph] AVERAGE ANNUAL TOTAL RETURN -------------------------------- 1 YEAR 3 YEARS LIFE OF FUND -4.32% -16.58% 3.13% LIBERTY ACORN FOREIGN FORTY CITIGROUP WORLD EX-US CAP RANGE $2-10B 11/23/98 $10,000 $10,000 10,140 10,045 12/98 11,000 10,339 11,790 10,310 11,590 10,052 3/99 11,980 10,449 12,240 11,032 12,170 10,567 6/99 13,110 10,953 13,511 11,362 13,771 11,490 9/99 13,621 11,530 14,132 11,535 16,999 11,864 12/99 19,975 12,772 19,665 12,154 24,245 12,311 3/00 23,093 12,680 21,258 12,172 18,923 11,976 6/00 19,853 12,611 19,469 12,203 20,266 12,586 9/00 19,237 12,168 18,480 11,791 16,128 11,440 12/00 17,309 11,998 17,874 11,939 15,826 11,505 3/01 13,706 10,607 14,413 11,391 14,382 11,293 6/01 13,763 10,999 13,062 10,723 12,778 10,626 9/01 10,625 9,392 11,305 9,769 11,925 10,118 12/01 12,280 10,140 11,650 9,841 11,508 9,991 3/02 11,915 10,562 12,290 10,756 12,433 11,097 6/02 12,047 10,712 10,746 9,753 10,950 9,730 9/02 10,147 8,859 10,127 9,017 10,381 9,476 12/02 10,452 9,209 9,944 8,978 9,528 8,810 3/03 9,629 8,660 10,533 9,425 11,447 10,101 6/30/03 11,527 10,389 --------------------------------------------------------------------- LIBERTY ACORN FOREIGN FORTY TOP 10 HOLDINGS (AS A % OF NET ASSETS) --------------------------------------------------------------------- 1. ANGLO IRISH BANK (Ireland) 4.2% Corporate Lending: Private Banking 2. KERRY GROUP (Ireland) 4.1% Food Ingredients 3. TALISMAN ENERGY (Canada) 4.0% Oil & Gas Producer 4. SYNTHES-STRATEC (Switzerland) 3.6% Products for Orthopedic Surgery 5. RHOEN-KLINIKUM (Germany) 3.6% Hospital Management 6. CORUS ENTERTAINMENT (Canada) 3.2% CATV Programming 7. TVB (Hong Kong) 3.2% Television Programming & Broadcasting 8. NEOPOST (France) 3.2% Postage Meter Machines 9. DEPFA BANK (Ireland) 3.0% International Public Sector Finance 10.COMPASS GROUP (United Kingdom) 3.0% International Concession & Contract Caterer 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. --------------------------------------------------------------------- 13 Liberty Acorn Twenty >In a Nutshell Photo of: John H. Park Liberty Acorn Twenty gained 14.41% for the June quarter, trailing the 17.63% return for the S&P MidCap 400 and the S&P 500's 15.39% gain. While a 14.41% return may be a satisfactory absolute return, we were disappointed that the Fund lost ground against its benchmarks. Liberty Acorn Twenty's lagging relative performance was not due to any large losses. In fact, only three of the Fund's 24 stocks lost money during the quarter and the worst-performing stock was down only 6%. Rather, stocks with positive returns were not up sufficiently for the Fund to match or exceed its benchmark indexes. The year-to-date picture was brighter. The Fund was up 16.52% vs. a 12.41% return for the S&P MidCap 400 and an 11.76% gain for the S&P 500. The best performing stock for the quarter was Techne, a long-time Liberty Acorn Twenty holding, up 47% after reporting good earnings growth. Techne manufactures reagents for the life-sciences industry. Synopsys, which makes software for the design of semiconductor chips, gained 46%, boosted by strong earnings and a positive future outlook. We maintained the Fund's positions in both stocks. On the losing side, fashion retailer Abercrombie & Fitch fell 6% as some investors may have been disappointed with same-store sales trends. Our analyst, Susie Hultquist, likes the prospects for this stock so we added to the Fund's position on the dip. Expeditors International of Washington fell 4% during the quarter due, in part, to concerns of SARS impacting its freight forwarding and logistics business. It's been our experience that small losses in such a short time period are more of a random result than a reaction to any major fundamental changes. Looking forward, we continue to like the Fund's prospects given our stocks' reasonable valuations combined with what we believe are the exceptional characteristics of our portfolio companies. We believe this approach will continue to provide above average returns with below average risk over a long-term investment horizon. /s/ John H. Park John H. Park Lead Portfolio Manager -------------------------------------------------------------------------------- JD Edwards Gets Noticed ----------------------- A couple of years ago analyst Ben Andrews noticed that the enterprise resource planning (ERP) software world had fought a war that left only a few players standing. One of the survivors, JD Edwards, focused on manufacturing clients and that had a large, loyal, installed customer base, but operating margins of zero percent. The catalyst? New management that reduced costs and focused on new lines of business (supply chain & CRM). Operating margins lifted to five percent, which attracted an even larger player in the ERP world, Peoplesoft, to see JD Edward's niche as valuable and offered to buy it. This offer increased JD Edward's stock price 30.5% in the quarter. -------------------------------------------------------------------------------- Liberty Acorn Twenty is a non-diversified fund. The performance of each of its holdings will have a greater impact on the fund's total return, and may make the fund's returns more volatile than a more diversified fund. Mid-cap stocks tend to be more volatile and may be less liquid than the stocks of larger companies. As of 6/30/03, the Fund's positions in the holdings mentioned were: Techne, 2.7%; Synopsys, 5.3%; Abercrombie & Fitch, 2.4%; Expeditors International of Washington, 4.1%; Jd Edwards, 2.0%. 14 Liberty Acorn Twenty >At a Glance Ticker Symbol: ACTWX PRETAX AND AFTER-TAX AVERAGE ANNUAL TOTAL RETURNS (CLASS Z) --------------------------------------------------------------------- >through June 30, 2003 Year Life to date* 1 Year 3 Years of Fund ---------------------------------------------- Returns before taxes 16.52% 13.06% 7.81% 3.54% --------------------------------------------------------------------- Returns after taxes 16.52 13.06 7.69 12.95 on distributions --------------------------------------------------------------------- Returns after taxes on 10.15 8.02 6.32 11.05 distributions and sale of fund shares --------------------------------------------------------------------- S&P MidCap 400 12.41 -0.71 0.99 8.09 (pretax) --------------------------------------------------------------------- Past performance, before and after taxes, cannot predict future investment results. After-tax returns are calculated using the highest historical individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns are shown for class Z shares only; after-tax returns for other share classes will vary. Indexes do not reflect any deduction for fees, expenses or taxes. Investment returns and principal value may fluctuate, resulting in a gain or loss on sale. *Year to date data not annualized. --------------------------------------------------------------------- LIBERTY ACORN TWENTY PORTFOLIO DIVERSIFICATION --------------------------------------------------------------------- >as a % of net assets, as of June 30, 2003 [Pie Chart] Consumer Goods/Services 27.3% Other* 7.9% Industrial Goods/Services 4.1% Finance 12.7% Information 25.9% Health Care 22.1% *Cash and other assets less liabilities. --------------------------------------------------------------------- THE VALUE OF A $10,000 INVESTMENT IN LIBERTY ACORN TWENTY (CLASS Z) --------------------------------------------------------------------- >November 23, 1998 through June 30, 2003 This graph compares the results of $10,000 invested in Liberty Acorn Twenty at inception on November 23, 1998 to the S&P MidCap 400, a broad, market-weighted index of 400 stocks that are in the next size/tier down from the S&P 500. The Index is unmanaged and returns for both the index and the Fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. The graph and table do not reflect tax deductions that a shareholder would pay on Fund distributions or the sale of Fund shares. 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. PERFORMANCE CHANGES OVER TIME. VISIT LIBERTYFUNDS.COM FOR DAILY UPDATES. LIBERTY ACORN TWENTY NAV ON 6/30/03: $16.36 TOTAL NET ASSETS: $388.7 MILLION [Line Graph] AVERAGE ANNUAL TOTAL RETURN --------------------------------- 1 YEAR 3 YEARS LIFE OF FUND 13.06% 7.81% 13.54% LIBERTY ACORN TWENTY S&P MidCap 400 11/23/98 $10,000 $10,000 10,030 9,911 12/98 10,710 11,109 11,000 10,676 10,710 10,117 3/99 11,480 10,400 12,710 11,220 12,730 11,269 6/99 13,040 11,872 13,190 11,620 12,060 11,222 9/99 12,110 10,875 12,970 11,429 13,250 12,029 12/99 13,848 12,744 13,474 12,385 13,555 13,252 3/00 14,171 14,361 13,464 13,860 13,100 13,687 6/00 14,320 13,888 13,931 14,107 15,431 15,682 9/00 15,798 15,575 15,928 15,047 14,382 13,911 12/00 15,465 14,975 15,914 15,309 14,984 14,435 3/01 14,404 13,362 15,454 14,836 16,297 15,181 6/01 16,023 15,120 15,870 14,895 15,126 14,408 9/01 14,207 12,615 14,513 13,174 16,023 14,153 12/01 16,703 14,885 16,374 14,807 16,023 14,826 3/02 16,582 15,885 15,683 15,811 16,143 15,544 6/02 15,869 14,407 14,860 13,011 15,222 13,077 9/02 14,520 12,023 15,321 12,544 16,088 13,270 12/02 15,397 12,725 15,332 12,353 15,376 12,058 3/03 15,683 12,160 16,582 13,043 17,481 14,124 6/30/03 17,942 14,304 --------------------------------------------------------------------- LIBERTY ACORN TWENTY TOP 10 HOLDINGS (AS A % OF NET ASSETS) 1. FIRST HEALTH GROUP 9.4% PPO Network 2. GUIDANT 6.9% Stents, Defibrillators & Other Cardiac Medical Devices 3. INTERPUBLIC GROUP 6.2% Advertising 4. SYNOPSYS 5.3% Software for Designing Semiconductor Chips 5. ELECTRONIC ARTS 4.6% Entertainment Software 6. EXPEDITORS INTERNATIONAL OF WASHINGTON 4.1% International Freight Forwarder 7. HARLEY-DAVIDSON 4.1% Motorcycles & Related Merchandise 8. HERMAN MILLER 4.1% Office Furniture 9. TCF FINANCIAL 4.0% Great Lakes Bank 10.ASSOCIATED BANC-CORP 3.9% Midwest Bank 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. --------------------------------------------------------------------- 15 Columbia Thermostat Fund >In a Nutshell Photo of: Ralph Wanger Photo of: Charles P. McQuaid Photo of: Harvet Hirschhorn Columbia Thermostat Fund finished the quarter up 11.36%. The S&P 500 was very strong with a 15.39% quarterly gain and the Lehman U.S. Credit Intermediate Bond Index returned 4.02%. With the rally in equities, this was a quarter in which flexible portfolios run by Wall Street experts had a real opportunity to excel, but, comparing Thermostat's return to the Lipper Flexible Portfolio Funds Index, our "automatic" system produced very competitive results. The three-month gain for this Lipper index was 12.05%. The Fund's return was in line with the Lipper Flexible Portfolio Funds Index for the half year too. Year-to-date Thermostat is up 9.01% vs. a 9.73% return for the Lipper index. During the quarter we hit three reallocation triggers. The Fund's bond exposure at quarter end was 40%, up from 25% at the end of the first quarter. In keeping with our simple investment strategy, as the S&P 500 climbed, all three times we sold 5% of our stock funds and invested the proceeds in bonds. We are also pleased to report that assets are growing at a healthy rate in Columbia Thermostat Fund. At quarter end, the total assets were $46.3 million. This was fast growth from the $9.7 million in assets we held at the end of the first quarter. With Thermostat's fund-of-funds structure, investing the cash inflows is an easy process and, as assets grow, the expense ratio should decline, providing a boost to returns. Our thanks to you for the confidence you have shown in our system and in the fund with the funny name. /s/ Ralph Wanger /s/ Charles P. McQuaid Ralph Wanger Charles P. McQuaid Co-Portfolio Manager Co-Portfolio Manager /s/ Harvey Hirschhorn Harvey Hirschhorn Co-Portfolio Manager The value of an investment in the fund is based primarily on the performance of the under lying portfolio funds and the allocation of the fund's assets among them. An investment in the underlying funds may present certain risks, including stock market fluctuations that occur in response to economic and business developments; and a greater degree of social, political and economic volatility associated with international investing. Investing in small-and mid-cap stocks may present special risks including possible illiquidity and greater price volatility than stocks of larger, more established companies. Changes in interest rates and changes in the financial strength of issuers of lower-rated bonds may also affect underlying fund performance. The fund is also subject to the risk that the investment adviser's decisions regarding asset classes and portfolio funds will not anticipate market trends successfully, resulting in a failure to preserve capital or lower total return. In addition, the fund may buy and sell shares of the portfolio funds frequently. This may result in higher transaction costs and additional tax liability. This is not an offer of the shares of any other mutual fund mentioned herein. 16 Columbia Thermostat Fund >At a Glance Ticker Symbol: COTZX PRETAX AND AFTER-TAX AVERAGE ANNUAL TOTAL RETURNS (CLASS Z) --------------------------------------------------------------------- >through June 30, 2003 Year Life to of Date* Fund Returns before taxes 9.01% 13.48% --------------------------------------------------------------------- Returns after taxes on distributions 8.99 13.46 --------------------------------------------------------------------- Returns after taxes on distribu- tions and sale of fund shares 5.54 8.28 --------------------------------------------------------------------- S&P 500 (pretax) 11.76 20.65 --------------------------------------------------------------------- Lehman U.S. Govt. Intermediate Bond Index (pretax) 2.63 4.03 --------------------------------------------------------------------- Lehman U.S. Credit Intermediate Bond Index (pretax) 6.36 9.63 --------------------------------------------------------------------- Lipper Flexible Portfolio Funds Index (pretax) 9.73 16.09 --------------------------------------------------------------------- Past performance, before and after taxes, cannot predict future investment results. After-tax returns are calculated using the highest historical individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns are shown for class Z shares only; after-tax returns for other share classes will vary. Indexes do not reflect any deduction for fees, expenses or taxes. Investment returns and principal value may fluctuate, resulting in a gain or loss on sale. *Year to date and life of fund data not annualized. --------------------------------------------------------------------- PORTFOLIO WEIGHTINGS --------------------------------------------------------------------- >AS A % OF ASSETS IN EACH INVESTMENT CATEGORY, AS OF JUNE 30, 2003 [Pie Chart] STOCK MUTUAL FUNDS Liberty Select Value 15% Liberty Acorn Fund 20% Liberty Acorn Twenty 15% Liberty Growth & Income 25% Liberty Growth Stock 25% [Pie Chart] BOND MUTUAL FUNDS Columbia High Yield 20% Liberty Federal Securities 30% Liberty Intermediate Bond 50% --------------------------------------------------------------------- THE VALUE OF A $10,000 INVESTMENT IN COLUMBIA THERMOSTAT FUND (CLASS Z) --------------------------------------------------------------------- >SEPTEMBER 25, 2002 THROUGH JUNE 30, 2003 This graph compares the results of $10,000 invested in Columbia Thermostat Fund at inception on September 25, 2002 to the S&P 500, a broad, market-weighted average of U.S. blue-chip company stock performance, and the Lehman U.S. Govt. Intermediate Bond Index, an index comprised of 1 to 10 year treasury and agency bonds, excluding targeted investor notes and state and local government series bonds. The Lehman U.S. Credit Intermediate Bond Index is the intermediate component of the U.S. Credit Index. The U.S. Credit Index includes publicly issued U.S. corporate and foreign debentures and secured notes that meet specified maturity, liquidity, and quality requirements. The Indexes are unmanaged and returns for the indexes and the Fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. The graph and table do not reflect tax deductions that a share holder would pay on Fund distributions or the sale of Fund shares. 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. PERFORMANCE CHANGES OVER TIME. VISIT LIBERTYFUNDS.COM FOR DAILY UPDATES. COLUMBIA THERMOSTAT FUND NAV ON 6/30/03: $11.34 TOTAL NET ASSETS: $46.3 MILLION [Line Graph] AVERAGE ANNUAL TOTAL RETURN --------------------------------- YEAR TO DATE LIFE OF FUND 9.01%* 13.48%* Lehman Lehman U.S. Columbia U.S. Govt. Credit Thermostat Intermediate Intermediate Fund S&P 500 Bond Bond 9/25/02 $10,000 $10,000 $10,000 $10,000 9/02 9,850 9,956 10,039 10,042.8 10,220 10,832 10,032 9,962.1 10,700 11,469 9,953 10,044.6 12/02 10,410 10,796 10,137 10,306.8 10,260 10,513 10,114 10,335.1 10,100 10,355 10,228 10,517.5 3/03 10,190 10,456 10,230 10,539.3 10,710 11,317 10,259 10,683.9 11,200 11,913 10,420 10,956.8 6/30/03 11,348 12,065 10,403 10,962.7 * Not annualized. --------------------------------------------------------------------- COLUMBIA THERMOSTAT FUND ASSET ALLOCATION --------------------------------------------------------------------- >AS A % OF NET ASSETS, AS OF JUNE 30, 2003 [Pie Chart] Cash and Other Assets Less Liabilities 3.1% Bond Mutual Funds 38.8% Stock Mutual Funds 58.1% --------------------------------------------------------------------- 17 Liberty Acorn Fund >Major Portfolio Changes in the Second Quarter (Unaudited) NUMBER OF SHARES ---------------------------- 03/31/03 06/30/03 ADDITIONS ---------------------------------------------------------------------------- INFORMATION Actel 261,000 361,000 Actuate 800,000 4,534,000 Administaff 0 139,000 American Tower 0 600,000 Aspect Communications 3,600,000 4,000,000 Avnet 1,610,000 1,695,000 Avocent 625,000 830,000 Cable Design Technologies 406,000 1,125,000 Ciber 3,350,000 3,469,000 Concurrent Computer 1,500,000 2,155,000 CTS 0 630,000 Cumulus Media, Cl. A 1,100,000 1,200,000 Deutsche Boerse (Germany) 175,000 275,000 Dionex 756,000 836,000 Euronext (France) 300,000 575,000 Hit Entertainment (United Kingdom) 2,000,000 2,500,000 Hong Kong Exchanges & Clearing (Hong Kong) 4,200,000 5,000,000 II VI 272,000 535,000 Indus International 3,770,000 5,000,000 Insight Communications 1,550,000 1,700,000 Integrated Circuit Systems 960,000 1,005,000 Jabil Circuit 1,035,000 1,170,000 JDA Software 2,150,000 2,200,000 LittelFuse 605,000 685,000 MAPICS 1,900,000 2,200,000 Mediacom Communications 2,100,000 2,500,000 Mettler Toledo 700,000 810,000 Moore-Wallace (Canada) 900,000 1,000,000 MRO Software 1,992,000 2,035,000 Neopost (France) 331,900 431,900 New Horizons Worldwide 600,000 800,000 Plantronics 637,000 830,000 Plexus 1,200,000 1,300,000 Radiant Systems 200,000 1,000,000 Rogers 169,000 380,000 Seachange International 2,350,000 2,500,000 Skillsoft Publishing 9,800,000 9,900,000 Supertex 365,000 565,000 Sybase 450,000 1,221,000 Systems & Computer Technology 2,817,000 3,050,000 Tech Data 0 780,000 Telephone and Data Systems 400,000 500,000 THQ 1,865,000 2,000,000 Trimble Navigation 755,000 885,000 Unova 231,000 900,000 Varian 587,000 651,000 Venture (Singapore) 1,450,000 1,750,000 Western Wireless 2,300,000 2,750,000 Zebra Technologies 294,000 329,000 NUMBER OF SHARES ---------------------------- 03/31/03 06/30/03 ---------------------------------------------------------------------------- HEALTH CARE Aclara Biosciences 1,792,000 1,982,000 Applera-Celera Genomics 0 900,000 Diagnostic Products 630,000 920,000 Edwards Lifesciences 1,234,000 1,554,000 Essilor International (France) 215,000 265,000 First Health Group 3,716,000 4,296,000 Lincare Holdings 2,166,000 2,491,000 Martek Biosciences 435,000 519,000 Nektar Therapeutics 1,968,000 2,055,000 Omega Pharma (Belgium) 0 281,000 OPG Groep (Netherlands) 100,000 300,000 Perbio Science (Sweden) 720,000 1,035,000 Rhoen-Klinikum (Germany) 360,000 385,000 Sequenom 0 2,800,000 Smith & Nephew (United Kingdom) 1,000,000 2,000,000 Synthes-Stratec (Switzerland) 0 20,000 ---------------------------------------------------------------------------- CONSUMER GOODS/SERVICES Abercrombie & Fitch 180,000 425,000 Action Performance 1,026,000 1,276,000 Aeropostale 805,000 1,005,000 Alliance Gaming 1,910,000 2,010,000 Ann Taylor 270,000 450,000 Argosy Gaming 475,000 875,000 Autogrill (Italy) 1,067,000 1,217,000 Bally Total Fitness 2,000,000 2,350,000 Billabong International (Australia) 0 1,950,000 Cheesecake Factory 158,000 243,000 Chico's Fas 1,850,000 2,095,000 Harley-Davidson 1,620,000 1,745,000 Herman Miller 1,769,000 1,900,000 Hon Industries 1,010,000 1,275,000 Hunter Douglas (Netherlands) 580,740 605,000 Hyundai Mobis (South Korea) 275,000 575,000 International Speedway Motors 605,000 805,000 Intrawest (Canada) 1,935,000 2,024,500 Jurys Doyle Hotel (Ireland) 0 620,000 Kerry Group (Ireland) 1,300,000 1,600,000 LaQuinta 3,050,000 3,380,000 Lion Nathan (Australia) 2,150,000 3,000,000 Michaels Stores 1,450,000 1,600,000 Nautica Enterprises 880,000 965,000 Nobia (Sweden) 0 550,000 Oxford Industries 0 265,000 Parmalat Finanziaria (Italy) 0 3,500,000 Petco Animal Supplies 450,000 815,000 Pinnacle Entertainment 1,825,000 1,925,000 Polaris Industries 0 275,000 18 NUMBER OF SHARES ---------------------------- 03/31/03 06/30/03 ADDITIONS, CONTINUED ---------------------------------------------------------------------------- CONSUMER GOODS/SERVICES (CONTINUED) Scotts Company 570,000 795,000 SCP Pool 912,000 1,007,000 Sky City Entertainment (New Zealand) 0 1,500,000 Speedway Motors 308,000 363,000 The Warehouse Group (New Zealand) 0 3,100,000 USS (Japan) 200,000 260,000 Weight Watchers 200,000 250,000 ---------------------------------------------------------------------------- FINANCE Anglo Irish Bank (Ireland) 2,830,000 2,900,000 Bank of Bermuda 289,000 356,000 BOK Financial 0 297,000 Depfa Bank (Ireland) 0 125,000 Downey Financial 659,000 807,000 First Federal Capital 550,000 700,000 Harleysville Group 0 700,000 Hawthorne Financial 400,000 440,000 Housing Development Finance (India) 1,199,606 1,700,000 Intermediate Capital (United Kingdom) 0 90,000 Investment Technology Group 0 200,000 Midwest Banc 0 170,000 Northbridge Financial (Canada) 0 455,000 Ohio Casualty 0 800,000 Pacific Northwest Bancorp 237,000 412,000 Philadelphia Consolidated Holding 821,000 870,000 Scottish Annuity & Life 350,000 650,000 Selective Insurance Group 0 308,000 West Coast Bancorp 0 249,000 ---------------------------------------------------------------------------- INDUSTRIAL GOODS/SERVICES Ametek 925,000 1,025,000 Bacou Dalloz (France) 50,000 65,000 Daito Trust Construction (Japan) 0 380,000 Esco Technologies 900,000 950,000 Florida Rock Industries 325,000 425,000 G&K Services 600,000 725,000 Geberit International (Switzerland) 0 32,000 Givaudan (Switzerland) 27,000 37,000 Grafton Group (Ireland) 1,560,000 2,900,000 Hughes Supply 475,000 600,000 Intermagnetics General 290,000 363,000 NUMBER OF SHARES ---------------------------- 03/31/03 06/30/03 ---------------------------------------------------------------------------- INDUSTRIAL GOODS/SERVICES (CONTINUED) McCarthy & Stone (United Kingdom) 0 750,000 Mine Safety Appliances 201,000 268,000 Munters (Sweden) 0 290,000 Schindler (Switzerland) 0 31,000 Schulman 484,000 983,000 Sembcorp Logistics (Singapore) 10,000,000 11,000,000 Simpson 303,000 488,000 Sinotrans (China) 20,000,000 40,000,000 Tenaris (Luxembourg) 50,000 450,000 Tennant 0 51,000 UTI Worldwide 700,000 900,000 Worthington Industries 800,000 1,050,000 Xstrata (United Kingdom) 1,000,000 2,220,000 ---------------------------------------------------------------------------- ENERGY/MINERALS Carbo Ceramics 600,000 650,000 Evergreen Resources 680,000 730,000 FMC Technologies 1,100,000 1,400,000 Key Energy Services 0 1,300,000 McMoRan Exploration 0 450,000 Talisman Energy (Canada) 300,000 365,000 Tullow Oil (United Kingdom) 0 3,000,000 Ultra Petroleum 2,500,000 2,550,000 ---------------------------------------------------------------------------- OTHER INDUSTRIES Comfort Group (Singapore) 0 15,000,000 Crescent Real Estate Equities 750,000 1,375,000 Federal Realty Investment Trust 380,000 690,000 Glimcher Realty Trust 525,000 975,000 Kobenhavns Lufthavne (Denmark) 0 100,000 Mills 425,000 725,000 Red Electrica (Spain) 600,000 829,800 19 Liberty Acorn Fund >Major Portfolio Changes in the Second Quarter (Unaudited), continued NUMBER OF SHARES ---------------------------- 03/31/03 06/30/03 SALES ---------------------------------------------------------------------------- INFORMATION Avid Technology 2,000,000 1,600,000 Concord EFS 293,000 0 International Game Technology 9,328,000 2,192,000 (INCLUDES THE EFFECT OF A 4 FOR 1 STOCK SPLIT) Shuffle Master 1,327,000 827,000 Travelsky Technology (Hong Kong) 8,000,000 0 ---------------------------------------------------------------------------- HEALTH CARE Kensey Nash 550,000 0 ---------------------------------------------------------------------------- CONSUMER GOODS/SERVICES Carnival 1,400,000 400,000 Coach 1,774,000 1,420,000 Goodman Fielder (Australia) 5,000,000 0 Kuoni Reisen (Switzerland) 20,000 0 NH Hoteles (Spain) 430,000 0 Orkla (Norway) 665,000 440,000 Six Flags 3,025,000 2,765,000 Star Cruises (Singapore) 26,800,000 0 Station Casinos 1,250,000 890,000 Waterford Wedgwood (Ireland) 6,961,600 0 ---------------------------------------------------------------------------- FINANCE Affiliated Managers Group 499,000 123,000 ---------------------------------------------------------------------------- INDUSTRIAL GOODS/SERVICES Airnet Systems 556,000 0 Applied Industrial Technologies 575,000 0 Hagemeyer (Netherlands) 1,120,000 0 Jenoptik (Germany) 250,000 0 Maruichi Steel Tube (Japan) 625,000 0 Serco Group (United Kingdom) 3,160,000 0 Technip - Coflexip (France) 140,000 0 ---------------------------------------------------------------------------- ENERGY/MINERALS Westport Resources 500,000 342,000 XTO Energy 6,400,000 6,300,000 ---------------------------------------------------------------------------- Other Industries BRE Properties 450,000 0 First Industrial Realty Trust 675,000 0 LaSalle Hotel Properties 1,099,000 574,000 20 Liberty Acorn Fund >Statement of Investments (Unaudited), June 30, 2003 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- SECURITIES: 94.0% ---------------------------------------------------------------------------- INFORMATION: 26.8% MEDIA >TV BROADCASTING: 0.4% 1,400,000 Gray Television $17,360 MID MARKET AFFILIATED TV STATIONS 3,300,000 TVB (Hong Kong) 11,785 TELEVISION PROGRAMMING & Broadcasting 200,000 Young Broadcasting (b) 4,226 TELEVISION STATIONS ---------------------------------------------------------------------------- 33,371 >RADIO BROADCASTING: 0.8% 1,200,000 Cumulus Media, Cl. A (b) 22,716 RADIO STATIONS IN SMALL CITIES 935,000 Saga Communications (b) 18,186 RADIO STATIONS IN SMALL & Mid-sized Cities 850,000 Salem Communications (b) 17,009 RADIO STATIONS FOR RELIGIOUS PROGRAMMING ---------------------------------------------------------------------------- 57,911 >TELEVISION PROGRAMMING/CATV: 1.5% 2,605,000 Liberty Media (b) 30,114 CATV PROGRAMMING & MEDIA COMPANY HOLDINGS 2,500,000 Mediacom Communications (b) 24,675 CABLE TELEVISION FRANCHISES 1,700,000 Insight Communications (b) 22,406 CATV FRANCHISES IN MIDWEST 1,000,000 Corus Entertainment (Canada) (b) 16,780 TELEVISION PROGRAMMING & RADIO STATIONS 2,500,000 Hit Entertainment (United Kingdom) 10,216 TELEVISION SHOWS FOR CHILDREN 1,500,000 United Global Com (b) 7,755 VIDEO, VOICE & DATA SERVICES OUTSIDE THE USA ---------------------------------------------------------------------------- 111,946 TELECOMMUNICATIONS >TELECOMMUNICATIONS/WIRELINE COMMUNICATIONS: 0.5% 850,000 Commonwealth Telephone (b) 37,374 RURAL PHONE FRANCHISES & CLEC ---------------------------------------------------------------------------- >TELECOMMUNICATIONS EQUIPMENT: 0.2% 830,000 Plantronics (b) 17,986 COMMUNICATION HEADSETS ---------------------------------------------------------------------------- >MOBILE COMMUNICATIONS: 1.1% 2,750,000 Western Wireless (b) 31,708 PHONE SERVICES 500,000 Telephone & Data Systems 24,850 CELLULAR & Telephone Services 2,500,000 Crown Castle International (b) 19,425 COMMUNICATION TOWERS IN USA & UK 600,000 American Tower (b) 5,310 COMMUNICATION TOWERS 533,000 COMARCO (b)(c) 3,784 WIRELESS NETWORK TESTING ---------------------------------------------------------------------------- 85,077 NUMBER OF SHARES OR PRINCIPAL AMOUNT (000) VALUE (000) ---------------------------------------------------------------------------- COMPUTER RELATED HARDWARE >COMPUTER HARDWARE/RELATED SYSTEMS: 2.2% 830,000 Avocent (b) $24,842 COMPUTER CONTROL SWITCHES 329,000 Zebra Technologies (b) 24,738 BAR CODE PRINTERS 2,500,000 Seachange International (b)(c) 23,850 SYSTEMS FOR VIDEO ON DEMAND & AD INSERTION 431,900 Neopost (France) (b) 18,381 POSTAGE METER MACHINES 585,000 Excel Technologies (b) 13,356 LASER SYSTEMS & ELECTRO-OPTICAL COMPONENTS 380,000 Rogers (b) 12,654 PCB LAMINATES & HIGH PERFORMANCE FOAMS 535,000 II VI (b) 12,348 LASER COMPONENTS 900,000 Unova (b) 9,990 BARCODE & WIRELESS LAN SYSTEMS 1,125,000 Cable Design Technologies (b) 8,044 NETWORKING & SPECIALTY CABLES 630,000 CTS 6,583 ELECTRONIC COMPONENTS, SENSORS & EMS 2,155,000 Concurrent Computer (b) 6,293 VIDEO ON DEMAND SERVICES & SOFTWARE 230,000 Applied Films (b) 5,952 THIN-FILM GLASS COATING EQUIPMENT $ 3,000 Tidel Technologies, 6% Note Due 9/8/04 (b) 450 63,158 Tidel Technologies (b) -- ATM MACHINES ---------------------------------------------------------------------------- 167,481 >GAMING EQUIPMENT: 3.3% 2,192,000 International Game Technology 224,307 SLOT MACHINES & PROGRESSIVE JACKPOTS 827,000 Shuffle Master (b)(c) 24,306 CARD SHUFFLERS, CASINO GAMES & SLOT MACHINES ---------------------------------------------------------------------------- 248,613 >CONTRACT MANUFACTURING: 0.8% 1,170,000 Jabil Circuit (b) 25,857 ELECTRONIC MANUFACTURING SERVICES 1,750,000 Venture (Singapore) 16,002 ELECTRONIC MANUFACTURING SERVICES 1,300,000 Plexus (b) 14,989 ELECTRONIC MANUFACTURING SERVICES ---------------------------------------------------------------------------- 56,848 >INSTRUMENTATION: 1.6% 836,000 Dionex (b) 33,231 ION & LIQUID CHROMATOGRAPHY 810,000 Mettler Toledo (b) 29,686 LABORATORY EQUIPMENT 651,000 Varian (b) 22,570 ANALYTICAL INSTRUMENTS 885,000 Trimble Navigation (b) 20,293 GPS-BASED INSTRUMENTS 2,300,000 Spectris (United Kingdom) 15,701 ELECTRONIC INSTRUMENTATION & CONTROLS ---------------------------------------------------------------------------- 121,481 21 Liberty Acorn Fund >Statement of Investments (Unaudited), continued NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >SEMICONDUCTORS/RELATED EQUIPMENT: 1.3% 1,005,000 Integrated Circuit Systems (b) $31,587 SILICON TIMING DEVICES 685,000 LittelFuse (b) 15,317 LITTLE FUSES 800,000 Semtech (b) 11,392 ANALOG SEMICONDUCTORS 565,000 Supertex (b) 10,379 MIXED-SIGNAL SEMICONDUCTORS 519,000 Microsemi 8,304 ANALOG/MIXED SIGNAL SEMICONDUCTORS 361,000 Actel (b) 7,400 FIELD PROGRAMMABLE GATE ARRAYS 679,000 IXYS (b) 5,412 POWER SEMICONDUCTORS 664,000 Asyst Technologies (b) 4,442 SEMICONDUCTOR FAB AUTOMATION EQUIPMENT ---------------------------------------------------------------------------- 94,233 SOFTWARE/SERVICES >BUSINESS SOFTWARE: 6.3% 1,180,000 Kronos (b)(c) 59,956 LABOR MANAGEMENT SOLUTIONS 1,600,000 Avid Technology (b)(c) 56,112 DIGITAL NONLINEAR EDITING SOFTWARE & SYSTEMS 3,350,000 JD Edwards (b) 48,005 MID MARKET ERP & SUPPLY CHAIN SOFTWARE 1,050,000 Micros Systems (b)(c) 34,629 INFORMATION SYSTEMS FOR RESTAURANTS & HOTELS 9,900,000 Novell (b) 30,492 SECURITY & Identity Management Software 3,050,000 Systems & Computer Technology (b)(c) 27,450 ENTERPRISE SOFTWARE & SERVICES 4,975,000 E.Piphany (b)(c) 25,422 CRM SOFTWARE 2,200,000 JDA Software (b)(c) 24,618 APPLICATIONS/SOFTWARE & SERVICES FOR RETAILERS 3,000,000 Lawson Software (b) 23,310 ENTERPRISE RESOURCE PLANNING (ERP) SOFTWARE 2,200,000 MAPICS (b)(c) 18,040 MID MARKET ERP SOFTWARE 2,035,000 MRO Software (b)(c) 17,562 ENTERPRISE MANAGEMENT SOFTWARE 1,221,000 Sybase (b) 16,984 DATABASE SOFTWARE 500,000 Hyperion Solutions (b) 16,880 ANALYTICAL APPLICATION SOFTWARE 4,000,000 Aspect Communications (b)(c) 15,480 CALL CENTER SOFTWARE 4,534,000 Actuate (b)(c) 12,605 INFORMATION DELIVERY SOFTWARE & SOLUTIONS 5,000,000 Indus International (b)(c) 10,045 ENTERPRISE ASSET MANAGEMENT SOFTWARE 500,000 SPSS (b) 8,370 STATISTICAL ANALYSIS SOFTWARE NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- 1,500,000 Witness Systems (b)(c) $7,755 CUSTOMER EXPERIENCE MANAGEMENT SOFTWARE 1,000,000 Radiant Systems (b) 6,740 POINT OF SALE SYSTEMS FOR CONVENIENCE STORES 1,200,000 ScanSoft (b) 6,516 SOFTWARE TO INCORPORATE SPEECH & IMAGES TO TEXT 3,300,000 BSQUARE (b)(c) 2,706 SOFTWARE TO HELP DESIGN MOBILE DEVICES 1,400,000 ClickSoftware Technologies (b)(c) 2,520 SERVICE CHAIN OPTIMIZATION SOFTWARE 70,000 Group 1 Software (b) 1,293 ADDRESS VERIFICATION SOFTWARE ---------------------------------------------------------------------------- 473,490 >CONSUMER SOFTWARE: 0.7% 2,000,000 THQ (b)(c) 36,000 ENTERTAINMENT SOFTWARE 1,500,000 Activision (b) 19,380 ENTERTAINMENT SOFTWARE ---------------------------------------------------------------------------- 55,380 >COMPUTER SERVICES: 1.0% 3,469,000 Ciber (b)(c) 24,352 SOFTWARE SERVICES & STAFFING 4,350,000 Igate Corp. (b)(c) 15,094 TECHNOLOGY STAFFING SERVICES 4,600,000 AnswerThink Consulting (b)(c) 8,878 IT INTEGRATOR FOR FORTUNE 2000 560,000 American Management Systems (b) 7,997 SOFTWARE DEVELOPMENT SERVICES 2,300,000 Analysts International (b)(c) 5,732 TECHNOLOGY STAFFING SERVICES 500,000 Pomeroy Computer Resources 5,530 NETWORK INTEGRATION SERVICES 600,000 Torex (United Kingdom) 4,959 APPLICATION SOFTWARE FOR HOSPITAL MANAGEMENT & RETAIL 800,000 New Horizons Worldwide (b)(c) 3,424 COMPUTER TRAINING SERVICES ---------------------------------------------------------------------------- 75,966 >BUSINESS INFORMATION/MARKETING SERVICES/PUBLISHING: 1.9% 1,200,000 Getty Images (b) 49,560 PHOTOGRAPHS FOR PUBLICATIONS & ELECTRONIC MEDIA 2,236,000 Navigant Consulting (b)(c) 26,497 CONSULTING FIRM 2,685,000 InfoUSA (b)(c) 21,748 BUSINESS DATA FOR SALES LEADS 800,000 INFORMATION Holdings (b) 14,600 PATENT & Other Business INFORMATION 1,000,000 Moore - Wallace (Canada) (b) 14,523 COMMERCIAL PRINTING 300,000 Proquest (b) 7,740 INFORMATION SERVICES FOR EDUCATION & AUTOMOTIVE MARKETS 1,700,000 PRIMEDIA (b) 5,185 SPECIALTY MAGAZINES & Other Publications 139,000 Administaff (b) 1,432 PROFESSIONAL EMPLOYER ORGANIZATION ---------------------------------------------------------------------------- 141,285 22 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >INTERNET: 1.1% 9,900,000 Skillsoft Publishing (b)(c) $49,995 INTEGRATED E-LEARNING SOLUTIONS 2,500,000 RSA Security (b) 26,875 ENTERPRISE SECURITY SOFTWARE 1,200,000 RealNetworks (b) 8,136 STREAMING SOFTWARE & Content 1,341,618 Vital Stream, Cl. C (b) 335 538,190 Vital Stream, Cl. B (b) 128 STREAMING SERVICES FOR THE INTERNET 250,000 NeoPlanet, Series A (b) 29 53,376 NeoPlanet, Series B (b) 11 WEB BROWSER 263,158 Bigfoot International, Series A (b) -- INTERNET DIRECT MARKETING ---------------------------------------------------------------------------- 85,509 >ELECTRONICS DISTRIBUTION: 0.7% 1,695,000 Avnet (b) 21,493 ELECTRONIC COMPONENTS DISTRIBUTION 780,000 Tech Data (b) 20,834 VAR FOR IT PRODUCTS 1,410,000 Pioneer-Standard Electronics 11,957 ELECTRONIC COMPONENTS DISTRIBUTION ---------------------------------------------------------------------------- 54,284 >TRANSACTION PROCESSORS: 1.4% 1,487,000 Global Payments 52,788 CREDIT CARD PROCESSOR 275,000 Deutsche Boerse (Germany) 14,592 TRADING, CLEARING & SETTLEMENT SERVICES FOR FINANCIAL MARKETS 575,000 Euronext (France) 14,279 TRADING SERVICES FOR FINANCIAL MARKETS 600,000 Cubic 13,332 REVENUE COLLECTION & Defense Systems 5,000,000 Hong Kong Exchanges & Clearing (Hong Kong) 7,245 TRADING, CLEARING & SETTLEMENT SERVICES FOR FINANCIAL MARKETS 405,100 Euronet Worldwide (b) 4,379 ATM PROCESSOR ---------------------------------------------------------------------------- 106,615 ---------- INFORMATION: TOTAL 2,024,850 ---------------------------------------------------------------------------- HEALTH CARE: 10.1% >BIOTECHNOLOGY/DRUG DELIVERY: 2.7% 519,000 Martek Biosciences (b) 22,286 FATTY ACIDS FOR BABY FORMULA & OTHER FOODS 1,035,000 Perbio Science (Sweden) 19,288 CONSUMABLES TO BIOTECH/PHARMACEUTICAL INDUSTRIES 2,055,000 Nektar Therapeutics (b) 18,968 PULMONARY DRUG DELIVERY 1,708,000 Ciphergen Biosystems (b)(c) 17,507 PROTEIN CHIPS USED FOR DRUG TARGET DISCOVERY 1,115,000 Enzon (b) 13,960 POLYMER DELIVERY TECHNOLOGY FOR IMPROVED DRUGS NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- 2,000,000 Medarex (b) $13,180 HUMANIZED ANTIBODIES 426,000 NPS Pharmaceuticals (b) 10,369 SMALL MOLECULE DRUGS 900,000 Applera-Celera Genomics (b) 9,288 DIAGNOSTICS & DRUG DEVELOPMENT 608,000 Protein Design Labs (b) 8,500 COMPUTER DESIGNED MONOCLONAL ANTIBODIES 1,982,000 Aclara Biosciences (b)(c) 8,384 MICROFLUIDIC SYSTEMS FOR DRUG DEVELOPMENT 2,800,000 Sequenom (b)(c) 7,616 HIGH SPEED DNA ANALYSIS INSTRUMENTS 1,875,000 Locus Discovery, Series D, Pfd. (b) 7,500 HIGH THROUGHPUT RATIONAL DRUG DESIGN 635,000 Maxygen (b) 6,966 MOLECULAR BREEDING 638,000 Diversa (b) 6,272 MOLECULAR BREEDING 389,000 Atherogenic (b) 5,808 DRUGS FOR ATHEROSCLEROSIS, RHEUMATOID ARTHRITIS, ASTHMA 865,000 Arena Pharmaceuticals (b) 5,744 NOVEL DRUG TARGETING TECHNOLOGY 304,000 Alexion Pharmaceuticals (b) 5,183 MONOCLONAL ANTIBODIES 1,600,000 Sangamo Biosciences (b)(c) 4,560 DRUG DISCOVERY 1,258,000 Corvas International (b) 3,397 RATIONAL DRUG DESIGN 528,000 Pharmacyclics (b) 2,503 LIGHT ACTIVATED DRUGS FOR CANCER & VASCULAR DISEASES 160,000 Myriad Genetics (b) 2,178 GENE DISCOVERY & DIAGNOSTIC PRODUCTS 1,249,999 Perlegen Sciences (b) 1,950 LARGE SCALE GENE SEQUENCING 320,000 Incyte Genomics (b) 1,485 BIOINFORMATICS & DRUG DEVELOPMENT 316,000 Guilford Pharmaceuticals (b) 1,435 DRUG DELIVERY & NEUROLOGY DRUGS 210,000 Gene Logic (b) 1,254 GENE EXPRESSION DATABASE 461,000 SYRRX, Series C (b) 1,042 X-RAY CRYSTALLOGRAPHY 325,000 Genzyme Molecular Oncology Division (b) 764 GENE EXPRESSION TECHNOLOGY & CANCER DRUGS 359,944 Microdose (b) 22 DRUG INHALERS ---------------------------------------------------------------------------- 207,409 >MEDICAL EQUIPMENT/LABORATORY SUPPLIES: 2.7% 1,554,000 Edwards Lifesciences (b) 49,946 HEART VALVES 920,000 Diagnostic Products 37,766 IMMUNODIAGNOSTIC KITS 583,000 Orthofix International (b) 19,087 BONE FIXATION & STIMULATION DEVICES 23 Liberty Acorn Fund >Statement of Investments (Unaudited), continued NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >MEDICAL EQUIPMENT/LABORATORY SUPPLIES--CONTINUED 875,000 Viasys Healthcare (b) $18,113 RESPIRATORY & NEUROLOGY MEDICAL EQUIPMENT 20,000 Synthes-Stratec (Switzerland) 14,398 PRODUCTS FOR ORTHOPEDIC SURGERY 770,000 Visx (b) 13,360 LASER EYE SURGERY EQUIPMENT 2,000,000 Smith & Nephew (United Kingdom) 11,512 MEDICAL EQUIPMENT & SUPPLIES 265,000 Essilor International (France) 10,693 EYEGLASS LENSES 600,000 Sola International (b) 10,440 SPECIALTY EYEGLASS LENSES 1,495,000 Novoste (b)(c) 8,970 RADIATION CATHETERS FOR IN-STENT RESTENOSIS 350,000 Haemonetics (b) 6,545 BLOOD & PLASMA COLLECTION EQUIPMENT ---------------------------------------------------------------------------- 200,830 >PHARMACEUTICALS: 0.1% 131,264 Yuhan (South Korea) 6,231 ETHICAL DRUG PRODUCER ---------------------------------------------------------------------------- >HOSPITAL MANAGEMENT: 0.2% 385,000 Rhoen-Klinikum (Germany) 14,946 HOSPITAL MANAGEMENT ---------------------------------------------------------------------------- >MEDICAL SUPPLIES: 0.5% 686,000 Techne (b) 20,813 CYTOKINES, ANTIBODIES, OTHER REAGENTS FOR LIFE SCIENCES 650,000 Owens & Minor 14,527 DISTRIBUTION OF MEDICAL SUPPLIES ---------------------------------------------------------------------------- 35,340 >SERVICES: 3.9% 4,296,000 First Health Group (b) 118,570 PPO NETWORK 2,491,000 Lincare Holdings (b) 78,491 HOME HEALTH CARE SERVICES 2,542,000 NDCHealth Group (c) 46,646 HEALTH CLAIMS PROCESSING & DRUG Marketing Services 1,333,000 Dendrite International (b) 17,169 SOFTWARE FOR PHARMACEUTICAL SALES FORCE 300,000 OPG Groep (Netherlands) 9,134 PHARMACEUTICAL WHOLESALER & RETAILER 440,000 Medquist (b) 8,906 MEDICAL TRANSCRIPTION SERVICES 281,000 Omega Pharma (Belgium) 8,565 OTC PRODUCTS, PHARMACY & DENTAL SUPPLIES 550,000 Serologicals (b) 7,497 BLOOD COLLECTION & ANTIBODY PRODUCTION 700,000 Nestor Healthcare (United Kingdom) 3,221 HEALTHCARE STAFFING COMPANY ---------------------------------------------------------------------------- 298,199 ---------- HEALTH CARE: TOTAL 762,955 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- CONSUMER GOODS/SERVICES: 19.6% GOODS LEISURE VEHICLES: 1.5% 1,745,000 Harley-Davidson $69,556 MOTORCYCLES & RELATED MERCHANDISE 1,495,000 Monaco Coach (b)(c) 22,918 RECREATIONAL VEHICLES 275,000 Polaris Industries 16,885 MANUFACTURER OF LEISURE VEHICLES & RELATED PRODUCTS 2,850,000 Ducati Motor (Italy) (b) 4,294 MOTORCYCLES & RELATED MERCHANDISE ---------------------------------------------------------------------------- 113,653 >FURNITURE/TEXTILES: 1.8% 740,000 Mohawk Industries (b) 41,092 CARPET & FLOORING 1,275,000 Hon Industries 38,887 OFFICE FURNITURE & FIREPLACES 1,900,000 Herman Miller 38,399 OFFICE FURNITURE 510,000 Furniture Brands International (b) 13,311 FURNITURE 550,000 Nobia (Sweden) 4,127 KITCHEN INTERIORS MANUFACTURING & DISTRIBUTION ---------------------------------------------------------------------------- 135,816 >FOOD & BEVERAGES: 0.7% 1,600,000 Kerry Group (Ireland) 24,772 FOOD INGREDIENTS 3,500,000 Parmalat Finanziaria (Italy) 11,031 DAIRY PRODUCER 3,000,000 Lion Nathan (Australia) 10,797 BEER BREWER/DISTRIBUTOR 440,000 Orkla (Norway) 7,624 DIVERSIFIED CONSUMER GOODS ---------------------------------------------------------------------------- 54,224 >NONDURABLES: 1.2% 795,000 Scotts Company (b) 39,352 CONSUMER LAWN & GARDEN PRODUCTS 2,300,000 Helen of Troy (b)(c) 34,868 HAIRDRYERS & CURLING IRONS 255,000 Uni-Charm (Japan) 11,042 INFANT HYGIENE & FEMININE CARE PRODUCTS 601,000 First Years (c) 7,320 Infant & Toddler Products ---------------------------------------------------------------------------- 92,582 >DURABLE GOODS: 1.2% 1,007,000 SCP Pool (b) 34,641 DISTRIBUTOR OF SWIMMING POOL SUPPLIES 605,000 Hunter Douglas (Netherlands) 20,181 DECORATIVE WINDOW COVERINGS 375,000 American Woodmark 17,460 KITCHEN CABINET 575,000 Hyundai Mobis (South Korea) 14,754 AUTO PARTS ---------------------------------------------------------------------------- 87,036 24 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >APPAREL: 2.3% 1,420,000 Coach (b) $70,631 DESIGNER & RETAILER OF BRANDED LEATHER ACCESSORIES 1,370,000 Jones Apparel (b) 40,086 WOMEN'S APPAREL 828,000 Steven Madden (b)(c) 18,084 WHOLESALER/RETAILER OF FASHION FOOTWEAR 965,000 Nautica Enterprises (b) 12,381 CASUAL APPAREL 265,000 Oxford Industries 11,003 BRANDED & PRIVATE LABEL APPAREL 200,000 Columbia Sportswear (b) 10,282 ACTIVE OUTDOOR APPAREL, FOOTWEAR & ACCESSORIES 1,950,000 Billabong International (Australia) 8,039 SURFWEAR APPAREL MANUFACTURER ---------------------------------------------------------------------------- 170,506 SERVICES >RETAIL: 5.1% 2,132,000 Christopher & Banks (b)(c) 78,863 WOMEN'S APPAREL RETAILER 1,600,000 Michaels Stores 60,896 CRAFT & HOBBY SPECIALTY RETAILER 2,095,000 Chico's Fas (b) 44,100 WOMEN'S SPECIALTY RETAIL 1,400,000 Borders Group (b) 24,654 BOOKSTORES 500,000 Whole Foods Market (b) 23,765 NATURAL FOOD SUPERMARKETS 1,005,000 Aeropostale (b) 21,587 MALL BASED TEEN RETAILER 536,000 Zale (b) 21,440 SPECIALTY RETAILER OF JEWELRY 713,000 Hot Topic (b) 19,187 MUSIC INSPIRED RETAILER OF APPAREL, ACCESSORIES & GIFTS 815,000 Petco Animal Supplies (b) 17,718 PET SUPPLIES & SERVICES 450,000 Ann Taylor (b) 13,027 WOMEN'S APPAREL RETAILER 344,000 Urban Outfitters (b) 12,350 ECLECTIC HOME & APPAREL RETAILER 425,000 Abercrombie & Fitch (b) 12,074 TEEN APPAREL RETAILER 500,000 Pier 1 Imports 10,200 IMPORTED FURNITURE & TCHOTCHKES 3,100,000 The Warehouse Group (New Zealand) 9,422 WAREHOUSE CLUB 395,000 Genesco (b) 6,991 MULTI-CONCEPT BRANDED FOOTWEAR RETAILER 750,000 Gadzooks (b)(c) 4,260 TEEN APPAREL RETAILER 700,000 Gaiam (b) 4,165 HEALTHY LIVING CATALOG & E-COMMERCE ---------------------------------------------------------------------------- 384,699 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >TRAVEL: 0.9% 2,024,500 Intrawest (Canada) $26,535 OWNER/OPERATOR OF SKI RESORTS 3,380,000 LaQuinta (b) 14,568 OWNER/FRANCHISER OF MID-PRICED HOTELS 950,000 Vail Resorts (b) 12,796 OWNER/OPERATOR OF SKI RESORTS 725,000 Navigant International (b)(c) 9,352 CORPORATE TRAVEL AGENCY 620,000 Jurys Doyle Hotel (Ireland) 6,012 HOTEL GROUP ---------------------------------------------------------------------------- 69,263 >CONSUMER SERVICES: 1.6% 2,200,000 ITT Educational Services (b) 64,350 POST-SECONDARY DEGREE PROGRAMS 2,350,000 Bally Total Fitness (b)(c) 21,220 NATIONAL CHAIN OF FITNESS CENTERS 260,000 USS (Japan) 13,190 USED CAR AUCTIONEER 250,000 Weight Watchers (b) 11,373 WEIGHT LOSS PROGRAM 1,750,000 Princeton Review (b)(c) 10,325 COLLEGE PREPARATION COURSES ---------------------------------------------------------------------------- 120,458 >ENTERTAINMENT/LEISURE PRODUCTS: 1.2% 805,000 International Speedway Motors 31,806 LARGEST MOTORSPORT RACETRACK OWNER & OPERATOR 1,276,000 Action Performance (c) 24,244 MOTORSPORT COLLECTIBLES & MERCHANDISING 2,765,000 Six Flags 18,747 WORLDWIDE THEME PARK OPERATOR 363,000 Speedway Motors 9,728 MOTORSPORT RACETRACK OWNER & Operator 1,750,000 Magna Entertainment, Cl. A (Canada) (b) 8,750 OWNER/OPERATOR THOROUGHBRED RACETRACKS ---------------------------------------------------------------------------- 93,275 >CASINOS: 1.4% 2,010,000 Alliance Gaming (b) 38,009 DIVERSIFIED GAMING COMPANY 890,000 Station Casinos 22,473 CASINOS & RIVERBOATS 875,000 Argosy Gaming (b) 18,296 REGIONAL RIVERBOAT CASINOS 1,925,000 Pinnacle Entertainment (b)(c) 13,090 REGIONAL RIVERBOAT CASINOS 1,500,000 Sky City Entertainment (New Zealand) 8,300 CASINO/ENTERTAINMENT COMPLEX 635,000 Monarch Casino & Resort (b)(c) 5,918 CASINO/HOTEL IN RENO 113,000 Lakes Entertainment (b) 903 GAMING ENTREPRENEUR ---------------------------------------------------------------------------- 106,989 25 Liberty Acorn Fund >Statement of Investments (Unaudited), continued NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >RESTAURANTS: 0.3% 1,217,000 Autogrill (Italy) $13,299 RESTAURANTS & CATERING FOR TRAVELERS 243,000 Cheesecake Factory (b) 8,721 CASUAL DINING RESTAURANT ---------------------------------------------------------------------------- 22,020 >CRUISE LINES: 0.4% 1,260,000 Steiner Leisure (b)(c) 18,396 SPAS & HAIR/SKIN PRODUCTS ON CRUISE SHIPS 400,000 Carnival 13,004 LARGEST CRUISE LINE ---------------------------------------------------------------------------- 31,400 ---------- CONSUMER GOODS/SERVICES: TOTAL 1,481,921 ---------------------------------------------------------------------------- FINANCE: 13.2% >BANKS: 4.2% 1,551,000 TCF Financial 61,792 GREAT LAKES BANK 1,608,000 Associated Banc-Corp 59,303 MIDWEST BANK 990,000 Texas Regional Bancshares 34,353 SOUTH TEXAS BANK 1,122,000 Glacier Bancorp (c) 27,624 MOUNTAIN STATES BANK 2,900,000 Anglo Irish Bank (Ireland) 25,685 CORPORATE LENDING: PRIVATE BANKING 1,634,000 Republic 21,928 MICHIGAN BANK 605,000 Chittenden 16,547 VERMONT & WESTERN MASSACHUSETTS BANK 440,000 Hawthorne Financial (b)(c) 15,250 REAL ESTATE LENDER 412,000 Pacific Northwest Bancorp 14,321 PACIFIC NW BUSINESS BANK 356,000 Bank of Bermuda 12,456 OFFSHORE BANK 297,000 BOK Financial (b) 11,455 OKLAHOMA BANK 125,000 Depfa Bank (Ireland) 9,741 INTERNATIONAL PUBLIC SECTOR FINANCE 249,000 West Coast Bancorp 4,532 PORTLAND SMALL BUSINESS LENDER 170,000 Midwest Bank 3,301 CHICAGO BANK 102,000 Integra Bank 1,755 INDIANA BANK ---------------------------------------------------------------------------- 320,043 >SAVINGS & LOANS: 2.3% 2,184,000 Peoples Bank Bridgeport 63,314 CONNECTICUT SAVINGS & LOAN 807,000 Downey Financial 33,329 CALIFORNIA HOME LENDER 1,228,000 Anchor Bancorp Wisconsin (c) 29,337 WISCONSIN THRIFT NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- 497,000 Quaker City Bancorp (c) $20,402 LA REAL ESTATE LENDER 1,700,000 Housing Development Finance (India) 15,007 MORTGAGE LOAN PROVIDER IN INDIA 700,000 First Federal Capital 13,895 WISCONSIN THRIFT ---------------------------------------------------------------------------- 175,284 >INSURANCE: 3.5% 1,320,000 HCC Insurance Holdings 39,032 AVIATION INSURANCE 138,000 Markel (b) 35,328 SPECIALTY INSURANCE 870,000 Philadelphia Consolidated Holding (b) 35,148 SPECIALTY INSURANCE 1,000,000 RLI 32,900 SPECIALTY INSURANCE 826,000 Leucadia National 30,661 INSURANCE HOLDING COMPANY 995,000 Protective Life 26,616 LIFE INSURANCE 700,000 Harleysville Group 16,114 COMMERCIAL & PERSONAL LINES INSURANCE 650,000 Scottish Annuity & Life 13,136 LIFE REINSURER 210,000 StanCorp Financial 10,966 GROUP LIFE, DISABILITY & 401K 800,000 Ohio Casualty (b) 10,544 COMMERCIAL & PERSONAL LINES INSURANCE 308,000 Selective Insurance Group 7,715 COMMERCIAL & PERSONAL LINES INSURANCE 455,000 Northbridge Financial (Canada) (b) 6,393 PROPERTY & CASUALTY INSURANCE ---------------------------------------------------------------------------- 264,553 >MONEY MANAGEMENT: 2.0% 2,230,000 SEI Investments 71,360 MUTUAL FUND ADMINISTRATION & INVESTMENT MANAGEMENT 1,100,000 Neuberger Berman 43,901 ASSET MANAGER FOR HIGH NET WORTH 855,000 Eaton Vance 27,018 SPECIALTY MUTUAL FUNDS 123,000 Affiliated Managers Group (b) 7,497 ASSET MANAGEMENT HOLDING COMPANY 1,360,000 Edinburgh Fund Managers (United Kingdom) 1,619 INVESTMENT MANAGEMENT 200,000 The Investment Company of China (China) (b) 409 CLOSED-END FUND ---------------------------------------------------------------------------- 151,804 >BROKERAGE: 0.1% 200,000 Investment Technology Group (b) 3,720 ELECTRONIC TRADING ---------------------------------------------------------------------------- 26 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >FINANCE COMPANIES: 1.1% 5,531,000 AmeriCredit (b) $47,290 AUTO LENDING 1,820,000 World Acceptance (b)(c) 29,630 PERSONAL LOANS 900,000 DVI Health Services (b)(c) 4,203 LEASES BIG MEDICAL EQUIPMENT 90,000 Intermediate Capital (United Kingdom) 1,446 EUROPEAN PROVIDER OF MEZZANINE CAPITAL ---------------------------------------------------------------------------- 82,569 ---------- FINANCE: TOTAL 997,973 ---------------------------------------------------------------------------- INDUSTRIAL GOODS/SERVICES: 11.8% >STEEL: 0.7% 1,300,000 Gibraltar Steel (c) 26,624 STEEL PROCESSING 1,050,000 Worthington Industries 14,070 STEEL PROCESSING 450,000 Tenaris (Luxembourg) (b) 11,475 STEEL PIPE FOR OIL WELLS & PIPELINES 370,000 Atchison Casting (b) 85 STEEL FOUNDRIES ---------------------------------------------------------------------------- 52,254 >INDUSTRIAL GOODS: 1.5% 1,400,000 Clarcor (c) 53,970 MOBILE & INDUSTRIAL FILTERS 750,000 Donaldson 33,337 INDUSTRIAL AIR FILTRATION 268,000 Mine Safety Appliances 11,690 SAFETY EQUIPMENT 363,000 Intermagnetics General (b) 7,202 SUPERCONDUCTING WIRE 65,000 Bacou Dalloz (France) 6,378 SAFETY EQUIPMENT ---------------------------------------------------------------------------- 112,577 >INDUSTRIAL DISTRIBUTION: 0.8% 600,000 Hughes Supply 20,820 INDUSTRIAL DISTRIBUTION 1,000,000 Watsco 16,560 HVAC DISTRIBUTION 2,900,000 Grafton Group (Ireland) 12,843 BUILDERS, WHOLESALERS & DIY RETAILING 900,000 NuCo2 (b)(c) 8,469 BULK CO2 GAS DISTRIBUTION TO RESTAURANTS ---------------------------------------------------------------------------- 58,692 >CONSTRUCTION: 0.8% 488,000 Simpson (b) 17,861 WALL JOINT MAKER 425,000 Florida Rock Industries 17,544 CONCRETE & AGGREGATES 380,000 Daito Trust Construction (Japan) 8,006 APARTMENT BUILDER 750,000 McCarthy & Stone (United Kingdom) 6,087 BUILDER OF RETIREMENT APARTMENTS 3,000,000 Consorcio (Mexico) (b) 5,957 LOW/MEDIUM INCOME HOUSE BUILDER NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- 395,000 Northwest Pipe Company (b)(c) $5,605 WATER TRANSMISSION PIPE ---------------------------------------------------------------------------- 61,060 >SPECIALTY CHEMICALS & INDUSTRIAL MATERIALS: 1.2% 1,850,000 Spartech (c) 39,239 PLASTICS DISTRIBUTION & COMPOUNDING 983,000 Schulman 15,787 PLASTICS DISTRIBUTION & COMPOUNDING 37,000 Givaudan (Switzerland) 15,604 INDUSTRIAL FRAGRANCES & FLAVORS 32,000 Geberit International (Switzerland) 9,873 PLUMBING SUPPLIES 266,600 Novozymes (Denmark) 7,428 INDUSTRIAL ENZYMES 347,000 SYMYX (b) 5,663 MATERIALS & CHEMICALS ---------------------------------------------------------------------------- 93,594 >MACHINERY: 1.1% 950,000 Esco Technologies (b)(c) 41,800 FILTRATION & TEST EQUIPMENT 1,025,000 Ametek 37,566 AEROSPACE/INDUSTRIAL INSTRUMENTS 51,000 Tennant 1,875 NON-RESIDENTIAL FLOOR CLEANING EQUIPMENT ---------------------------------------------------------------------------- 81,241 >OUTSOURCING SERVICES & TRAINING: 0.4% 2,400,000 Labor Ready (b)(c) 17,208 TEMPORARY MANUAL LABOR 9,500,000 Li & Fung (Hong Kong) 12,243 SOURCING OF CONSUMER GOODS 600,000 GP Strategies (b)(c) 3,648 TRAINING PROGRAMS ---------------------------------------------------------------------------- 33,099 >CONGLOMERATES: 0.1% 5,550 Pargesa (Switzerland) 11,337 INDUSTRIAL & MEDIA CONGLOMERATE ---------------------------------------------------------------------------- >INDUSTRIAL SUPPLIERS: 0.2% 2,220,000 Xstrata (United Kingdom) 14,769 DIVERSIFIED MINING HOLDING COMPANY ---------------------------------------------------------------------------- >LOGISTICS: 2.6% 2,900,000 Expeditors International of Washington 100,456 INTERNATIONAL FREIGHT FORWARDER 900,000 UTI Worldwide 28,071 INTERNATIONAL FREIGHT FORWARDER 1,000,000 Forward Air (b) 25,370 FREIGHT TRANSPORTATION BETWEEN AIRPORTS 1,400,000 Exel (United Kingdom) 14,393 GLOBAL LOGISTICS & FREIGHT FORWARDING 11,000,000 Sembcorp Logistics (Singapore) 11,745 LOGISTIC SERVICES FOR MARINE TRANSPORT 40,000,000 Sinotrans (China) (b) 11,285 INTEGRATED LOGISTICS IN CHINA 27 Liberty Acorn Fund >Statement of Investments (Unaudited), continued NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >LOGISTICS--CONTINUED 759,000 Hub Group (b)(c) $6,664 TRUCK & RAIL FREIGHT FORWARDER ---------------------------------------------------------------------------- 197,984 >WATER: 1.4% 2,400,000 Tetra Tech (b) 41,112 RESOURCE MANAGEMENT & INFRASTRUCTURE CONSULTING 855,000 Cuno (b)(c) 30,883 FILTRATION & FLUIDS CLARIFICATION 730,000 Pall 16,425 FILTRATION & FLUIDS CLARIFICATION 900,000 Insituform Technologies (b) 15,912 WATER/SEWER PIPE REPAIR ---------------------------------------------------------------------------- 104,332 >OTHER INDUSTRIAL SERVICES: 1.0% 725,000 G&K Services 21,460 UNIFORM RENTAL 1,500,000 Clark (b)(c) 17,925 EXECUTIVE COMPENSATION & BENEFITS CONSULTING 825,000 Mobile Mini (b)(c) 13,472 LEASES PORTABLE STORAGE UNITS 605,000 Zardoya Otis (Spain) 9,116 605,000 Zardoya Otis Bonus Rights (Spain) 905 ELEVATOR MANUFACTURER & SERVICE PROVIDER 290,000 Munters (Sweden) 6,311 MOISTURE & Humidity Control 31,000 Schindler (Switzerland) 5,000 ELEVATOR MANUFACTURER & SERVICE PROVIDER ---------------------------------------------------------------------------- 74,189 ---------- INDUSTRIAL GOODS/SERVICES: TOTAL 895,128 ---------------------------------------------------------------------------- ENERGY/MINERALS: 7.0% >INDEPENDENT POWER: 0.2% 570,000 Gamesa (Spain) 12,752 SPANISH WIND TURBINES 720,000 Millennium Cell (b) 1,310 FUEL CELL TECHNOLOGY ---------------------------------------------------------------------------- 14,062 >OIL/GAS PRODUCERS: 3.9% 6,300,000 XTO Energy 126,693 NATURAL GAS PRODUCER 730,000 Evergreen Resources (b) 39,646 COAL SEAM GAS PRODUCER 1,000,000 Western Gas 39,600 OIL PRODUCER & COAL SEAM GAS PRODUCER 2,550,000 Ultra Petroleum (b) 32,921 NATURAL GAS PRODUCER 1,200,000 Southwestern Energy (b) 18,012 NATURAL GAS PRODUCER 365,000 Talisman Energy (Canada) 16,557 OIL & GAS PRODUCER 342,000 Westport Resources (b) 7,781 OIL & GAS PRODUCER 2,265,000 Tipperary (b)(c) 5,889 COAL SEAM GAS PRODUCER 450,000 McMoran Exploration (b) 5,013 NATURAL GAS PRODUCERS & LNG DEVELOPER NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- 3,000,000 Tullow Oil (United Kingdom) (b) $3,915 OIL & GAS PRODUCER 135,000 Quicksilver (b) 3,233 NATURAL GAS & COAL SEAM GAS PRODUCER ---------------------------------------------------------------------------- 299,260 >DISTRIBUTION/MARKETING/REFINING: 1.1% 1,400,000 Equitable Resources 57,036 NATURAL GAS UTILITY & PRODUCER 761,000 Atmos Energy 18,873 NATURAL GAS UTILITY 1,270,000 Aquila (b) 7,861 ELECTRIC UTILITY HOLDING COMPANY ---------------------------------------------------------------------------- 83,770 >OIL SERVICES: 1.8% 1,400,000 FMC Technologies (b) 29,470 OIL & GAS WELL HEAD MANUFACTURER 4,500,000 Newpark Resources (b)(c) 24,660 DRILLING FLUID SERVICES TO OIL & GAS INDUSTRY 650,000 Carbo Ceramics 24,212 NATURAL GAS WELL STIMULANTS 3,000,000 Saipem (Italy) 22,499 OFFSHORE CONSTRUCTION & DRILLING 1,300,000 Key Energy Services (b) 13,936 OIL & GAS WELL WORKOVER SERVICES 850,000 Enerflex Systems (Canada) 10,219 NATURAL GAS COMPRESSOR 900,000 Hanover Compressor (b) 10,170 NATURAL GAS COMPRESSOR RENTAL ---------------------------------------------------------------------------- 135,166 ---------- ENERGY/MINERALS: TOTAL 532,258 ---------------------------------------------------------------------------- OTHER INDUSTRIES: 5.5% >REAL ESTATE: 4.9% 1,160,000 The Rouse Company 44,196 REGIONAL SHOPPING MALLS 615,000 General Growth Properties 38,401 REGIONAL SHOPPING MALLS 875,000 SL Green Realty 30,529 MANHATTAN OFFICE BUILDINGS 699,000 Forest City Enterprises, Cl. B 29,113 COMMERCIAL & RESIDENTIAL PROPERTY DEVELOPER 800,000 Macerich Company 28,104 REGIONAL SHOPPING MALLS 700,000 Manufactured Home Communities 24,577 MANUFACTURED HOME COMMUNITIES 725,000 Mills 24,324 REGIONAL SHOPPING MALLS 1,375,000 Crescent Real Estate Equities 22,839 CLASS A OFFICE BUILDINGS 690,000 Federal Realty Investment Trust 22,080 SHOPPING CENTERS 975,000 Glimcher Realty Trust 21,840 REGIONAL SHOPPING MALLS 400,000 Chelsea Properties Group 16,124 OUTLET MALLS 540,000 AMB Property 15,212 INDUSTRIAL PROPERTIES 28 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >REAL ESTATE--CONTINUED 700,000 Keystone Property Trust $12,957 INDUSTRIAL PROPERTIES 200,000 Essex Property Trust 11,450 WEST COAST APARTMENTS 650,000 United Dominion Realty 11,193 APARTMENTS 574,000 LaSalle Hotel Properties 8,484 UPSCALE/FULL SERVICE HOTELS 348,805 Security Capital European Realty (Luxembourg) (b) 5,058 REAL ESTATE INVESTMENTS 190,000 Consolidated Tomoka 4,773 16,000 ACRES OF FLORIDA LAND ---------------------------------------------------------------------------- 371,254 >TRANSPORTATION: 0.2% 100,000 Kobenhavns Lufthavne (Denmark) 8,125 COPENHAGEN AIRPORT AUTHORITY 15,000,000 Comfort Group (Singapore) (b) 6,858 TAXI SERVICE ---------- 14,983 >REGULATED UTILITIES: 0.4% 1,200,000 Unisource Energy 22,560 ELECTRIC UTILITY IN ARIZONA 829,800 Red Electrica (Spain) 10,881 SPANISH POWER GRID ---------------------------------------------------------------------------- 33,441 ---------------------------------------------------------------------------- OTHER INDUSTRIES: TOTAL 419,678 TOTAL COMMON STOCKS AND OTHER ---------- EQUITY-LIKE SECURITIES: 94.0% 7,114,763 (COST: $5,302,050) PRINCIPAL AMOUNT (000) VALUE (000) ---------------------------------------------------------------------------- SHORT-TERM OBLIGATIONS: 5.8% Yield 0.87%: 1.20% Due 7/01/03 - 8/07/03 $ 70,000 American General Finance $69,984 70,000 Campbell Soup 69,969 50,000 Bayer 49,999 45,000 Citigroup 44,987 25,000 Citicorp 24,999 25,000 Marshall & Ilsley 24,995 25,000 Coca Cola 24,994 24,710 Sara Lee 24,698 20,000 Prudential Funding 19,996 20,000 General Electric Capital Services 19,995 16,968 Baxter International 16,964 15,600 John Hancock Financial 15,596 15,000 Virginia Electric & Power 14,992 10,000 US Treasury Bill 9,991 4,902 Repurchase agreement with State Street Bank & Trust Co., dated 6/30/03, due 7/01/03 at 1.10%, collateralized by Federal Home Loan Mortgage Notes maturing 1/28/05, market value $5,001 (repurchase proceeds: $4,902) 4,902 ---------------------------------------------------------------------------- (AMORTIZED COST: $437,061) 437,061 ---------- TOTAL INVESTMENTS: 99.8% 7,551,824 (COST: $5,739,111) (a) CASH AND OTHER ASSETS LESS LIABILITIES: 0.2% 12,926 ---------- TOTAL NET ASSETS: 100% $7,564,750 ============================================================================ 29 Liberty Acorn Fund >Statement of Investments (Unaudited), continued ---------------------------------------------------------------------------- >Notes to Statement of Investments (in thousands) (a) At June 30, 2003, for federal income tax purposes cost of investment is $5,739,520 and net unrealized appreciation was $1,812,304, consisting of gross unrealized appreciation of $2,282,814 and gross unrealized depreciation of $470,510. (b) Non-income producing security. (c) On June 30, 2003, the fund held the following percentages of the outstanding voting shares of the companies listed below:
World Acceptance 10.19% Sequenom 7.10% AnswerThink Consulting 10.12% Witness Systems 6.85% Hub Group 9.85% E.Piphany 6.83% Skillsoft Publishing 9.94% Spartech 6.80% Indus International 9.71% Monarch Casino & Resort 6.68% MAPICS 9.68% Sangamo Biosciences 6.47% Analysts International 9.50% Princeton Review 6.42% Seachange International 9.28% Ciphergen Biosystems 6.38% Novoste 9.15% Micros Systems 6.06% Systems & Computer Technology 9.07% Northwest Pipe Company 6.03% BSQUARE 8.91% Labor Ready 6.00% Christopher & Banks 8.60% Steven Madden 6.00% Igate Corp. 8.47% Kronos 5.96% NuCo2 8.46% DVI Health Services 5.93% MRO Software 8.33% Newpark Resources 5.78% Gadzooks 8.20% Glacier Bancorp 5.78% Clark 8.06% Tipperary 5.77% Gibraltar Steel 8.05% Mobile Mini 5.77% Quaker City Bancorp 8.02% Aclara Biosciences 5.75% JDA Software 7.72% Avid Technology 5.65% Helen of Troy 7.69% Clarcor 5.62% Steiner Leisure 7.65% ClickSoftware Technologies 5.47% COMARCO 7.58% Ciber 5.42% New Horizons Worldwide 7.57% Navigant Consulting 5.35% Actuate 7.53% Hawthorne Financial 5.28% Pinnacle Entertainment 7.42% InfoUSA 5.24% NDCHealth Group 7.30% THQ 5.23% Aspect Communications 7.28% Monaco Coach 5.15% Bally Total Fitness 7.28% Cuno 5.12% Esco Technologies 7.27% Navigant International 5.08% First Years 7.23% GP Strategies 5.08% Action Performance 7.15% Anchor Bancorp Wisconsin 5.02% Shuffle Master 5.01%
The aggregate cost and value of these companies (in thousands) at June 30, 2003, was $1,177 and $1,344, respectively. Investments in affiliate companies represent 0.02% of total net assets at June 30, 2003. Investment activity and income amounts relating to affiliates during the period ended June 30, 2003 were as follows: Dividend Income $ 1,728 Net realized gain or loss $ 8,938 Change in unrealized gain $ 283,647 Purchases $ 98,388 Proceeds from sales $ 94,853 In addition, additional purchases of existing portfolio holdings that were considered affiliates in prior years, resulted in the fund owning more than 5% of the outstanding shares of certain issues at June 30, 2003. Therefore, the cost and market value affiliate disclosure amounts include both acquisitions of new investments in affiliates during the year, as well as prior year investment holdings that became affiliates during the current year. (d) On June 30, 2003, the market value of foreign securities (in thousands) represents 10.34% of total net assets. Value Percent ========================================================== Canada $99,757 1.32% United Kingdom 87,838 1.16 Ireland 79,053 1.05 Switzerland 56,212 0.74 Italy 51,123 0.68 France 49,731 0.66 Singapore 34,605 0.46 Spain 33,654 0.44 Japan 32,238 0.43 Hong Kong 31,273 0.41 Sweden 29,726 0.39 Germany 29,538 0.39 Value Percent ========================================================= Netherlands $29,315 0.39% South Korea 20,985 0.28 Australia 18,836 0.25 New Zealand 17,722 0.23 Luxembourg 16,533 0.22 Denmark 15,554 0.20 India 15,007 0.20 China 11,694 0.15 Belgium 8,565 0.11 Norway 7,624 0.10 Mexico 5,957 0.08 --------- ------- Total Foreign Portfolio $782,540 10.34% ========= ======= 30 Liberty Acorn International >Major Portfolio Changes in the Second Quarter (Unaudited) NUMBER OF SHARES ---------------------------- 03/31/03 06/30/03 Additions ---------------------------------------------------------------------------- EUROPE >NORWAY Ekornes 0 156,000 Tomra Systems 0 1,050,000 >SWEDEN Hexagon 0 212,000 Intrum Justitia 1,505,000 1,730,000 Munters 0 240,000 Nobia 0 550,000 >FRANCE Bonduelle 0 36,000 Euronext 425,000 575,000 >UNITED KINGDOM/IRELAND Anglo Irish Bank (Ireland) 2,200,000 2,300,000 Business Post 85,000 600,000 Depfa Bank (Ireland) 0 125,000 Euro Money Institutional Investor 1,590,000 1,700,000 Expro International 1,600,000 2,500,000 Grafton Group (Ireland) 2,280,000 2,600,000 Hit Entertainment 3,315,000 3,400,000 Jurys Doyle Hotel (Ireland) 0 500,000 Marconi 0 5,375,000 McCarthy & Stone 0 450,000 Nestor Healthcare 1,400,000 1,500,000 RPS Group 4,700,000 5,500,000 Xstrata 700,000 1,550,000 >SWITZERLAND BKW Energie 0 33,500 >ITALY De Longhi 800,000 1,700,000 Parmalat Finanziaria 1,200,000 2,700,000 >SPAIN Abengoa 1,199,500 2,000,000 Prosegur 685,000 757,000 Red Electrica 0 600,000 Telefonica Publicidado Info 1,062,588 1,600,000 >NETHERLANDS Aalberts Industrie 0 409,000 Fugro 220,000 230,476 Hunter Douglas 520,000 545,000 United Services Group 666,000 686,122 Vopak 500,000 800,000 NUMBER OF SHARES ---------------------------- 03/31/03 06/30/03 ---------------------------------------------------------------------------- ASIA >HONG KONG Global Bio-Chem Technology Group 30,000,000 35,000,000 Lianhua Supermarket 0 5,802,000 >JAPAN Toyo Technica 870,000 1,005,000 >INDIA Housing Development Finance 1,700,000 2,000,000 ---------------------------------------------------------------------------- OTHER COUNTRIES >AUSTRALIA/NEW ZEALAND Billabong International 0 2,500,000 Perpetual Trustees 350,000 420,000 The Warehouse Group (New Zealand) 2,500,000 3,500,000 >CANADA Esprit Exploration 0 5,000,000 Shawcor 600,000 700,000 31 Liberty Acorn International >Major Portfolio Changes in the Second Quarter (Unaudited), continued NUMBER OF SHARES ---------------------------- 03/31/03 06/30/03 Sales ---------------------------------------------------------------------------- EUROPE >GERMANY Jenoptik 970,000 0 Norddeutsche Affinerie 136,900 0 Rhoen-Klinikum 350,000 335,000 Rhoen-Klinikum Pfd. 435,000 300,000 >NORWAY Orkla 681,000 456,000 >SWEDEN Perbio Science 1,090,000 905,000 >FRANCE/BELGIUM Essilor International 320,000 270,000 Grandvision 327,500 315,000 IPSO 35,453 0 Neopost 600,000 500,000 RTL Group (Belgium) 250,000 100,000 Technip-Coflexip 110,000 0 >UNITED KINGDOM/IRELAND Charles Taylor Consulting 500,000 0 Exel 1,300,000 1,000,000 Serco Group 2,250,000 0 Spectris 2,320,000 1,420,000 SSL International 2,250,000 1,490,900 Waterford Wedgwood (Ireland) 10,180,000 0 >SWITZERLAND Geberit International 50,000 40,000 Kuoni Reisen 23,000 0 >ITALY Autogrill 1,350,000 1,200,000 Permasteelisa 385,000 0 >SPAIN Amadeus Global Travel 1,260,000 0 NH Hoteles 1,000,000 0 Zardoya Otis 640,000 425,000 >NETHERLANDS Hagemeyer 1,185,000 0 IM Tech 670,000 585,000 NUMBER OF SHARES ---------------------------- 03/31/03 06/30/03 ---------------------------------------------------------------------------- ASIA >HONG KONG Aeon Credit Service 5,000,000 0 Jiangsu Express 17,000,000 12,000,000 Techtronic Industries 6,500,000 5,600,000 Tingyi Holding 22,000,000 0 Travelsky Technology 8,500,000 0 Wing Hang Bank 2,000,000 0 Zhejiang Expressway 15,000,000 11,000,000 >JAPAN Fuji Seal 390,000 292,500 (INCLUDES THE EFFECT OF A 2 FOR 1 STOCK SPLIT) Maruichi Steel Tube 730,000 0 Orix 180,000 0 >TAIWAN Advantech 5,850,000 0 Ase Test 2,200,000 1,750,000 >SOUTH KOREA Hyundai Mobis 675,000 575,000 >SINGAPORE Comfort Group 27,065,115 27,000,000 Star Cruises 15,000,000 0 >INDIA Hero Honda Motors 1,500,000 0 ---------------------------------------------------------------------------- OTHER COUNTRIES >AUSTRALIA Goodman Fielder 5,000,000 0 >CANADA Canadian 88 5,000,000 0 Power Financial 600,000 300,000 >SOUTH AFRICA Harmony Gold 700,000 500,000 32 Liberty Acorn International >Statement of Investments (Unaudited), June 30, 2003 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- COMMON STOCKS AND OTHER EQUITY-LIKE SECURITIES: 96.0% ---------------------------------------------------------------------------- EUROPE: 60.4% >GERMANY/AUSTRIA: 7.6% 275,000 Deutsche Boerse $14,592 TRADING, CLEARING & SETTLEMENT SERVICES FOR FINANCIAL MARKETS 335,000 Rhoen-Klinikum Pfd. 13,467 300,000 Rhoen-Klinikum 11,646 HOSPITAL MANAGEMENT 500,000 GFK 9,432 MARKET RESEARCH SERVICES 655,000 Software AG 9,049 DATABASE SOFTWARE 240,000 Zapf Creation 8,944 TOY MANUFACTURER 550,000 Hugo Boss Designs 8,136 FASHION APPAREL 200,000 Flughafen Wien (Austria) 7,281 VIENNA AIRPORT AUTHORITY 325,000 Kali & Salz 6,621 POTASH PRODUCTS, FERTILIZERS, SALT & WASTE MANAGEMENT 1,000,000 Takkt 5,211 MAIL ORDER RETAILER OF OFFICE & WAREHOUSE DURABLES 80,000 Henkel 4,961 CHEMICALS, DETERGENTS & NON-FOOD CONSUMER BRANDS 70,000 Beru 4,038 AUTO PARTS & ELECTRONICS 200,000 Lion Bioscience (b) 925 BIOINFORMATICS ---------------------------------------------------------------------------- 104,303 >DENMARK: 0.6% 100,000 Kobenhavns Lufthavne 8,126 COPENHAGEN AIRPORT AUTHORITY ---------------------------------------------------------------------------- >NORWAY: 1.8% 2,190,000 Den Norske Bank 10,808 BANK 456,000 Orkla 7,902 DIVERSIFIED CONSUMER GOODS 1,050,000 Tomra Systems 4,512 REVERSE VENDING MACHINES 156,000 Ekornes 2,087 NICHE FURNITURE MANUFACTURER ---------------------------------------------------------------------------- 25,309 >FINLAND: 1.5% 384,000 Amer Group 11,758 BRANDED SPORTING GOODS 475,000 Jaakko Poyry 8,387 ENGINEERING CONSULTANTS IN FORESTRY, ENERGY ---------------------------------------------------------------------------- 20,145 >SWEDEN: 3.6% 905,000 Perbio Science 16,866 CONSUMABLES TO BIOTECH/PHARMACEUTICAL INDUSTRIES 1,730,000 Intrum Justitia 9,434 RECEIVABLES MANAGEMENT & DEBT COLLECTION 520,000 Castellum 8,943 OFFICE, WAREHOUSE & RETAIL PROPERTY COMPANY NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- 240,000 Munters $5,223 MOISTURE & HUMIDITY CONTROL 212,000 Hexagon 4,680 DIVERSIFIED ENGINEERING 550,000 Nobia 4,127 KITCHEN INTERIORS MANUFACTURING & DISTRIBUTION ---------------------------------------------------------------------------- 49,273 >FRANCE/BELGIUM: 8.0% 500,000 Neopost (b) 21,280 POSTAGE METER MACHINES 575,000 Euronext 14,280 TRADING SERVICES FOR FINANCIAL MARKETS 445,000 Omega Pharma (Belgium) 13,564 OTC PRODUCTS, PHARMACY & DENTAL SUPPLIES 130,000 Bacou Dalloz 12,755 SAFETY EQUIPMENT 270,000 Essilor International 10,895 EYEGLASS LENSES 500,000 Fininfo 8,909 DATA FEEDS FOR FRENCH BANKS & BROKERS 100,000 Groupe Bourbon 7,574 FOOD RETAILER 315,000 Grandvision 6,522 EUROPEAN EYEGLASS RETAILER 90,000 Vallourec 5,880 SEAMLESS TUBES 100,000 RTL Group (Belgium) 4,785 TV & RADIO BROADCASTER 36,000 Bonduelle 2,878 PRODUCER OF CANNED, FROZEN & FRESH VEGETABLES ---------------------------------------------------------------------------- 109,322 >UNITED KINGDOM/IRELAND: 15.8% 2,300,000 Anglo Irish Bank (Ireland) 20,371 CORPORATE LENDING: PRIVATE BANKING 1,300,000 Kerry Group (Ireland) 20,127 FOOD INGREDIENTS 3,400,000 Hit Entertainment 13,893 CHILDREN'S TELEVISION SHOWS 5,500,000 RPS Group 12,409 ENVIRONMENTAL CONSULTING 2,500,000 Expro International 11,648 OFFSHORE OIL FIELD SERVICES 2,600,000 Grafton Group (Ireland) 11,514 BUILDERS, WHOLESALERS & DIY RETAILING 1,550,000 Xstrata 10,312 DIVERSIFIED MINING HOLDING COMPANY 1,000,000 Exel 10,281 GLOBAL LOGISTICS & FREIGHT FORWARDING 1,200,000 Torex 9,917 APPLICATION SOFTWARE FOR HOSPITAL MANAGEMENT & RETAIL 125,000 Depfa Bank (Ireland) 9,741 INTERNATIONAL PUBLIC SECTOR FINANCE 1,420,000 Spectris 9,694 ELECTRONIC INSTRUMENTS & CONTROLS 6,500,000 Tullow Oil (b) 8,483 OIL & GAS PRODUCER 1,150,000 Bunzl 8,074 DISTRIBUTION OF DISPOSABLE PRODUCTS TO FOOD INDUSTRY 33 Liberty Acorn International >Statement of Investments (Unaudited), continued NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >UNITED KINGDOM/IRELAND--CONTINUED 420,000 Cobham $8,021 AEROSPACE 1,700,000 Euro Money Institutional Investor 7,973 FINANCIAL PUBLICATIONS 1,490,900 SSL International 7,220 MEDICAL & FOOTCARE PRODUCTS 1,200,000 Smith & Nephew 6,907 MEDICAL EQUIPMENT & SUPPLIES 1,500,000 Nestor Healthcare 6,902 HEALTHCARE STAFFING COMPANY 5,375,000 Marconi (b) 5,464 TELECOMMUNICATIONS EQUIPMENT 500,000 Irish Life & Permanent (Ireland) 5,406 SAVINGS PRODUCTS 500,000 Jurys Doyle Hotel (Ireland) 4,848 HOTEL GROUP 600,000 Business Post 4,116 PARCEL & EXPRESS MAIL SERVICE 450,000 McCarthy & Stone 3,652 BUILDER OF RETIREMENT APARTMENTS 55,000 Intermediate Capital 884 EUROPEAN PROVIDER OF MEZZANINE CAPITAL ---------------------------------------------------------------------------- 217,857 >SWITZERLAND: 6.3% 21,000 Synthes-Stratec 15,118 PRODUCTS FOR ORTHOPEDIC SURGERY 30,000 Givaudan 12,652 INDUSTRIAL FRAGRANCES & FLAVORS 40,000 Geberit International 12,341 PLUMBING SUPPLIES 80,000 Kaba Holdings 11,423 BUILDING SECURITY SYSTEMS 5,250 Pargesa 10,725 INDUSTRIAL & MEDIA CONGLOMERATE 33,500 BKW Energie 8,105 ELECTRIC UTILITY 40,000 Schindler 6,452 ELEVATOR MANUFACTURER & SERVICE PROVIDER 110,000 Bachem 5,420 PEPTIDES 90,000 Bon Appetit 4,075 WHOLESALE FOOD DISTRIBUTOR AND SPECIALTY RESTAURANT/RETAILER ---------------------------------------------------------------------------- 86,311 >ITALY: 3.5% 1,200,000 Autogrill 13,113 RESTAURANTS & CATERING FOR TRAVELERS 1,500,000 Saipem 11,249 OFFSHORE OIL CONSTRUCTION & DRILLING 2,700,000 Parmalat Finanziaria 8,510 DAIRY PRODUCER 212,000 Davide Campari 8,133 BEVERAGES 1,700,000 De Longhi 7,489 CONSUMER APPLIANCES FOR HEATING, AIR CONDITIONING & COOKING ---------------------------------------------------------------------------- 48,494 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >SPAIN: 4.8% 2,000,000 Abengoa $11,963 ENGINEERING & CONSTRUCTION 530,000 Gamesa 11,857 SPANISH WIND TURBINES 757,000 Prosegur 11,207 SECURITY GUARDS 600,000 Red Electrica 7,868 SPANISH POWER GRID 1,137,045 Cortefiel 7,847 APPAREL RETAILER 1,600,000 Telefonica Publicidado Info 7,748 SPANISH TELEPHONE DIRECTORIES 425,000 Zardoya Otis 6,404 425,000 Zardoya Otis Bonus Rights 636 ELEVATOR MANUFACTURER & SERVICE PROVIDER ---------------------------------------------------------------------------- 65,530 >NETHERLANDS: 5.5% 545,000 Hunter Douglas 18,180 DECORATIVE WINDOW COVERINGS 377,000 OPG Groep 11,479 PHARMACEUTICAL WHOLESALER & RETAILER 800,000 Vopak 10,895 OIL & CHEMICAL STORAGE 585,000 IM Tech 10,854 TECHNICAL ENGINEERING 230,476 Fugro 9,544 SURVEY & GPS SERVICES 686,122 United Services Group 8,089 TEMPORARY STAFFING SERVICES 409,000 Aalberts Industrie 7,198 FLOW CONTROL & HEAT TREATMENT ---------------------------------------------------------------------------- 76,239 >LUXEMBOURG: 1.4% 420,000 Tenaris (b) 10,710 STEEL PIPE FOR OIL WELLS & PIPELINES 1,280,000 Ses Global 8,319 SATELLITE BROADCASTING SERVICES ---------------------------------------------------------------------------- 19,029 ---------- EUROPE: TOTAL 829,938 ---------------------------------------------------------------------------- ASIA: 22.2% >HONG KONG/CHINA: 5.3% 35,000,000 Global Bio-Chem Technology Group 11,333 CORN-BASED FOOD PRODUCTS 3,000,000 TVB 10,714 TELEVISION PROGRAMMING & BROADCASTING 5,600,000 Techtronic Industries 9,371 POWER TOOL MANUFACTURER 4,000,000 Hong Kong Exchanges & Clearing 5,796 TRADING, CLEARING & SETTLEMENT SERVICES FOR FINANCIAL MARKETS 20,000,000 Sinotrans (China) (b) 5,642 INTEGRATED LOGISTICS IN CHINA 12,000,000 JCG Holding 5,617 CONSUMER FINANCE 11,000,000 Zhejiang Expressway 4,549 TOLL ROAD BUILDER & OPERATOR 34 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >HONG KONG/CHINA--CONTINUED 15,000,000 Linmark $4,520 APPAREL/HARD GOODS SOURCING AGENT 12,000,000 Jiangsu Expressway 4,501 TOLL ROAD BUILDER & OPERATOR 25,000,000 Lerado Group 4,168 BABY PARAPHERNALIA 8,000,000 Hainan Meilan Airport 3,770 CHINESE AIRPORT OPERATOR 5,802,000 Lianhua Supermarket (b) 3,088 CHINESE SUPERMARKET CHAIN ---------------------------------------------------------------------------- 73,069 >JAPAN: 8.2% 875,000 Yakult Honsha 11,754 DAIRY BASED BEVERAGES 267,000 Uni-Charm 11,562 INFANT HYGIENE & FEMININE CARE PRODUCTS 1,005,000 Toyo Technica 9,878 VALUE ADDED RESELLER OF IMPORTED INSTRUMENTATION 190,000 USS 9,638 USED CAR AUCTIONEER 292,500 Fuji Seal 8,981 PACKAGING MATERIALS & MACHINERY 410,000 Daito Trust Construction 8,638 APARTMENT BUILDER 220,000 ARRK 7,691 PROTOTYPES & MOLDS FOR NEW PRODUCT DEVELOPMENT 700,000 NIFCO 7,522 MOLDED PLASTIC COMPONENTS 385,000 Daiseki 5,801 WASTE DISPOSAL & RECYCLING 35,000 Bellsystem24 5,621 CALL CENTERS 325,000 Aderans 5,776 HAIR PIECES 135,000 Sugi Pharmacy 5,508 DRUGSTORES 150,000 Eneserve 5,419 IN-HOUSE POWER GENERATORS 140,000 Goldcrest 3,679 APARTMENT DEVELOPER 1,150,000 OMC Card 3,521 CREDIT CARD ISSUER 100,000 Taisei Lamick 2,340 PACKAGING MATERIALS & MACHINERY ---------------------------------------------------------------------------- 113,329 >TAIWAN: 1.0% 1,750,000 Ase Test (b) 9,625 SEMICONDUCTOR PACKAGING & TEST SERVICES 6,150,000 Chroma Ate (b) 3,856 TEST & MEASUREMENT INSTRUMENTS ---------------------------------------------------------------------------- 13,481 >SOUTH KOREA: 4.0% 575,000 Hyundai Mobis 14,754 AUTO PARTS 140,000 Cheil Communications 13,771 ADVERTISING 500,000 S1 Corporation 9,460 SECURITY SERVICES NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- 156,264 Yuhan $7,417 ETHICAL DRUG PRODUCER 100,000 Samsumg Fire & Marine 4,864 NON-LIFE INSURANCE 475,000 Samyoung Heat Exchange (c) 4,732 POWER PLANT RELATED MACHINERY ---------------------------------------------------------------------------- 54,998 >SINGAPORE: 2.4% 27,000,000 Comfort Group (b) 12,344 TAXI SERVICE 1,200,000 Venture 10,973 ELECTRONIC MANUFACTURING SERVICES 9,000,000 Sembcorp Logistics 9,610 LOGISTIC SERVICES FOR MARINE TRANSPORT ---------------------------------------------------------------------------- 32,927 >INDIA: 1.3% 2,000,000 Housing Development Finance 17,655 MORTGAGE LOAN PROVIDER IN INDIA ---------------------------------------------------------------------------- ---------- ASIA: TOTAL 305,459 ---------------------------------------------------------------------------- LATIN AMERICA: 1.3% >MEXICO: 1.1% 600,000 Grupo Aeroportuario 8,778 MEXICAN AIRPORT AUTHORITY 3,500,000 Consorcio ARA (b) 6,950 LOW/MEDIUM INCOME HOUSE BUILDER ---------------------------------------------------------------------------- 15,728 >BRAZIL: 0.2% 835,000 Cia De Consessoes Rodoviaria 2,654 BRAZILIAN TOLLROADS ---------------------------------------------------------------------------- ---------- LATIN AMERICA: TOTAL 18,382 ---------------------------------------------------------------------------- OTHER COUNTRIES: 12.1% >AUSTRALIA/NEW ZEALAND: 4.8% 2,500,000 Jupiters 10,760 CASINO 3,500,000 The Warehouse Group (New Zealand) 10,638 WAREHOUSE CLUB 2,500,000 Billabong International 10,307 SURFWEAR APPAREL MANUFACTURER 1,800,000 Sky City Entertainment (New Zealand) 9,959 CASINO/ENTERTAINMENT COMPLEX 2,500,000 Lion Nathan 8,997 BEER BREWER/DISTRIBUTOR 420,000 Perpetual Trustees 8,658 INVESTMENT MANAGEMENT 5,000,000 Computershare 6,278 FINANCIAL SOFTWARE/SERVICES ---------------------------------------------------------------------------- 65,597 >CANADA: 6.6% 1,000,000 Corus Entertainment (b) 16,780 CATV PROGRAMMING 365,000 Talisman Energy 16,557 OIL & GAS PRODUCER 300,000 Power Financial 9,681 LIFE INSURANCE & MUTUAL FUNDS 35 Liberty Acorn International >Statement of Investments (Unaudited), continued NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >CANADA--CONTINUED 5,000,000 Esprit Exploration (b) $8,850 NATURAL GAS PRODUCER 700,000 Shawcor 7,745 OIL & GAS PIPELINE PRODUCTS 600,000 Patheon (b) 6,638 PHARMACEUTICAL CONTRACT MANUFACTURER 450,000 Moore-Wallace (b) 6,536 COMMERCIAL PRINTING 500,000 Kingsway Financial (b) 6,030 AUTO & SPECIALTY INSURANCE 750,000 Altagas Services 5,947 NATURAL GAS GATHERER & PROCESSOR 450,000 Intrawest 5,898 OWNER/OPERATOR OF SKI RESORTS ---------------------------------------------------------------------------- 90,662 >RUSSIA: 0.2% 8,666 Khanty Mansiysk (b) 3,596 OIL PRODUCTION IN RUSSIA ---------------------------------------------------------------------------- >SOUTH AFRICA: 0.5% 500,000 Harmony Gold 6,580 GOLD MINING ---------------------------------------------------------------------------- ---------- OTHER: TOTAL 166,435 TOTAL COMMON STOCKS AND OTHER EQUITY-LIKE SECURITIES: 96.0% ---------- (COST: $1,224,127) 1,320,214 PRINCIPAL AMOUNT(000) VALUE (000) ---------------------------------------------------------------------------- SHORT-TERM OBLIGATIONS: 2.8% $35,000 Household Finance 1.31% Due 7/01/03 $35,000 3,707 Repurchase Agreement with State Street Bank & Trust Co., dated 6/30/03, due 7/01/03 at 1.10%, collateralized by Federal Home Loan Mortgage Notes maturing 1/28/05, market value $3,783 (repurchase proceeds: $3,707) 3,707 ---------------------------------------------------------------------------- (AMORTIZED COST: $38,707) 38,707 ---------- TOTAL INVESTMENTS: 98.8% 1,358,921 (COST: $1,262,834) (a) CASH AND OTHER ASSETS LESS LIABILITIES: 1.2% 16,019 ---------- TOTAL NET ASSETS: 100% $1,374,940 ============================================================================ >Notes to Statement of Investments (in thousands) (a) At June 30, 2003, for federal income tax purposes cost of investment was $1,270,059 and net unrealized appreciation was $88,862 consisting of gross unrealized appreciation of $217,990 and gross unrealized depreciation of $129,128. (b) Non-income producing security. (c) On June 30, 2003, the fund held the following percentages of the outstanding voting shares of the companies listed below: Samyoung Heat Exchange (South Korea) 6.33% The aggregate cost and value of this company at June 30, 2003, was $8,990 and $4,732, respectively. Investments in affiliate companies represent 0.34% of total net assets at June 30, 2003. The change in unrealized gain in this company amounted to $6 for the period ended June 30, 2003. There was no other investment activity during the period. (d) On June 30, 2003, $504,690 or 36.7% of the Fund's net assets was denominated in the Euro currency. 36 Liberty Acorn International >Portfolio Diversification (Unaudited) At June 30, 2003, the Fund's portfolio investments as a percent of net assets was diversified as follows: VALUE (000) PERCENT ---------------------------------------------------------------------------- >COMPUTER HARDWARE Semiconductors $9,625 0.7% ---------------------------------------------------------------------------- 9,625 0.7 >TECHNOLOGY SERVICES Full Service 9,917 0.7 Embedded Systems 9,049 0.7 ---------------------------------------------------------------------------- 18,966 1.4 >TELECOM Cable 8,319 0.6 ISP 5,464 0.4 ---------------------------------------------------------------------------- 13,783 1.0 >BROADCASTING/MEDIA CONTENT Radio & TV Broadcasting 29,392 2.1 Hybrid Internet 24,630 1.8 Media Content Providers 16,780 1.2 Market Research 9,432 0.7 ---------------------------------------------------------------------------- 80,234 5.8 >HEALTH CARE Services 54,389 4.0 Drugs 49,993 3.6 Devices & Consumables 29,245 2.1 Biotech 6,345 0.5 ---------------------------------------------------------------------------- 139,972 10.2 >BUSINESS SERVICES Business Services 53,299 3.9 BPO 26,491 1.9 Logistics 19,891 1.4 Consumer Services 9,638 0.7 ---------------------------------------------------------------------------- 109,319 7.9 VALUE (000) PERCENT ---------------------------------------------------------------------------- >FINANCIALS Lending Institutions $60,376 4.4% Asset Management 28,734 2.1 Insurance 25,981 1.9 ---------------------------------------------------------------------------- 115,091 8.4 >CONSUMER GOODS/SERVICES Branded Goods 166,788 12.1 Leisure 56,682 4.1 Retail Outlets 47,187 3.4 Distribution/ E-Commerce 16,155 1.2 ---------------------------------------------------------------------------- 286,812 20.8 >INDUSTRIALS Goods 221,460 16.1 R&D Design Firms 17,715 1.3 Construction 16,001 1.2 Electronic Manufacturing 13,734 1.0 EMS Design 10,973 0.8 Distribution 5,642 0.4 ---------------------------------------------------------------------------- 285,525 20.8 >OTHER INDUSTRIES Energy 118,632 8.6 Real Estate 46,472 3.4 Utilities 44,890 3.3 Not-Classified 40,168 2.9 Conglomerate 10,725 0.8 ---------------------------------------------------------------------------- 260,887 19.0 TOTAL COMMON STOCKS AND ---------------------------- OTHER EQUITY-LIKE SECURITIES: 1,320,214 96.0 SHORT-TERM OBLIGATIONS: 38,707 2.8 ---------------------------- TOTAL INVESTMENTS: 1,358,921 98.8 CASH AND OTHER ASSETS LESS LIABILITIES: 16,019 1.2 ---------------------------- TOTAL NET ASSETS: $1,374,940 100.0% ============================================================================ 37 Liberty Acorn USA >Major Portfolio Changes in the Second Quarter (Unaudited) NUMBER OF SHARES ---------------------------- 03/31/03 06/30/03 Additions ---------------------------------------------------------------------------- INFORMATION Cable Design Technologies 0 150,000 Crown Castle International 490,000 550,000 JDA Software 864,000 974,000 MRO Software 348,500 473,500 ---------------------------------------------------------------------------- CONSUMER GOODS/SERVICES Aeropostale 110,500 135,500 Oxford Industries 0 28,000 ---------------------------------------------------------------------------- FINANCE AmeriCredit 846,500 931,500 Harleysville Group 0 97,000 ---------------------------------------------------------------------------- ENERGY/MINERALS FMC Technologies 30,700 110,700 Ultra Petroleum 135,000 215,000 NUMBER OF SHARES ---------------------------- 03/31/03 06/30/03 Sales ---------------------------------------------------------------------------- FINANCE World Acceptance 590,000 550,000 38 Liberty Acorn USA >Statement of Investments (Unaudited), June 30, 2003 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- COMMON STOCKS: 92.6% ---------------------------------------------------------------------------- INFORMATION: 39.1% >BROADCASTING: 2.2% 333,100 Salem Communications (b) $6,666 RADIO STATIONS FOR RELIGIOUS PROGRAMMING 138,500 Gray Television 1,717 MID MARKET AFFILIATED TV STATIONS 57,000 Saga Communications (b) 1,109 RADIO STATIONS IN SMALL & MID-SIZED CITIES ---------------------------------------------------------------------------- 9,492 >TELEVISION PROGRAMMING: 1.4% 600,000 Mediacom Communications (b) 5,922 CABLE TELEVISION FRANCHISES ---------------------------------------------------------------------------- >TELECOMMUNICATIONS/WIRELINE COMMUNICATIONS: 2.4% 227,800 Commonwealth Telephone (b) 10,016 RURAL PHONE FRANCHISES & CLEC ---------------------------------------------------------------------------- >MOBILE COMMUNICATIONS: 4.5% 927,000 Western Wireless (b) 10,688 PHONE SERVICES 550,000 Crown Castle International (b) 4,273 COMMUNICATION TOWERS IN USA & UK 60,000 Telephone & Data Systems 2,982 CELLULAR & TELEPHONE SERVICES 182,700 COMARCO (b) 1,297 WIRELESS NETWORK TESTING ---------------------------------------------------------------------------- 19,240 >COMPUTER SERVICES: 2.2% 232,000 American Management Systems (b) 3,313 SOFTWARE DEVELOPMENT SERVICES 786,000 RCM Technologies (b)(c) 3,065 TECHNOLOGY STAFFING SERVICES 670,000 AnswerThink Consulting (b) 1,293 IT INTEGRATOR FOR FORTUNE 2000 149,600 Ciber (b) 1,050 SOFTWARE SERVICES & STAFFING 256,600 Analysts International (b) 639 TECHNOLOGY STAFFING SERVICES ---------------------------------------------------------------------------- 9,360 >BUSINESS/CONSUMER SOFTWARE: 15.9% 527,600 Micros Systems (b) 17,400 INFORMATION SYSTEMS FOR RESTAURANTS & HOTELS 221,100 Kronos (b) 11,234 LABOR MANAGEMENT SOLUTIONS 974,000 JDA Software (b) 10,899 APPLICATIONS/SOFTWARE & SERVICES FOR RETAILERS 370,000 JD Edwards (b) 5,302 MID MARKET ERP & SUPPLY CHAIN SOFTWARE 1,330,000 Novell (b) 4,096 SECURITY & IDENTITY MANAGEMENT SOFTWARE 473,500 MRO Software (b) 4,086 ENTERPRISE MANAGEMENT SOFTWARE 206,000 Group 1 Software (b) 3,805 ADDRESS VERIFICATION SOFTWARE 192,500 THQ (b) 3,465 ENTERTAINMENT SOFTWARE NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- 505,000 E.Piphany (b) $2,581 CRM SOFTWARE 140,000 SPSS (b) 2,344 STATISTICAL ANALYSIS SOFTWARE 102,000 Activision (b) 1,318 ENTERTAINMENT SOFTWARE 65,000 MAPICS (b) 533 MID MARKET ERP SOFTWARE 100,000 Aspect Communications (b) 387 CALL CENTER SOFTWARE ---------------------------------------------------------------------------- 67,450 >TRANSACTION PROCESSORS: 2.2% 211,640 Global Payments 7,513 CREDIT CARD PROCESSOR 170,000 Euronet Worldwide (b) 1,838 ATM PROCESSOR ---------------------------------------------------------------------------- 9,351 >BUSINESS INFORMATION/MARKETING SERVICES/PUBLISHING: 2.1% 102,800 Getty Images (b) 4,246 PHOTOGRAPHS FOR PUBLICATIONS & ELECTRONIC MEDIA 240,000 Navigant Consulting (b) 2,844 CONSULTING FIRM 108,600 INFORMATION Holdings (b) 1,982 PATENT & OTHER BUSINESS INFORMATION ---------------------------------------------------------------------------- 9,072 >CONTRACT MANUFACTURING: 0.4% 140,000 Plexus (b) 1,614 ELECTRONIC MANUFACTURING SERVICES ---------------------------------------------------------------------------- >INSTRUMENTATION: 0.3% 60,000 Trimble Navigation (b) 1,376 GPS-BASED INSTRUMENTS ---------------------------------------------------------------------------- >COMPUTER HARDWARE/SEMICONDUCTORS/ RELATED EQUIPMENT: 5.5% 129,000 Zebra Technologies (b) 9,700 BAR CODE PRINTERS 175,300 Integrated Circuit Systems (b) 5,510 SILICON TIMING DEVICES 424,100 Seachange International (b) 4,046 SYSTEMS FOR VIDEO ON DEMAND & AD INSERTION 70,000 LittelFuse (b) 1,565 FUSES FOR OVERCURRENT & OVERVOLTAGE PROTECTION 40,000 Rogers (b) 1,332 PCB LAMINATES & HIGH PERFORMANCE FOAMS 150,000 Cable Design Technologies (b) 1,072 NETWORKING & SPECIALTY CABLES ---------------------------------------------------------------------------- 23,225 ---------- INFORMATION: TOTAL 166,118 ---------------------------------------------------------------------------- HEALTH CARE: 17.2% >BIOTECHNOLOGY/DRUG DELIVERY: 2.9% 720,000 Nektar Therapeutics (b) 6,646 PULMONARY DRUG DELIVERY 211,400 Enzon (b) 2,647 POLYMER DELIVERY TECHNOLOGY FOR IMPROVED DRUGS 39 Liberty Acorn USA >Statement of Investments (Unaudited), continued NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >BIOTECHNOLOGY/DRUG DELIVERY--CONTINUED 375,000 Locus Discovery, Series D, Pfd. (b) $1,500 HIGH THROUGHPUT RATIONAL DRUG DESIGN 90,000 Applera-Celera Genomics (b) 929 DIAGNOSTICS & DRUG DEVELOPMENT 154,000 SYRRX, Series C (b) 348 X-RAY CRYSTALLOGRAPHY 363,636 Metabolex, Series F (b) 44 DRUGS FOR DIABETES ---------------------------------------------------------------------------- 12,114 >MEDICAL EQUIPMENT: 4.9% 335,000 Edwards Lifesciences (b) 10,767 HEART VALVES 220,000 Viasys Healthcare (b) 4,554 RESPIRATORY & NEUROLOGY MEDICAL EQUIPMENT 135,600 Visx (b) 2,353 LASER EYE SURGERY 345,000 Novoste (b) 2,070 RADIATION CATHETERS FOR IN-STENT RESTENOSIS 30,000 Diagnostic Products 1,231 IMMUNODIAGNOSTIC KITS ---------------------------------------------------------------------------- 20,975 >MEDICAL SUPPLIES: 1.6% 222,800 Techne (b) 6,760 CYTOKINES, ANTIBODIES, OTHER REAGENTS FOR LIFE SCIENCES ---------------------------------------------------------------------------- >SERVICES: 7.8% 639,000 First Health Group (b) 17,636 PPO NETWORK 246,800 Lincare Holdings (b) 7,777 HOME HEALTH CARE SERVICES 323,300 NDCHealth Group 5,933 HEALTH CLAIMS PROCESSING & DRUG MARKETING SERVICES 100,000 Dendrite International (b) 1,288 SOFTWARE FOR PHARMACEUTICAL SALES FORCE 26,000 Medquist (b) 526 MEDICAL TRANSCRIPTION SERVICES ---------------------------------------------------------------------------- 33,160 ---------- HEALTH CARE: TOTAL 73,009 ---------------------------------------------------------------------------- CONSUMER GOODS/SERVICES: 13.8% >CONSUMER SERVICES: 3.1% 430,000 ITT Educational Services (b) 12,578 POST-SECONDARY DEGREE PROGRAM 48,900 Bally Total Fitness (b) 442 NATIONAL CHAIN OF FITNESS CENTERS ---------------------------------------------------------------------------- 13,020 >APPAREL: 1.7% 197,600 Steven Madden (b) 4,316 WHOLESALER/RETAILER OF FASHION FOOTWARE 32,000 Coach (b) 1,592 DESIGNER & RETAILER OF BRANDED LEATHER ACCESSORIES 28,000 Oxford Industries 1,163 BRANDED & PRIVATE LABEL APPAREL ---------------------------------------------------------------------------- 7,071 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >ENTERTAINMENT: 1.2% 91,300 International Speedway Motors $3,607 LARGEST MOTORSPORT RACETRACK OWNER & OPERATOR 70,000 Action Performance 1,330 MOTORSPORT COLLECTIBLES & MERCHANDISING ---------------------------------------------------------------------------- 4,937 >DURABLE GOODS: 0.3% 30,000 American Woodmark 1,397 KITCHEN CABINET ---------------------------------------------------------------------------- >FURNITURE: 0.5% 60,000 Herman Miller 1,213 OFFICE FURNITURE 20,000 Mohawk Industries (b) 1,111 CARPET & FLOORING ---------------------------------------------------------------------------- 2,324 >NONDURABLES: 1.9% 167,200 Scotts Company (b) 8,276 CONSUMER LAWN & GARDEN PRODUCTS ---------------------------------------------------------------------------- >RETAIL: 5.1% 212,500 Christopher & Banks (b) 7,860 WOMEN'S APPAREL RETAILER 135,500 Aeropostale (b) 2,911 MALL BASED TEEN RETAILER 58,300 Urban Outfitters (b) 2,093 MULTI CHANNEL LIFESTYLE RETAILER 347,000 Gadzooks (b) 1,971 TEEN APPAREL RETAILER 50,000 Michaels Stores 1,903 CRAFT & HOBBY SPECIALTY RETAILER 50,000 Ann Taylor (b) 1,447 WOMEN'S APPAREL RETAILER 50,000 Abercrombie & Fitch (b) 1,420 TEEN APPAREL RETAILER 75,000 Genesco (b) 1,327 MULTI-CONCEPT BRANDED FOOTWEAR RETAILER 25,000 Petco Animal Supplies (b) 544 PET SUPPLIES & SERVICES ---------------------------------------------------------------------------- 21,476 ---------- CONSUMER GOODS/SERVICES: TOTAL 58,501 ---------------------------------------------------------------------------- FINANCE: 11.2% >BANKS: 1.1% 158,125 Chittenden 4,325 VERMONT & WEST MASSACHUSETTS BANK 10,000 TCF Financial 398 GREAT LAKES BANK ---------------------------------------------------------------------------- 4,723 >FINANCE COMPANIES: 4.0% 550,000 World Acceptance (b) 8,954 PERSONAL LOANS 931,500 AmeriCredit (b) 7,964 AUTO LENDING ---------------------------------------------------------------------------- 16,918 40 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >SAVINGS & LOAN: 1.5% 75,000 Downey Financial $3,097 CALIFORNIA HOME LENDER 116,400 Anchor Bancorp Wisconsin 2,781 WISCONSIN THRIFT 16,500 Peoples Bank Bridgeport 478 CONNECTICUT SAVINGS & LOAN ---------------------------------------------------------------------------- 6,356 >MONEY MANAGEMENT: 0.3% 40,000 SEI Investments 1,280 MUTUAL FUND ADMINISTRATION & INVESTMENT MANAGEMENT ---------------------------------------------------------------------------- >INSURANCE: 4.3% 350,000 HCC Insurance Holdings 10,350 AVIATION INSURANCE 17,000 Markel (b) 4,352 SPECIALTY INSURANCE 97,000 Harleysville Group 2,233 COMMERCIAL & PERSONAL LINES INSURANCE 35,000 Philadelphia Consolidated Holding (b) 1,414 SPECIALTY INSURANCE ---------------------------------------------------------------------------- 18,349 ---------- FINANCE: TOTAL 47,626 ---------------------------------------------------------------------------- INDUSTRIAL GOODS/SERVICES: 5.0% >SPECIALTY CHEMICALS/INDUSTRIAL MATERIALS: 0.7% 95,000 Spartech 2,015 PLASTICS DISTRIBUTION & COMPOUNDING 70,000 Schulman 1,124 PLASTICS DISTRIBUTION & COMPOUNDING ---------------------------------------------------------------------------- 3,139 >INDUSTRIAL DISTRIBUTION: 0.2% 100,000 NuCo2 (b) 941 BULK CO2 GAS DISTRIBUTION TO RESTAURANTS ---------------------------------------------------------------------------- >CONSTRUCTION: 0.3% 30,000 Florida Rock Industries 1,238 CONCRETE & AGGREGATES ---------------------------------------------------------------------------- >MACHINERY: 0.6% 59,000 Esco Technologies (b) 2,596 FILTRATION & TEST EQUIPMENT ---------------------------------------------------------------------------- >WATER: 1.1% 134,000 Cuno (b) 4,840 FILTRATION & FLUIDS CLARIFICATION ---------------------------------------------------------------------------- >INDUSTRIAL GOODS: 0.1% 10,300 Intermagnetics General (b) 204 SUPERCONDUCTING WIRE ---------------------------------------------------------------------------- NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >LOGISTICS: 1.1% 346,000 Hub Group (b) $3,038 TRUCK & RAIL FREIGHT FORWARDER 59,600 Forward Air (b) 1,512 FREIGHT TRANSPORTATION BETWEEN AIRPORTS ---------------------------------------------------------------------------- 4,550 >INDUSTRIAL SERVICES: 0.9% 206,900 Insurance Auto Auctions (b) 2,599 AUTO SALVAGE SERVICES 95,000 Clark (b) 1,135 EXECUTIVE COMPENSATION & BENEFITS CONSULTING ---------------------------------------------------------------------------- 3,734 ---------- INDUSTRIAL GOODS/SERVICES: TOTAL 21,242 ---------------------------------------------------------------------------- ENERGY/MINERALS: 5.5% >OIL SERVICES: 1.5% 651,000 Newpark Resources (b) 3,567 DRILLING FLUID SERVICES TO OIL & GAS INDUSTRY 110,700 FMC Technologies (b) 2,330 OIL & GAS WELL HEAD MANUFACTURER 10,000 Carbo Ceramics 372 NATURAL GAS WELL STIMULANTS ---------------------------------------------------------------------------- 6,269 >OIL & GAS PRODUCERS: 1.6% 215,000 Ultra Petroleum (b) 2,776 NATURAL GAS PRODUCER 68,000 Western Gas 2,693 OIL & COAL SEAM GAS PRODUCER 82,100 Southwestern Energy (b) 1,232 NATURAL GAS PRODUCER ---------------------------------------------------------------------------- 6,701 >DISTRIBUTION/MARKETING/REFINING: 2.4% 122,600 Equitable Resources 4,995 NATURAL GAS UTILITY & PRODUCER 193,000 Atmos Energy 4,786 NATURAL GAS UTILITY 115,000 Aquila (b) 712 ELECTRIC UTILITY HOLDING COMPANY ---------------------------------------------------------------------------- 10,493 ---------- ENERGY/MINERALS: TOTAL 23,463 ---------------------------------------------------------------------------- OTHER INDUSTRIES: 0.8% >REAL ESTATE: 0.8% 47,000 The Rouse Company 1,791 REGIONAL SHOPPING MALLS 100,000 Crescent Real Estate Equities 1,661 CLASS A OFFICE BUILDINGS ---------------------------------------------------------------------------- 3,452 ---------- OTHER INDUSTRIES: TOTAL 3,452 ---------- TOTAL COMMON STOCKS: 92.6% 393,411 (COST: $343,663) 41 PRINCIPAL AMOUNT (000) VALUE (000) ---------------------------------------------------------------------------- SHORT-TERM OBLIGATIONS: 7.5% $30,000 Household Finance 1.03% - 1.31% Due 7/01 - 7/02/03 $30,000 1,750 Repurchase Agreement with State Street Bank & Trust Co., dated 6/30/03, due 7/01/03 at 1.10%, collateralized by Federal Home Loan Mortgage Notes maturing 1/28/05, market value $1,785 (repurchase proceeds: $1,750) 1,750 ---------------------------------------------------------------------------- (AMORTIZED COST: $31,750) 31,750 ---------- TOTAL INVESTMENTS: 100.1% 425,161 (COST: $375,413) (a) CASH AND OTHER ASSETS LESS LIABILITIES: (0.1%) (256) ---------- TOTAL NET ASSETS: 100% $424,905 ============================================================================ >Notes to Statement of Investments (in thousands) (a) At June 30, 2003, for federal income tax purposes cost of investment is the same and net unrealized appreciation was $49,748 consisting of gross unrealized appreciation of $92,647 and gross unrealized depreciation of $42,899. (b) Non-income producing security. (c) On June 30, 2003, the fund held the following percentages of the outstanding voting shares of the companies listed below: RCM Technologies 7.42% The aggregate cost and value of this company at June 30, 2003, was $5,636 and $3,065, respectively. Investments in affiliate companies represent 0.72% of total net assets at June 30, 2003. The change in unrealized gain in this company amounted to $8 during the period ended June 30, 2003. There was no other investment activity during the period. 42 Liberty Acorn Foreign Forty >Major Portfolio Changes in the Second Quarter (Unaudited) NUMBER OF SHARES ---------------------------- 03/31/03 06/30/03 Additions ---------------------------------------------------------------------------- EUROPE >FRANCE Euronext 20,000 35,000 >UNITED KINGDOM/IRELAND British Sky Broadcasting 0 60,000 Depfa Bank (Ireland) 0 13,000 Grafton Group (Ireland) 0 170,000 Hit Entertainment 0 190,000 Marconi 0 270,000 >SPAIN Red Electrica 0 60,000 >LUXEMBOURG Tenaris 0 35,000 ---------------------------------------------------------------------------- ASIA >JAPAN Daito Trust Construction 0 25,000 Hoya 0 10,000 USS 0 10,000 NUMBER OF SHARES ----------------------------- 03/31/03 06/30/03 Sales ---------------------------------------------------------------------------- EUROPE >NORWAY Orkla 78,000 0 >UNITED KINGDOM Exel 140,000 45,000 ---------------------------------------------------------------------------- ASIA >JAPAN Oriental Land 21,000 0 Orix 17,000 0 43 Liberty Acorn Foreign Forty >Statement of Investments (Unaudited) June 30, 2003 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- COMMON STOCKS: 95.3% ---------------------------------------------------------------------------- EUROPE: 70.3% >GERMANY: 7.2% 30,000 Rhoen-Klinikum $1,206 HOSPITAL MANAGEMENT 17,000 Deutsche Boerse 902 TRADING, CLEARING & SETTLEMENT SERVICES FOR FINANCIAL MARKETS 5,000 Henkel 310 CHEMICALS, DETERGENTS & NON-FOOD CONSUMER BRANDS ---------------------------------------------------------------------------- 2,418 >NORWAY: 2.9% 201,000 Den Norske Bank 992 BANK ---------------------------------------------------------------------------- >FRANCE/BELGIUM: 7.4% 25,000 Neopost (b) 1,064 POSTAGE METER MACHINES 35,000 Euronext 869 TRADING SERVICES FOR FINANCIAL MARKETS 14,000 Essilor International 565 EYEGLASS LENSES ---------------------------------------------------------------------------- 2,498 >UNITED KINGDOM/IRELAND: 33.9% 160,000 Anglo Irish Bank (Ireland) 1,417 CORPORATE LENDING: PRIVATE BANKING 90,000 Kerry Group (Ireland) 1,393 FOOD INGREDIENTS 13,000 Depfa Bank (Ireland) 1,013 INTERNATIONAL PUBLIC SECTOR FINANCE 185,000 Compass Group 999 INTERNATIONAL CONCESSION & CONTRACT CATERER 200,000 BG Group 888 OIL & GAS PRODUCER 190,000 Hit Entertainment 776 CHILDREN'S TELEVISION SHOWS 170,000 Grafton Group (Ireland) 753 BUILDERS, WHOLESALERS & DIY RETAILING 90,000 Reed Elsevier 750 SCIENTIFIC, LEGAL, EDUCATION & BUSINESS PUBLISHER 60,000 British Sky Broadcasting (b) 666 DIGITAL SATELLITE BROADCASTING 90,000 Bunzl 632 DISTRIBUTION OF DISPOSABLE PRODUCTS TO FOOD INDUSTRY 100,000 Smith & Nephew 576 MEDICAL EQUIPMENT & SUPPLIES 45,000 Exel 463 GLOBAL LOGISTICS & FREIGHT FORWARDING 18,000 Cobham 344 AEROSPACE 40,000 Amersham 301 HEALTH & BIOSCIENCES 270,000 Marconi (b) 274 TELECOMMUNICATIONS EQUIPMENT 15,000 Irish Life & Permanent (Ireland) 162 SAVINGS PRODUCTS ---------------------------------------------------------------------------- 11,407 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >SWITZERLAND: 8.6% 1,700 Synthes-Stratec $1,224 PRODUCTS FOR ORTHOPEDIC SURGERY 1,700 Givaudan 717 INDUSTRIAL FRAGRANCES & FLAVORS 4,000 Schindler 645 ELEVATOR MANUFACTURER & SERVICE PROVIDER 1,000 Geberit International 309 PLUMBING SUPPLIES ---------------------------------------------------------------------------- 2,895 >ITALY: 4.3% 230,000 Parmalat Finanziaria 725 DAIRY PRODUCER 65,000 Autogrill 710 RESTAURANTS & CATERING FOR TRAVELERS ---------------------------------------------------------------------------- 1,435 >SPAIN: 2.3% 60,000 Red Electrica 787 SPANISH POWER GRID ---------------------------------------------------------------------------- >NETHERLANDS: 1.0% 28,000 Wolters Kluwer 338 LEGAL & BUSINESS PUBLISHER ---------------------------------------------------------------------------- >LUXEMBOURG: 2.7% 35,000 Tenaris (b) 892 STEEL PIPE FOR OIL WELLS & PIPELINES ---------------------------------------------------------------------------- ---------- EUROPE: TOTAL 23,662 ---------------------------------------------------------------------------- ASIA: 14.0% >HONG KONG: 3.2% 300,000 TVB 1,071 TELEVISION PROGRAMMING & BROADCASTING ---------------------------------------------------------------------------- >JAPAN: 8.7% 10,000 Hoya 690 OPTO-ELECTRICAL COMPONENTS & EYEGLASS LENSES 40,000 Terumo 666 MEDICAL SUPPLIES 8,000 Nidec 529 ELECTRIC MOTORS 25,000 Daito Trust Construction 527 APARTMENT BUILDER 10,000 USS 507 USED CAR AUCTIONEER ---------------------------------------------------------------------------- 2,919 >SINGAPORE: 2.1% 78,000 Venture 713 ELECTRONIC MANUFACTURING SERVICES ---------------------------------------------------------------------------- ---------- ASIA: TOTAL 4,703 44 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- OTHER COUNTRIES: 11.0% >AUSTRALIA: 2.8% 260,000 Lion Nathan $936 BEER BREWER/DISTRIBUTOR ---------------------------------------------------------------------------- >CANADA: 8.2% 30,000 Talisman Energy 1,361 OIL & GAS PRODUCER 64,000 Corus Entertainment (b) 1,074 CATV PROGRAMMING 10,000 Power Financial 323 LIFE INSURANCE & MUTUAL FUNDS ---------------------------------------------------------------------------- 2,758 ---------- OTHER: TOTAL 3,694 ---------- TOTAL COMMON STOCKS: 95.3% 32,059 (COST: $27,641)TERM OBLIGATIONS: 3.0% PRINCIPAL AMOUNT (000) VALUE (000) ---------------------------------------------------------------------------- SHORT-TERM OBLIGATIONS: 3.0% $1,018 Repurchase Agreement with State Street Bank & Trust Co., 0dated 6/30/03, due 7/01/03 at 1.10%, collateralized by Federal National Mortgage Association maturing 1/28/05, market value $1,039 (repurchase proceeds: $1,018) $1,018 ---------------------------------------------------------------------------- (AMORTIZED COST: $1,018) 1,018 ---------- TOTAL INVESTMENTS: 98.3% 33,077 (COST: $28,659) (a) CASH AND OTHER ASSETS LESS LIABILITIES: 1.7% 561 ---------- TOTAL NET ASSETS: 100% $33,638 ============================================================================ ---------------------------------------------------------------------------- >Notes to Statement of Investments (in thousands) (a) At June 30, 2003, for federal income tax purposes cost of investments is the same and net unrealized appreciation was $4,418, consisting of gross unrealized appreciation of $4,811 and gross unrealized depreciation of $393. (b) Non-income producing security. (c) At June 30, 2003, $12,229 or 36.4% of the Fund's net assets was denominated in Euro currency. 45 Liberty Acorn Foreign Forty >Portfolio Diversification (Unaudited) At June 30, 2003, the Fund's portfolio investments as a percent of net assets was diversified as follows: VALUE (000) PERCENT ---------------------------------------------------------------------------- >INFORMATION TECHNOLOGY Television Programming $1,850 5.5% Financial Processors 1,771 5.3 Television Broadcasting 1,737 5.2 Computer Hardware and Related Equipment 1,593 4.7 Publishing 1,088 3.2 Contract Manufacturing 713 2.1 Semiconductors and Related Equipment 690 2.1 ---------------------------------------------------------------------------- 9,442 28.1 >HEALTH CARE Medical Equipment 2,364 7.0 Hospital Management 1,206 3.6 Hospital/ Laboratory Supplies 967 2.9 ---------------------------------------------------------------------------- 4,537 13.5 >CONSUMER GOODS/SERVICES Food 2,118 6.3 Restaurants 1,709 5.1 Beverage 936 2.8 Goods Distribution 507 1.5 Nondurables 310 0.9 ---------------------------------------------------------------------------- 5,580 16.6 >FINANCE Banks 3,422 10.2 Money Management 323 0.9 Insurance 162 0.5 ---------------------------------------------------------------------------- 3,907 11.6 VALUE (000) PERCENT ---------------------------------------------------------------------------- >INDUSTRIAL GOODS/SERVICES Other Industrial Services $1,108 3.3% Steel 893 2.7 Construction 753 2.2 Specialty Chemicals 717 2.1 Outsourcing and Training Services 632 1.9 Electrical Components 618 1.8 Industrial Materials 309 0.9 ---------------------------------------------------------------------------- 5,030 14.9 >ENERGY/MINERALS Oil/Gas Producers 2,249 6.7 ---------------------------------------------------------------------------- 2,249 6.7 >OTHER Regulated Utilities 787 2.3 Real Estate 527 1.6 ---------------------------------------------------------------------------- 1,314 3.9 ------------------------ TOTAL COMMON STOCKS: 32,059 95.3 SHORT-TERM OBLIGATIONS: 1,018 3.0 ------------------------ TOTAL INVESTMENTS: 33,077 98.3 CASH AND OTHER ASSETS LESS LIABILITIES: 561 1.7 ------------------------ NET ASSETS: $33,638 100.0% ============================================================================ 46 Liberty Acorn Twenty >Major Portfolio Changes in the Second Quarter (Unaudited) NUMBER OF SHARES ----------------------------- 03/31/03 06/30/03 Additions ---------------------------------------------------------------------------- INFORMATION Electronic Arts 105,000 240,000 Interpublic Group 0 1,800,000 JD Edwards 310,000 550,000 Moody's 220,000 235,000 Synopsys 240,000 330,000 Tektronix 225,000 360,000 ---------------------------------------------------------------------------- HEALTH CARE First Health Group 700,000 1,330,000 Guidant 500,000 600,000 Lincare Holdings 265,000 385,000 Techne 160,000 340,000 ---------------------------------------------------------------------------- CONSUMER GOODS/SERVICES Abercrombie & Fitch 200,000 330,000 Coach 0 240,000 Costco 280,000 400,000 Harley-Davidson 205,000 400,000 Herman Miller 0 780,000 International Speedway Motors 185,000 260,000 Mohawk Industries 160,000 270,000 Safeway 0 650,000 ---------------------------------------------------------------------------- FINANCE Associated Banc-Corp 330,000 410,000 SEI Investments 175,000 260,000 TCF Financial 290,000 390,000 ---------------------------------------------------------------------------- INDUSTRIAL GOODS/SERVICES Expeditors International of Washington 370,000 465,000 NUMBER OF SHARES ---------------------------- 03/31/03 06/30/03 Sales ---------------------------------------------------------------------------- INFORMATION Liberty Media 1,950,000 0 Waters 170,000 0 ---------------------------------------------------------------------------- HEALTH CARE IMS Health 485,000 0 ---------------------------------------------------------------------------- CONSUMER GOODS/SERVICES Jones Apparel 165,000 0 47 Liberty Acorn Twenty >Statement of Investments (Unaudited) June 30, 2003 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- COMMON STOCKS: 92.1% ---------------------------------------------------------------------------- INFORMATION: 25.9% >INSTRUMENTATION: 2.0% 360,000 Tektronix (b) $7,776 ANALYTICAL INSTRUMENTS ---------------------------------------------------------------------------- >GAMING EQUIPMENT: 2.6% 100,000 International Game Technology 10,233 SLOT MACHINES & PROGRESSIVE JACKPOTS ---------------------------------------------------------------------------- >CONSUMER SOFTWARE: 4.6% 240,000 Electronic Arts (b) 17,757 ENTERTAINMENT SOFTWARE ---------------------------------------------------------------------------- >BUSINESS SOFTWARE: 7.3% 330,000 Synopsys (b) 20,410 SOFTWARE FOR DESIGNING SEMICONDUCTOR CHIPS 550,000 JD Edwards (b) 7,881 MID MARKET ERP & SUPPLY CHAIN SOFTWARE ---------------------------------------------------------------------------- 28,291 >ADVERTISING: 6.2% 1,800,000 Interpublic Group 24,084 ADVERTISING ---------------------------------------------------------------------------- >BUSINESS INFORMATION: 3.2% 235,000 Moody's 12,387 RATINGS SERVICE FOR CREDIT OBLIGATIONS ---------- INFORMATION: TOTAL 100,528 ---------------------------------------------------------------------------- HEALTH CARE: 22.1% >MEDICAL EQUIPMENT: 6.8% 600,000 Guidant 26,634 STENTS, DEFIBRILLATORS & OTHER CARDIAC MEDICAL DEVICES ---------------------------------------------------------------------------- >SERVICES: 12.6% 1,330,000 First Health Group (b) 36,708 PPO NETWORK 385,000 Lincare Holdings (b) 12,131 HOME HEALTH CARE SERVICES ---------------------------------------------------------------------------- 48,839 >HOSPITAL/LABORATORY SUPPLIES: 2.7% 340,000 Techne (b) 10,316 CYTOKINES, ANTIBODIES, OTHER REAGENTS FOR LIFE SCIENCES ---------------------------------------------------------------------------- ---------- HEALTH CARE: TOTAL 85,789 ---------------------------------------------------------------------------- CONSUMER GOODS/SERVICES: 27.3% >LEISURE VEHICLES: 4.1% 400,000 Harley-Davidson 15,944 Motorcycles & Related Merchandise ---------------------------------------------------------------------------- NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >RETAIL: 9.6% 400,000 Costco (b) $14,640 WAREHOUSE SUPERSTORES 650,000 Safeway (b) 13,299 RETAIL FOOD & DRUG STORES 330,000 Abercrombie & Fitch (b) 9,375 TEEN APPAREL RETAILER ---------------------------------------------------------------------------- 37,314 >ENTERTAINMENT: 2.6% 260,000 International Speedway Motors 10,273 LARGEST MOTORSPORT RACETRACK OWNER & OPERATOR ---------------------------------------------------------------------------- FURNITURE & MANUFACTURERS: 11.0% 780,000 Herman Miller 15,764 OFFICE FURNITURE 270,000 Mohawk Industries (b) 14,993 CARPET & FLOORING 240,000 Coach (b) 11,938 DESIGNER & RETAILER OF BRANDED LEATHER ACCESSORIES ---------------------------------------------------------------------------- 42,695 ---------- CONSUMER GOODS/SERVICES: TOTAL 106,226 ---------------------------------------------------------------------------- FINANCE: 12.7% >BANKS: 7.9% 390,000 TCF Financial 15,538 GREAT LAKES BANK 410,000 Associated Banc-Corp 15,121 MIDWEST BANK ---------------------------------------------------------------------------- 30,659 >INSURANCE: 2.7% 41,000 Markel (b) 10,496 SPECIALTY INSURANCE ---------------------------------------------------------------------------- >MONEY MANAGEMENT: 2.1% 260,000 SEI Investments 8,320 MUTUAL FUND ADMINISTRATION & INVESTMENT MANAGEMENT ---------------------------------------------------------------------------- ---------- FINANCE: TOTAL 49,475 ---------------------------------------------------------------------------- INDUSTRIAL GOODS/SERVICES: 4.1% >LOGISTICS: 4.1% 465,000 Expeditors International of Washington 16,108 INTERNATIONAL FREIGHT FORWARDER ---------------------------------------------------------------------------- ---------- INDUSTRIAL GOODS/SERVICES: TOTAL 16,108 ---------- TOTAL COMMON STOCKS: 92.1% (COST: $308,864) 358,126 48 PRINCIPAL AMOUNT (000) VALUE (000) ---------------------------------------------------------------------------- SHORT-TERM OBLIGATIONS: 6.8% $18,000 Household Finance 1.03% Due 7/01/03 $17,999 8,231 Repurchase Agreement with State Street Bank & Trust Co., dated 6/30/03, due 7/01/03 at 1.10%, collateralized by Federal Home Loan Mortgage Notes maturing 1/28/05, market value $8,399 (repurchase proceeds: $8,231) 8,231 ---------------------------------------------------------------------------- (AMORTIZED COST: $26,230) 26,230 ---------- TOTAL INVESTMENTS: 98.9% 384,356 (COST: $335,094) (a) CASH AND OTHER ASSETS LESS LIABILITIES: 1.1% 4,356 ---------- TOTAL NET ASSETS: 100% $388,712 ============================================================================ >Notes to Statement of Investments (in thousands) (a) At June 30, 2003, for federal income tax purposes cost of investments is the same and net unrealized appreciation was $49,262, consisting of gross unrealized appreciation of $51,895 and gross unrealized depreciation of $2,633. (b) Non-income producing security. 49 Liberty Acorn Family of Funds > Statements of Assets and Liabilities (Unaudited)
LIBERTY LIBERTY LIBERTY LIBERTY LIBERTY ACORN ACORN ACORN ACORN ACORN JUNE 30, 2003 FUND INTERNATIONAL USA FOREIGN FORTY TWENTY ---------------------------------------------------------------------------------------------------------------------------------- (IN THOUSANDS) ASSETS Investments, at value (cost: Liberty Acorn Fund $5,739,111; Liberty Acorn $7,551,824 $1,358,921 $425,161 $33,077 $384,356 International $1,262,834; Liberty Acorn USA $375,413; Liberty Acorn Foreign Forty $28,659; Liberty Acorn Twenty $335,094) Cash -- 71 1 1 496 Foreign currency (cost: Liberty Acorn Fund $575; Liberty Acorn International $13,090, Liberty Acorn Foreign Forty $50) 577 13,088 -- 50 -- Receivable for: Investments sold 5,969 8,925 -- 433 -- Fund shares sold 30,538 1,232 1,538 26 5,584 Dividends and interest 3,928 2,196 44 125 11 Expense reimbursement due from Advisor -- -- -- 10 -- Deferred Trustees' Compensation Investments 686 317 48 -- -- Other assets 34 8 2 -- 30 ---------------------------------------------------------------------------------------------------------------------------------- Total Assets 7,593,556 1,384,758 426,794 33,722 390,477 LIABILITIES Payable to custodian bank 509 -- -- -- -- Payable for: Investments purchased 19,264 7,221 96 -- 1,393 Fund shares redeemed 6,261 1,461 1,588 11 308 Foreign capital gains tax 486 21 -- -- -- Custodian 60 181 10 8 -- Management fee -- 2 -- -- -- Administration fee 4 -- -- -- -- 12b-1 Service & Distribution fees 177 -- 2 -- 23 Legal and audit fees 78 71 8 18 14 Reports to shareholders 219 126 39 22 27 Deferred Trustees' fees 686 317 48 -- -- Transfer agent fee 884 201 94 25 -- Other liabilities 178 217 4 -- -- ---------------------------------------------------------------------------------------------------------------------------------- Total Liabilities 28,806 9,818 1,889 84 1,765 ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS $7,564,750 $1,374,940 $424,905 $33,638 $388,712 ================================================================================================================================== COMPOSITION OF NET ASSETS Paid in capital $5,735,670 $1,557,140 $395,001 $68,620 $332,222 Undistributed net investment income (Accumulated net investment loss) 3,520 13,287 (1,743) 173 (1,091) Accumulated net realized gain (loss) 13,719 (284,480) (18,101) (39,588) 8,319 Net unrealized appreciation (depreciation) on: Investments (net of unrealized PFIC gains of $409 for Liberty Acorn Fund and $7,225 for Liberty Acorn International Fund) 1,812,304 88,862 49,748 4,418 49,262 Foreign currency transactions (463) 131 -- 15 -- ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS $7,564,750 $1,374,940 $424,905 $33,638 $388,712 ================================================================================================================================== Net asset value per share-- Class A (a) $17.87 $17.32 $16.97 $11.25 $16.19 (Net assets/shares) ($1,115,904/62,438) ($41,071/2,371) ($46,021/2,711) ($2,262/201) ($93,436/5,772) Maximum offering price per share-- Class A (b) $18.96 $18.38 $18.01 $11.94 $17.18 (Net asset value per share/ front-end sales charge) ($17.87/.9425) ($17.32/.9425) ($16.97/.9425) ($11.25/.9425) ($16.19/.9425) Net asset value and offering price per share-- Class B (a) $17.57 $17.07 $16.71 $11.04 $15.91 (Net assets/shares) ($830,970/47,300) ($26,745/1,567) ($44,679/2,673) ($1,850/167) ($62,714/3,942) Net asset value and offering price per share-- Class C (a) $17.57 $17.07 $16.71 $11.06 $15.91 (Net assets/shares) ($545,231/31,040) ($16,379/959) ($22,129/1,324) ($3,067/278) ($27,111/1,704) Net asset value, offering price and redemption price per share-- Class Z $18.11 $17.43 $17.14 $11.34 $16.36 (Net assets/shares) ($5,072,645/280,041) ($1,290,745/74,055) ($312,076/18,202) ($26,459/2,333) ($205,451/12,559)
(a) Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (b) On sales of $50,000 or more the offering price is reduced. See accompanying notes to financial statements. 50 Liberty Acorn Family of Funds > Statements of Operations (Unaudited) For the Six Months Ended June 30, 2003
LIBERTY LIBERTY LIBERTY LIBERTY LIBERTY ACORN ACORN ACORN ACORN ACORN (in thousands) FUND INTERNATIONAL USA FOREIGN FORTY TWENTY ------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME: Dividend income $31,190 $23,170 $569 $480 $571 Interest income 3,213 418 141 9 101 ------------------------------------------------------------------------------------------------------------ 34,403 23,588 710 489 672 Foreign taxes withheld (870) (2,435) -- (45) -- ------------------------------------------------------------------------------------------------------------ Total Investment Income 33,533 21,153 710 444 672 EXPENSES: Management fees 20,805 5,480 1,617 151 1,071 Administration fees 1,549 324 87 8 60 12b-1 Service & Distribution fees 6,968 249 344 26 379 Custody fees 247 506 5 22 4 Legal and audit fees 151 65 20 16 14 Transfer agent fee 3,250 552 244 43 154 Trustees' fee 100 32 4 1 1 Registration and blue sky 221 39 40 39 43 Reports to shareholders 216 110 36 19 24 Other expenses 108 34 6 1 2 ------------------------------------------------------------------------------------------------------------ Total expenses 33,615 7,391 2,403 326 1,752 Less custody fees paid indirectly (1) --* --* --* --* Less reimbursement of expenses by Advisor -- -- -- (69) -- ------------------------------------------------------------------------------------------------------------ Net Expenses 33,614 7,391 2,403 257 1,752 ------------------------------------------------------------------------------------------------------------ Net Investment Income (Loss) (81) 13,762 (1,693) 187 (1,080) NET REALIZED AND UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS: Net realized gain (loss) on: Investments 69,836 (60,137) 5,769 (1,696) 8,871 Foreign currency transactions (153) (7) -- 9 -- ------------------------------------------------------------------------------------------------------------ Net realized gain (loss) 69,683 (60,144) 5,769 (1,687) 8,871 ============================================================================================================ Net change in net unrealized appreciation/depreciation on: Investments 968,294 218,808 63,661 4,600 34,073 Foreign currency transactions (202) 315 -- 1 -- ------------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation/ depreciation 968,092 219,123 63,661 4,601 34,073 ============================================================================================================ Net realized and unrealized gain 1,037,775 158,979 69,430 2,914 42,944 ------------------------------------------------------------------------------------------------------------ Net Increase in Net Assets resulting from Operations $1,037,694 $172,741 $67,737 $3,101 $41,864 ============================================================================================================
* Rounds to less than $500. See accompanying notes to financial statements. 51 Liberty Acorn Family of Funds > Statements of Changes in Net Assets
LIBERTY LIBERTY ACORN ACORN FUND INTERNATIONAL (UNAUDITED) (UNAUDITED) SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED INCREASE (DECREASE) IN NET ASSETS ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31, -------------------------------------------------------------------------------------------------------------- (in thousands) 2003 2002 2003 2002 OPERATIONS: Net investment income (loss) $(81) $(5,079) $13,762 $11,854 Net realized gain (loss) on investments, forward foreign currency contracts and foreign currency transactions 69,683 (57,609) (60,144) (88,618) Change in net unrealized appreciation (depreciation) of investments and foreign currency transactions 968,092 (778,655) 219,123 (188,391) ------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) from Operations 1,037,694 (841,343) 172,741 (265,155) DISTRIBUTION TO SHAREHOLDERS FROM: Net investment income -- Class A -- -- (106) (24) Net investment income -- Class Z -- -- (5,829) (9,265) ------------------------------------------------------------------------------------------------------------- Total Distribution to Shareholders -- -- (5,935) (9,289) SHARE TRANSACTIONS: Subscriptions -- Class A 349,996 645,380 27,305 264,875 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- -- -- -- Distributions reinvested -- Class A -- -- 80 17 Redemptions -- Class A (105,500) (134,555) (24,566) (251,764) ------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) -- Class A 244,496 510,825 2,819 13,128 Subscriptions -- Class B 147,145 490,366 4,559 15,847 Redemptions -- Class B (45,126) (67,763) (3,376) (6,194) ------------------------------------------------------------------------------------------------------------ Net Increase (Decrease) -- Class B 102,019 422,603 1,183 9,653 Subscriptions-- Class C 135,132 330,698 9,443 43,176 Redemptions-- Class C (37,166) (53,861) (9,612) (40,348) ------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) -- Class C 97,966 276,837 (169) 2,828 Subscriptions-- Class Z 626,204 917,983 132,423 649,314 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- -- -- -- Distributions reinvested-- Class Z -- -- 5,337 8,562 Redemptions -- Class Z (284,270) (509,628) (244,903) (768,033) ------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) -- Class Z 341,934 408,355 (107,143) (110,157) ------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) from Share Transactions 786,415 1,618,620 (103,310) (84,548) ------------------------------------------------------------------------------------------------------------- Total Increase (Decrease) in Net Assets 1,824,109 777,277 63,496 (358,992) NET ASSETS: Beginning of period 5,740,641 4,963,364 1,311,444 1,670,436 ------------------------------------------------------------------------------------------------------------- End of period $7,564,750 $5,740,641 $1,374,940 $1,311,444 ============================================================================================================== UNDISTRIBUTED NET INVESTMENT INCOME (ACCUMULATED NET INVESTMENT LOSS OR OVERDISTRIBUTED NET INVESTMENT INCOME $3,520 $3,601 $13,287 $5,460 ==============================================================================================================
See accompanying notes to financial statements. 52
LIBERTY LIBERTY ACORN LIBERTY ACORN USA FOREIGN FORTY ACORN TWENTY (UNAUDITED) (UNAUDITED) (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31, ----------------------------------------------------------------------------------------------------------------------------------- (in thousands) 2003 2002 2003 2002 2003 2002 OPERATIONS: Net investment income (loss) Net realized gain (loss) on $(1,693) $(2,949) $187 $39 $(1,080) ($1,224) investments, forward foreign currency contracts and foreign currency transactions 5,769 (17,552) (1,687) (6,845) 8,871 (508) Change in net unrealized appreciation (depreciation) of investments and foreign currency transactions 63,661 (56,039) 4,601 1,151 34,073 (7,857) ----------------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) from Operations 67,737 (76,540) 3,101 (5,655) 41,864 (9,589) DISTRIBUTION TO SHAREHOLDERS FROM: Net investment income -- Class A -- -- -- -- -- -- Net investment income -- Class Z -- -- (19) -- -- -- Total Distribution to Shareholders -- -- (19) -- -- -- SHARE TRANSACTIONS: Subscriptions--Class A 15,797 35,469 1,209 54,708 63,814 31,504 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- 22 -- -- -- -- Distributions reinvested -- Class A -- -- -- -- -- -- Redemptions -- Class A (9,095) (15,616) (1,774) (54,724) (11,671) (10,199) ----------------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) -- Class A 6,702 19,875 (565) (16) 52,143 21,305 Subscriptions -- Class B 5,097 33,711 555 2,363 27,206 27,565 Redemptions -- Class B (4,823) (13,914) (685) (2,245) (4,447) (5,862) ----------------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) -- Class B 274 19,797 (130) 118 22,759 21,703 Subscriptions -- Class C 2,748 14,839 2,268 5,117 14,743 8,806 Redemptions -- Class C (2,414) (5,070) (2,401) (5,510) (1,246) (2,268) ----------------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) -- Class C 334 9,769 (133) (393) 13,497 6,538 Subscriptions -- Class Z 59,485 125,400 19,902 72,837 106,843 46,496 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- 10,075 -- -- -- -- Distributions reinvested -- Class Z -- -- 19 -- -- -- Redemptions -- Class Z (33,150) (75,563) (21,889) (79,344) (16,704) (17,872) ----------------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) -- Class Z 26,335 59,912 (1,968) (6,507) 90,139 28,624 ----------------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) from Share Transactions 33,645 109,353 (2,796) (6,798) 178,538 78,170 ----------------------------------------------------------------------------------------------------------------------------------- Total Increase (Decrease) in Net Assets 101,382 32,813 286 (12,453) 220,402 68,581 NET ASSETS: Beginning of period 323,523 290,710 33,352 45,805 168,310 99,729 ----------------------------------------------------------------------------------------------------------------------------------- End of period $424,905 $323,523 $33,638 $33,352 $388,712 $168,310 =================================================================================================================================== UNDISTRIBUTED NET INVESTMENT INCOME (ACCUMULATED NET INVESTMENT LOSS OR OVERDISTRIBUTED NET INVESTMENT INCOME $(1,743) $(50) $173 $5 $(1,091) $(11) ===================================================================================================================================
53 Liberty Acorn Family of Funds > Statements of Changes in Net Assets, continued
LIBERTY LIBERTY ACORN ACORN FUND INTERNATIONAL (UNAUDITED) (UNAUDITED) SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED CHANGES IN SHARES OF BENEFICIAL INTEREST: ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31, ---------------------------------------------------------------------------------------------------------- (in thousands) 2003 2002 2003 2002 Subscriptions -- Class A 21,908 38,478 1,770 15,488 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- -- -- -- Shares issued in reinvestment and capital gains -- Class A -- -- 5 1 Less shares redeemed -- Class A (6,681) (8,482) (1,610) (14,677) ---------------------------------------------------------------------------------------------------------- Net Increase (Decrease) -- Class A 15,227 29,996 165 812 Subscriptions-- Class B 9,351 29,099 298 923 Less shares redeemed-- Class B (2,954) (4,407) (224) (376) ---------------------------------------------------------------------------------------------------------- Net Increase (Decrease) -- Class B 6,397 24,692 74 547 Subscriptions -- Class C 8,551 19,804 631 2,573 Less shares redeemed -- Class C (2,373) (3,475) (636) (2,396) ---------------------------------------------------------------------------------------------------------- Net Increase (Decrease) -- Class C 6,178 16,329 (5) 177 Subscriptions -- Class Z 38,473 54,769 8,580 38,166 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- -- -- -- Shares issued in reinvestment and capital gains -- Class Z -- -- 313 484 Less shares redeemed -- Class Z (17,828) (31,314) (15,403) (45,408) ---------------------------------------------------------------------------------------------------------- Net Increase (Decrease) -- Class Z 20,645 23,455 (6,510) (6,758) ---------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Shares of Beneficial Interest 48,447 94,472 (6,276) (5,222) ----------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. 54
LIBERTY LIBERTY ACORN LIBERTY ACORN USA FOREIGN FORTY ACORN TWENTY (UNAUDITED) (UNAUDITED) (UNAUDITED) SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED CHANGES IN SHARES OF BENEFICIAL INTEREST: ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31, ------------------------------------------------------------------------------------------------------------------------------------ (IN THOUSANDS) 2003 2002 2003 2002 2003 2002 Subscriptions-- Class A 1,022 2,124 122 4,749 4,298 2,229 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- 2 -- -- -- -- Shares issued in reinvestment and capital gains -- Class A -- -- -- -- -- -- Less shares redeemed -- Class A (597) (1,009) (176) (4,731) (805) (735) ------------------------------------------------------------------------------------------------------------------------------------ Net Increase (Decrease) -- Class A 425 1,117 (54) 18 3,493 1,494 Subscriptions -- Class B 340 2,019 56 220 1,848 1,955 Less shares redeemed -- Class B (342) (937) (71) (211) (317) (431) ------------------------------------------------------------------------------------------------------------------------------------ Net Increase (Decrease) -- Class B (2) 1,082 (15) 9 1,531 1,524 Subscriptions -- Class C 181 892 232 459 997 630 Less shares redeemed -- Class C (164) (335) (243) (495) (88) (164) ------------------------------------------------------------------------------------------------------------------------------------ Net Increase (Decrease) -- Class C 17 557 (11) (36) 909 466 Subscriptions -- Class Z 3,898 7,498 1,970 6,884 7,115 3,286 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- 724 -- -- -- -- Shares issued in reinvestment and capital gains -- Class Z -- -- 2 -- -- -- Less shares redeemed -- Class Z (2,170) (4,844) (2,164) (7,419) (1,145) (1,263) ------------------------------------------------------------------------------------------------------------------------------------ Net Increase (Decrease) -- Class Z 1,728 3,378 (192) (535) 5,970 2,023 ------------------------------------------------------------------------------------------------------------------------------------ Net Increase (Decrease) in Shares of Beneficial Interest 2,168 6,134 (272) (544) 11,903 5,507 ------------------------------------------------------------------------------------------------------------------------------------
55 Liberty Acorn Family of Funds > Financial Highlights
(UNAUDITED) SIX MONTHS LIBERTY ACORN FUND CLASS Z ENDED JUNE 30, YEARS ENDED DECEMBER 31, -------------------------------------------------------------------------------------------------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000 1999 1998 NET ASSET VALUE, BEGINNING OF PERIOD $15.50 $17.88 $17.21 $18.53 $16.85 $16.99 INCOME FROM INVESTMENT OPERATIONS Net investment income (a) 0.03 0.02 0.05 0.10 0.09 0.04 Net realized and unrealized gain (loss) 2.58 (2.40) 1.01 1.55 5.22 0.91 -------------------------------------------------------------------------------------------------------------------------- Total from Investment Operations 2.61 (2.38) 1.06 1.65 5.31 0.95 -------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income -- -- (0.04) (0.11) (0.09) (0.03) From net realized gains -- -- (0.35) (2.86) (3.54) (1.06) -------------------------------------------------------------------------------------------------------------------------- Total Distributions Declared to Shareholders -- -- (0.39) (2.97) (3.63) (1.09) ========================================================================================================================== NET ASSET VALUE, END OF PERIOD $18.11 $15.50 $17.88 $17.21 $18.53 $16.85 ========================================================================================================================== Total Return (b) 16.84%(c) (13.31)% 6.14% 10.06% 33.40% 6.00% ========================================================================================================================== RATIOS TO AVERAGE NET ASSETS Expenses (d) 0.80%(e) 0.82% 0.82% 0.83% 0.85% 0.84% Net investment income (d) 0.31%(e) 0.15% 0.28% 0.55% 0.49% 0.30% Portfolio turnover rate 7%(c) 13% 20% 29% 34% 24% Net assets at end of period (in millions) $5,073 $4,022 $4,220 $3,983 $3,921 $3,549
(a) Per share data was calculated using average shares outstanding during the period. (b) Total return at net asset value assuming all distributions reinvested. (c) Not annualized. (d) The benefits derived from custody fees paid indirectly had no impact. (e) Annualized.
(UNAUDITED) SIX MONTHS LIBERTY ACORN INTERNATIONAL CLASS Z ENDED JUNE 30, YEARS ENDED DECEMBER 31, -------------------------------------------------------------------------------------------------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000 1999 1998 NET ASSET VALUE, BEGINNING OF PERIOD $15.40 $18.47 $23.85 $35.33 $20.82 $18.39 INCOME FROM INVESTMENT OPERATIONS Net investment income (a) 0.17 0.14 0.12 0.01 0.83 0.17 Net realized and unrealized gain (loss) 1.94 (3.10) (5.11) (6.73) 15.45 2.68 -------------------------------------------------------------------------------------------------------------------------- Total from Investment Operations 2.11 (2.96) (4.99) (6.72) 16.28 2.85 -------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income (0.08) (0.11) -- (0.66) (0.22) (0.15) From net realized gains -- -- (0.39) (4.10) (1.55) (0.27) -------------------------------------------------------------------------------------------------------------------------- Total Distributions Declared to Shareholders (0.08) (0.11) (0.39) (4.76) (1.77) (0.42) ========================================================================================================================== NET ASSET VALUE, END OF PERIOD $17.43 $15.40 $18.47 $23.85 $35.33 $20.82 ========================================================================================================================== Total Return (b) 13.69%(c) (16.10)% (21.11)% (20.02)% 79.20% 15.40% ========================================================================================================================== RATIOS TO AVERAGE NET ASSETS Expenses (d) 1.09%(e) 1.06% 1.06% 1.05% 1.11% 1.12% Net investment income (d) 2.17%(e) 0.80% 0.62% 0.02% 0.12% 0.86% Portfolio turnover rate 22%(c) 52% 45% 63% 46% 37% Net assets at end of period (in millions) $1,291 $1,241 $1,613 $2,459 $2,868 $1,725
(a) Per share data was calculated using average shares outstanding during the period. (b) Total return at net asset value assuming all distributions reinvested. (c) Not annualized. (d) The benefits derived from custody fees paid indirectly had no impact. (e) Annualized.
(UNAUDITED) SIX MONTHS LIBERTY ACORN USA CLASS Z ENDED JUNE 30, YEARS ENDED DECEMBER 31, --------------------------------------------------------------------------------------------------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000 1999 1998 NET ASSET VALUE, BEGINNING OF PERIOD $14.28 $17.52 $14.90 $16.75 $14.80 $15.12 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (a) (0.05) (0.10) (0.08) (0.05) 0.00(b) (0.07) Net realized and unrealized gain (loss) 2.91 (3.14) 2.94 (1.48) 3.32 0.87 --------------------------------------------------------------------------------------------------------------------------- Total from Investment Operations 2.86 (3.24) 2.86 (1.53) 3.32 0.80 --------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income -- -- -- (0.00)(b) -- -- From net realized gains -- -- (0.24) (0.32) (1.37) (1.12) --------------------------------------------------------------------------------------------------------------------------- Total Distributions Declared to Shareholders -- -- (0.24) (0.32) (1.37) (1.12) ============================================================================================================================ NET ASSET VALUE, END OF PERIOD $17.14 $14.28 $17.52 $14.90 $16.75 $14.80 ============================================================================================================================ Total Return (c) 20.03%(d) (18.49)% 19.25% (8.99%) 23.00% 5.80% ============================================================================================================================ RATIOS TO AVERAGE NET ASSETS Expenses (e) 1.12%(f) 1.17% 1.17% 1.15% 1.15% 1.20% Net investment income (loss) (e) (0.71)%(f) (0.64)% (0.46)% (0.32)% 0.00%(g) (0.42%) Portfolio turnover rate 6%(d) 31% 24% 45% 49% 42% Net assets at end of period $312 $235 $229 $222 $371 $281 (in millions)
(a) Per share data was calculated using average shares outstanding during the period. (b) Rounds to less than $0.01 per share. (c) Total return at net asset value assuming all distributions reinvested. (d) Not annualized. (e) The benefits derived from custody fees paid indirectly had no impact. (f) Annualized. (g) Rounds to less than 0.01%. See accompanying notes to financial statements 56-57 spread Liberty Acorn Family of Funds > Financial Highlights
(UNAUDITED) SIX MONTHS LIBERTY ACORN FOREIGN FORTY CLASS Z ENDED JUNE 30, --------------------------------------------------------------------------------- Selected data for a share outstanding throughout each period 2003 2002 NET ASSET VALUE, BEGINNING OF PERIOD $10.29 $12.09 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (a) 0.07 0.03 Net realized and unrealized gain (loss) 0.99 (1.83) --------------------------------------------------------------------------------- Total from Investment Operations 1.06 (1.80) --------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income (0.01) -- From net realized gains -- -- --------------------------------------------------------------------------------- Total distributions declared to shareholders (0.01) -- ================================================================================= NET ASSET VALUE, END OF PERIOD $11.34 $10.29 ================================================================================= Total Return (b) 10.28%(c)(d) (14.89)%(d) ================================================================================= RATIOS TO AVERAGE NET ASSETS Expenses 1.45%(e)(f) 1.45%(f) Net investment income (loss) 1.34%(e)(f) 0.26%(f) Reimbursement 0.40%(e) 0.33% Portfolio turnover rate 50%(c) 102% Net assets at end of period (in millions) $26 $26
(a) Per share data was calculated using average shares outstanding during the period. (b) Total return at net asset value assuming all distributions reinvested. (c) Not annualized. (d) Had the Advisor not reimbursed a portion of expenses, total return would have been reduced. (e) Annualized. (f) The benefits derived from custody fees paid indirectly had no impact. (g) In accordance with a requirement of the Securities and Exchange Commission, the ratios reflect total expenses prior to the reduction of custody fees for cash balances it maintains with the custodian ("custody fees paid indirectly"). The ratios of expenses to average daily net assets and net investment income to average daily net assets net of custody fees paid indirectly would have been 1.45% and (0.14)%, respectively for the year ended December 31, 1999, and 1.45% and (0.50)%, respectively for the period ended December 31, 1998. (UNAUDITED) SIX MONTHS LIBERTY ACORN TWENTY CLASS Z ENDED JUNE 30, -------------------------------------------------------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 NET ASSET VALUE, BEGINNING OF PERIOD $14.04 $15.23 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (a) (0.04) (0.10) Net realized and unrealized gain (loss) 2.36 (1.09) -------------------------------------------------------------------------------- Total from Investment Operations 2.32 (1.19) -------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income -- -- From net realized gains -- -- -------------------------------------------------------------------------------- Total Distributions Declared to Shareholders -- -- ================================================================================ NET ASSET VALUE, END OF PERIOD $16.36 $14.04 ================================================================================ Total Return (c) 16.52%(d) (7.81)%(e) ================================================================================ RATIOS TO AVERAGE NET ASSETS Expenses 1.10%(f)(g) 1.26%(g) Net investment income (loss) (0.54)%(f)(g) (0.67)%(g) Reimbursement -- 0.01% Portfolio turnover rate 25%(d) 40% Net assets at end of period (in millions) $205 $93 (a) Per share data was calculated using average shares outstanding during the period. (b) Rounds to less than $0.01 per share. (c) Total return at net asset value assuming all distributions reinvested. (d) Not annualized. (e) Had the Advisor not reimbursed a portion of expenses, total return would have been reduced. (f) Annualized. (g) The benefits derived from custody fees paid indirectly had no impact. (h) In accordance with a requirement of the Securities and Exchange Commission, the ratios reflect total expenses prior to the reduction of custody fees for cash balances it maintains with the custodian ("custody fees paid indirectly"). The ratios of expenses to average daily net assets and net investment income to average daily net assets net of custody fees paid indirectly would have been 1.32% and (0.50)%, respectively for the year ended December 31, 2000, 1.35% and (0.60)%, respectively for the year ended December 31, 1999, 1.35% and 0.28% for the period ended December 31, 1998. See accompanying notes to financial statements 58
INCEPTION NOVEMBER 23 THROUGH LIBERTY ACORN FOREIGN FORTY YEARS ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------ selected data for a share outstanding throughout each period 2001 2000 1999 1998 NET ASSET VALUE, BEGINNING OF PERIOD $17.15 $19.93 $11.00 $10.00 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (a) (0.05) (0.11) (0.02) (0.01) Net realized and unrealized gain (loss) (4.92) (2.53) 8.98 1.01 ------------------------------------------------------------------------------------------ Total from Investment Operations (4.97) (2.64) 8.96 1.00 ------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income (0.01) (0.04) -- -- From net realized gains (0.08) (0.10) (0.03) -- ------------------------------------------------------------------------------------------ Total distributions declared to SHAREHOLDERS (0.09) (0.14) (0.03) -- ------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD $12.09 $17.15 $19.93 $11.00 ========================================================================================== Total Return (b) (29.05)%(d) (13.35)% 81.60%(d) 10.00%(c)(d) ========================================================================================== RATIOS TO AVERAGE NET ASSETS Expenses 1.45%(f) 1.33%(f) 1.48%(g) 1.73%(e)(g) Net investment income (loss) (0.32)%(f) (0.42)%(f) (0.17)%(g) (0.78)%(e)(g) Reimbursement Portfolio turnover rate 0.01% -- 0.09% 0.97%(e) Net assets at end of period 82% 79% 60% 90%(e) (IN MILLIONS) $37 $130 $107 $16
INCEPTION NOVEMBER 23 THROUGH LIBERTY ACORN TWENTY YEARS ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------------------------------------------------ SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2001 2000 1999 1998 NET ASSET VALUE, BEGINNING OF PERIOD $14.13 $13.70 $10.71 $10.00 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (a) (0.05) (0.07) (0.08) 0.00(b) Net realized and unrealized gain (loss) 1.18 1.59 3.21 0.71 ------------------------------------------------------------------------------------------ Total from Investment Operations 1.13 1.52 3.13 0.71 ------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income -- (0.01) -- -- From net realized gains (0.03) (1.08) (0.14) -- ------------------------------------------------------------------------------------------ Total Distributions Declared to Shareholders (0.03) (1.09) (0.14) -- ========================================================================================== NET ASSET VALUE, END OF PERIOD $15.23 $14.13 $13.70 $10.71 ========================================================================================== Total Return (c) 8.00%(e) 11.68% 29.30%(e) 7.10%(d)(e) ========================================================================================== RATIOS TO AVERAGE NET ASSETS Expenses 1.35% 1.34%(h) 1.37%(h) 1.41%(f)(h) Net investment income (loss) (0.44)% (0.52)%(h) (0.62)%(h) 0.22%(f)(h) Reimbursement 0.03% -- 0.04% 0.42%(f) Portfolio turnover rate 82% 116% 101% 173%(f) Net assets at end of period (IN MILLIONS) $70 $67 $68 $34
59 Liberty Acorn Family of Funds > Notes to Financial Statements (Unaudited) 1. Nature of Operations Liberty Acorn Fund, Liberty Acorn International, Liberty Acorn USA, Liberty Acorn Foreign Forty and Liberty Acorn Twenty (the "Funds") are series of Liberty Acorn 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. The Funds may issue an unlimited number of shares. The Funds offer four classes of shares: Class A, Class B, Class C and Class Z. Class A shares are sold with a front-end sales charge. A contingent deferred sales charge is assessed to Class A shares purchased without an initial sales charge on redemptions made within eighteen months on an original purchase of $1 million to $25 million. Class B shares are subject to a contingent deferred sales charge. Class B shares will convert to Class A shares in three, four or eight years after purchase, depending on the program under which shares are purchased. Class C shares are subject to a contingent deferred sales charge on redemptions made within one year after purchase. Class Z shares are offered continuously at net asset value. There are certain restrictions on the purchase of Class Z shares. The financial highlights for Class A, Class B and Class C shares are presented in a separate semi-annual report. The semi-annual financial statements for the Columbia Thermostat Fund, another Fund of the Trust, are presented on page 64 of this report. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are borne pro rata on the basis of the relative net assets of all classes, except each class bears certain expenses unique to that class such as distribution services, transfer agent, and certain other class specific expenses. Differences in class expenses may result in payment of different dividend distributions for each class. All the share classes of the Trust have equal rights with respect to voting subject to class specific arrangements. On July 26, 2002, Liberty Acorn USA acquired all of the net assets of the Stein Roe Small Company Growth Fund ("Stein Roe Fund") pursuant to a plan of reorganization approved by the Stein Roe Fund shareholders on June 28, 2002. The acquisition was accomplished by a tax-free exchange of 1,139,488 shares of the Stein Roe Fund (valued at $10,096,640) for 726,123 shares of Liberty Acorn USA. The net assets of the Stein Roe Fund were combined with the net assets of the Liberty Acorn USA on the acquisition date and included $3,125,202 of unrealized depreciation on investment. The aggregate net assets of Liberty Acorn USA immediately before and after acquisition were $306,945,066 and $317,041,706, respectively. 2. Significant Accounting Policies >Security valuation Investments are stated at fair 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. If a security is traded principally on the Nasdaq Stock Market Inc., the SEC-approved Nasdaq Official Closing Price will be applied. Securities for which there are no reported sales on the valuation date are valued at the latest 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. >Repurchase agreements The Funds may engage in repurchase agreement transactions. The Funds, through their custodians, receive delivery of underlying securities collateralizing repurchase agreements. The Funds' investment advisor determines that the value of the underlying securities is at all times at least equal to the resale price. In the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings. >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 60 is recorded on the accrual basis and includes amortization of discounts on money market instruments and long-term debt instruments when required for federal income tax purposes. Realized gains and losses from security transactions are reported on an identified cost basis. >Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. >Financial instruments Each Fund may purchase or sell exchange-traded financial futures contracts, which are contracts that obligate that Fund to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Funds enter into such contracts to hedge a portion of their portfolio. Gains and losses are reflected as "Net Realized Gain (Loss) on Futures" in the Statements of Operations. Additionally, each Fund, except for Liberty Acorn USA and Liberty Acorn Twenty, may engage in portfolio hedging with respect to changes in foreign 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. The Funds bear the market risk that arises from changes in the value of financial instruments and securities indices (futures contracts) or from changes in foreign currency rates (forward foreign currency contracts) and the credit risk should a counterparty fail to perform under such contracts. None of the Funds entered into any futures contracts or forward foreign currency contracts during the six months ended June 30, 2003. >Fund share valuation Fund shares are sold and redeemed on a continuing basis at net asset value. Net asset value per share is determined daily as of the close of trading on the New York Stock Exchange on each day the Exchange is open for trading. All income, expenses (other than the Class A, Class B and Class C 12b-1 service and distribution fees, and Class A, Class B, Class C and Class Z shares Transfer Agent fees) and realized and unrealized gains (losses) of a fund are allocated to each class proportionately on a daily basis for purposes of determining the net asset value of each class. >Custody fees Custody fees are reduced based on each Funds' cash balances maintained with the custodian. The amount is disclosed as a reduction of total expenses in the Statement of Operations. >Federal income taxes The Funds have complied with the special provisions of the Internal Revenue Code available to regulated investment companies and, in the manner provided therein, distribute all their taxable income, as well as any net realized gain on sales of investments and foreign currency transactions reportable for federal income tax purposes. Accordingly, the Fund paid no federal income taxes and no federal income tax provision was required. >Distributions to Shareholders Distributions to shareholders are recorded on the ex-date. 3. Federal Tax Information The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. For the year ended December 31, 2002, the following capital loss carryforwards are available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code: YEAR OF LIBERTY LIBERTY ACORN LIBERTY ACORN EXPIRATION ACORN FUND INTERNATIONAL USA ---------------------------------------------------------- (in thousands) 2008 $ -- $ -- $ 126 2009 -- 111,479 3,634 2010 38,238 76,335 17,936 ---------------------------------------------------------- TOTAL $38,238 $187,814 $21,696 YEAR OF LIBERTY LIBERTY EXPIRATION FOREIGN FORTY TWENTY ---------------------------------------------------------- (in thousands) 2009 $ 23,084 $ -- 2010 12,528 530 ---------------------------------------------------------- TOTAL $35,612 $530 During the year ended December 31, 2002, the capital loss carryforward acquired by Liberty Acorn USA as a result of the merger with Stein Roe Fund was $3,760. Expired capital loss carryforwards, if any, are recorded as a reduction of paid-in capital. 61 Liberty Acorn Family of Funds > Notes to Financial Statements continued Under current tax rules, certain capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As of December 31, 2002, for federal income tax purposes, post-October losses were deferred to January 1, 2003 as follows: AMOUNT --------------------------------------------------------- (in thousands) Liberty Acorn Fund $15,436 Liberty Acorn International 32,617 Liberty Acorn USA 1,921 Liberty Acorn Foreign Forty 1,251 Liberty Acorn Twenty -- --------------------------------------------------------- Liberty Acorn Fund and Liberty Acorn International have elected to mark-to-market their investments in Passive Foreign Investment Companies ("PFIC's") for federal income tax purposes. Gains and losses relating to PFIC's are treated as ordinary income for federal income tax purposes. A summary of transactions relating to PFIC's is as follows (in thousands): LIBERTY ACORN FUND --------------------------------------------------------- Cumulative unrealized appreciation on PFIC's recognized in prior years at December 31, 2001 $ -- Unrealized appreciation (depreciation) on PFIC's recognized for federal income tax purposes during 2002 409 Unrealized appreciation recognized in prior years on PFIC's sold during 2002 -- --------- Cumulative unrealized appreciation on PFIC's carried forward at December 31, 2002 $ 409 --------- LIBERTY ACORN INTERNATIONAL --------------------------------------------------------- Cumulative unrealized appreciation on PFIC's recognized in prior years at December 31, 2001 $8,026 Unrealized appreciation (depreciation) on PFIC's recognized for federal income tax purposes during 2002 319 Unrealized appreciation recognized in prior years on PFIC's sold during 2002 (1,120) --------- Cumulative unrealized appreciation on PFIC's carried forward at December 31, 2002 $7,225 --------- 4. Transactions with Affiliates The Funds' investment adviser, Liberty Wanger Asset Management, L.P. ("Liberty WAM"), a wholly-owned subsidiary of Columbia Management Group, Inc., which in turn is a wholly-owned subsidiary of Fleet National Bank, which in turn is a wholly-owned subsidiary of FleetBoston Financial Corporation ("Fleet"), furnishes continuing investment supervision to each Fund and is responsible for the overall management of the Funds' business affairs. Under the Funds' investment management agreement, fees are accrued daily and paid monthly to Liberty WAM at the annual rates shown in the table below for each fund. LIBERTY ACORN FUND ------------------------------------------------ Net asset value: For the first $700 million .75% Next $1.300 billion .70% Net assets in excess of $2 billion .65% LIBERTY ACORN INTERNATIONAL ------------------------------------------------ Net asset value: For the first $100 million 1.20% Next $400 million .95% Net assets in excess of $500 million .75% LIBERTY ACORN USA ------------------------------------------------ Net asset value: For the first $200 million .95% Net assets in excess of $200 million .90% LIBERTY ACORN FOREIGN FORTY ------------------------------------------------ On average daily net assets: .95% LIBERTY ACORN TWENTY ------------------------------------------------ On average daily net assets: .90% >Expense Limit Liberty WAM has voluntarily agreed to reimburse the ordinary operating expenses (exclusive of distribution and service fees, interest, taxes and extraordinary expenses, if any) exceeding 1.45% of the average annual net assets for Liberty Acorn Foreign Forty Class Z shares and 1.35% of the average annual net assets for Liberty Acorn Twenty Class Z shares. Liberty WAM has also contracted to provide administrative services to each Fund at an annual rate of .05% of average daily net assets. Liberty Funds Distributor, Inc. (the "Distributor"), an indirect subsidiary of Fleet, is each Fund's principal underwriter and receives no compensation on the sale of Class Z shares. Each Fund has adopted a 12b-1 plan which requires it to pay the Distributor a service and distribution fee on the net assets attributable to Class A, Class B and Class C shares. Certain officers and trustees of the Trust are also officers of Liberty WAM. The Trust makes no direct payments to its officers and trustees who are affiliated with Liberty WAM. Trustees' fees and expenses for the six months ended June 30, 2003 are as follows: 62 Six Months Ended June 30, 2003 ----------------------------------------- (in thousands) Liberty Acorn Fund $100 Liberty Acorn International 32 Liberty Acorn USA 4 Liberty Acorn Foreign Forty 1 Liberty Acorn Twenty 1 ----------------------------------------- The Trust provides a deferred compensation plan for its trustees. Under this deferred compensation plan, trustees may elect to defer all or a portion of their compensation. Amounts deferred are retained by the Trust and represent an unfunded obligation of the Trust. The value of amounts deferred is determined by reference to the change in value of Class Z shares of one or more series of the Trust or a money market fund as specified by the participant. Benefits under the deferred compensation plan are payable upon retirement. During the six months ended June 30, 2003, the Funds engaged in purchases and sales transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions complied with Rule 17a-7 under the Investment Company Act of 1940 and were as follows: FUNDS PURCHASES SALES ------------------------------------------------------- (in thousands) Liberty Acorn Fund $29,399 $ -- Liberty Acorn International 1,778 31,855 Liberty Acorn USA -- -- Liberty Acorn Foreign Forty -- 45 Liberty Acorn Twenty -- 512 ------------------------------------------------------- 5. Borrowing Arrangements The Trust participates in a $150,000,000 credit facility which was entered into to facilitate portfolio liquidity. No amounts have been borrowed under this facility for the six months ended June 30, 2003. 6. Investment Transactions The aggregate cost of purchases and proceeds from sales other than short-term obligations for the six months ended June 30, 2003 were: LIBERTY ACORN FUND -------------------------------------------- (in thousands) 2003 Investment securities Purchases $1,336,950 Proceeds from sales 426,789 ============================================ LIBERTY ACORN INTERNATIONAL -------------------------------------------- (in thousands) 2003 Investment securities Purchases $274,216 Proceeds from sales 344,080 ============================================ LIBERTY ACORN USA -------------------------------------------- (in thousands) 2003 Investment securities Purchases $45,375 Proceeds from sales 19,976 ============================================ LIBERTY ACORN FOREIGN FORTY -------------------------------------------- (in thousands) 2003 Investment securities Purchases $15,108 Proceeds from sales 17,047 ============================================ LIBERTY ACORN TWENTY -------------------------------------------- (in thousands) 2003 Investment securities Purchases $215,145 Proceeds from sales 58,315 ============================================ 63 Columbia Thermostat Fund > Statement of Investments (Unaudited), June 30, 2003 NUMBER OF SHARES OR PRINCIPAL AMOUNT (000) VALUE (000) --------------------------------------------------------- > STOCK FUNDS: 58.1% 454 Liberty Growth & Income Fund, Class Z $6,711 273 Liberty Growth Stock Fund, Class Z (b) 6,711 296 Liberty Acorn Fund, Class Z 5,374 246 Liberty Acorn Twenty, Class Z (b) 4,037 197 Liberty Select Value Fund, Class Z 4,035 --------------------------------------------------------- TOTAL STOCK FUNDS (COST: $24,931) 26,868 > BOND FUNDS: 38.8% 977 Liberty Intermediate Bond Fund, Class Z 8,975 488 Liberty Federal Securities Fund, Class Z 5,389 412 Columbia High Yield Fund, Class Z 3,582 --------------------------------------------------------- TOTAL BOND FUNDS (COST: $17,836) 17,946 > SHORT-TERM OBLIGATION: 1.1% $503 Repurchase agreement with State Street Bank & Trust Co., dated 06/30/03, due 07/01/03 at 1.10%, collateralized by Federal National Mortgage Association Notes maturing 03/24/05, market value $513 (repurchase proceeds $503) 503 --------------------------------------------------------- (AMORTIZED COST: $503) 503 --------- TOTAL INVESTMENTS: 98.0% (COST: $43,270) (A) 45,317 CASH AND OTHER ASSETS LESS LIABILITIES: 2.0% 944 --------- TOTAL NET ASSETS: 100% $ 46,261 ========================================================= >Notes to Statement of Investments (in thousands) (a) At June 30, 2003, for federal income tax purposes cost of investments is the same and net unrealized appreciation was $2,047, consisting of gross unrealized appreciation of $2,047 and gross unrealized depreciation of $0. (b) Non-income producing. 64 Columbia Thermostat Fund > Statements of Assets and Liabilities (Unaudited) JUNE 30, 2003 ------------------------------------------------------------------------- (IN THOUSANDS) ASSETS Investments, at value (cost: $43,270) $45,317 Cash 1 Receivable for: Fund shares sold 2,522 Dividends 57 Expense reimbursement due from Advisor 5 Other assets 56 ------------------------------------------------------------------------- Total Assets 47,958 LIABILITIES Payable for: Investments purchased 1,635 Fund shares redeemed 13 12b-1 Service & Distribution fees 7 Legal and audit fee 26 Trustees' fee 5 Transfer agent fee 10 Other liabilities 1 ------------------------------------------------------------------------- Total Liabilities 1,697 ------------------------------------------------------------------------- NET ASSETS $46,261 ========================================================================= COMPOSITION OF NET ASSETS Paid in capital $44,174 Undistributed net investment income 40 Net unrealized appreciation on investments 2,047 ------------------------------------------------------------------------- Net Assets $46,261 ========================================================================= Net asset value per share-- Class A (a) $11.33 (Net assets/shares) ($13,708/1,211) Maximum offering price per share-- Class A (b) $12.02 (Net asset value per share/front-end sales charge) ($11.33/0.9425) Net asset value and offering price per share-- Class B (a) $11.30 (Net assets/shares) ($17,589/1,556) Net asset value per share-- Class D (a) $11.30 (Net assets/shares) ($5,717/506) Maximum offering price per share-- Class D (b) $11.41 (Net asset value per share/front-end sales charge) ($11.30/0.99) Net asset value, offering price and redemption price per share-- Class Z $11.34 (Net assets/shares) ($9,247/815) (a) Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (b) On sales of $50,000 or more the offering price is reduced. See accompanying notes to financial statements. 65 Columbia Thermostat Fund > Statements of Operations (Unaudited) For the Six Months Ended June 30, 2003 (in thousands) ------------------------------------------------------------- INVESTMENT INCOME: Dividends from investment company shares $122 Interest income --* ------------------------------------------------------------- Total Investment Income 122 EXPENSES: Management fees 8 Administration fees 4 12-1b Services & Distribution fees 33 Custody fees 3 Legal and audit fees 15 Transfer agent fee 17 Trustees fee 3 Registration and blue sky 67 Reports to shareholders 14 Organization expense 43 Other expenses 2 ------------------------------------------------------------- Total expenses 209 Less custody fees paid indirectly --* Less reimbursement of expenses by Advisor (128) ------------------------------------------------------------- Net Expenses 81 ------------------------------------------------------------- Net Investment Income 41 NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Realized gain distributions from investment company shares 1 Net unrealized appreciation on investments 1,987 ------------------------------------------------------------- Net realized and unrealized gain 1,988 ------------------------------------------------------------- Net Increase in Net Assets resulting from Operations $2,029 ============================================================= *Rounds to less than $500. See accompanying notes to financial statements. 66 Columbia Thermostat Fund > Statement of Changes in Net Assets (UNAUDITED) SIX MONTHS PERIOD ENDED INCREASE IN NET ASSETS ENDED JUNE 30, DECEMBER 31, --------------------------------------------------------------------- (IN THOUSANDS) 2003 (a) 2002 (b) OPERATIONS: Net investment income $41 $9 Net realized gain on investments 1 10 Net unrealized appreciation 1,987 60 --------------------------------------------------------------------- Net Increase from Operations 2,029 79 DISTRIBUTION TO SHAREHOLDERS FROM: Net investment income -- Class A (2) -- Net realized gain -- Class A (3) -- Net investment income -- Class B (4) -- Net realized gain -- Class B (4) -- Net investment income -- Class D (1) -- Net realized gain -- Class D (1) -- Net investment income -- Class Z (3) -- Net realized gain -- Class Z (3) -- --------------------------------------------------------------------- Total Distribution to Shareholders (21) -- SHARE TRANSACTIONS: Subscriptions -- Class A 13,352 -- Distributions reinvested -- Class A 5 -- Redemptions -- Class A (37) -- --------------------------------------------------------------------- Net Increase -- Class A 13,320 -- Subscriptions -- Class B 16,945 -- Distributions reinvested -- Class B 8 -- Redemptions -- Class B (63) -- --------------------------------------------------------------------- Net Increase -- Class B 16,890 -- Subscriptions -- Class D 5,544 -- Distributions reinvested -- Class D 2 -- Redemptions -- Class D (21) -- --------------------------------------------------------------------- Net Increase -- Class D 5,525 -- Subscriptions -- Class Z 4,802 4,089 Distributions reinvested -- Class Z 6 -- Redemptions -- Class Z (442) (16) --------------------------------------------------------------------- Net Increase -- Class Z 4,366 4,073 --------------------------------------------------------------------- Net Increase from Share Transactions 40,101 4,073 --------------------------------------------------------------------- Total Increase in Net Assets 42,109 4,152 --------------------------------------------------------------------- NET ASSETS: Beginning of period 4,152 -- ---------------------------------------------------------------------- End of period $46,261 $4,152 ====================================================================== UNDISTRIBUTED NET INVESTMENT INCOME $40 $9 ====================================================================== (a) Class A, Class B, and Class D commenced operations March 3, 2003. (b) Class Z commenced operations September 25, 2002. See accompanying notes to financial statements. 67 Columbia Thermostat Fund > Statement of Changes in Net Assets continued (UNAUDITED) SIX MONTHS PERIOD ENDED CHANGES IN SHARES OF BENEFICIAL INTEREST: ENDED JUNE 30, DECEMBER 31, ------------------------------------------------------------------------- (in thousands) 2003 (a) 2002 (b) Subscriptions -- Class A 1,214 -- Shares issued in reinvestment and capital gains -- Class A --(c) -- Less shares redeemed -- Class A (3) -- ------------------------------------------------------------------------- Net Increase -- Class A 1,211 -- Subscriptions -- Class B 1,561 -- Shares issued in reinvestment and capital gains -- Class B 1 -- Less shares redeemed -- Class B (6) -- ------------------------------------------------------------------------- Net Increase -- Class B 1,556 -- Subscriptions -- Class D 508 -- Shares issued in reinvestment and capital gains -- Class D --(c) -- Less shares redeemed -- Class D (2) -- ------------------------------------------------------------------------- Net Increase -- Class D 506 -- Subscriptions -- Class Z 456 400 Shares issued in reinvestment and capital gains -- Class Z 1 -- Less shares redeemed -- Class Z (41) (1) ------------------------------------------------------------------------- Net Increase -- Class Z 416 399 ------------------------------------------------------------------------- Net Increase in Shares of Beneficial Interest 3,689 399 ------------------------------------------------------------------------- (a) Class A, Class B, Class D commenced operations March 3, 2003. (b) Class Z commenced operations September 25, 2002. (c) Rounds to less than 500 shares. See accompanying notes to financial statements 68 Columbia Thermostat Fund > Financial Highlights INCEPTION (UNAUDITED) SEPTEMBER 25, SIX MONTHS 2002 THROUGH CLASS Z ENDED JUNE 30, DECEMBER 31, -------------------------------------------------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 NET ASSET VALUE, BEGINNING OF PERIOD $10.41 $10.00 INCOME FROM INVESTMENT OPERATIONS Net investment income (a) 0.05 0.04 Net realized and unrealized gain 0.88 0.37 -------------------------------------------------------------------------- Total from Investment Operations 0.93 0.41 -------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income 0.00(b) -- From net realized gains 0.00(b) -- -------------------------------------------------------------------------- Total Distributions Declared to Shareholders 0.00 -- -------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $11.34 $10.41 ========================================================================== Total Return (c)(d) 9.01% 4.10% ========================================================================== RATIOS TO AVERAGE NET ASSETS Expenses (e)(f) 0.60%(g) 0.62%(h) Net investment income (f) 0.83%(g) 1.41%(h) Reimbursement (f) 1.71% 19.94% Portfolio turnover rate (d) 26% 11% Net assets at end of period (IN MILLIONS) $9 $4 (a) Per share data was calculated using average shares outstanding during the period. Recognition of net investment income by the Fund is affected by the timing of the declaration of dividends by the underlying investment companies in which the Fund invests. (b) Rounds to less than $0.01 per share. (c) Had the Advisor not reimbursed a portion of expenses, total return would have been reduced. (d) Not annualized. (e) Does not include expenses of the investment companies in which the Fund invests. (f) Annualized. (g) The benefits derived from custody fees paid indirectly had no impact. (h) In accordance with a requirement of the Securities and Exchange Commission, the ratios reflect total expenses prior to the reduction of custody fees for cash balances it maintains with the custodian ("custody fees paid indirectly"). The ratios of expenses to average daily net assets and net investment income to average daily net assets net of custody fees paid indirectly would have been 0.60% and 1.43%, respectively for the period ended December 31, 2002. See accompanying notes to financial statements 69 Columbia Thermostat Fund > Notes to Financial Statements (Unaudited) 1. Nature of Operations Columbia Thermostat Fund (the "Fund"), a series of Liberty Acorn Trust (the "Trust"), an open-end management investment company organized as a Massachusetts business trust, commenced operations September 25, 2002. The Fund may issue an unlimited number of shares. The Fund currently offers four classes of shares: Class A, Class B, Class D and Class Z shares. Class A shares are sold with a front-end sales charge. A contingent deferred sales charge may be assessed to Class A shares purchased without an initial sales charge on redemptions made within eighteen months on an original purchase of $1 million to $25 million. Class B shares are subject to a contingent deferred sales charge. Class B shares will convert to Class A shares in three, four or eight years after purchase, depending on the program under which shares are purchased. Class D shares are sold with a front-end sales charge and are subject to a contingent deferred sales charge on redemptions made within one year after purchase. Class Z shares are offered continuously at net asset value. There are certain restrictions on the purchase of Class Z shares. The financial highlights for Class A, Class B and Class D shares are presented in a separate semi-annual report. The semi-annual report for the other series of the Trust is also included in this report. The investment objective of the Fund is to provide long-term total return. The Fund pursues its investment objective by investing in shares of other mutual funds. As a `fund of funds', under normal circumstances, the Fund allocates at least 95% of its net assets among a selected group of stock and bond mutual funds (the "Portfolio Funds") according to the current level of the Standard & Poor's 500 Stock Index in relation to predetermined ranges set by the Fund's investment adviser. As of June 30, 2003, the Fund invested in five stock Portfolio Funds (Liberty Acorn Fund, Liberty Acorn Twenty Fund, Liberty Growth & Income Fund, Liberty Select Value Fund, Liberty Growth Stock Fund) and three bond Portfolio Funds (Liberty Federal Securities Fund, Liberty Intermediate Bond Fund and Columbia High-Yield Fund). The Fund may also invest up to 5% of its net assets plus any cash received that day in cash, high quality short-term paper and government securities. 2. Significant Accounting Policies >Security valuation Investments in Portfolio Funds are valued at their net asset value as reported by the underlying funds. High quality short-term paper and government securities having a maturity of 60 days or less from the valuation date are valued on an amortized cost basis. >Repurchase agreements The Fund may engage in repurchase agreement transactions. The Fund, through their custodian, receives delivery of underlying securities collateralizing repurchase agreements. The Fund's investment advisor determines that the value of the underlying securities is at all times at least equal to the resale price. In the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings. >Security transactions and investment income Portfolio Fund transactions are accounted for on the trade date (date the order to buy or sell is executed). Dividend income and realized gain distributions from other funds are recorded on the ex-dividend date. Interest income is recorded on the accrual basis and includes amortization of discounts on money market instruments and short-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. >Fund share valuation Fund shares are sold and redeemed on a continuing basis at net asset value. Net asset value per share is determined daily as of the close of trading on the New York Stock Exchange on each day the Exchange is open for trading. >Custody fees The custody fees are reduced based on the Fund's cash balance maintained with the custodian. The amount is disclosed as a reduction of total expenses in the Statement of Operations. >Federal income taxes The Fund has complied with the special provisions of the Internal Revenue Code available to regulated investment companies and, in the manner provided therein, distributes all of its taxable income, as well as any net realized gain on sales of Portfolio Fund shares and any distributions of net realized gains received by the Fund from its Portfolio 70 Funds, reportable for federal income tax purposes. Accordingly, the Fund paid no federal income taxes and no federal income tax provision was required. >Distributions to Shareholders Distributions to shareholders are recorded on the ex-date. 3. Federal Tax Information The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. 4. Transactions with Affiliates The Fund's investment adviser, Liberty Wanger Asset Management, L.P. ("Liberty WAM"), a wholly-owned subsidiary of Columbia Management Group, Inc., which in turn is a wholly-owned subsidiary of Fleet National Bank, which in turn is a wholly-owned subsidiary of FleetBoston Financial Corporation ("Fleet"), furnishes continuing investment supervision to the Fund and is responsible for the overall management of the Fund's business affairs. Under the Fund's investment management agreement, fees are accrued daily and paid monthly to Liberty WAM at the annual rate of 0.10% of the Fund's average daily net assets. >Expense Limit Liberty WAM has agreed to voluntarily reimburse the direct operating expenses (exclusive of interest and fees on borrowings and expenses associated with the Fund's investment in other investment companies) exceeding 0.60% of the average annual net assets of the Fund's Class Z shares. Liberty WAM has also contracted to provide administrative services at an annual rate of .05% of the Fund's average daily net assets. Liberty Funds Distributor, Inc. (the "Distributor"), an indirect subsidiary of Fleet, is the Fund's principal underwriter and receives no compensation on the sale of shares. The Fund has adopted a 12b-1 plan which requires it to pay the Distributor a service and distribution fee on net assets attributable to Class A, Class B and Class D shares. Certain officers and trustees of the Trust are also officers of Liberty WAM. The Trust makes no direct payments to its officers and trustees who are affiliated with Liberty WAM. Trustees' fees and expenses for the six months ended June 30, 2003, were $2,991. 5. Borrowing Agreements The Trust participates in a $150,000,000 credit facility which was entered into to facilitate portfolio liquidity. No amounts have been borrowed under this facility under this facility for the six months ended June 30, 2003. 6. Investment Transactions The aggregate cost of purchases and proceeds from sales other than short-term obligations for the six months ended June 30, 2003 were: ------------------------------------------------------------ (in thousands) Purchases $43,332 Proceeds from sales $4,250 ============================================================ 71 Liberty Acorn Family of Funds Class Z Share Information MINIMUM INITIAL INVESTMENT FOR ALL FUNDS $1,000 $1,000 FOR AN IRA MINIMUM SUBSEQUENT INVESTMENT $100 EXCHANGE FEE NONE ------------------------------------------------------------ LIBERTY ACORN FUND ACRNX ------------------------------------------------------------ Management Fee 0.68% 12b-1 Fee None Other Expenses 0.12% ------- Expense Ratio 0.80% ------------------------------------------------------------ LIBERTY ACORN INTERNATIONAL ACINX ------------------------------------------------------------ Management Fee 0.81% 12b-1 Fee None Other Expenses 0.28% ------- Expense Ratio 1.09% ------------------------------------------------------------ LIBERTY ACORN USA AUSAX ------------------------------------------------------------ Management Fee 0.94% 12b-1 Fee None Other Expenses 0.18% ------- Expense Ratio 1.12% ------------------------------------------------------------ LIBERTY ACORN FOREIGN FORTY ACFFX ------------------------------------------------------------ Management Fee 0.95% 12b-1 Fee None Other Expenses 0.50% ------- Net Expense Ratio 1.45% ------------------------------------------------------------ LIBERTY ACORN TWENTY ACTWX ------------------------------------------------------------ Management Fee 0.90% 12b-1 Fee None Other Expenses 0.20% ------- Net Expense Ratio 1.10% ------------------------------------------------------------ COLUMBIA THERMOSTAT FUND COTZX ------------------------------------------------------------ Management Fee 0.10% 12b-1 Fee None Other Expenses 0.50% ------- Net Expense Ratio 0.60% Fees and expenses are for the six months ended June 30, 2003 and for Liberty Acorn Foreign Forty and Columbia Thermostat Fund include the effect of Liberty Wanger Asset Management's undertaking to reimburse those funds for any ordinary operating expenses, net of custody fees paid indirectly, exceeding 1.45% and 0.60% of their average net assets, respectively. These expense limitations are voluntary and can be terminated by either the Funds or Liberty Wanger Asset Management, L.P. on 30 days' notice. 72 This page intentionally left blank This page intentionally left blank This page intentionally left blank The Liberty Acorn ------------------------ Family of Funds TRUSTEES Robert E. Nason CHAIRMAN Margaret Eisen Leo A. Guthart Jerome Kahn, Jr. Steven N. Kaplan David C. Kleinman Charles P.McQuaid Allan B. Muchin Ralph Wanger John A.Wing OFFICERS Ralph Wanger PRESIDENT Charles P. McQuaid SENIOR VICE PRESIDENT J. Kevin Connaughton ASSISTANT TREASURER P. Zachary Egan VICE PRESIDENT Kevin S. Jacobs ASSISTANT SECRETARY Kenneth A. Kalina ASSISTANT TREASURER Bruce H. Lauer VICE PRESIDENT, SECRETARY AND TREASURER Louis J. Mendes VICE PRESIDENT Robert A. Mohn VICE PRESIDENT Todd Narter VICE PRESIDENT Christopher Olson VICE PRESIDENT John H. Park VICE PRESIDENT Vincent P. Pietropaolo ASSISTANT SECRETARY Leah J. Zell VICE PRESIDENT INVESTMENT ADVISOR Liberty Wanger Asset Management, L.P. 227 West Monroe Street, Suite 3000 Chicago, Illinois 60606 1-800-922-6769 DISTRIBUTOR Liberty Funds Distributor, Inc. One Financial Center Boston, Massachusetts 02111-2621 TRANSFER AGENT, DIVIDEND DISBURSING AGENT Liberty Funds Services, Inc. P.O. Box 8081 Boston, Massachusetts 02266-8081 1-800-338-2550 LEGAL COUNSEL Bell, Boyd & Lloyd LLC Chicago, Illinois THIS REPORT, INCLUDING THE SCHEDULES OF INVESTMENTS, IS SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF LIBERTY ACORN TRUST. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION UNLESS PRECEDED OR ACCOMPANIED BY A PROSPECTUS. FIND OUT WHAT'S NEW - VISIT OUR WEB SITE AT: WWW.LIBERTYFUNDS.COM OUR E-MAIL ADDRESS IS: ServiceInquiries@ColumbiaManagement.com SHAREHOLDERS SHOULD NOT INCLUDE PERSONAL INFORMATION SUCH AS ACCOUNT NUMBERS, SOCIAL SECURITY NUMBERS OR TAXPAYER IDENTIFICATION NUMBERS IN E-MAIL. WE ARE UNABLE TO ACCEPT ACCOUNT TRANSACTIONS SENT VIA E-MAIL. 76 [Eagle head logo] Liberty funds A MEMBER OF COLUMBIA MANAGEMENT GROUP (C)2003 LIBERTY FUNDS DISTRRIBUTOR, INC A MEMBER OF COLUMBIA MANAGEMENT GROUP ONCE FINANCIAL CENTER, BOSTON, MA 02111-2621 PRESORTED FIRST-CLASS MAIL U.S. POSTAGE PAID HOLLISTON, MA PERMIT NO. 20 ACN-03/624O-0603 (08/03) 03/2413 LIBERTY ACORN FUNDS Semiannual Report June 30, 2003 LIBERTY ACORN FUND LIBERTY ACORN INTERNATIONAL LIBERTY ACORN USA LIBERTY ACORN FOREIGN FORTY LIBERTY ACORN TWENTY COLUMBIA THERMOSTAT FUND [Photo of woman holding binder] Look on page 5 for a letter from newly named CIO Chuck McQuaid. Liberty Acorn Family of Funds Semiannual Report 2003 Table of Contents ------------------------------------------------------- THE LIBERTY ACORN FAMILY OF FUNDS ------------------------------------------------------- Share Class Performance 1 Fund Performance vs. Benchmarks 2 Squirrel Chatter: Energy Resources In 2030 3 From the Desk of Chuck McQuaid 5 ------------------------------------------------------- LIBERTY ACORN FUND ------------------------------------------------------- In a Nutshell 6 At a Glance 7 Major Portfolio Changes 18 Statement of Investments 21 ------------------------------------------------------- LIBERTY ACORN INTERNATIONAL ------------------------------------------------------- In a Nutshell 8 At a Glance 9 Major Portfolio Changes 31 Statement of Investments 33 Portfolio Diversification 37 ------------------------------------------------------- LIBERTY ACORN USA ------------------------------------------------------- In a Nutshell 10 At a Glance 11 Major Portfolio Changes 38 Statement of Investments 39 ------------------------------------------------------- LIBERTY ACORN FOREIGN FORTY ------------------------------------------------------- In a Nutshell 12 At a Glance 13 Major Portfolio Changes 43 Statement of Investments 44 Portfolio Diversification 46 ------------------------------------------------------- LIBERTY ACORN TWENTY ------------------------------------------------------- In a Nutshell 14 At a Glance 15 Major Portfolio Changes 47 Statement of Investments 48 ------------------------------------------------------- COLUMBIA THERMOSTAT FUND ------------------------------------------------------- In a Nutshell 16 At a Glance 17 Statement of Investments 66 Statement of Assets and Liabilities 67 Statement of Operations 68 Statement of Changes in Net Assets 69 Financial Highlights 71 Notes to Financial Statements 72 ------------------------------------------------------- LIBERTY ACORN FAMILY OF FUNDS ------------------------------------------------------- Statements of Assets and Liabilities 50 Statements of Operations 51 Statements of Changes in Net Assets 52 Financial Highlights 56 Notes to Financial Statements 62 Board of Trustees and Management of Acorn 76 > Net Asset Value Per Share as of 6/30/03
COLUMBIA LIBERTY LIBERTY ACORN LIBERTY LIBERTY ACORN LIBERTY THERMOSTAT ACORN FUND INTERNATIONAL ACORN USA FOREIGN FORTY ACORN TWENTY FUND --------------------------------------------------------------------------------------------------------------- Class A $17.87 $17.32 $16.97 $11.25 $16.19 $11.33 --------------------------------------------------------------------------------------------------------------- Class B $17.57 $17.07 $16.71 $11.04 $15.91 $11.30 --------------------------------------------------------------------------------------------------------------- Class C $17.57 $17.07 $16.71 $11.06 $15.91 NA --------------------------------------------------------------------------------------------------------------- Class D NA NA NA NA NA $11.30 ---------------------------------------------------------------------------------------------------------------
Not FDIC May Lose Value Insured No Bank Guarantee There is no assurance that the trends described in this report will continue or come to pass because, in part, economic and market conditions change frequently. An investment in any of these Funds presents certain risks, including stock market fluctuations due to economic and business developments. LIBERTY ACORN FAMILY OF FUNDS >SHARE CLASS PERFORMANCE AVERAGE ANNUAL TOTAL RETURNS THROUGH 6/30/03
CLASS A CLASS B CLASS C WITHOUT WITH WITHOUT WITH WITHOUT WITH SALES CHARGE SALES CHARGE SALES CHARGE SALES CHARGE SALES CHARGE SALES CHARGE LIBERTY ACORN FUND (6/10/70) ------------------------------------------------------------------------------------------------------------------- 3 months* 19.85% 12.96% 19.69% 14.69% 19.69% 18.69% ------------------------------------------------------------------------------------------------------------------- Year to date* 16.49% 9.79% 16.13% 11.13% 16.20% 15.20% ------------------------------------------------------------------------------------------------------------------- 1 year 4.38% -1.62% 3.72% -1.28% 3.72% 2.72% ------------------------------------------------------------------------------------------------------------------- 5 years 8.08% 6.81% 7.72% 7.44% 7.72% 7.72% ------------------------------------------------------------------------------------------------------------------- 10 years 12.30% 11.64% 12.11% 12.11% 12.11% 12.11% ------------------------------------------------------------------------------------------------------------------- Life of fund 15.74% 15.53% 15.68% 15.68% 15.68% 15.68% ------------------------------------------------------------------------------------------------------------------- LIBERTY ACORN INTERNATIONAL (9/23/92) ------------------------------------------------------------------------------------------------------------------- 3 months* 21.37% 14.39% 21.06% 16.06% 21.06% 20.06% ------------------------------------------------------------------------------------------------------------------- Year to date* 13.37% 6.85% 12.97% 7.97% 12.97 11.97% ------------------------------------------------------------------------------------------------------------------- 1 year -6.01% -11.41% -6.72% -11.39% -6.67% -7.60% ------------------------------------------------------------------------------------------------------------------- 5 years 0.38% -0.81% 0.02% -0.30% 0.02% 0.02% ------------------------------------------------------------------------------------------------------------------- 10 years 6.74% 6.11% 6.55% 6.55% 6.55% 6.55% ------------------------------------------------------------------------------------------------------------------- Life of fund 8.80% 8.20% 8.62% 8.62% 8.62% 8.62% ------------------------------------------------------------------------------------------------------------------- LIBERTY ACORN USA (9/4/96) ------------------------------------------------------------------------------------------------------------------- 3 months* 23.06% 15.98% 22.87% 17.87% 22.87% 21.87% ------------------------------------------------------------------------------------------------------------------- Year to date* 19.68% 12.79% 19.27% 14.27% 19.27% 18.27% ------------------------------------------------------------------------------------------------------------------- 1 year 1.80% -4.05% 1.15% -3.85% 1.15% 0.15% ------------------------------------------------------------------------------------------------------------------- 5 years 3.66% 2.44% 3.32% 2.97% 3.32% 3.32% ------------------------------------------------------------------------------------------------------------------- Life of fund 11.47% 10.51% 11.20% 11.20% 11.20% 11.20% ------------------------------------------------------------------------------------------------------------------- LIBERTY ACORN FOREIGN Forty (11/23/98) ------------------------------------------------------------------------------------------------------------------- 3 months* 19.55% 12.68% 19.22% 14.22% 19.31% 18.31% ------------------------------------------------------------------------------------------------------------------- Year to date* 9.86% 3.55% 9.52% 4.52% 9.61% 8.61% ------------------------------------------------------------------------------------------------------------------- 1 year -4.74% -10.22% -5.40% -10.13% -5.31% -6.26% ------------------------------------------------------------------------------------------------------------------- 3 year -16.82% -18.44% -17.34% -18.17% -17.29% -17.29% ------------------------------------------------------------------------------------------------------------------- Life of fund 2.94% 1.62% 2.52% 2.12% 2.56% 2.56% ------------------------------------------------------------------------------------------------------------------- LIBERTY ACORN TWENTY (11/23/98) ------------------------------------------------------------------------------------------------------------------- 3 months* 14.26% 7.69% 14.13% 9.13% 14.13% 13.13% ------------------------------------------------------------------------------------------------------------------- Year to date* 16.22% 9.54% 15.88% 10.88% 15.88% 14.88% ------------------------------------------------------------------------------------------------------------------- 1 year 12.59% 6.11% 11.81% 6.81% 11.88% 10.88% ------------------------------------------------------------------------------------------------------------------- 3 year 7.43% 5.33% 6.81% 5.93% 6.81% 6.81% ------------------------------------------------------------------------------------------------------------------- Life of fund 13.28% 11.84% 12.86% 12.57% 12.86% 12.86% ------------------------------------------------------------------------------------------------------------------- COLUMBIA THERMOSTAT Fund (9/25/02) Class D ------------------------------------------------------------------------------------------------------------------- 3 months* 11.27% 4.87% 10.97% 5.97% 10.97% 9.97% ------------------------------------------------------------------------------------------------------------------- Year to date* 8.91% 2.65% 8.63% 3.63% 8.63% 7.63% ------------------------------------------------------------------------------------------------------------------- Life of fund* 13.38% 6.86% 13.08% 8.08% 13.08% 12.08% -------------------------------------------------------------------------------------------------------------------
*Not annualized. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Returns and value of an investment will vary, resulting in a gain or loss on sale. All results shown assume reinvestment of distributions. The "with sales charge" returns include the maximum 5.75% sales charge for Class A shares, the appropriate Class B contingent deferred sales charge for the holding period after purchase as follows: through first year -- 5%, second year -- 4%, third year -- 5%, fourth year -- 3%, fifth year -- 2%, sixth year -- 1%, thereafter -- 0%; and the Class C contingent deferred sales charge of 1% for the first year only. For Class D shares, a 1% upfront sales charge and 1% contingent deferred sales charge for the first year only applies to subsequent fund purchases by existing shareholders. Performance of the different share classes will vary based on differences in sales charges and fees associated with each class. Performance results reflect any voluntary waivers or reimbursements of Fund expenses by the Advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. Class A, B, C and D share (newer class shares) performance for all funds includes returns of the Fund's Class Z shares (the oldest existing Fund class) for periods prior to the inception of the newer class shares. The new class shares were launched October 16, 2000 for the five Liberty Acorn funds and March 3, 2003 for Columbia Thermostat Fund. These Class Z share returns are not restated to reflect any expense differential (e.g., Rule 12b-1 fees) between Class Z shares and the newer class shares. Had the expense differential been reflected, the returns for the periods prior to the inception of Class A, B, C and D shares would have been lower. 1 >FUND PERFORMANCE VS. BENCHMARKS CLASS A SHARES, WITHOUT SALES CHARGE, AVERAGE ANNUAL TOTAL RETURNS THROUGH 6/30/03+
2ND* YEAR TO* 1 3 5 10 LIFE QUARTER DATE YEAR YEARS YEARS YEARS OF FUND ------------------------------------------------------------------------------------------------------------------ LIBERTY ACORN FUND (6/10/70) 19.85% 16.49% 4.38% 5.72% 8.08% 12.30% 15.74% ------------------------------------------------------------------------------------------------------------------ S&P 500 15.39% 11.76% 0.25% -11.20% -1.61% 10.04% 11.84% ------------------------------------------------------------------------------------------------------------------ Russell 2500 21.91% 16.92% 1.41% -1.36% 3.65% 10.27% NA ------------------------------------------------------------------------------------------------------------------ Russell 2000 23.42% 17.88% -1.64% -3.30% 0.97% 8.24% NA ------------------------------------------------------------------------------------------------------------------ Lipper Small-Cap Core Funds Index 20.56% 14.33% -2.37% -0.86% 2.98% 9.68% NA ------------------------------------------------------------------------------------------------------------------ Lipper Mid-Cap Core Funds Index 18.63% 14.11% 1.72% -4.87% 3.94% 10.25% NA ------------------------------------------------------------------------------------------------------------------ LIBERTY ACORN INTERNATIONAL (9/23/92) 21.37% 13.37% -6.01% -14.86% 0.38% 6.74% 8.80% ------------------------------------------------------------------------------------------------------------------ Citigroup EMI Global ex-US 23.19% 17.80% 1.88% -6.25% -0.46% 2.22% 3.90% ------------------------------------------------------------------------------------------------------------------ MSCI EAFE 19.27% 9.47% -6.46% -13.57% -3.99% 2.78% 4.15% ------------------------------------------------------------------------------------------------------------------ Lipper Int'l Small- Cap Funds Index 23.77% 18.39% 1.94% -8.41% 2.67% NA NA ------------------------------------------------------------------------------------------------------------------ LIBERTY ACORN USA (9/4/96) 23.06% 19.68% 1.80% 7.61% 3.66% -- 11.47% ------------------------------------------------------------------------------------------------------------------ Russell 2000 23.42% 17.88% -1.64% -3.30% 0.97% -- 5.79% ------------------------------------------------------------------------------------------------------------------ Lipper Small-Cap Core Funds Index 20.56% 14.33% -2.37% -0.86% 2.98% -- 7.33% ------------------------------------------------------------------------------------------------------------------ S&P 500 15.39% 11.76% 0.25% -11.20% -1.61% -- 7.58% ------------------------------------------------------------------------------------------------------------------ LIBERTY ACORN FOREIGN FORTY (11/23/98) 19.55% 9.86% -4.74% -16.82% -- -- 2.94% ------------------------------------------------------------------------------------------------------------------ Citigroup World ex-US Cap Range $2-10B 19.97% 12.81% -3.02% -6.26% -- -- 0.83% ------------------------------------------------------------------------------------------------------------------ MSCI EAFE 19.27% 9.47% -6.46% -13.57% -- -- -4.21% ------------------------------------------------------------------------------------------------------------------ Lipper International Funds Index 19.72% 9.18% -6.40% -12.28% -- -- -2.00% ------------------------------------------------------------------------------------------------------------------ LIBERTY ACORN TWENTY (11/23/98) 14.26% 16.22% 12.59% 7.43% -- -- 13.28% ------------------------------------------------------------------------------------------------------------------ S&P MidCap 400 17.63% 12.41% -0.71% 0.99% -- -- 8.09% ------------------------------------------------------------------------------------------------------------------ Lipper Mid-Cap Growth Index 17.68% 15.78% 0.22% -19.30% -- -- 1.79% ------------------------------------------------------------------------------------------------------------------ S&P 500 15.39% 11.76% 0.25% -11.20% -- -- -2.43% ------------------------------------------------------------------------------------------------------------------ COLUMBIA THERMOSTAT FUND (9/25/02) 11.27% 8.91% -- -- -- -- 13.38%* ------------------------------------------------------------------------------------------------------------------ S&P 500 15.39% 11.76% -- -- -- -- 20.65%* ------------------------------------------------------------------------------------------------------------------ Lehman U.S Govt. Intermediate Bond Index 1.69% 2.63% -- -- -- -- 4.03%* ------------------------------------------------------------------------------------------------------------------ Lehman U.S. Credit Intermediate Bond Index 4.02% 6.36% -- -- -- -- 9.63%* ------------------------------------------------------------------------------------------------------------------ Lipper Flexible Portfolio Funds Index 12.05% 9.73% -- -- -- -- 16.09%* ------------------------------------------------------------------------------------------------------------------
*Not annualized. +Class A shares (newer class shares) performance information includes returns of the Funds' Class Z shares (the oldest existing Fund class) for periods prior to the inception of the newer class shares. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Mutual fund performance changes over time. Please visit libertyfunds.com for daily performance updates. The investment return and principal value of an investment in any Liberty Acorn Fund will fluctuate so that fund shares, when redeemed, may be worth more or less than their original cost. DESCRIPTION OF INDEXES: S&P 500 is a broad, market-weighted average of U.S. blue-chip company stock performance. S&P MIDCAP 400 is a broad market-weighted index of 400 stocks that are in the next size/tier down from the S&P 500. RUSSELL 2000 is an unmanaged, market-weighted index of 2,000 smaller U.S. companies, formed by taking the largest 3,000 companies and eliminating the largest 1,000. RUSSELL 2500 is the smallest 2,500 U.S. companies taken from this same group. CITIGROUP EMI GLOBAL EX-US is an index of the bottom 20% of institutionally investable capital of developed and emerging countries, selected by index sponsor, outside the U.S. MSCI EAFE is Morgan Stanley's Europe, Australasia and Far East Index, an unmanaged, widely recognized international benchmark that comprises 20 major markets in proportion to world stock market capitalization. CITIGROUP WORLD EX-US CAP RANGE $2-$10B is a subset of Citigroup's Broad Market Index, representing a mid-cap developed market index excluding the U.S. LIPPER INDEXES include the largest funds tracked by Lipper, Inc. in the named category. LIPPER MID-CAP GROWTH INDEX -- 30 mid-cap growth funds; LIPPER MID-CAP CORE FUNDS INDEX -- 30 mid-cap core funds; LIPPER INTERNATIONAL FUNDS INDEX -- 30 largest non-U.S. funds, not including non-U.S. small cap funds; LIPPER INTERNATIONAL SMALL-CAP FUNDS INDEX -- 10 largest non-U.S. funds investing in small cap companies, including Liberty Acorn International; LIPPER SMALL-CAP CORE FUNDS INDEX -- 30 largest small cap core funds, including Liberty Acorn Fund. LIPPER FLEXIBLE PORTFOLIO FUNDS INDEX is an equal dollar weighted index of the 30 largest mutual funds within the Flexible Portfolio fund classification, as defined by Lipper. LEHMAN U.S. GOVERNMENT INTERMEDIATE BOND INDEX is made up of 1 to 10 year treasury and agency bonds, excluding targeted investor notes and state and local government series bonds. LEHMAN U.S. CREDIT INTERMEDIATE BOND INDEX is the intermediate component of the U.S. Credit Index. The U.S. Credit Index includes publicly issued U.S. corporate and foreign debentures and secured notes that meet specified maturity, liquidity, and quality requirements. All indexes are unmanaged and returns include reinvested distributions. A more complete description of each index is included in the Funds statement of additional information. It is not possible to invest directly in an index. 2 > Squirrel Chatter: ENERGY RESOURCES IN 2030 Photo of Ralph Wanger "I SELL HERE, SIR, WHAT ALL THE WORLD DESIRES TO HAVE - POWER." This epigram was told to James Boswell (yes, Samuel Johnson's Boswell) by Matthew Boulton, British inventor and partner in the steam engine business with James Watt. Boulton's steam engine fired up the industrial revolution. The last 200 years has seen vast increases in energy use and dramatic changes in every category of power. John Maynard Keynes wrote an essay in 1930 based on a 100-year forecast of the future. We analyzed that forecast in the 2002 Annual Report, and made some forecasts of social changes due to demographics and family structure in the 2003 First Quarter Report. This "Squirrel Chatter" considers the prospects for energy in 2030. Today, energy sources are mainly fossil fuels. We get three-eighths of our energy from petroleum, one-fourth from natural gas, one-fourth coal, and one-eighth from all other sources (hydro, nuclear, and renewables such as solar and wind power). All of these sources are useful, and each has problems. For instance, petroleum, natural gas, and coal often have sulphur content that has to be removed before the fuel can be used. All three fuels produce carbon dioxide, a greenhouse gas believed to cause global warming. Hydro sites are rare, and spoil the ecology in a river basin. Nuclear power is in decline due to popular hostility. Solar and wind power only work intermittently. We must expand the 1% share of solar and wind power, but it is hard to project more than 8% of the total energy supply coming from renewables by 2030. Energy sources are always in the wrong place, so energy has to be transported to where we want to use it. Electricity, for instance, is not an energy source (there are no electric mines) but is an excellent way to get coal or hydro energy transported to our houses. Fertilizer can be thought of as a way to transport energy (sourced from natural gas) delivered to farms. There is a lot of excitement today about using hydrogen to run fuel cells for automobiles and other uses. There are no hydrogen mines either, so hydrogen is an energy transport system rather than an energy source. President Bush spent years in the oil industry, and I knew Secretary of Commerce Don Evans when he ran the Tom Brown oil company for 16 years. Why are these oilmen pushing hydrogen as a vehicle fuel? After all, gasoline is a great vehicle fuel, with high energy per cubic foot of gas tank, easily handled (you pump your own gas very nicely), and the infrastructure of pipelines, refineries, and filling stations is in place. It will cost hundreds of billions of dollars to switch to hydrogen fuel. We are many years away from having hydrogen-powered fuel cells as automobile power. Fuel cells are still way too costly to be practical. Lots of research and development money and time will be needed to make fuel cell cars as cheap and reliable as the gas buggies we have now. Hydrogen is very hard to handle, because it is the smallest molecule in the universe. Hydrogen will leak through very small holes in pipes or tanks; leaks obviously waste fuel and create fire hazards. Storing hydrogen in a car means keeping it under very high pressure in a tank made largely out of carbon fiber. That kind of tank is expensive and subject to sudden rupture that would blow up the car. There are other alternatives for hydrogen storage (we own Millennium Cell1, a company that has a proprietary system for transporting hydrogen as sodium borohydride, a solid fuel) but these alternatives are not cost-effective at the present time. We see many stories claiming that hydrogen is a good fuel because it produces only water as a combustion product, and no carbon dioxide, a bad greenhouse gas. The authors of these stories, however, tend to skip over the fact that hydrogen, as explained above, is only an energy transport mechanism, not an energy source. Coal, oil, or gas would be burned to make the hydrogen, creating carbon dioxide at the hydrogen refinery. The only large-scale alternative to making hydrogen without fossil fuels would be to build more nuclear plants, and no one wants to go down that road at this time. Alternatives such as solar and wind aren't expected to be of sufficient scale to run the vehicle fuel system by 2030. What problem does the government foresee that creates a need for a whole new system for fuel refining and delivery? I think that the administration wants hydrogen fuel-cell cars to be common by 2030 not to reduce carbon dioxide but for another reason; we won't have enough gasoline. By our target forecast date, 2030, the world petroleum industry will not be completely out of oil, but production levels will be dropping each year. The demand for oil, if unconstrained, is going to rise every year. Increased demand is expected to be slower in the United States, Europe and Japan (perhaps as low as 0.7% per year vs. 1.2% per year in the 1990s), but the rest of the world will want to use more oil at a growth rate of at least 2%. Think about 800 million Chinese and Indians entering the middle class and desiring cars and air conditioners. The demand for oil will be constrained, either by government rationing or by very high price. The American geologist King Hubbert did studies in the 1950s showing that U.S. oil production would peak around 1970, and it did. The same math tells us that world oil production will peak too. Various experts pick different years; a few have guessed it will happen before 2010 but most energy experts think this is too pessimistic. The Hubbert's Peak advocates include lots of academics, 3 ecologists, and bureaucrats, but they aren't the only ones who agree with his predictions. I have talked to experienced financial analysts who have followed the oil and gas industry for decades, and they believe that an oil production peak is going to occur before 2030. Petroleum supplies will be augmented by other sources of liquid hydrocarbons. Natural gas liquids are important, and high-cost liquids (deep ocean floor oil, tar sands) are another. Including these, total available oil ever on the planet was about 2,500 to 3,000 billion barrels. If the total is around 2,700, the oil industry divides neatly; 900 billion barrels produced in all the years up to now, 900 billion barrels to be produced in the next 30 years, and 900 billion for all the future after that. By 2030, oil production will be no higher than it is today, despite the many more people who would like to use it. By 2050, oil will be very scarce, and much more valuable as a chemical raw material than as a fuel. How about natural gas? There is a lot of gas in the world, but natural gas production has already gone into decline in the United States and Canada. We will start importing much bigger quantities of liquified natural gas, a lot from Russia. We need more gas, but world natural gas production is also likely to peak by 2030. Can we discover enough new oil to extend the peak production year beyond 2020? Most experts think not. Oil exploration has been active the last few years, but we are using up 28 billion barrels per year and only finding 10 billion. CONSEQUENCES After 2010, the sources of oil are likely to shift. Non-OPEC production has already peaked (USA, North Sea, Indonesia) or will soon. Even Russian oil, with all that prospective land in Siberia, appears to have peaked due to very bad field management during the Soviet era. The swing producers (that should be able to expand production in the 2010-2020 decade) are Saudi Arabia, Iraq, Iran, Kuwait, and United Arab Emirates. Whoever controls production from those five Persian Gulf countries will have enormous economic power. (This has NOTHING to do with the conflict in Iraq.) The first oil reserves to be exploited are those with shallow fields that flow to the surface easily. As these fields are used up, we have to spend more money to develop deeper or less productive deposits. In other words, more capital is needed per barrel. Oil service companies will do well as agents to build capital-intensive production systems, such as deep-sea production. We will make fuels out of tar sands in Canada and Venezuela. One can make gasoline out of coal or oil shale -- at a hefty cost. All of these schemes to make oil from low-grade sources are much more like the mining business than the oil business. The way civilized societies live has depended on the ever-increasing use of Power, in Boulton's sense. Changing the way we live is going to be a challenge. Houses being built now will still be in use in 2030. Airliners being built now will still be in the fleet in 2030. Will soaring energy prices make these houses and planes obsolete in the 2030s? Our fastest-growing cities, such as Phoenix and Las Vegas, are being built in the desert, requiring massive use of automobiles, airlines, and air conditioning to be livable. If gasoline becomes very expensive and almost unattainable, we have a lot of changes to make before the world of 2030. Can we maintain a high-tech society with economic growth but that uses less energy? These potential crises are still 30 years away but our children and grandchildren will live in that world. Let's hope a new age industrial revolution emerges. /s/ Ralph Wanger Ralph Wanger CHIEF INVESTMENT OFFICER, LIBERTY WANGER ASSET MANAGEMENT, L.P. LEAD PORTFOLIO MANAGER, LIBERTY ACORN FUND -------------------------------------------------------------------------------- 1 As of June 30, 2003, Millennium Cell was 0.02% of assets in Liberty Acorn Fund.Because the funds are actively managed, fund holdings will vary with changes in portfolio investments. THE OPINIONS EXPRESSED ARE THOSE OF THE CONTRIBUTOR AND ARE SUBJECT TO CHANGE. SINCE ECONOMIC AND MARKET CONDITIONS CHANGE FREQUENTLY, THERE CAN BE NO ASSURANCE THAT THE TRENDS DESCRIBED HERE WILL CONTINUE OR THAT THE FORECASTS WILL COME TO PASS. 4 > FROM THE DESK OF CHUCK MCQUAID Photo of Charles P. McQuaid Dear Shareholders, I look forward to assuming the roles of chief investment officer of Liberty Wanger Asset Management, L.P, and lead manager of Liberty Acorn Fund when Ralph Wanger steps down on September 30, 2003. My association with Ralph dates back to 1978 when I joined him on the investment team of what is now Liberty Acorn Fund. I remember reading one of Ralph's early shareholder reports, which featured a "vice vs. virtue" portfolio comparison (vice, a portfolio that included names like Playboy and U.S. Tobacco, won). At that point I knew I was not working for an ordinary money manager and subsequently realized I had hitched my wagon to a star. Be assured that as I take on this new responsibility not much will change. I'm in the fortunate position of being named head coach of an exceptional team with a winning record. Ralph Wanger created the Liberty Acorn Funds' investment process more than three decades ago and it's worked time and again. Over the last 33 years, we've seen other highly rated, small-cap funds come and go. We believe what sets us apart and has allowed us to succeed where others have failed is our team-oriented investment process. We don't just have one or two analysts or managers looking for winning stocks in a hot industry. That method may bring in assets for a while but may be doomed to fail when the market inevitably shifts. Instead, we have a team of analysts, each responsible for knowing the ins and outs of specific industries or international regions. Our senior analysts in effect run sub portfolios of Liberty Acorn Fund and Liberty Acorn International within their areas of expertise and have the authority to buy and sell stocks within our guidelines. Portfolio managers control industry, region and cash allocations and monitor all trades to confirm they are in line with our process and strategy. In my role as chief investment officer, I will become directly responsible for our international investment team. Leah Zell steps down from this position at the end of September. I became more involved with the international management team at the beginning of the year as part of our succession planning. I spent considerable time studying the international stocks held in Liberty Acorn Fund and across our international products. I liked what I found -stocks in what we believe to be growing, smaller companies that we can hold for a while. While we won't be altering our approach to investing in international markets, we have already begun to fine-tune our research on earnings drivers for foreign stocks. On May 1, Zach Egan and Louis Mendes became co-portfolio managers of Liberty Acorn International. Leah will act as an advisor after September 30. Zach and Louis are well trained in the Wanger investment approach and bring more than 15 years of combined, international investing experience to the Fund. Both have spent a portion of their careers living and working overseas. Zach and Louis are part of a nine-person international investment team that works together to put what we believe to be the best stock ideas into our portfolios. Each of our international analysts speak several languages and has a first-hand understanding of the cultural, political and economic issues that color the diverse, international investment universe. In addition to serving as an advisor, Leah will continue to co-manage an offshore fund investing in European stocks, so she will continue to interact with the analyst team, discussing stock ideas and regional issues. Having served as co-manager since 1995, I will move into the lead portfolio manager position of Liberty Acorn Fund. Rob Mohn and John Park were named co-managers on the fund as of May 1. Both Rob and John will also continue as lead managers of the funds they currently manage - Rob on Liberty Acorn USA and John on Liberty Acorn Twenty. Rob has been with the firm since 1992 and John came on board a year later in 1993. As a combined management team, we will each continue in our role of analyst as part of the 11-person domestic team and will confer on any strategic decisions related to the fund. As Ralph previously mentioned, he will keep his office with us and serve as an advisor. We expect to be frequently in touch with him. I would like to thank you for the confidence you have shown in the Liberty Acorn Funds and assure you that, thanks to Ralph's genius and the firm's strong leadership, we will continue to operate using an investment process that has been successful over the long-term. /s/ Charles P. McQuaid Charles P. McQuaid CHIEF INVESTMENT OFFICER, LIBERTY WANGER ASSET MANAGEMENT, L.P., EFFECTIVE OCTOBER 1, 2003 5 Liberty Acorn Fund > In a Nutshell Photo of Ralph Wanger Photo of Charles P. McQuaid Photo of Robert A. Mohn Photo of John H. Park Liberty Acorn Fund jumped 19.85% (Class A shares, without sales charge) in the second quarter, slightly less than its small-cap benchmarks (see Page 2 for performance data) and somewhat more than the large-cap S&P 500, up 15.39%. Year-to-date the Fund is up 16.49%, performing in line with the Russell 2500's 16.92% return but slightly behind the Russell 2000's 17.88% gain. Tiny stocks and turnaround situations did the best in the second quarter. A Prudential Financial report calculated that within the Russell 2000, stocks of the smallest fifth in market capitalization gained an average of 47%, while stocks of more speculative companies returned 38%. An example of this trend in Liberty Acorn can be seen with auto lender AmeriCredit. The Fund's position in AmeriCredit, a turnaround situation, jumped over 150%. In previous reports we have stated that we bought some speculative stocks because we believed we were being compensated to take risk. Several of these stocks paid off in the quarter. Western Wireless, a cellular telephone company serving rural areas, doubled on improved cash flow. Ciphergen Biosystems, a provider of protein analysis equipment, gained 82% on surging product sales and the resolution of a lawsuit. We've also mentioned that we have been building our technology weighting in the Fund, and tech stocks did beat the market during the quarter. Video-editing equipment supplier Avid Technology, e-learning company Skillsoft Publishing, and enterprise resource provider Lawson Software, saw gains in the 50% to 90% range over the three months. Retail stocks also did well in the quarter and the Fund's holdings in the sector were no exception. Christopher & Banks beat earnings expectations and its stock doubled. Michaels Stores rang up a 50% gain on solid results, while Coach bagged a 30% rise on rapid sales and earnings growth. Foreign stocks have underperformed for several years, causing some of these stocks to become relatively cheap.Calling on our international team, we rebuilt Liberty Acorn's foreign position to 10% of net assets. The Fund's foreign holdings jumped 27% in the quarter. Perbio Science, a Swedish supplier to the biotech industry, surged 54% on a takeover attempt. France's Neopost, a postage meter company, stamped out a 52% gain as it integrated acquisitions, cut on-line losses, and made its earnings estimates. /s/ Ralph Wanger /s/ Charles P. McQuaid Ralph Wanger Charles P. McQuaid LEAD PORTFOLIO MANAGER CO-PORTFOLIO MANAGER /s/ Robert A. Mohn /s/ John H. Park Robert A. Mohn John H. Park CO-PORTFOLIO MANAGER CO-PORTFOLIO MANAGER WIRING HOME THE MONEY ---------------------- We began buying Western Wireless in early 2002 as part of a package of what we believed to be high potential, albeit high-risk telecom stocks. We believed it had a fine business model - serving under penetrated rural wireless markets via cellular licenses at 850 MHz, which allow signals to travel long distances. Only one competitor existed in over 60% of its area. We thought growth would improve once it rolled out digital phones and renewed its roaming contracts. Risk was high due to a poor balance sheet, but the stock, down over 90% from its all time high of $75, had lots of upside. We added to the Fund's position as the stock collapsed further. Growth subsequently resumed, and the company is cleaning up its balance sheet and its distracting foreign operations. While risk remains, the stock jumped to over $13 as of early July. SMALL-CAP STOCKS ARE OFTEN MORE VOLATILE AND LESS LIQUID THAN THE STOCKS OF LARGER COMPANIES. SMALL COMPANIES MAY HAVE A SHORTER HISTORY OF OPERATIONS THAN LARGER COMPANIES AND MAY HAVE A LESS DIVERSIFIED PRODUCT LINE, MAKING THEM MORE SUSCEPTIBLE TO MARKET PRESSURE. INVESTMENTS IN FOREIGN SECURITIES HAVE SPECIAL RISKS, INCLUDING POLITICAL OR ECONOMIC INSTABILITY, HIGHER COSTS, DIFFERENT REGULATIONS, ACCOUNTING STANDARDS, TRADING PRACTICES AND LEVELS OF INFORMATION, AND CURRENCY EXCHANGE RATE FLUCTUATIONS. AS OF 6/30/03, THE FUND'S POSITIONS IN THE HOLDINGS MENTIONED WERE: AMERICREDIT, 0.6%; WESTERN WIRELESS, 0.4%; CIPHERGEN BIOSYSTEMS, 0.2%; AVID TECHNOLOGY, 0.7%; SKILLSOFT PUBLISHING, 0.7%; LAWSON SOFTWARE, 0.3%; CHRISTOPHER & BANKS, 1.0%; MICHAELS STORES, 0.8%; COACH, 0.9%; PERBIO SCIENCE, 0.3%; NEOPOST, 0.2%. 6 Liberty Acorn Fund > At a Glance Ticker Symbol: LACAX PRETAX AND AFTER-TAX AVERAGE ANNUAL TOTAL RETURNS (BASED ON CLASS A SHARE RETURNS) -------------------------------------------------------------------------------- >Through June 30, 2003 YEAR TO DATE* 1 YEAR 5 YEARS 10 YEARS Returns before NAV 16.49% 4.38% 8.08% 12.30% taxes POP 9.79 -1.62 6.81 11.64 ----------------------------------------------------------------------- Returns after taxes NAV 16.49 4.38 6.23 10.11 on distributions POP 9.79 -1.62 4.98 9.46 ----------------------------------------------------------------------- Returns after taxes NAV 10.13 2.69 6.30 9.68 on distributions and POP 6.01 -1.00 5.24 9.08 sale of fund shares ----------------------------------------------------------------------- S&P 500 (pretax) 11.76 0.25 -1.61 10.04 ----------------------------------------------------------------------- Russell 2500 (pretax) 16.92 1.41 3.65 10.27 ----------------------------------------------------------------------- Russell 2000 (pretax) 17.88 -1.64 0.97 8.24 ----------------------------------------------------------------------- Past performance, before and after taxes, cannot predict future investment results. After-tax returns are calculated using the highest historical individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Class A shares only; after-tax returns for other share classes will vary. Indexes do not reflect any deduction for fees, expenses or taxes. Investment returns and principal value may fluctuate, resulting in a gain or loss on sale. Public offering price (POP) returns include the maximum sales charge of 5.75% for Class A shares. Net asset value (NAV) returns do not include sales charges or contingent deferred sales charges (CDSC). *Year to date data not annualized LIBERTY ACORN FUND PORTFOLIO DIVERSIFICATION > as a % of net assets, as of June 30, 2003 (Pie Chart) Information 26.8% Software/Services 13.1% Computer Related Hardware 9.2% Media 2.7% Telecommunication 1.8% Consumer Goods/Services 19.6% Finance 13.2% Industrial Goods/Services 11.8% Health Care 10.1% Energy/Minerals 7.0% Other 6.6% Real Estate 4.9% *Other includes cash and other assets less liabilities of 6.0%. Foreign equities within the portfolio were 10.3% diversified by country as follows: 6.5% Europe; 1.3% Canada; 1.5% Asia without Japan; 0.3% Australia; 0.4% Japan; 0.1% Latin America; 0.2% New Zealand. -------------------------------------------------------------------------------- THE VALUE OF A $10,000 INVESTMENT IN LIBERTY ACORN FUND -------------------------------------------------------------------------------- >June 30, 1993 through June 30, 2003 Illustration is based on a hypothetical $10,000 investment in Class A shares of the Fund, which includes the 5.75% maximum initial sales charge. The Fund commenced operations on 6/10/1970, but until 10/16/2000, offered only the shares that are now designated Class Z shares. The historical performance of Class A, B and C shares (newer class shares) for the period prior to 10/16/2000 is based on the performance of Class Z shares. The Class A, B and C share returns are not restated to reflect any expense differential (e.g., Rule 12b-1 fees) between Class A, B and C and Class Z. Had the expense differential been reflected, the returns for periods prior to the inception of the newer class shares would have been lower. Performance may reflect any voluntary waiver or reimbursement of Fund expenses by the Advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. The S&P 500 is a broad, market-weighted average of U.S. blue-chip company stock performance. The Russell 2000 is a market-weighted index of 2,000 smaller U.S. companies formed by taking the largest 3,000 U.S. companies and eliminating the largest 1,000. The Russell 2500 is the smallest 2,500 U.S. companies taken from this same group. Indexes are unmanaged and returns for the indexes and the Fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. PERFORMANCE CHANGES OVER TIME. VISIT LIBERTYFUNDS.COM FOR DAILY UPDATES. TOTAL NET ASSETS: $7,564.8 MILLION (Mountain Chart) CLASS A CLASS B CLASS C CLASS Z without $31,903 $31,370 $31,370 $32,397 sales charge ---------------------------------------------------- with $30,068 $31,370 $31,370 N/A sales charge LIBERTY ACORN LIBERTY ACORN FUND - A FUND - AT NAV WITH SALES CHARGE RUSSELL 2000 S & P 500 Russell 2500 6/30/ $10000.00 $ 9425.00 $10000.00 $10000.00 $0000.00 1993 9949.00 9376.93 10138.10 9959.70 10064.20 10605.60 9995.81 10576.00 10337.70 10509.90 10915.30 10287.70 10874.50 10258.50 10708.40 11331.20 10679.70 11154.40 10470.60 10836.70 10902.90 10276.00 10787.30 10370.80 10487.40 11308.50 10658.20 11156.10 10496.20 10898.10 11365.00 10711.50 11505.90 10853.00 11243.00 11227.50 10581.90 11464.30 10558.40 11202.40 10684.10 10069.70 10859.00 10098.10 10655.80 10772.80 10153.30 10923.50 10227.60 10717.70 10651.00 10038.60 10800.90 10395.50 10607.50 10286.80 9695.27 10434.10 10140.60 10277.40 10619.00 10008.40 10605.50 10473.70 10556.00 11108.60 10469.80 11196.50 10903.00 11126.80 10969.70 10338.90 11159.00 10636.40 11013.80 10929.10 10300.70 11115.00 10875.30 11033.00 10504.00 9899.99 10666.10 10479.30 10554.90 10466.20 9864.35 10952.60 10634.80 10784.10 10269.40 9678.90 10814.40 10910.50 10762.70 10603.20 9993.46 11264.30 11335.80 11302.80 10756.90 10138.40 11458.30 11670.30 11580.20 10876.30 10250.90 11713.10 12013.90 11786.40 11210.20 10565.60 11914.50 12494.00 12035.90 11663.10 10992.50 12532.50 12784.20 12613.20 12229.90 11526.70 13254.50 13208.20 13357.30 12359.50 11648.90 13528.70 13241.40 13571.10 12610.50 11885.30 13770.30 13800.30 13825.00 12083.30 11388.50 13154.40 13750.90 13392.40 12428.90 11714.20 13707.10 14354.50 13964.80 12643.90 11916.90 14068.70 14631.10 14202.80 12848.80 12110.00 14053.70 15129.00 14303.70 13351.20 12583.50 14491.70 15269.30 14734.60 13611.50 12828.80 14786.60 15416.20 15034.50 14337.00 13512.60 15577.30 15643.60 15729.80 14848.80 13995.00 16191.20 16047.00 16156.90 14560.80 13723.50 15526.30 16108.20 15660.70 13809.40 13015.40 14170.10 15396.60 14514.20 14338.30 13513.90 14992.70 15721.40 15348.70 14866.00 14011.20 15578.80 16606.20 16013.80 14790.20 13939.70 15338.70 17064.20 15908.50 15205.80 14331.40 15970.70 18354.10 16677.30 15496.20 14605.20 16389.30 17990.40 16905.90 16041.70 15119.30 16716.90 19114.30 17373.10 15836.30 14925.70 16311.50 19187.30 17114.80 15115.80 14246.60 15541.80 18472.70 16340.10 15198.90 14325.00 15585.10 19575.40 16546.80 16404.20 15460.90 17319.00 20767.30 18070.00 17157.10 16170.60 18061.20 21697.70 18808.50 18035.60 16998.50 18901.70 23424.00 19910.60 18118.50 17076.70 19334.20 22111.80 20188.10 19508.20 18386.50 20749.30 23322.80 21507.80 18932.70 17844.10 19837.80 22543.90 20541.20 18932.70 17844.10 19709.40 23587.50 20633.30 19368.20 18254.50 20054.50 23992.50 21023.70 19025.40 17931.40 19737.90 24258.00 20702.40 20416.10 19242.20 21197.50 26007.50 22205.80 21692.10 20444.80 22071.70 27339.40 23179.60 22011.00 20745.40 22193.80 27614.40 23267.40 21179.00 19961.20 20998.50 27139.80 22187.20 21632.20 20388.40 21042.70 28242.10 22213.50 20405.70 19232.30 19339.10 27941.50 20687.60 16683.70 15724.40 15583.90 23901.70 16785.30 17412.80 16411.50 16803.50 25432.90 17977.30 18292.10 17240.30 17488.80 27501.70 18959.90 19043.90 17948.90 18405.10 29168.50 19899.10 20533.20 19352.50 19543.90 30849.30 21104.80 20520.80 19340.90 19803.70 32139.30 21068.60 19595.30 18468.60 18199.70 31140.40 19684.20 19803.10 18664.40 18483.80 32386.30 20105.30 21422.90 20191.10 20140.10 33640.50 21903.70 21763.60 20512.20 20434.30 32846.10 22244.20 22925.70 21607.50 21358.30 34669.00 23401.70 23258.20 21920.80 20772.30 33586.50 22941.70 22579.00 21280.70 20003.50 33420.40 22223.90 22454.80 21163.70 20007.90 32504.10 21893.30 23133.00 21802.80 20088.90 34561.00 22372.50 24773.10 23348.70 21288.50 35263.60 23635.80 27381.70 25807.30 23698.30 37340.50 26200.20 26716.30 25180.10 23317.70 35464.40 25597.70 28696.00 27046.00 27168.30 34793.10 29294.30 27499.40 25918.20 25377.10 38196.80 28846.00 26553.40 25026.60 23850.00 37047.60 27294.70 25993.10 24498.50 22460.00 36287.50 25985.10 26996.50 25444.20 24417.90 37182.10 27692.10 27107.20 25548.50 23632.30 36600.80 26987.00 29083.30 27411.00 25435.40 38874.30 29310.80 29568.90 27868.70 24687.90 36822.00 28357.20 28800.20 27144.20 23585.80 36666.30 27579.10 27285.30 25716.40 21164.70 33775.50 25152.10 30103.80 28372.90 22982.40 33940.80 27318.30 30645.70 28883.60 24178.90 35145.00 28216.00 29858.10 28141.30 22592.40 31940.50 26399.10 28493.60 26855.20 21487.30 29917.00 24950.80 30998.20 29215.80 23168.20 32241.90 27154.40 32312.50 30454.50 23737.70 32457.90 27971.10 32735.80 30853.50 24557.40 31667.90 28368.20 32094.20 30248.80 23228.10 31356.20 27353.80 30813.60 29041.80 22477.90 29393.20 26457.40 26616.80 25086.30 19452.10 27019.60 23033.60 27756.00 26160.00 20590.40 27534.90 24224.60 29871.00 28153.40 22184.40 29647.00 26183.80 31776.80 29949.60 23553.70 29906.70 27651.60 31455.80 29647.10 23308.80 29470.30 27308.30 31043.80 29258.80 22669.90 28901.90 26830.20 33310.00 31394.60 24492.00 29988.90 28685.20 33220.00 31309.90 24715.20 28170.70 28612.30 32203.50 30351.80 23618.30 27963.20 27773.60 30561.10 28803.80 22446.40 25971.10 26208.50 26918.20 25370.40 19056.30 23946.80 23080.80 27133.60 25573.40 19007.80 24104.00 23150.60 25508.30 24041.60 17642.70 21484.40 21316.40 26579.60 25051.30 18208.40 23375.40 22011.20 28294.00 26667.10 19833.40 24751.20 23808.10 27382.90 25808.40 18729.10 23297.20 22730.90 26723.00 25186.40 18210.70 22686.90 22127.00 26295.40 24783.50 17660.50 22346.50 21595.30 26616.20 25085.80 17887.90 22563.40 21801.10 28918.60 27255.70 19584.00 24422.00 23744.10 30954.40 29174.50 21685.60 25708.70 26079.30 6/30/2003 31903.30 30068.20 22078.00 26036.70 26577.50 -------------------------------------------------------------------------------- LIBERTY ACORN FUND TOP 10 HOLDINGS (AS A % OF NET ASSETS, AS OF JUNE 30, 2003) -------------------------------------------------------------------------------- 1. International Game Technology 3.0% SLOT MACHINES & PROGRESSIVE JACKPOTS 2. XTO Energy 1.7% NATURAL GAS PRODUCER 3. First Health Group 1.6% PPO NETWORK 4. Expeditors International of Washington 1.3% INTERNATIONAL FREIGHT FORWARDER 5. Christopher & Banks 1.0% WOMEN'S APPAREL RETAILER 6. Lincare Holdings 1.0% HOME HEALTH CARE SERVICES 7. SEI Investments 0.9% MUTUAL FUND ADMINISTRATION & INVESTMENT MANAGEMENT 8. Coach 0.9% DESIGNER & RETAILER OF BRANDED LEATHER ACCESSORIES 9. Harley-Davidson 0.9% MOTORCYCLES & RELATED MERCHANDISE 10.ITT Educational Services 0.9% POST-SECONDARY DEGREE PROGRAMS 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. 7 Liberty Acorn International > In a Nutshell Photo of Leah Joy Zell Photo of P.Zachary Egan Photo of Louis J. Mendes III Liberty Acorn International soared 21.37% (Class A shares, without sales charge) in the three months from April through June. This represents the second best quarterly performance in the Fund's history. It was a particularly good period for international small-cap stocks, with the Citigroup EMI Global ex-US Index up 23.19%, against a 19.27% gain for the larger cap MSCI EAFE Index. Year-to-date, the Fund is up 13.37% vs. a 17.80% return for the Citigroup EMI Global ex-US Index. Several trends converged to drive stock prices higher globally. The quick end to the war in Iraq, accompanied by a drop in oil prices, lowered the perceived risk in owning equities. Simultaneously, the Federal Reserve Bank and central banks elsewhere dropped interest rates to record levels in order to pump liquidity into the world financial system. With equities deeply oversold by mid-March, the strong stimulus sparked a powerful rally in share prices. At the company level, we have not seen a convincing improvement in corporate fundamentals as yet but sentiment has clearly turned more positive. Several of our holdings, from Sky City Entertainment in New Zealand to Givaudan in Switzerland, have announced large share buybacks. At the end of June, Perbio Science of Sweden received a takeover offer from U.S.-based Fisher Scientific. After quarter end, another of our names, JCG Holding in Hong Kong, announced it is in talks to go private. This flurry of corporate activity is in sharp contrast to the subdued environment of the last three years. Our core strategy of owning companies with what we believe to be solid business models at reasonable prices remains in place. The appreciation of the euro against the dollar has tilted our geographic weighting temporarily toward Europe, but we are finding many good opportunities in Asia to redress the balance. Favored Asian themes include domestic demand driven stories such as Housing Development Finance (Indian mortgage bank) and Zhejiang Expressway (Chinese toll road operator). In Europe, the Fund is overweighted in companies that may potentially benefit from regulatory change, such as Rhoen-Klinikum (German health care privatization) and Tomra Systems (Norwegian reverse vending machines for returnable beverage containers). /s/ Leah Joy Zell /s/ P. Zachary Egan Leah Joy Zell P. Zachary Egan LEAD PORTFOLIO MANAGER CO-PORTFOLIO MANAGER /s/ Louis J. Mendes III Louis J. Mendes III CO-PORTFOLIO MANAGER Ralph Wanger on China: ---------------------- New Leadership at Bat New leaders have been appointed in China, from the "fourth Generation" of Party leaders. The two most prominent were both born in 1942, are technocrats who spent many years in remote provinces, and worked their way upward in the Communist Party. Although there is no change in the idea that the Party has a tight monopoly on political power, the new leaders will build a more open and modern economy. Hu Jintao is the new President of China, and Wen Jiabao has been made Premier of the State Council. Most of us are not sure whether a Premier outranks a President or vice-versa. The answer: When they line up in order of rank, Wen is on second. Hu's on first. Imagine the routine Abbott and Costello could have developed if American intellectuals James WATT and Irving HOWE joined WEN and HU in a game of baseball... Perbio Cultivates Growth ------------------------ One of the best performers in the quarter was Perbio Science. Perbio is a world-class player in the field of cell cultures used to develop medicines based on human proteins. A recent addition to the Fund, Perbio quickly became our seventh largest position after a takeover bid lifted the shares 54%. INVESTMENTS IN FOREIGN SECURITIES HAVE SPECIAL RISKS, INCLUDING POLITICAL OR ECONOMIC INSTABILITY, HIGHER COSTS, DIFFERENT REGULATIONS, ACCOUNTING STANDARDS, TRADING PRACTICES AND LEVELS OF INFORMATION, AND CURRENCY EXCHANGE RATE FLUCTUATIONS. SMALL-CAP STOCKS ARE OFTEN MORE VOLATILE AND LESS LIQUID THAN THE STOCKS OF LARGER COMPANIES. SMALL COMPANIES MAY HAVE A SHORTER HISTORY OF OPERATIONS THAN LARGER COMPANIES AND MAY HAVE A LESS DIVERSIFIED PRODUCT LINE, MAKING THEM MORE SUSCEPTIBLE TO MARKET PRESSURE. AS OF 6/30/03, THE FUND'S POSITIONS IN THE HOLDINGS MENTIONED WERE: SKY CITY ENTERTAINMENT, 0.7%; GIVAUDAN, 0.9%; PERBIO SCIENCE, 1.2%; FISHER SCIENTIFIC, 0.0%; JCG HOLDING, 0.4%; HOUSING DEVELOPMENT FINANCE, 1.3%; ZHEJIANG EXPRESSWAY, 0.3%; RHOEN-KLINIKUM, 1.8%; TOMRA SYSTEMS, 0.3%. 8 Liberty Acorn International > At a Glance Ticker Symbol: LAIAX PRETAX AND AFTER-TAX AVERAGE ANNUAL TOTAL RETURNS (BASED ON CLASS A SHARE RETURNS) -------------------------------------------------------------------------------- > Through June 30, 2003 YEAR TO DATE* 1 YEAR 5 YEARS 10 YEARS ------------------------------------------------------------------------- Returns before NAV 13.37% -6.01% 0.38% 6.74% taxes POP 6.85 -11.41 -0.81 8.20 ------------------------------------------------------------------------- Returns after taxes NAV 13.25 -6.13 -0.70 5.86 on distributions POP 6.73 -11.53 -1.87 5.23 ------------------------------------------------------------------------- Returns after taxes NAV 8.20 -3.69 0.49 5.67 on distributions and POP 4.20 -7.01 -0.46 5.11 sale of fund shares ------------------------------------------------------------------------- Citigroup EMI Global 17.80 1.88 -0.46 2.22 ex-US (pretax) ------------------------------------------------------------------------- Past performance, before and after taxes, cannot predict future investment results. After-tax returns are calculated using the highest historical individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Class A shares only; after-tax returns for other share classes will vary. Indexes do not reflect any deduction for fees, expenses or taxes. Investment returns and principal value may fluctuate, resulting in a gain or loss on sale. Public offering price (POP) returns include the maximum sales charge of 5.75% for Class A shares. Net asset value (NAV) returns do not include sales charges or contingent deferred sales charges (CDSC). *Year to date data not annualized -------------------------------------------------------------------------------- LIBERTY ACORN INTERNATIONAL PORTFOLIO DIVERSIFICATION -------------------------------------------------------------------------------- >as a % of net assets, as of June 30, 2003 (Pie Chart) Consumer Goods/Services 20.8% Industrials 20.8% Health Care 10.2% Other* 9.4% Energy 8.6% Financials 8.4% Business Services 7.9% Broadcasting/Media Content 5.8% Real Estate 3.4% Utilities 3.3% Technology Services 1.4% *Other includes cash and other assets less liabilities of 4.0%. -------------------------------------------------------------------------------- THE VALUE OF A $10,000 INVESTMENT IN LIBERTY ACORN INTERNATIONAL -------------------------------------------------------------------------------- >June 30, 1993 through June 30, 2003 Illustration is based on a hypothetical $10,000 investment in Class A shares of the Fund, which includes the 5.75% maximum initial sales charge. The Fund commenced operations on 9/23/1992, but until 10/16/2000, offered only the shares that are now designated Class Z shares. The historical performance of Class A, B and C shares (newer class shares) for the period prior to 10/16/2000 is based on the performance of Class Z shares. The Class A, B and C share returns are not restated to reflect any expense differential (e.g., Rule 12b-1 fees) between Class A, B, and C and Class Z. Had the expense differential been reflected, the returns for periods prior to the inception of the newer class shares would have been lower. Performance may reflect any voluntary waiver or reimbursement of Fund expenses by the Advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. The EMI Global ex-US is Citigroup's index of the bottom 20% of institutionally investable capital of developed and emerging countries, as selected by Citigroup, excluding the U.S. The index is unmanaged and returns for both the index and Fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. PERFORMANCE CHANGES OVER TIME. VISIT LIBERTYFUNDS.COM FOR DAILY UPDATES. TOTAL NET ASSETS: $1,374.9 MILLION (Mountain Chart) CLASS A CLASS B CLASS C CLASS Z Without sales charge $19,191 $18,852 $18,852 $19,453 ------------------------------------------------------------- With sales charge $18,087 $18,852 $18,852 N/A LIBERTY ACORN LIBERTY ACORN INTERNATIONAL - INTERNATIONAL - A A WITH SALES CITIGROUP EMI AT NAV CHARGE GLOBAL EX-US 6/30/1993 $10000.00 $ 9425.00 $10000.00 10000.00 9425.00 10308.00 10650.00 10037.60 10839.90 10766.10 10147.00 10613.70 11268.90 10620.90 10576.30 11315.10 10664.50 9692.09 12336.80 11627.50 10314.90 12871.00 12130.90 11346.50 12824.70 12087.20 11425.80 12266.80 11561.50 11238.90 12351.40 11641.20 11575.10 12282.30 11576.00 11407.70 12034.20 11342.20 11645.70 12367.50 11656.40 11783.20 12755.80 12022.40 11917.30 12763.50 12029.60 11578.00 12786.50 12051.20 11773.70 12078.10 11383.60 11094.70 11867.90 11185.50 11163.30 11330.30 10678.80 10698.70 11260.10 10612.60 10522.30 11462.80 10803.70 10926.60 11813.50 11134.20 11266.50 12000.20 11310.20 11122.20 12171.80 11471.90 10999.30 12833.90 12096.00 11615.60 12701.70 11971.40 11340.70 13021.80 12273.10 11417.00 12616.80 11891.40 11075.70 12437.70 11722.50 11171.10 12929.00 12185.50 11590.90 13435.80 12663.20 11864.50 13841.50 13045.70 12003.10 14090.70 13280.50 12256.10 14543.00 13706.80 12888.10 14972.00 14111.10 12787.20 15166.70 14294.60 12781.20 14682.80 13838.60 12285.00 14894.30 14037.80 12406.90 14988.10 14126.30 12476.10 15136.50 14266.10 12396.70 15551.20 14657.00 12610.60 15601.00 14703.90 12291.70 15975.40 15056.80 12114.80 16175.10 15245.00 12358.00 15935.70 15019.40 12204.40 15704.70 14801.60 12038.70 16389.40 15447.00 12748.60 16882.70 15911.90 13072.30 16994.10 16017.00 12946.10 16093.40 15168.10 12379.50 16769.30 15805.10 12577.50 15860.50 14948.50 11967.70 15692.30 14790.00 11413.20 15631.10 14732.30 11175.80 15851.50 14940.10 11526.60 17126.00 16141.20 12398.20 18468.70 17406.70 12997.70 18851.00 17767.00 13102.80 19173.30 18070.90 13214.10 18837.80 17754.60 12748.40 18958.40 17868.20 12667.90 16541.20 15590.00 11003.10 15813.30 14904.10 10759.20 16341.50 15401.90 11500.60 17268.10 16275.20 11896.80 18040.00 17002.70 12148.90 18456.70 17395.40 12064.20 17903.00 16873.60 11838.20 18250.30 17200.90 12351.10 19341.70 18229.50 13104.40 19463.50 18344.40 12782.30 21075.10 19863.30 13279.60 21825.40 20570.40 13708.00 22454.00 21162.80 13949.20 22828.90 21516.30 13885.80 23815.20 22445.80 13759.20 27382.70 25808.20 14254.00 32333.40 30474.30 15224.30 32213.80 30361.50 14934.10 37393.80 35243.60 15508.70 36242.10 34158.10 15577.50 32023.50 30182.10 14554.70 29644.10 27939.60 14250.30 31102.60 29314.20 15115.90 30713.80 28947.80 14615.00 31404.90 29599.10 15033.50 29803.30 28089.60 14261.60 27585.90 25999.70 13398.70 25329.40 23872.90 12808.20 25848.60 24362.30 13308.80 27009.20 25456.20 13556.60 25056.50 23615.70 13029.90 22638.50 21336.80 12020.70 23505.60 22154.00 12807.50 23343.40 22001.10 12781.80 22190.20 20914.30 12348.20 21295.90 20071.40 11986.10 20855.10 19655.90 11953.10 18004.20 16969.00 10396.90 18854.00 17769.90 10819.30 19904.20 18759.70 11264.10 20268.40 19103.00 11356.90 19771.90 18635.00 11151.20 19704.60 18571.60 11337.90 20721.40 19529.90 12076.60 21394.80 20164.60 12328.00 21296.40 20071.90 12722.50 20423.30 19248.90 12226.30 18258.40 17208.60 11181.40 17960.80 16928.10 11114.30 16347.90 15407.90 10088.40 16424.80 15480.30 10316.40 16922.40 15949.40 10702.00 16934.30 15960.50 10574.60 16514.30 15564.70 10396.90 16061.80 15138.20 10211.30 15819.30 14909.70 10111.90 17255.70 16263.50 11065.20 18670.60 17597.10 12008.40 6/30/2003 19190.80 18087.30 12456.60 -------------------------------------------------------------------------------- LIBERTY ACORN INTERNATIONAL TOP 10 HOLDINGS (AS A % OF NET ASSETS, AS OF JUNE 30, 2003) -------------------------------------------------------------------------------- 1. Rhoen-Klinikum (Germany) 1.8% HOSPITAL MANAGEMENT 2. Neopost (France) 1.6% POSTAGE METER MACHINES 3. Anglo Irish Bank (Ireland) 1.5% CORPORATE LENDING: PRIVATE BANKING 4. Kerry Group (Ireland) 1.5% FOOD INGREDIENTS 5. Hunter Douglas (Netherlands) 1.3% DECORATIVE WINDOW COVERINGS 6. Housing Development Finance (India) 1.3% MORTGAGE LOAN PROVIDER IN INDIA 7. Perbio Science (Sweden) 1.2% CONSUMABLES TO BIOTECH/PHARMACEUTICAL INDUSTRIES 8. Corus Entertainment(Canada) 1.2% CATV PROGRAMMING 9. Talisman Energy (Canada) 1.2% OIL & GAS PRODUCER 10.Synthes-Stratec (Switzerland) 1.1% PRODUCTS FOR ORTHOPEDIC SURGERY 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. -------------------------------------------------------------------------------- 9 Liberty Acorn USA > In a Nutshell Photo of Robert A. Mohn Liberty Acorn USA was up 23.06% (Class A shares, without sales charge) for the second quarter, performing in line with the 23.42% gain of the Russell 2000. Year-to-date, the Fund is up 19.68%, outperforming a 17.88% gain for the benchmark. Western Wireless was 2003's top performer through June 30. Up over 117% year-to-date, this rural cellular service provider is adding new subscribers at a fast pace and is operating with positive free cash flow, a rarity in the cellular business. Technology winners included software companies Micros Systems and Kronos, and Integrated Circuit Systems, a manufacturer of silicon timing devices used in computers. In our current economic environment, 10% revenue growth for a technology stock is considered to be very strong and Kronos and Integrated Circuit Systems are both growing at better than a 10% rate. Fund returns were also boosted by the strong performance of companies perceived to benefit from economic growth. Auto lender AmeriCredit and loan provider World Acceptance were among the top contributors to the Fund. After several quarters of dismal performance, AmeriCredit came back strong with a 161% rebound in Liberty Acorn USA for the quarter. Year-to-date, the stock moved into positive territory as well, up 11%. World Acceptance saw an 81% quarterly increase and is up nearly 114% so far in 2003. After a rough first quarter, biotechnology stocks rebounded in the second quarter. Nektar Therapeutics was up 46% for the three months on positive news related to its development of inhaled insulin. Techne supplies reagents used in the biotech industry so it benefited by association during the quarter's biotech uptick. Women's fashion retailer Christopher & Banks also provided strong year-to-date and second quarter returns. Up 78% for the six months and 109% this last quarter, the market responded favorably to continued strong sales within this growing franchise. Despite mixed signals on the economy, the perception that a recovery is imminent fueled the quarter's rally in more speculative names. We are pleased that the Fund matched the benchmark rise without having a portfolio loaded with fundamentally questionable stocks. The Fund's stocks have real earnings or fill a niche that we believe is primed for future success. The majority of the companies in Liberty Acorn USA's portfolio have been generating real value even during the downturn of the last three years. /s/ Robert A. Mohn Robert A. Mohn LEAD PORTFOLIO MANAGER Zebra Technologies Earns --------------------------- Its Stripes Zebra Technologies is the leading provider of bar code printers, which are used in a variety of industries to produce labels for inventory tracking. We liked Zebra's stock due to the company's respectable financial performance during the tech meltdown and solid growth prospects. Although bar coding was already widely used, Zebra's increased investment in R&D and marketing began to create opportunities in under-served market segments. One example is healthcare, where bar coding is being implemented to reduce costs and errors in ordering and administering drugs. Zebra is also a leader in plastic card printers, a business that should benefit as organizations spend more on personal identification and security. Finally, we believe Zebra is well-positioned in radio-frequency identification (RFID). Zebra's stock appreciated 31% year-to-date. Small-cap stocks are often more volatile and less liquid than the stocks of larger companies. Small companies may have a shorter history of operations than larger companies and may have a less diversified product line, making them more susceptible to market pressure. As of 6/30/03, the fund's positions in the holdings mentioned were: Western Wireless, 2.5%; Micros Systems, 4.1%; Kronos, 2.6%; Integrated Circuit Systems, 1.3%; Americredit, 1.9%; World Acceptance, 2.1%; Nektar Therapeutics, 1.6%; Techne, 1.6%; Christopher & Banks, 1.8%; Zebra Technologies, 2.3%. 10 Liberty Acorn USA > At a Glance Ticker Symbol: LAUAX PRETAX AND AFTER-TAX AVERAGE ANNUAL TOTAL RETURNS (BASED ON CLASS A SHARE RETURNS) -------------------------------------------------------------------------------- > Through June 30, 2003 YEAR TO LIFE OF DATE* 1 YEAR 5 YEARS FUND -------------------------------------------------------------------------------- Returns before NAV 19.68% 1.80% 3.66% 11.47% taxes POP 12.79 -4.05 2.44 10.51 -------------------------------------------------------------------------------- Returns after taxes NAV 19.68 1.80 2.83 10.67 on distributions POP 12.79 -4.05 1.62 9.71 -------------------------------------------------------------------------------- Returns after taxes NAV 12.08 1.10 2.78 9.44 on distributions and POP 7.86 -2.49 1.79 8.60 sale of fund shares -------------------------------------------------------------------------------- Russell 2000 (pretax) 17.88 -1.64 0.97 5.79 -------------------------------------------------------------------------------- Past performance, before and after taxes, cannot predict future investment results. After-tax returns are calculated using the highest historical individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Class A shares only; after-tax returns for other share classes will vary. Indexes do not reflect any deduction for fees, expenses or taxes. Investment returns and principal value may fluctuate, resulting in a gain or loss on sale. Public offering price (POP) returns include the maximum sales charge of 5.75% for Class A shares. Net asset value (NAV) returns do not include sales charges or contingent deferred sales charges (CDSC). *Year to date data not annualized LIBERTY ACORN USA PORTFOLIO DIVERSIFICATION -------------------------------------------------------------------------------- >as a % of net assets, as of June 30, 2003 (Pie chart) Information 39.1% Software/Services 22.4% Computer Related Hardware 6.9% Media 3.6% Telecommunication 6.2% Health Care 17.2% Consumer Goods/Services 13.8% Other 8.2% Finance 11.2% Energy/Minerals 5.5% Industrial Goods/Services 5% *Other includes cash and other assets less liabilities of 7.4%. THE VALUE OF A $10,000 INVESTMENT IN LIBERTY ACORN USA -------------------------------------------------------------------------------- >September 4, 1996 through June 30, 2003 Illustration is based on a hypothetical $10,000 investment in Class A shares of the Fund, which includes the 5.75% maximum initial sales charge. The Fund commenced operations on 9/4/1996, but until 10/16/2000, offered only the shares that are now designated Class Z shares. The historical performance of Class A, B and C shares (newer class shares) for the period prior to 10/16/2000 is based on the performance of Class Z shares. The Class A, B and C share returns are not restated to reflect any expense differential (e.g., Rule 12b-1 fees) between the Class A, B, and C and Class Z. Had the expense differential been reflected, the returns for periods prior to the inception of the newer class shares would have been lower. Performance may reflect any voluntary waiver or reimbursement of Fund expenses by the Advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. The Russell 2000 is a market-weighted index of 2,000 smaller U.S. companies formed by taking the largest 3,000 U.S. companies and eliminating the largest 1,000. The index is unmanaged and returns for both the index and the Fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. PERFORMANCE CHANGES OVER TIME. VISIT LIBERTYFUNDS.COM FOR DAILY UPDATES. TOTAL NET ASSETS: $424.9 MILLION (Mountain Chart) CLASS A CLASS B CLASS C CLASS Z Without $20,976 $20,631 $20,631 $21,298 sales charge With $19,770 $20,631 $20,631 N/A sales charge LIBERTY ACORN LIBERTY ACORN USA - A USA - A AT NAV WITH SALES CHARGE RUSSELL 2000 9/4/1996 10000.00 9425.00 10000.00 9/30/1996 10720.00 10103.60 10360.00 10810.00 10188.50 10200.00 11259.80 10612.30 10621.00 12/31/1996 11649.30 10979.50 10899.00 12209.70 11507.60 11117.00 11919.10 11233.70 10847.00 3/31/1997 11479.30 10819.20 10335.00 11419.60 10762.90 10364.00 12509.00 11789.70 11517.00 6/30/1997 13318.30 12552.50 12011.00 13998.90 13194.00 12570.00 14348.90 13523.80 12857.00 9/30/1997 15338.90 14457.00 13798.00 15139.50 14269.00 13192.00 15169.80 14297.50 13107.00 12/31/1997 15412.50 14526.30 13336.00 15076.50 14209.60 13126.00 16320.30 15381.90 14096.00 3/31/1998 17400.80 16400.20 14678.00 17992.40 16957.80 14759.00 17227.70 16237.10 13964.00 6/30/1998 17525.80 16518.00 13993.00 16593.40 15639.30 12861.00 13936.80 13135.40 10363.00 9/30/1998 14152.80 13339.00 11174.00 14655.20 13812.50 11630.00 15404.10 14518.40 12239.00 12/31/1998 16306.80 15369.10 12997.00 15778.40 14871.20 13169.00 14896.40 14039.90 12103.00 3/31/1999 15017.10 14153.60 12292.00 16096.80 15171.20 13393.00 16735.90 15773.50 13589.00 6/30/1999 17651.30 16636.40 14203.00 18048.50 17010.70 13814.00 16823.00 15855.70 13302.00 9/30/1999 16866.70 15896.90 13305.00 17860.20 16833.20 13359.00 18810.30 17728.70 14157.00 12/31/1999 20059.30 18905.90 15759.00 19054.40 17958.70 15506.00 19868.00 18725.60 18067.00 3/31/2000 19820.30 18680.60 16876.00 17568.70 16558.50 15860.00 16526.90 15576.60 14936.00 6/30/2000 16834.30 15866.30 16238.00 16748.40 15785.40 15715.00 17765.10 16743.60 16915.00 9/30/2000 17642.50 16628.00 16417.00 17642.50 16628.00 15685.00 16613.90 15658.60 14075.00 12/31/2000 18230.50 17182.20 15283.00 19382.60 18268.10 16079.00 19320.60 18209.70 15024.00 3/31/2001 18866.60 17781.70 14289.00 21145.70 19929.80 15407.00 22321.30 21037.90 15786.00 6/30/2001 22933.00 21614.30 16331.00 23164.60 21832.60 15447.00 22516.00 21221.30 14948.00 9/30/2001 19257.90 18150.60 12936.00 19306.10 18196.00 13693.00 20433.50 19258.60 14753.00 12/31/2001 21628.90 20385.20 15663.00 21875.50 20617.60 15500.00 21120.80 19906.30 15075.00 3/31/2002 22911.80 21594.40 16287.00 23246.30 21909.60 16436.00 21923.60 20663.00 15706.00 6/30/2002 20601.60 19417.00 14927.00 17783.30 16760.80 12672.00 17511.20 16504.30 12640.00 9/30/2002 16201.40 15269.80 11732.00 16967.70 15992.10 12109.00 18438.80 17378.60 13189.00 12/31/2002 17524.20 16516.60 12455.00 17252.60 16260.60 12110.00 17005.90 16028.10 11744.00 3/31/2003 17043.30 16063.30 11895.00 18711.80 17635.90 13023.00 20652.30 19464.80 14421.00 6/30/2003 20976.10 19770.00 14682.00 LIBERTY ACORN USA TOP 10 HOLDINGS (AS A % OF NET ASSETS, AS OF JUNE 30, 2003) -------------------------------------------------------------------------------- 1. First Health Group 4.2% PPO NETWORK 2. Micros Systems 4.1% INFORMATION SYSTEMS FOR RESTAURANTS & HOTELS 3. ITT Educational Services 3.0% POST-SECONDARY DEGREE PROGRAMS 4. Kronos 2.6% LABOR MANAGEMENT SOLUTIONS 5. JDA Software 2.6% APPLICATIONS/SOFTWARE & SERVICES FOR RETAILERS 6. Edwards Lifesciences 2.5% HEART VALVES 7. Western Wireless 2.5% PHONE SERVICES 8. HCC Insurance Holdings 2.4% AVIATION INSURANCE 9. Commonwealth Telephone 2.4% RURAL PHONE FRANCHISES & CLEC 10.Zebra Technologies 2.3% BAR CODE PRINTERS 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. 11 Liberty Acorn Foreign Forty > In a Nutshell Photo of Todd M. Narter Photo of Christopher J. Olson Liberty Acorn Foreign Forty rose 19.55% (Class A shares, without sales charge) for the quarter, performing better than the MSCI EAFE and slightly less than its Citigroup benchmark. The MSCI EAFE Index rose 19.27% and the Citigroup World ex-US Cap Range $2-10B Index rose 19.97% over the three months. The markets have rebounded strongly for the quarter and year so far and the Fund has performed roughly in-line. Year-to-date, the Fund is up 9.86%, vs. 9.47% for the MSCI EAFE Index and 12.81% for the benchmark. Germany was one of the best-performing developed markets in the second quarter, up 27%. The Fund was not only overweighted in Germany, but our German stocks performed better than the strong German market. Rhoen-Klinikum, a hospital management company that is one of the Fund's largest holdings, rebounded nicely from a weak first quarter that saw the share price slide 7%. In the second quarter, the shares increased 32%. Deutsche Boerse, the German stock exchange, benefited from the strong stock market and finished the quarter up 37%. On the downside, the Fund's weakest performing holdings for the quarter were based in Japan. Orix, a financial services firm that provides loans, insurance and banking services throughout the world, was our worst performer, down 13%. Oriental Land, a Disney theme park operator in Tokyo, continued to suffer from the impact of bad weather and light foot traffic into the park. The shares were off 6% in the second quarter. We opted to sell both of these stocks in the quarter. Liberty Acorn Foreign Forty has been underweighted in Japan vs. the benchmark for quite some time. So far, we have been right to be underweight, as Japan has been in a bear market for the last 10 years. We have not seen a positive change in the Japanese economic outlook, and better ideas have been found elsewhere. /s/ Todd M. Narter /s/ Christopher J. Olson Todd M. Narter Christopher J. Olson CO-PORTFOLIO MANAGER CO-PORTFOLIO MANAGER What's A Franking Machine? -------------------------- A franking machine is an electronic postage meter. Perhaps you've seen one in the mailroom of your firm. They're great to have around because mail can be sent out faster and more efficiently. The machines are also more secure, eliminating the need to keep large amounts of stamps or petty cash around; and they help save money because the postage paid is the exact amount necessary, not the fixed rate of postage stamps. Neopost is the world's second largest supplier of franking machines. With high barriers to entry, a consolidating industry and huge recurring revenues (60% of sales) we believe Neopost is a good business. For the quarter, the stock was up 52% in Liberty Acorn Foreign Forty. Mid-cap stocks tend to be more volatile and may be less liquid than the stocks of larger companies. Investments in foreign securities have special risks, including political or economic instability, higher costs, different regulations, accounting standards, trading practices and levels of information, and currency exchange rate fluctuations. As of 6/30/03, the Fund's positions in the holdings mentioned were: Rhoen-klinikum, 3.6%; Deutsche Boerse, 2.7%; Orix, 0.0%; Oriental Land, 0.0%; Neopost, 3.2%. 12 Liberty Acorn Foreign Forty > At a Glance Ticker Symbol: LAFAX PRETAX AND AFTER-TAX AVERAGE ANNUAL TOTAL RETURNS (BASED ON CLASS A SHARE RETURNS) -------------------------------------------------------------------------------- >Through June 30, 2003 YEAR TO LIFE OF DATE* 1 YEAR 3 YEARS FUND -------------------------------------------------------------------------------- Returns before NAV 9.86% -4.74% -16.82% 2.94% taxes POP 3.55 -10.22 -18.44 1.62 -------------------------------------------------------------------------------- Returns after taxes NAV 9.86 -4.74 -16.86 2.83 on distributions POP 3.55 -10.22 -18.48 1.51 -------------------------------------------------------------------------------- Returns after taxes NAV 6.06 -2.91 -12.91 2.35 on distributions and POP 2.18 -6.27 -14.09 1.28 sale of fund shares -------------------------------------------------------------------------------- Citigroup World 12.81 -3.02 -6.26 0.83 ex-US Cap Range $2-10B (pretax) -------------------------------------------------------------------------------- Past performance, before and after taxes, cannot predict future investment results. After-tax returns are calculated using the highest historical individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Class A shares only; after-tax returns for other share classes will vary. Indexes do not reflect any deduction for fees, expenses or taxes. Investment returns and principal value may fluctuate, resulting in a gain or loss on sale. Public offering price (POP) returns include the maximum sales charge of 5.75% for Class A shares. Net asset value (NAV) returns do not include sales charges or contingent deferred sales charges (CDSC). *Year to date data not annualized (Pie Chart) Liberty Acorn Foreign Forty Portfolio Diversification -------------------------------------------------------------------------------- >as a % of net assets, as of June 30, 2003 Information Technology 28.1% Consumer Goods/Services 16.6% Industrial Goods/Services 14.9% Other* 8.6% Health Care 13.5% Finance 11.6% Energy/Minerals 6.7% *Other includes cash and other assets less liabilities of 4.7%. THE VALUE OF A $10,000 INVESTMENT IN LIBERTY ACORN FOREIGN FORTY -------------------------------------------------------------------------------- >November 23, 1998 through June 30, 2003 Illustration is based on a hypothetical $10,000 investment in Class A shares of the Fund, which includes the 5.75% maximum initial sales charge. The Fund commenced operations on 11/23/1998, but until 10/16/2000, offered only the shares that are now designated Class Z shares. The historical performance of Class A, B and C shares (newer class shares) for the period prior to 10/16/2000 is based on the performance of Class Z shares. The Class A, B and C share returns are not restated to reflect any expense differential (e.g., Rule 12b-1 fees) between Class A, B and C and Class Z. Had the expense differential been reflected, the returns for periods prior to the inception of the newer class shares would have been lower. Performance may reflect any voluntary waiver or reimbursement of Fund expenses by the Advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. Citigroup World ex-US Cap Range $2-$10B is a subset of Citigroup's Broad Market Index, representing a mid-cap developed market index excluding the U.S. The index is unmanaged and returns for the index and Fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. PERFORMANCE CHANGES OVER TIME. VISIT LIBERTYFUNDS.COM FOR DAILY UPDATES. TOTAL NET ASSETS: $33.6 MILLION CLASS A CLASS B CLASS C CLASS Z Without $11,427 $11,214 $11,234 $11,527 sales charge With $10,770 $11,014 $11,234 N/A sales charge (Mountain Chart) LIBERTY ACORN LIBERTY ACORN CITIGROUP WORLD FOREIGN FOREIGN EX-US FORTY - A FORTY - A CAP RANGE AT NAV WITH SALES CHARGE $2-10B 11/23/1998 10000.00 9425.00 10000.00 10140.00 9556.95 10045.00 12/31/1998 10999.90 10367.40 10339.00 11789.70 11111.80 10310.00 11589.20 10922.90 10052.00 3/31/1999 11978.60 11289.90 10449.00 12238.60 11534.90 11032.00 12168.80 11469.10 10567.00 6/30/1999 13108.20 12354.50 10953.00 13509.40 12732.60 11362.00 13770.10 12978.30 11490.00 9/30/1999 13620.00 12836.80 11530.00 14130.70 13318.20 11535.00 16996.50 16019.20 11864.00 12/31/1999 19972.50 18824.10 12772.00 19661.00 18530.50 12154.00 24240.00 22846.20 12311.00 3/31/2000 23088.60 21761.00 12680.00 21255.40 20033.20 12172.00 18919.40 17831.50 11976.00 6/30/2000 19848.30 18707.10 12611.00 19465.30 18346.00 12203.00 20263.30 19098.20 12586.00 9/30/2000 19234.00 18128.00 12168.00 18487.70 17424.70 11791.00 16126.80 15199.50 11440.00 12/31/2000 17307.30 16312.10 11998.00 17862.90 16835.80 11939.00 15814.00 14904.70 11505.00 3/31/2001 13694.90 12907.50 10607.00 14411.20 13582.50 11391.00 14370.80 13544.50 11293.00 6/30/2001 13761.50 12970.20 10999.00 13040.40 12290.60 10723.00 12766.50 12032.50 10626.00 9/30/2001 10612.80 10002.60 9392.00 11283.50 10634.80 9769.00 11903.00 11218.60 10118.00 12/31/2001 12258.90 11554.00 10140.00 11628.80 10960.20 9841.00 11486.90 10826.40 9991.00 3/31/2002 11893.60 11209.70 10562.00 12258.70 11553.80 10756.00 12380.10 11668.20 11097.00 6/30/2002 11993.80 11304.20 10712.00 10704.50 10089.00 9753.00 10897.20 10270.60 9730.00 9/30/2002 10104.90 9523.90 8859.00 10084.70 9504.86 9017.00 10328.80 9734.87 9476.00 12/31/2002 10400.00 9802.04 9209.00 9892.52 9323.70 8978.00 9476.05 8931.18 8810.00 3/31/2003 9557.54 9007.98 8660.00 10451.20 9850.23 9425.00 11355.20 10702.30 10101.00 6/30/2003 11427.10 10770.00 10389.00 -------------------------------------------------------------------------------- LIBERTY ACORN FOREIGN FORTY TOP 10 HOLDINGS (AS A % OF NET ASSETS, AS OF JUNE 30, 2003) -------------------------------------------------------------------------------- 1. Anglo Irish Bank (Ireland) 4.2% CORPORATE LENDING: PRIVATE BANKING 2. Kerry Group (Ireland) 4.1% FOOD INGREDIENTS 3. Talisman Energy (Canada) 4.0% OIL & GAS PRODUCER 4. Synthes-Stratec (Switzerland) 3.6% PRODUCTS FOR ORTHOPEDIC SURGERY 5. Rhoen-Klinikum (Germany) 3.6% HOSPITAL MANAGEMENT 6. Corus Entertainment (Canada) 3.2% CATV PROGRAMMING 7. TVB (Hong Kong) 3.2% TELEVISION PROGRAMMING & BROADCASTING 8. Neopost (France) 3.2% POSTAGE METER MACHINES 9. Depfa Bank (Ireland) 3.0% INTERNATIONAL PUBLIC SECTOR FINANCE 10.Compass Group (United Kingdom) 3.0% INTERNATIONAL CONCESSION & CONTRACT CATERER 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. 13 Liberty Acorn Twenty > In a Nutshell Photo of John H. Park Liberty Acorn Twenty gained 14.26% (Class A shares, without sales charge) for the second quarter, trailing the 17.63% return for the S&P MidCap 400 and the S&P 500's 15.39% gain. While a 14.26% return may be a satisfactory absolute return, we were disappointed that the Fund lost ground against its benchmarks. Liberty Acorn Twenty's lagging relative performance was not due to any large losses. In fact, only three of the Fund's 24 stocks lost money during the quarter and the worst-performing stock was down only 6%. Rather, stocks with positive returns were not up sufficiently for the Fund to match or exceed its benchmark indexes. The year-to-date picture was brighter. The Fund was up 16.22% vs. a 12.41% return for the S&P MidCap 400 and an 11.76% gain for the S&P 500. The best performing stock for the quarter was Techne, a long-time Liberty Acorn Twenty holding, up 47% after reporting good earnings growth. Techne manufactures reagents for the life-sciences industry. Synopsys, which makes software for the design of semiconductor chips, gained 46%, boosted by strong earnings and a positive future outlook. We maintained the Fund's positions in both stocks. On the losing side, fashion retailer Abercrombie & Fitch fell 6% as some investors may have been disappointed with same-store sales trends. Our analyst, Susie Hultquist, likes the prospects for this stock so we added to the Fund's position on the dip. Expeditors International of Washington fell 4% during the quarter due, in part, to concerns of SARS impacting its freight forwarding and logistics business. It's been our experience that small losses in such a short time period are more of a random result than a reaction to any major fundamental changes. Looking forward, we continue to like the Fund's prospects given our stocks' reasonable valuations combined with what we believe are the exceptional business characteristics of our portfolio companies. We believe this approach will continue to provide above average returns with below average risk over a long-term investment horizon. /s/ John H. Park John H. Park LEAD PORTFOLIO MANAGER JD Edwards Gets Noticed ----------------------- A couple of years ago analyst Ben Andrews noticed that the enterprise resource planning (ERP) software world had fought a war that left only a few players standing. One of the survivors, JD Edwards, focused on manufacturing clients that had a large, loyal, installed customer base, but operating margins of zero percent. The catalyst? New management that reduced costs and focused on new lines of business (supply chain and CRM). Operating margins lifted to five percent, which attracted an even larger player in the ERP world, Peoplesoft, to see JD Edward's niche as valuable and offered to buy it. This offer increased JD Edward's stock price 30.5% in the quarter. Liberty Acorn Twenty is a non-diversified fund. the performance of each of its holdings will have a greater impact on the fund's total return, and may make the fund's returns more volatile than a more diversified fund. Mid-cap stocks tend to be more volatile and may be less liquid than the stocks of larger companies. As of 6/30/03, the fund's positions in the holdings mentioned were: Techne, 2.7%; Synopsys, 5.3%; Abercrombie & FITCH, 2.4%; Expeditors International of Washington, 4.1%; Peoplesoft, 0.0%; Jd Edwards, 2.0%. 14 Liberty Acorn Twenty > At a Glance Ticker Symbol: LTFAX PRETAX AND AFTER-TAX AVERAGE ANNUAL TOTAL RETURNS (BASED ON CLASS A SHARE RETURNS) -------------------------------------------------------------------------------- >Through June 30, 2003 YEAR TO LIFE OF DATE* 1 YEAR 3 YEARS FUND -------------------------------------------------------------------------------- Returns before NAV 16.22% 12.59% 7.43% 13.28% taxes POP 9.54 6.11 5.33 11.84 -------------------------------------------------------------------------------- Returns after taxes NAV 16.22 12.59 7.32 12.69 on distributions POP 9.54 6.11 5.22 11.25 -------------------------------------------------------------------------------- Returns after taxes NAV 9.96 7.73 6.02 10.83 on distributions and POP 5.86 3.75 4.30 9.60 sale of fund shares -------------------------------------------------------------------------------- S&P MidCap 12.41 -0.71 0.99 8.09 400 (pretax) -------------------------------------------------------------------------------- Past performance, before and after taxes, cannot predict future investment results. After-tax returns are calculated using the highest historical individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Class A shares only; after-tax returns for other share classes will vary. Indexes do not reflect any deduction for fees, expenses or taxes. Investment returns and principal value may fluctuate, resulting in a gain or loss on sale. Public offering price (POP) returns include the maximum sales charge of 5.75% for Class A shares. Net asset value (NAV) returns do not include sales charges or contingent deferred sales charges (CDSC). *Year to date data not annualized LIBERTY ACORN TWENTY PORTFOLIO DIVERSIFICATION -------------------------------------------------------------------------------- >as a % of net assets, as of June 30, 2003 (Pie Chart) Consumer Goods/Services 27.3% Information 25.9% Health Care 22.1% Finance 12.7% Industrial Good/Services 4.1% Other* 7.9% *Cash and other assets less liabilities. THE VALUE OF A $10,000 INVESTMENT IN LIBERTY ACORN TWENTY -------------------------------------------------------------------------------- >November 23, 1998 through June 30, 2003 Illustration is based on a hypothetical $10,000 investment in Class A shares of the Fund, which includes the 5.75% maximum initial sales charge. The Fund commenced operations on 11/23/1998, but until 10/16/2000, offered only the shares that are now designated Class Z shares. The historical performance of Class A, B and C shares (newer class shares) for the period prior to 10/16/2000 is based on the performance of Class Z shares. The Class A, B and C share returns are not restated to reflect any expense differential (e.g., Rule 12b-1 fees) between Class A, B and C and Class Z. Had the expense differential been reflected, the returns for periods prior to the inception of the newer class shares would have been lower. Performance may reflect any voluntary waiver or reimbursement of Fund expenses by the Advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. The S&P MidCap 400 is a broad, market-weighted index of 400 stocks that are in the next size/tier down from the S&P 500. The index is unmanaged and returns for the index and the Fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. PERFORMANCE CHANGES OVER TIME. VISIT LIBERTYFUNDS.COM FOR DAILY UPDATES. TOTAL NET ASSETS: $388.7 MILLION CLASS A CLASS B CLASS C CLASS Z Without sales charge $17,755 $17,449 $17,449 $17,942 With sales charge $16735 $17,249 $17,449 N/A (Mountain Chart) LIBERTY ACORN LIBERTY ACORN TWENTY - A TWENTY - A WITH SALES S & P at NAV charge MidCap 400 11/23/1998 10000.00 9425.00 10000.00 10030.00 9453.28 9911.00 12/31/1998 10710.00 10094.20 11109.00 11000.30 10367.80 10676.00 10709.90 10094.00 10117.00 3/31/1999 11479.90 10819.80 10400.00 12709.40 11978.60 11220.00 12729.70 11997.80 11269.00 6/30/1999 13040.30 12290.50 11872.00 13190.30 12431.90 11620.00 12059.90 11366.50 11222.00 9/30/1999 12109.30 11413.10 10875.00 12969.10 12223.40 11429.00 13249.20 12487.40 12029.00 12/31/1999 13846.80 13050.60 12744.00 13472.90 12698.20 12385.00 13553.80 12774.40 13252.00 3/31/2000 14170.50 13355.70 14361.00 13463.30 12689.20 13860.00 13099.80 12346.60 13687.00 6/30/2000 14319.40 13496.10 13888.00 13931.40 13130.30 14107.00 15431.80 14544.50 15682.00 9/30/2000 15799.10 14890.60 15575.00 15928.60 15012.70 15047.00 14382.00 13555.00 13911.00 12/31/2000 15454.80 14566.20 14975.00 15903.00 14988.60 15309.00 14972.70 14111.80 14435.00 3/31/2001 14381.30 13554.40 13362.00 15421.00 14534.30 14836.00 16263.00 15327.90 15181.00 6/30/2001 15989.80 15070.40 15120.00 15836.30 14925.70 14895.00 15092.00 14224.20 14408.00 9/30/2001 14162.30 13348.00 12615.00 14458.30 13627.00 13174.00 15957.70 15040.10 14153.00 12/31/2001 16637.50 15680.80 14885.00 16308.00 15370.30 14807.00 15957.40 15039.90 14826.00 3/31/2002 16506.30 15557.20 15885.00 15606.80 14709.40 15811.00 16045.30 15122.70 15544.00 6/30/2002 15770.90 14864.10 14407.00 14772.60 13923.20 13011.00 15124.20 14254.60 13077.00 9/30/2002 14422.50 13593.20 12023.00 15212.80 14338.10 12544.00 15968.90 15050.70 13270.00 12/31/2002 15277.40 14399.00 12725.00 15211.70 14337.10 12353.00 15233.00 14357.10 12058.00 3/31/2003 15540.70 14647.20 12160.00 16429.70 15485.00 13043.00 17307.00 16311.90 14124.00 6/30/2003 17755.50 16734.50 14304.00 LIBERTY ACORN TWENTY TOP 10 HOLDINGS (AS A % OF NET ASSETS, AS OF JUNE 30, 2003) -------------------------------------------------------------------------------- 1. First Health Group 9.4% PPO NETWORK 2. Guidant 6.9% STENTS, DEFIBRILLATORS & OTHER CARDIAC MEDICAL DEVICES 3. Interpublic Group 6.2% ADVERTISING 4. Synopsys 5.3% SOFTWARE FOR DESIGNING SEMICONDUCTOR CHIPS 5. Electronic Arts 4.6% ENTERTAINMENT SOFTWARE 6. Expeditors International 4.1% of Washington INTERNATIONAL FREIGHT FORWARDER 7. Harley-Davidson 4.1% MOTORCYCLES & RELATED MERCHANDISE 8. Herman Miller 4.1% OFFICE FURNITURE 9. TCF Financial 4.0% GREAT LAKES BANK 10.Associated Banc-Corp 3.9% MIDWEST BANK 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. 15 Columbia Thermostat Fund > In a Nutshell Photo of Ralph Wanger Photo of Charles P. McQuaid Photo of Harvey Hirschhorn Columbia Thermostat Fund finished the second quarter up 11.27% (Class A shares, without sales charge). The S&P 500 was very strong with a 15.39% quarterly gain and the Lehman U.S. Credit Intermediate Bond Index returned 4.02%. With the rally in equities, this was a quarter in which flexible portfolios run by Wall Street experts had a real opportunity to excel, but, comparing Thermostat's return to the Lipper Flexible Portfolio Funds Index, our "automatic" system produced very competitive results. The three-month gain for this Lipper index was 12.05%. The Fund's return was in line with the Lipper Flexible Portfolio Funds Index for the half year too. Year-to-date Thermostat is up 8.91% vs. a 9.73% return for the Lipper index. During the quarter we hit three reallocation triggers. The Fund's bond exposure at quarter end was 40%, up from 25% at the end of the first quarter. In keeping with our simple investment strategy, as the S&P 500 climbed, all three times we sold 5% of our stock funds and invested the proceeds in bonds. We are also pleased to report that assets are growing at a healthy rate in Columbia Thermostat Fund. At quarter end, the total assets were $46.3 million. This was fast growth from the $9.7 million in assets we held at the end of the first quarter. With Thermostat's fund-of-funds structure, investing the cash inflows is an easy process and, as assets grow, the expense ratio should decline, providing a boost to returns. Our thanks to you for the confidence you have shown in our system and in the fund with the funny name. /s/ Ralph Wanger /s/ Charles P. Mcquaid Ralph Wanger Charles P. McQuaid CO-PORTFOLIO MANAGER CO-PORTFOLIO MANAGER /s/ Harvey Hirschhorn Harvey Hirschhorn CO-PORTFOLIO MANAGER The value of an investment in the fund is based primarily on the performance of the underlying portfolio funds and the allocation of the fund's assets among them. An investment in the underlying funds may present certain risks, including stock market fluctuations that occur in response to economic and business developments; and a greater degree of social, political and economic volatility associated with international investing. Investing in small-and mid-cap stocks may present special risks including possible illiquidity and greater price volatility than stocks of larger, more established companies. Changes in interest rates and changes in the financial strength of issuers of lower-rated bonds may also affect underlying fund performance. The fund is also subject to the risk that the investment adviser's decisions regarding asset classes and portfolio funds will not anticipate market trends successfully, resulting in a failure to preserve capital or lower total return. In addition, the fund may buy and sell shares of the portfolio funds frequently. This may result in higher transaction costs and additional tax liability. This is not an offer of the shares of any other mutual fund mentioned herein. 16 Columbia Thermostat Fund > At a Glance Ticker Symbol: CTFAX PRETAX AND AFTER-TAX AVERAGE ANNUAL TOTAL RETURNS (BASED ON CLASS A SHARE RETURNS) -------------------------------------------------------------------------------- >through June 30, 2003 YEAR LIFE OF TO DATE* FUND* -------------------------------------------------------------------------------- Returns before taxes NAV 8.91% 13.38% POP 2.65 6.86 -------------------------------------------------------------------------------- Returns after taxes NAV 8.89 17.89 on distributions POP 2.63 9.07 -------------------------------------------------------------------------------- Returns after taxes on distributions and NAV 5.48 10.93 sale of fund shares POP 1.63 5.57 -------------------------------------------------------------------------------- S&P 500 (pretax) 11.76 20.65 -------------------------------------------------------------------------------- Lehman U.S. Govt. Intermediate Bond 2.63 4.03 Index (pretax) -------------------------------------------------------------------------------- Lehman U.S. Credit Intermediate Bond 6.36 9.63 Index (pretax) -------------------------------------------------------------------------------- Lipper Flexible Portfolio Funds Index (pretax) 9.73 16.09 -------------------------------------------------------------------------------- Past performance, before and after taxes, cannot predict future investment results. After-tax returns are calculated using the highest historical individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Class A shares only; after-tax returns for other share classes will vary. Indexes do not reflect any deduction for fees, expenses or taxes. Investment returns and principal value may fluctuate, resulting in a gain or loss on sale. Public offering price (POP) returns include the maximum sales charge of 5.75% for Class A shares. Net asset value (NAV) returns do not include sales charges or contingent deferred sales charges (CDSC). *Not annualized. Portfolio Weightings -------------------------------------------------------------------------------- >as a % of assets in each investment category, as of June 30, 2003 (Pie Chart) Stock Mutual Funds Liberty Acorn Fund 20% Liberty Acorn Twenty 15% Liberty Growth Stock 25% Liberty Growth & Income 25% Liberty Select Value 15% BOND MUTUAL FUNDS Liberty Federal Securities 30% Liberty Intermediate Bond 50% Columbia High Yield 20% THE VALUE OF A $10,000 INVESTMENT IN COLUMBIA THERMOSTAT FUND -------------------------------------------------------------------------------- >September 25, 2002 through June 30, 2003 Illustration is based on a hypothetical $10,000 investment in Class A shares of the Fund, which includes the 5.75% maximum initial sales charge. The Fund commenced operations on 9/25/2002, but until 3/3/2003, offered only Class Z shares. The historical performance of Class A, B, and D shares (newer class shares) for the period prior to 3/3/2003 is based on the performance of Class Z shares. The Class A, B and D share returns are not restated to reflect any expense differential (e.g. Rule 12b-1 fees) between Class A, B and D and Class Z. Had the expense differential been reflected, the returns for periods prior to the inception of the newer class shares would have been lower. Performance may reflect any voluntary waiver or reimbursement of Fund expenses by the Advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. The S&P 500 is a broad, market-weighted average of U.S. blue-chip company stock performance. The Lehman U.S. Govt. Intermediate Bond Index is made up of 1 to 10 year treasury and agency bonds, excluding targeted investor notes and state and local government series bonds. The Lehman U.S. Credit Intermediate Bond Index is the intermediate component of the U.S. Credit Index. The U.S. Credit Index includes publicly issued U.S. corporate and foreign debentures and secured notes that meet specified maturity, liquidity, and quality requirements. The indexes are unmanaged and returns for the indexes and the Fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. PERFORMANCE CHANGES OVER TIME. VISIT LIBERTYFUNDS.COM FOR DAILY UPDATES. TOTAL NET ASSETS: $46.3 MILLION CLASS A CLASS B CLASS D CLASS Z Without sales charge $11,338 $11,308 $11,308 $11,348 With sales charge $10,686 $10,808 $11,208 N/A (Mountain Chart) COLUMBIA LEHMAN U.S. LEHMAN U.S. FUND - A THERMOSTAT GOVT. CREDIT WITH SALES FUND - A AT INTERMEDIATE INTERMEDIATE CHARGE NAV S&P 500 Bond Bond 9/25/2002 9425.00 10000.00 10000.00 10000.00 10000.00 9/30/2002 9283.63 9850.00 9956.00 10039.00 10042.80 10/31/2002 9632.69 10220.40 10832.00 10032.00 9962.13 11/30/2002 10085.40 10700.70 11469.00 9953.00 10044.60 12/31/2002 9812.11 10410.70 10796.00 10137.00 10306.80 1/31/2003 9670.82 10260.80 10513.00 10114.00 10335.10 2/28/2003 9519.95 10100.70 10355.00 10228.00 10517.50 3/31/2003 9604.68 10190.60 10456.00 10230.00 10539.30 10094.50 10710.40 11317.00 10259.00 10683.90 10546.80 11190.20 11913.00 10420.00 10956.80 6/30/2003 10686.00 11338.00 12065.00 10403.00 10962.70 COLUMBIA THERMOSTAT FUND ASSET ALLOCATION >as a % of net assets, as of June 30, 2003 Columbia Thermostat Fund Asset Allocation >as a % of net assets, as of June 30, 2003 (Pie Chart) Stock Mutual Funds 58.1% Bond Mutual Funds 38.8% Cash and Other Assets Less Liabilities 3.1% 17 LIBERTY ACORN FUND >MAJOR PORTFOLIO CHANGES IN THE SECOND QUARTER (UNAUDITED) NUMBER OF SHARES ----------------------------- 03/31/03 06/30/03 Additions ---------------------------------------------------------------------------- INFORMATION Actel 261,000 361,000 Actuate 800,000 4,534,000 Administaff 0 139,000 American Tower 0 600,000 Aspect Communications 3,600,000 4,000,000 Avnet 1,610,000 1,695,000 Avocent 625,000 830,000 Cable Design Technologies 406,000 1,125,000 Ciber 3,350,000 3,469,000 Concurrent Computer 1,500,000 2,155,000 CTS 0 630,000 Cumulus Media, Cl. A 1,100,000 1,200,000 Deutsche Boerse (Germany) 175,000 275,000 Dionex 756,000 836,000 Euronext (France) 300,000 575,000 Hit Entertainment (United Kingdom) 2,000,000 2,500,000 Hong Kong Exchanges & Clearing (Hong Kong) 4,200,000 5,000,000 II VI 272,000 535,000 Indus International 3,770,000 5,000,000 Insight Communications 1,550,000 1,700,000 Integrated Circuit Systems 960,000 1,005,000 Jabil Circuit 1,035,000 1,170,000 JDA Software 2,150,000 2,200,000 LittelFuse 605,000 685,000 MAPICS 1,900,000 2,200,000 Mediacom Communications 2,100,000 2,500,000 Mettler Toledo 700,000 810,000 Moore-Wallace (Canada) 900,000 1,000,000 MRO Software 1,992,000 2,035,000 Neopost (France) 331,900 431,900 New Horizons Worldwide 600,000 800,000 Plantronics 637,000 830,000 Plexus 1,200,000 1,300,000 Radiant Systems 200,000 1,000,000 Rogers 169,000 380,000 Seachange International 2,350,000 2,500,000 Skillsoft Publishing 9,800,000 9,900,000 Supertex 365,000 565,000 Sybase 450,000 1,221,000 Systems & Computer Technology 2,817,000 3,050,000 Tech Data 0 780,000 Telephone and Data Systems 400,000 500,000 THQ 1,865,000 2,000,000 Trimble Navigation 755,000 885,000 Unova 231,000 900,000 Varian 587,000 651,000 Venture (Singapore) 1,450,000 1,750,000 Western Wireless 2,300,000 2,750,000 Zebra Technologies 294,000 329,000 NUMBER OF SHARES ----------------------------- 03/31/03 06/30/03 ---------------------------------------------------------------------------- HEALTH CARE Aclara Biosciences 1,792,000 1,982,000 Applera-Celera Genomics 0 900,000 Diagnostic Products 630,000 920,000 Edwards Lifesciences 1,234,000 1,554,000 Essilor International (France) 215,000 265,000 First Health Group 3,716,000 4,296,000 Lincare Holdings 2,166,000 2,491,000 Martek Biosciences 435,000 519,000 Nektar Therapeutics 1,968,000 2,055,000 Omega Pharma (Belgium) 0 281,000 OPG Groep (Netherlands) 100,000 300,000 Perbio Science (Sweden) 720,000 1,035,000 Rhoen-Klinikum (Germany) 360,000 385,000 Sequenom 0 2,800,000 Smith & Nephew (United Kingdom) 1,000,000 2,000,000 Synthes-Stratec (Switzerland) 0 20,000 ---------------------------------------------------------------------------- CONSUMER GOODS/SERVICES Abercrombie & Fitch 180,000 425,000 Action Performance 1,026,000 1,276,000 Aeropostale 805,000 1,005,000 Alliance Gaming 1,910,000 2,010,000 Ann Taylor 270,000 450,000 Argosy Gaming 475,000 875,000 Autogrill (Italy) 1,067,000 1,217,000 Bally Total Fitness 2,000,000 2,350,000 Billabong International (Australia) 0 1,950,000 Cheesecake Factory 158,000 243,000 Chico's Fas 1,850,000 2,095,000 Harley-Davidson 1,620,000 1,745,000 Herman Miller 1,769,000 1,900,000 Hon Industries 1,010,000 1,275,000 Hunter Douglas (Netherlands) 580,740 605,000 Hyundai Mobis (South Korea) 275,000 575,000 International Speedway Motors 605,000 805,000 Intrawest (Canada) 1,935,000 2,024,500 Jurys Doyle Hotel (Ireland) 0 620,000 Kerry Group (Ireland) 1,300,000 1,600,000 LaQuinta 3,050,000 3,380,000 Lion Nathan (Australia) 2,150,000 3,000,000 Michaels Stores 1,450,000 1,600,000 Nautica Enterprises 880,000 965,000 Nobia (Sweden) 0 550,000 Oxford Industries 0 265,000 Parmalat Finanziaria (Italy) 0 3,500,000 Petco Animal Supplies 450,000 815,000 Pinnacle Entertainment 1,825,000 1,925,000 Polaris Industries 0 275,000 18 NUMBER OF SHARES ----------------------------- 03/31/03 06/30/03 Additions, continued ---------------------------------------------------------------------------- CONSUMER GOODS/SERVICES (CONTINUED) Scotts Company 570,000 795,000 SCP Pool 912,000 1,007,000 Sky City Entertainment (New Zealand) 0 1,500,000 Speedway Motors 308,000 363,000 The Warehouse Group (New Zealand) 0 3,100,000 USS (Japan) 200,000 260,000 Weight Watchers 200,000 250,000 ---------------------------------------------------------------------------- FINANCE Anglo Irish Bank (Ireland) 2,830,000 2,900,000 Bank of Bermuda 289,000 356,000 BOK Financial 0 297,000 Depfa Bank (Ireland) 0 125,000 Downey Financial 659,000 807,000 First Federal Capital 550,000 700,000 Harleysville Group 0 700,000 Hawthorne Financial 400,000 440,000 Housing Development Finance (India) 1,199,606 1,700,000 Intermediate Capital (United Kingdom) 0 90,000 Investment Technology Group 0 200,000 Midwest Banc 0 170,000 Northbridge Financial (Canada) 0 455,000 Ohio Casualty 0 800,000 Pacific Northwest Bancorp 237,000 412,000 Philadelphia Consolidated Holding 821,000 870,000 Scottish Annuity & Life 350,000 650,000 Selective Insurance Group 0 308,000 West Coast Bancorp 0 249,000 ---------------------------------------------------------------------------- INDUSTRIAL GOODS/SERVICES Ametek 925,000 1,025,000 Bacou Dalloz (France) 50,000 65,000 Daito Trust Construction (Japan) 0 380,000 Esco Technologies 900,000 950,000 Florida Rock Industries 325,000 425,000 G&K Services 600,000 725,000 Geberit International (Switzerland) 0 32,000 Givaudan (Switzerland) 27,000 37,000 Grafton Group (Ireland) 1,560,000 2,900,000 Hughes Supply 475,000 600,000 Intermagnetics General 290,000 363,000 NUMBER OF SHARES ----------------------------- 03/31/03 06/30/03 ---------------------------------------------------------------------------- INDUSTRIAL GOODS/SERVICES (CONTINUED) McCarthy & Stone (United Kingdom) 0 750,000 Mine Safety Appliances 201,000 268,000 Munters (Sweden) 0 290,000 Schindler (Switzerland) 0 31,000 Schulman 484,000 983,000 Sembcorp Logistics (Singapore) 10,000,000 11,000,000 Simpson 303,000 488,000 Sinotrans (China) 20,000,000 40,000,000 Tenaris (Luxembourg) 50,000 450,000 Tennant 0 51,000 UTI Worldwide 700,000 900,000 Worthington Industries 800,000 1,050,000 Xstrata (United Kingdom) 1,000,000 2,220,000 ---------------------------------------------------------------------------- ENERGY/MINERALS Carbo Ceramics 600,000 650,000 Evergreen Resources 680,000 730,000 FMC Technologies 1,100,000 1,400,000 Key Energy Services 0 1,300,000 McMoRan Exploration 0 450,000 Talisman Energy (Canada) 300,000 365,000 Tullow Oil (United Kingdom) 0 3,000,000 Ultra Petroleum 2,500,000 2,550,000 ---------------------------------------------------------------------------- OTHER INDUSTRIES Comfort Group (Singapore) 0 15,000,000 Crescent Real Estate Equities 750,000 1,375,000 Federal Realty Investment Trust 380,000 690,000 Glimcher Realty Trust 525,000 975,000 Kobenhavns Lufthavne (Denmark) 0 100,000 Mills 425,000 725,000 Red Electrica (Spain) 600,000 829,800 19 LIBERTY ACORN FUND >MAJOR PORTFOLIO CHANGES IN THE SECOND QUARTER (UNAUDITED), CONTINUED NUMBER OF SHARES ----------------------------- 03/31/03 06/30/03 Sales ---------------------------------------------------------------------------- INFORMATION Avid Technology 2,000,000 1,600,000 Concord EFS 293,000 0 International Game Technology 9,328,000 2,192,000 (INCLUDES THE EFFECT OF A 4 FOR 1 STOCK SPLIT) Shuffle Master 1,327,000 827,000 Travelsky Technology (Hong Kong) 8,000,000 0 ---------------------------------------------------------------------------- HEALTH CARE Kensey Nash 550,000 0 ---------------------------------------------------------------------------- CONSUMER GOODS/SERVICES Carnival 1,400,000 400,000 Coach 1,774,000 1,420,000 Goodman Fielder (Australia) 5,000,000 0 Kuoni Reisen (Switzerland) 20,000 0 NH Hoteles (Spain) 430,000 0 Orkla (Norway) 665,000 440,000 Six Flags 3,025,000 2,765,000 Star Cruises (Singapore) 26,800,000 0 Station Casinos 1,250,000 890,000 Waterford Wedgwood (Ireland) 6,961,600 0 ---------------------------------------------------------------------------- FINANCE Affiliated Managers Group 499,000 123,000 ---------------------------------------------------------------------------- INDUSTRIAL GOODS/SERVICES Airnet Systems 556,000 0 Applied Industrial Technologies 575,000 0 Hagemeyer (Netherlands) 1,120,000 0 Jenoptik (Germany) 250,000 0 Maruichi Steel Tube (Japan) 625,000 0 Serco Group (United Kingdom) 3,160,000 0 Technip - Coflexip (France) 140,000 0 ---------------------------------------------------------------------------- ENERGY/MINERALS Westport Resources 500,000 342,000 XTO Energy 6,400,000 6,300,000 ---------------------------------------------------------------------------- OTHER INDUSTRIES BRE Properties 450,000 0 First Industrial Realty Trust 675,000 0 LaSalle Hotel Properties 1,099,000 574,000 20 LIBERTY ACORN FUND >STATEMENT OF INVESTMENTS (UNAUDITED), JUNE 30, 2003 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- SECURITIES: 94.0% ---------------------------------------------------------------------------- INFORMATION: 26.8% MEDIA >TV BROADCASTING: 0.4% 1,400,000 Gray Television $ 17,360 MID MARKET AFFILIATED TV STATIONS 3,300,000 TVB (Hong Kong) 11,785 TELEVISION PROGRAMMING & BROADCASTING 200,000 Young Broadcasting (b) 4,226 TELEVISION STATIONS ---------------------------------------------------------------------------- 33,371 >RADIO BROADCASTING: 0.8% 1,200,000 Cumulus Media, Cl. A (b) 22,716 RADIO STATIONS IN SMALL CITIES 935,000 Saga Communications (b) 18,186 RADIO STATIONS IN SMALL & MID-SIZED CITIES 850,000 Salem Communications (b) 17,009 RADIO STATIONS FOR RELIGIOUS PROGRAMMING ---------------------------------------------------------------------------- 57,911 >TELEVISION PROGRAMMING/CATV: 1.5% 2,605,000 Liberty Media (b) 30,114 CATV PROGRAMMING & MEDIA COMPANY HOLDINGS 2,500,000 Mediacom Communications (b) 24,675 CABLE TELEVISION FRANCHISES 1,700,000 Insight Communications (b) 22,406 CATV FRANCHISES IN MIDWEST 1,000,000 Corus Entertainment (Canada) (b) 16,780 TELEVISION PROGRAMMING & RADIO STATIONS 2,500,000 Hit Entertainment (United Kingdom) 10,216 TELEVISION SHOWS FOR CHILDREN 1,500,000 United Global Com (b) 7,755 VIDEO, VOICE & DATA SERVICES OUTSIDE THE USA ---------------------------------------------------------------------------- 111,946 TELECOMMUNICATIONS >TELECOMMUNICATIONS/WIRELINE COMMUNICATIONS: 0.5% 850,000 Commonwealth Telephone (b) 37,374 RURAL PHONE FRANCHISES & CLEC ---------------------------------------------------------------------------- >TELECOMMUNICATIONS EQUIPMENT: 0.2% 830,000 Plantronics (b) 17,986 COMMUNICATION HEADSETS ---------------------------------------------------------------------------- >MOBILE COMMUNICATIONS: 1.1% 2,750,000 Western Wireless (b) 31,708 PHONE SERVICES 500,000 Telephone & Data Systems 24,850 CELLULAR & TELEPHONE SERVICES 2,500,000 Crown Castle International (b) 19,425 COMMUNICATION TOWERS IN USA & UK 600,000 American Tower (b) 5,310 COMMUNICATION TOWERS 533,000 COMARCO (b)(c) 3,784 WIRELESS NETWORK TESTING ---------------------------------------------------------------------------- 85,077 NUMBER OF SHARES OR PRINCIPAL AMOUNT(000) VALUE (000) ---------------------------------------------------------------------------- COMPUTER RELATED HARDWARE >COMPUTER HARDWARE/RELATED SYSTEMS: 2.2% 830,000 Avocent (b) $ 24,842 COMPUTER CONTROL SWITCHES 329,000 Zebra Technologies (b) 24,738 BAR CODE PRINTERS 2,500,000 Seachange International (b)(c) 23,850 SYSTEMS FOR VIDEO ON DEMAND & AD INSERTION 431,900 Neopost (France) (b) 18,381 POSTAGE METER MACHINES 585,000 Excel Technologies (b) 13,356 LASER SYSTEMS & ELECTRO-OPTICAL COMPONENTS 380,000 Rogers (b) 12,654 PCB LAMINATES & HIGH PERFORMANCE FOAMS 535,000 II VI (b) 12,348 LASER COMPONENTS 900,000 Unova (b) 9,990 BARCODE & WIRELESS LAN SYSTEMS 1,125,000 Cable Design Technologies (b) 8,044 NETWORKING & SPECIALTY CABLES 630,000 CTS 6,583 ELECTRONIC COMPONENTS, SENSORS & EMS 2,155,000 Concurrent Computer (b) 6,293 VIDEO ON DEMAND SERVICES & SOFTWARE 230,000 Applied Films (b) 5,952 THIN-FILM GLASS COATING EQUIPMENT $ 3,000 Tidel Technologies, 6% Note Due 9/8/04 (b) 450 63,158 Tidel Technologies (b) -- ATM MACHINES ---------------------------------------------------------------------------- 167,481 >GAMING EQUIPMENT: 3.3% 2,192,000 International Game Technology 224,307 SLOT MACHINES & PROGRESSIVE JACKPOTS 827,000 Shuffle Master (b)(c) 24,306 CARD SHUFFLERS, CASINO GAMES & SLOT MACHINES ---------------------------------------------------------------------------- 248,613 >CONTRACT MANUFACTURING: 0.8% 1,170,000 Jabil Circuit (b) 25,857 ELECTRONIC MANUFACTURING SERVICES 1,750,000 Venture (Singapore) 16,002 ELECTRONIC MANUFACTURING SERVICES 1,300,000 Plexus (b) 14,989 ELECTRONIC MANUFACTURING SERVICES ---------------------------------------------------------------------------- 56,848 >INSTRUMENTATION: 1.6% 836,000 Dionex (b) 33,231 ION & LIQUID CHROMATOGRAPHY 810,000 Mettler Toledo (b) 29,686 LABORATORY EQUIPMENT 651,000 Varian (b) 22,570 ANALYTICAL INSTRUMENTS 885,000 Trimble Navigation (b) 20,293 GPS-BASED INSTRUMENTS 2,300,000 Spectris (United Kingdom) 15,701 ELECTRONIC INSTRUMENTATION & CONTROLS ---------------------------------------------------------------------------- 121,481 21 LIBERTY ACORN FUND >STATEMENT OF INVESTMENTS (UNAUDITED), CONTINUED NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >SEMICONDUCTORS/RELATED EQUIPMENT: 1.3% 1,005,000 Integrated Circuit Systems (b) $ 31,587 SILICON TIMING DEVICES 685,000 LittelFuse (b) 15,317 LITTLE FUSES 800,000 Semtech (b) 11,392 ANALOG SEMICONDUCTORS 565,000 Supertex (b) 10,379 MIXED-SIGNAL SEMICONDUCTORS 519,000 Microsemi 8,304 ANALOG/MIXED SIGNAL SEMICONDUCTORS 361,000 Actel (b) 7,400 FIELD PROGRAMMABLE GATE ARRAYS 679,000 IXYS (b) 5,412 POWER SEMICONDUCTORS 664,000 Asyst Technologies (b) 4,442 SEMICONDUCTOR FAB AUTOMATION EQUIPMENT ---------------------------------------------------------------------------- 94,233 SOFTWARE/SERVICES >BUSINESS SOFTWARE: 6.3% 1,180,000 Kronos (b)(c) 59,956 LABOR MANAGEMENT SOLUTIONS 1,600,000 Avid Technology (b)(c) 56,112 DIGITAL NONLINEAR EDITING SOFTWARE & SYSTEMS 3,350,000 JD Edwards (b) 48,005 MID MARKET ERP & SUPPLY CHAIN SOFTWARE 1,050,000 Micros Systems (b)(c) 34,629 INFORMATION SYSTEMS FOR RESTAURANTS & HOTELS 9,900,000 Novell (b) 30,492 SECURITY & IDENTITY MANAGEMENT SOFTWARE 3,050,000 Systems & Computer Technology (b)(c) 27,450 ENTERPRISE SOFTWARE & SERVICES 4,975,000 E.Piphany (b)(c) 25,422 CRM SOFTWARE 2,200,000 JDA Software (b)(c) 24,618 APPLICATIONS/SOFTWARE & SERVICES FOR RETAILERS 3,000,000 Lawson Software (b) 23,310 ENTERPRISE RESOURCE PLANNING (ERP) SOFTWARE 2,200,000 MAPICS (b)(c) 18,040 MID MARKET ERP SOFTWARE 2,035,000 MRO Software (b)(c) 17,562 ENTERPRISE MANAGEMENT SOFTWARE 1,221,000 Sybase (b) 16,984 DATABASE SOFTWARE 500,000 Hyperion Solutions (b) 16,880 ANALYTICAL APPLICATION SOFTWARE 4,000,000 Aspect Communications (b)(c) 15,480 CALL CENTER SOFTWARE 4,534,000 Actuate (b)(c) 12,605 INFORMATION DELIVERY SOFTWARE & SOLUTIONS 5,000,000 Indus International (b)(c) 10,045 ENTERPRISE ASSET MANAGEMENT SOFTWARE 500,000 SPSS (b) 8,370 STATISTICAL ANALYSIS SOFTWARE NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- 1,500,000 Witness Systems (b)(c) $ 7,755 CUSTOMER EXPERIENCE MANAGEMENT SOFTWARE 1,000,000 Radiant Systems (b) 6,740 POINT OF SALE SYSTEMS FOR CONVENIENCE STORES 1,200,000 ScanSoft (b) 6,516 SOFTWARE TO INCORPORATE SPEECH & IMAGES TO TEXT 3,300,000 BSQUARE (b)(c) 2,706 SOFTWARE TO HELP DESIGN MOBILE DEVICES 1,400,000 ClickSoftware Technologies (b)(c) 2,520 SERVICE CHAIN OPTIMIZATION SOFTWARE 70,000 Group 1 Software (b) 1,293 ADDRESS VERIFICATION SOFTWARE ---------------------------------------------------------------------------- 473,490 >CONSUMER SOFTWARE: 0.7% 2,000,000 THQ (b)(c) 36,000 ENTERTAINMENT SOFTWARE 1,500,000 Activision (b) 19,380 ENTERTAINMENT SOFTWARE ---------------------------------------------------------------------------- 55,380 >COMPUTER SERVICES: 1.0% 3,469,000 Ciber (b)(c) 24,352 SOFTWARE SERVICES & STAFFING 4,350,000 Igate Corp. (b)(c) 15,094 TECHNOLOGY STAFFING SERVICES 4,600,000 AnswerThink Consulting (b)(c) 8,878 IT INTEGRATOR FOR FORTUNE 2000 560,000 American Management Systems (b) 7,997 SOFTWARE DEVELOPMENT SERVICES 2,300,000 Analysts International (b)(c) 5,732 TECHNOLOGY STAFFING SERVICES 500,000 Pomeroy Computer Resources 5,530 NETWORK INTEGRATION SERVICES 600,000 Torex (United Kingdom) 4,959 APPLICATION SOFTWARE FOR HOSPITAL MANAGEMENT & RETAIL 800,000 New Horizons Worldwide (b)(c) 3,424 COMPUTER TRAINING SERVICES ---------------------------------------------------------------------------- 75,966 >BUSINESS INFORMATION/MARKETING SERVICES/PUBLISHING: 1.9% 1,200,000 Getty Images (b) 49,560 PHOTOGRAPHS FOR PUBLICATIONS & ELECTRONIC MEDIA 2,236,000 Navigant Consulting (b)(c) 26,497 CONSULTING FIRM 2,685,000 InfoUSA (b)(c) 21,748 BUSINESS DATA FOR SALES LEADS 800,000 Information Holdings (b) 14,600 PATENT & OTHER BUSINESS INFORMATION 1,000,000 Moore - Wallace (Canada) (b) 14,523 COMMERCIAL PRINTING 300,000 Proquest (b) 7,740 INFORMATION SERVICES FOR EDUCATION & AUTOMOTIVE MARKETS 1,700,000 PRIMEDIA (b) 5,185 SPECIALTY MAGAZINES & OTHER PUBLICATIONS 139,000 Administaff (b) 1,432 PROFESSIONAL EMPLOYER ORGANIZATION ---------------------------------------------------------------------------- 141,285 22 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >INTERNET: 1.1% 9,900,000 Skillsoft Publishing (b)(c) $ 49,995 INTEGRATED E-LEARNING SOLUTIONS 2,500,000 RSA Security (b) 26,875 ENTERPRISE SECURITY SOFTWARE 1,200,000 RealNetworks (b) 8,136 STREAMING SOFTWARE & CONTENT 1,341,618 Vital Stream, Cl. C (b) 335 538,190 Vital Stream, Cl. B (b) 128 STREAMING SERVICES FOR THE INTERNET 250,000 NeoPlanet, Series A (b) 29 53,376 NeoPlanet, Series B (b) 11 WEB BROWSER 263,158 Bigfoot International, Series A (b) -- INTERNET DIRECT MARKETING ---------------------------------------------------------------------------- 85,509 >ELECTRONICS DISTRIBUTION: 0.7% 1,695,000 Avnet (b) 21,493 ELECTRONIC COMPONENTS DISTRIBUTION 780,000 Tech Data (b) 20,834 VAR FOR IT PRODUCTS 1,410,000 Pioneer-Standard Electronics 11,957 ELECTRONIC COMPONENTS DISTRIBUTION ---------------------------------------------------------------------------- 54,284 >TRANSACTION PROCESSORS: 1.4% 1,487,000 Global Payments 52,788 CREDIT CARD PROCESSOR 275,000 Deutsche Boerse (Germany) 14,592 TRADING, CLEARING & SETTLEMENT SERVICES FOR FINANCIAL MARKETS 575,000 Euronext (France) 14,279 TRADING SERVICES FOR FINANCIAL MARKETS 600,000 Cubic 13,332 REVENUE COLLECTION & DEFENSE SYSTEMS 5,000,000 Hong Kong Exchanges & Clearing (Hong Kong) 7,245 TRADING, CLEARING & SETTLEMENT SERVICES FOR FINANCIAL MARKETS 405,100 Euronet Worldwide (b) 4,379 ATM PROCESSOR ---------------------------------------------------------------------------- 106,615 ---------- INFORMATION: TOTAL 2,024,850 ---------------------------------------------------------------------------- HEALTH CARE: 10.1% >BIOTECHNOLOGY/DRUG DELIVERY: 2.7% 519,000 Martek Biosciences (b) 22,286 FATTY ACIDS FOR BABY FORMULA & OTHER FOODS 1,035,000 Perbio Science (Sweden) 19,288 CONSUMABLES TO BIOTECH/PHARMACEUTICAL INDUSTRIES 2,055,000 Nektar Therapeutics (b) 18,968 PULMONARY DRUG DELIVERY 1,708,000 Ciphergen Biosystems (b)(c) 17,507 PROTEIN CHIPS USED FOR DRUG TARGET DISCOVERY 1,115,000 Enzon (b) 13,960 POLYMER DELIVERY TECHNOLOGY FOR IMPROVED DRUGS NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- 2,000,000 Medarex (b) $ 13,180 HUMANIZED ANTIBODIES 426,000 NPS Pharmaceuticals (b) 10,369 SMALL MOLECULE DRUGS 900,000 Applera-Celera Genomics (b) 9,288 DIAGNOSTICS & DRUG DEVELOPMENT 608,000 Protein Design Labs (b) 8,500 COMPUTER DESIGNED MONOCLONAL ANTIBODIES 1,982,000 Aclara Biosciences (b)(c) 8,384 MICROFLUIDIC SYSTEMS FOR DRUG DEVELOPMENT 2,800,000 Sequenom (b)(c) 7,616 HIGH SPEED DNA ANALYSIS INSTRUMENTS 1,875,000 Locus Discovery, Series D, Pfd. (b) 7,500 HIGH THROUGHPUT RATIONAL DRUG DESIGN 635,000 Maxygen (b) 6,966 MOLECULAR BREEDING 638,000 Diversa (b) 6,272 MOLECULAR BREEDING 389,000 Atherogenic (b) 5,808 DRUGS FOR ATHEROSCLEROSIS, RHEUMATOID ARTHRITIS, ASTHMA 865,000 Arena Pharmaceuticals (b) 5,744 NOVEL DRUG TARGETING TECHNOLOGY 304,000 Alexion Pharmaceuticals (b) 5,183 MONOCLONAL ANTIBODIES 1,600,000 Sangamo Biosciences (b)(c) 4,560 DRUG DISCOVERY 1,258,000 Corvas International (b) 3,397 RATIONAL DRUG DESIGN 528,000 Pharmacyclics (b) 2,503 LIGHT ACTIVATED DRUGS FOR CANCER & VASCULAR DISEASES 160,000 Myriad Genetics (b) 2,178 GENE DISCOVERY & DIAGNOSTIC PRODUCTS 1,249,999 Perlegen Sciences (b) 1,950 LARGE SCALE GENE SEQUENCING 320,000 Incyte Genomics (b) 1,485 BIOINFORMATICS & DRUG DEVELOPMENT 316,000 Guilford Pharmaceuticals (b) 1,435 DRUG DELIVERY & NEUROLOGY DRUGS 210,000 Gene Logic (b) 1,254 GENE EXPRESSION DATABASE 461,000 SYRRX, Series C (b) 1,042 X-RAY CRYSTALLOGRAPHY 325,000 Genzyme Molecular Oncology Division (b) 764 GENE EXPRESSION TECHNOLOGY & CANCER DRUGS 359,944 Microdose (b) 22 DRUG INHALERS ---------------------------------------------------------------------------- 207,409 >MEDICAL EQUIPMENT/LABORATORY SUPPLIES: 2.7% 1,554,000 Edwards Lifesciences (b) 49,946 HEART VALVES 920,000 Diagnostic Products 37,766 IMMUNODIAGNOSTIC KITS 583,000 Orthofix International (b) 19,087 BONE FIXATION & STIMULATION DEVICES 23 LIBERTY ACORN FUND >STATEMENT OF INVESTMENTS (UNAUDITED), CONTINUED NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >MEDICAL EQUIPMENT/LABORATORY SUPPLIES--CONTINUED 875,000 Viasys Healthcare (b) $ 18,113 RESPIRATORY & NEUROLOGY MEDICAL EQUIPMENT 20,000 Synthes-Stratec (Switzerland) 14,398 PRODUCTS FOR ORTHOPEDIC SURGERY 770,000 Visx (b) 13,360 LASER EYE SURGERY EQUIPMENT 2,000,000 Smith & Nephew (United Kingdom) 11,512 MEDICAL EQUIPMENT & SUPPLIES 265,000 Essilor International (France) 10,693 EYEGLASS LENSES 600,000 Sola International (b) 10,440 SPECIALTY EYEGLASS LENSES 1,495,000 Novoste (b)(c) 8,970 RADIATION CATHETERS FOR IN-STENT RESTENOSIS 350,000 Haemonetics (b) 6,545 BLOOD & PLASMA COLLECTION EQUIPMENT ---------------------------------------------------------------------------- 200,830 >PHARMACEUTICALS: 0.1% 131,264 Yuhan (South Korea) 6,231 ETHICAL DRUG PRODUCER ---------------------------------------------------------------------------- >HOSPITAL MANAGEMENT: 0.2% 385,000 Rhoen-Klinikum (Germany) 14,946 HOSPITAL MANAGEMENT ---------------------------------------------------------------------------- >MEDICAL SUPPLIES: 0.5% 686,000 Techne (b) 20,813 CYTOKINES, ANTIBODIES, OTHER REAGENTS FOR LIFE SCIENCES 650,000 Owens & Minor 14,527 DISTRIBUTION OF MEDICAL SUPPLIES ---------------------------------------------------------------------------- 35,340 >SERVICES: 3.9% 4,296,000 First Health Group (b) 118,570 PPO NETWORK 2,491,000 Lincare Holdings (b) 78,491 HOME HEALTH CARE SERVICES 2,542,000 NDCHealth Group (c) 46,646 HEALTH CLAIMS PROCESSING & DRUG MARKETING SERVICES 1,333,000 Dendrite International (b) 17,169 SOFTWARE FOR PHARMACEUTICAL SALES FORCE 300,000 OPG Groep (Netherlands) 9,134 PHARMACEUTICAL WHOLESALER & RETAILER 440,000 Medquist (b) 8,906 MEDICAL TRANSCRIPTION SERVICES 281,000 Omega Pharma (Belgium) 8,565 OTC PRODUCTS, PHARMACY & DENTAL SUPPLIES 550,000 Serologicals (b) 7,497 BLOOD COLLECTION & ANTIBODY PRODUCTION 700,000 Nestor Healthcare (United Kingdom) 3,221 HEALTHCARE STAFFING COMPANY ---------------------------------------------------------------------------- 298,199 ---------- HEALTH CARE: TOTAL 762,955 ---------------------------------------------------------------------------- NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- CONSUMER GOODS/SERVICES: 19.6% GOODS LEISURE VEHICLES: 1.5% 1,745,000 Harley-Davidson $ 69,556 MOTORCYCLES & RELATED MERCHANDISE 1,495,000 Monaco Coach (b)(c) 22,918 RECREATIONAL VEHICLES 275,000 Polaris Industries 16,885 MANUFACTURER OF LEISURE VEHICLES & RELATED PRODUCTS 2,850,000 Ducati Motor (Italy) (b) 4,294 MOTORCYCLES & RELATED MERCHANDISE ---------------------------------------------------------------------------- 113,653 >FURNITURE/TEXTILES: 1.8% 740,000 Mohawk Industries (b) 41,092 CARPET & FLOORING 1,275,000 Hon Industries 38,887 OFFICE FURNITURE & FIREPLACES 1,900,000 Herman Miller 38,399 OFFICE FURNITURE 510,000 Furniture Brands International (b) 13,311 FURNITURE 550,000 Nobia (Sweden) 4,127 KITCHEN INTERIORS MANUFACTURING & DISTRIBUTION ---------------------------------------------------------------------------- 135,816 >FOOD & BEVERAGES: 0.7% 1,600,000 Kerry Group (Ireland) 24,772 FOOD INGREDIENTS 3,500,000 Parmalat Finanziaria (Italy) 11,031 DAIRY PRODUCER 3,000,000 Lion Nathan (Australia) 10,797 BEER BREWER/DISTRIBUTOR 440,000 Orkla (Norway) 7,624 DIVERSIFIED CONSUMER GOODS ---------------------------------------------------------------------------- 54,224 >NONDURABLES: 1.2% 795,000 Scotts Company (b) 39,352 CONSUMER LAWN & GARDEN PRODUCTS 2,300,000 Helen of Troy (b)(c) 34,868 HAIRDRYERS & CURLING IRONS 255,000 Uni-Charm (Japan) 11,042 INFANT HYGIENE & FEMININE CARE PRODUCTS 601,000 First Years (c) 7,320 INFANT & TODDLER PRODUCTS ---------------------------------------------------------------------------- 92,582 >DURABLE GOODS: 1.2% 1,007,000 SCP Pool (b) 34,641 DISTRIBUTOR OF SWIMMING POOL SUPPLIES 605,000 Hunter Douglas (Netherlands) 20,181 DECORATIVE WINDOW COVERINGS 375,000 American Woodmark 17,460 KITCHEN CABINET 575,000 Hyundai Mobis (South Korea) 14,754 AUTO PARTS ---------------------------------------------------------------------------- 87,036 24 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >APPAREL: 2.3% 1,420,000 Coach (b) $ 70,631 DESIGNER & RETAILER OF BRANDED LEATHER ACCESSORIES 1,370,000 Jones Apparel (b) 40,086 WOMEN'S APPAREL 828,000 Steven Madden (b)(c) 18,084 WHOLESALER/RETAILER OF FASHION FOOTWEAR 965,000 Nautica Enterprises (b) 12,381 CASUAL APPAREL 265,000 Oxford Industries 11,003 BRANDED & PRIVATE LABEL APPAREL 200,000 Columbia Sportswear (b) 10,282 ACTIVE OUTDOOR APPAREL, FOOTWEAR & ACCESSORIES 1,950,000 Billabong International (Australia) 8,039 SURFWEAR APPAREL MANUFACTURER ---------------------------------------------------------------------------- 170,506 SERVICES >RETAIL: 5.1% 2,132,000 Christopher & Banks (b)(c) 78,863 WOMEN'S APPAREL RETAILER 1,600,000 Michaels Stores 60,896 CRAFT & HOBBY SPECIALTY RETAILER 2,095,000 Chico's Fas (b) 44,100 WOMEN'S SPECIALTY RETAIL 1,400,000 Borders Group (b) 24,654 BOOKSTORES 500,000 Whole Foods Market (b) 23,765 NATURAL FOOD SUPERMARKETS 1,005,000 Aeropostale (b) 21,587 MALL BASED TEEN RETAILER 536,000 Zale (b) 21,440 SPECIALTY RETAILER OF JEWELRY 713,000 Hot Topic (b) 19,187 MUSIC INSPIRED RETAILER OF APPAREL, ACCESSORIES & GIFTS 815,000 Petco Animal Supplies (b) 17,718 PET SUPPLIES & SERVICES 450,000 Ann Taylor (b) 13,027 WOMEN'S APPAREL RETAILER 344,000 Urban Outfitters (b) 12,350 ECLECTIC HOME & APPAREL RETAILER 425,000 Abercrombie & Fitch (b) 12,074 TEEN APPAREL RETAILER 500,000 Pier 1 Imports 10,200 IMPORTED FURNITURE & TCHOTCHKES 3,100,000 The Warehouse Group (New Zealand) 9,422 WAREHOUSE CLUB 395,000 Genesco (b) 6,991 MULTI-CONCEPT BRANDED FOOTWEAR RETAILER 750,000 Gadzooks (b)(c) 4,260 TEEN APPAREL RETAILER 700,000 Gaiam (b) 4,165 HEALTHY LIVING CATALOG & E-COMMERCE ---------------------------------------------------------------------------- 384,699 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >TRAVEL: 0.9% 2,024,500 Intrawest (Canada) $ 26,535 OWNER/OPERATOR OF SKI RESORTS 3,380,000 LaQuinta (b) 14,568 OWNER/FRANCHISER OF MID-PRICED HOTELS 950,000 Vail Resorts (b) 12,796 OWNER/OPERATOR OF SKI RESORTS 725,000 Navigant International (b)(c) 9,352 CORPORATE TRAVEL AGENCY 620,000 Jurys Doyle Hotel (Ireland) 6,012 HOTEL GROUP ---------------------------------------------------------------------------- 69,263 >CONSUMER SERVICES: 1.6% 2,200,000 ITT Educational Services (b) 64,350 POST-SECONDARY DEGREE PROGRAMS 2,350,000 Bally Total Fitness (b)(c) 21,220 NATIONAL CHAIN OF FITNESS CENTERS 260,000 USS (Japan) 13,190 USED CAR AUCTIONEER 250,000 Weight Watchers (b) 11,373 WEIGHT LOSS PROGRAM 1,750,000 Princeton Review (b)(c) 10,325 COLLEGE PREPARATION COURSES ---------------------------------------------------------------------------- 120,458 >ENTERTAINMENT/LEISURE PRODUCTS: 1.2% 805,000 International Speedway Motors 31,806 LARGEST MOTORSPORT RACETRACK OWNER & OPERATOR 1,276,000 Action Performance (c) 24,244 MOTORSPORT COLLECTIBLES & MERCHANDISING 2,765,000 Six Flags 18,747 WORLDWIDE THEME PARK OPERATOR 363,000 Speedway Motors 9,728 MOTORSPORT RACETRACK OWNER & OPERATOR 1,750,000 Magna Entertainment, Cl. A (Canada) (b) 8,750 OWNER/OPERATOR THOROUGHBRED RACETRACKS ---------------------------------------------------------------------------- 93,275 >CASINOS: 1.4% 2,010,000 Alliance Gaming (b) 38,009 DIVERSIFIED GAMING COMPANY 890,000 Station Casinos 22,473 CASINOS & RIVERBOATS 875,000 Argosy Gaming (b) 18,296 REGIONAL RIVERBOAT CASINOS 1,925,000 Pinnacle Entertainment (b)(c) 13,090 REGIONAL RIVERBOAT CASINOS 1,500,000 Sky City Entertainment (New Zealand) 8,300 CASINO/ENTERTAINMENT COMPLEX 635,000 Monarch Casino & Resort (b)(c) 5,918 CASINO/HOTEL IN RENO 113,000 Lakes Entertainment (b) 903 GAMING ENTREPRENEUR ---------------------------------------------------------------------------- 106,989 25 LIBERTY ACORN FUND >STATEMENT OF INVESTMENTS (UNAUDITED), CONTINUED NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >RESTAURANTS: 0.3% 1,217,000 Autogrill (Italy) $ 13,299 RESTAURANTS & CATERING FOR TRAVELERS 243,000 Cheesecake Factory (b) 8,721 CASUAL DINING RESTAURANT ---------------------------------------------------------------------------- 22,020 >CRUISE LINES: 0.4% 1,260,000 Steiner Leisure (b)(c) 18,396 SPAS & HAIR/SKIN PRODUCTS ON CRUISE SHIPS 400,000 Carnival 13,004 LARGEST CRUISE LINE ---------------------------------------------------------------------------- 31,400 ---------- CONSUMER GOODS/SERVICES: TOTAL 1,481,921 ---------------------------------------------------------------------------- FINANCE: 13.2% >BANKS: 4.2% 1,551,000 TCF Financial 61,792 GREAT LAKES BANK 1,608,000 Associated Banc-Corp 59,303 MIDWEST BANK 990,000 Texas Regional Bancshares 34,353 SOUTH TEXAS BANK 1,122,000 Glacier Bancorp (c) 27,624 MOUNTAIN STATES BANK 2,900,000 Anglo Irish Bank (Ireland) 25,685 CORPORATE LENDING: PRIVATE BANKING 1,634,000 Republic 21,928 MICHIGAN BANK 605,000 Chittenden 16,547 VERMONT & WESTERN MASSACHUSETTS BANK 440,000 Hawthorne Financial (b)(c) 15,250 REAL ESTATE LENDER 412,000 Pacific Northwest Bancorp 14,321 PACIFIC NW BUSINESS BANK 356,000 Bank of Bermuda 12,456 OFFSHORE BANK 297,000 BOK Financial (b) 11,455 OKLAHOMA BANK 125,000 Depfa Bank (Ireland) 9,741 INTERNATIONAL PUBLIC SECTOR FINANCE 249,000 West Coast Bancorp 4,532 PORTLAND SMALL BUSINESS LENDER 170,000 Midwest Bank 3,301 CHICAGO BANK 102,000 Integra Bank 1,755 INDIANA BANK ---------------------------------------------------------------------------- 320,043 >SAVINGS & LOANS: 2.3% 2,184,000 Peoples Bank Bridgeport 63,314 CONNECTICUT SAVINGS & LOAN 807,000 Downey Financial 33,329 CALIFORNIA HOME LENDER 1,228,000 Anchor Bancorp Wisconsin (c) 29,337 WISCONSIN THRIFT NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- 497,000 Quaker City Bancorp (c) $ 20,402 LA REAL ESTATE LENDER 1,700,000 Housing Development Finance (India) 15,007 MORTGAGE LOAN PROVIDER IN INDIA 700,000 First Federal Capital 13,895 WISCONSIN THRIFT ---------------------------------------------------------------------------- 175,284 >INSURANCE: 3.5% 1,320,000 HCC Insurance Holdings 39,032 AVIATION INSURANCE 138,000 Markel (b) 35,328 SPECIALTY INSURANCE 870,000 Philadelphia Consolidated Holding (b) 35,148 SPECIALTY INSURANCE 1,000,000 RLI 32,900 SPECIALTY INSURANCE 826,000 Leucadia National 30,661 INSURANCE HOLDING COMPANY 995,000 Protective Life 26,616 LIFE INSURANCE 700,000 Harleysville Group 16,114 COMMERCIAL & PERSONAL LINES INSURANCE 650,000 Scottish Annuity & Life 13,136 LIFE REINSURER 210,000 StanCorp Financial 10,966 GROUP LIFE, DISABILITY & 401K 800,000 Ohio Casualty (b) 10,544 COMMERCIAL & PERSONAL LINES INSURANCE 308,000 Selective Insurance Group 7,715 COMMERCIAL & PERSONAL LINES INSURANCE 455,000 Northbridge Financial (Canada) (b) 6,393 PROPERTY & CASUALTY INSURANCE ---------------------------------------------------------------------------- 264,553 >MONEY MANAGEMENT: 2.0% 2,230,000 SEI Investments 71,360 MUTUAL FUND ADMINISTRATION & INVESTMENT MANAGEMENT 1,100,000 Neuberger Berman 43,901 ASSET MANAGER FOR HIGH NET WORTH 855,000 Eaton Vance 27,018 SPECIALTY MUTUAL FUNDS 123,000 Affiliated Managers Group (b) 7,497 ASSET MANAGEMENT HOLDING COMPANY 1,360,000 Edinburgh Fund Managers (United Kingdom) 1,619 INVESTMENT MANAGEMENT 200,000 The Investment Company of China (China) (b) 409 CLOSED-END FUND ---------------------------------------------------------------------------- 151,804 >BROKERAGE: 0.1% 200,000 Investment Technology Group (b) 3,720 ELECTRONIC TRADING ---------------------------------------------------------------------------- 26 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >FINANCE COMPANIES: 1.1% 5,531,000 AmeriCredit (b) $ 47,290 AUTO LENDING 1,820,000 World Acceptance (b)(c) 29,630 PERSONAL LOANS 900,000 DVI Health Services (b)(c) 4,203 LEASES BIG MEDICAL EQUIPMENT 90,000 Intermediate Capital (United Kingdom) 1,446 EUROPEAN PROVIDER OF MEZZANINE CAPITAL ---------------------------------------------------------------------------- 82,569 ---------- FINANCE: TOTAL 997,973 ---------------------------------------------------------------------------- INDUSTRIAL GOODS/SERVICES: 11.8% >STEEL: 0.7% 1,300,000 Gibraltar Steel (c) 26,624 STEEL PROCESSING 1,050,000 Worthington Industries 14,070 STEEL PROCESSING 450,000 Tenaris (Luxembourg) (b) 11,475 STEEL PIPE FOR OIL WELLS & PIPELINES 370,000 Atchison Casting (b) 85 STEEL FOUNDRIES ---------------------------------------------------------------------------- 52,254 >INDUSTRIAL GOODS: 1.5% 1,400,000 Clarcor (c) 53,970 MOBILE & INDUSTRIAL FILTERS 750,000 Donaldson 33,337 INDUSTRIAL AIR FILTRATION 268,000 Mine Safety Appliances 11,690 SAFETY EQUIPMENT 363,000 Intermagnetics General (b) 7,202 SUPERCONDUCTING WIRE 65,000 Bacou Dalloz (France) 6,378 SAFETY EQUIPMENT ---------------------------------------------------------------------------- 112,577 >INDUSTRIAL DISTRIBUTION: 0.8% 600,000 Hughes Supply 20,820 INDUSTRIAL DISTRIBUTION 1,000,000 Watsco 16,560 HVAC DISTRIBUTION 2,900,000 Grafton Group (Ireland) 12,843 BUILDERS, WHOLESALERS & DIY RETAILING 900,000 NuCo2 (b)(c) 8,469 BULK CO2 GAS DISTRIBUTION TO RESTAURANTS ---------------------------------------------------------------------------- 58,692 >CONSTRUCTION: 0.8% 488,000 Simpson (b) 17,861 WALL JOINT MAKER 425,000 Florida Rock Industries 17,544 CONCRETE & AGGREGATES 380,000 Daito Trust Construction (Japan) 8,006 APARTMENT BUILDER 750,000 McCarthy & Stone (United Kingdom) 6,087 BUILDER OF RETIREMENT APARTMENTS 3,000,000 Consorcio (Mexico) (b) 5,957 LOW/MEDIUM INCOME HOUSE BUILDER NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- 395,000 Northwest Pipe Company (b)(c) $ 5,605 WATER TRANSMISSION PIPE ---------------------------------------------------------------------------- 61,060 >SPECIALTY CHEMICALS & INDUSTRIAL MATERIALS: 1.2% 1,850,000 Spartech (c) 39,239 PLASTICS DISTRIBUTION & COMPOUNDING 983,000 Schulman 15,787 PLASTICS DISTRIBUTION & COMPOUNDING 37,000 Givaudan (Switzerland) 15,604 INDUSTRIAL FRAGRANCES & FLAVORS 32,000 Geberit International (Switzerland) 9,873 PLUMBING SUPPLIES 266,600 Novozymes (Denmark) 7,428 INDUSTRIAL ENZYMES 347,000 SYMYX (b) 5,663 MATERIALS & CHEMICALS ---------------------------------------------------------------------------- 93,594 >MACHINERY: 1.1% 950,000 Esco Technologies (b)(c) 41,800 FILTRATION & TEST EQUIPMENT 1,025,000 Ametek 37,566 AEROSPACE/INDUSTRIAL INSTRUMENTS 51,000 Tennant 1,875 NON-RESIDENTIAL FLOOR CLEANING EQUIPMENT ---------------------------------------------------------------------------- 81,241 >OUTSOURCING SERVICES & TRAINING: 0.4% 2,400,000 Labor Ready (b)(c) 17,208 TEMPORARY MANUAL LABOR 9,500,000 Li & Fung (Hong Kong) 12,243 SOURCING OF CONSUMER GOODS 600,000 GP Strategies (b)(c) 3,648 TRAINING PROGRAMS ---------------------------------------------------------------------------- 33,099 >CONGLOMERATES: 0.1% 5,550 Pargesa (Switzerland) 11,337 INDUSTRIAL & MEDIA CONGLOMERATE ---------------------------------------------------------------------------- >INDUSTRIAL SUPPLIERS: 0.2% 2,220,000 Xstrata (United Kingdom) 14,769 DIVERSIFIED MINING HOLDING COMPANY ---------------------------------------------------------------------------- >LOGISTICS: 2.6% 2,900,000 Expeditors International of Washington 100,456 INTERNATIONAL FREIGHT FORWARDER 900,000 UTI Worldwide 28,071 INTERNATIONAL FREIGHT FORWARDER 1,000,000 Forward Air (b) 25,370 FREIGHT TRANSPORTATION BETWEEN AIRPORTS 1,400,000 Exel (United Kingdom) 14,393 GLOBAL LOGISTICS & FREIGHT FORWARDING 11,000,000 Sembcorp Logistics (Singapore) 11,745 LOGISTIC SERVICES FOR MARINE TRANSPORT 40,000,000 Sinotrans (China) (b) 11,285 INTEGRATED LOGISTICS IN CHINA 27 LIBERTY ACORN FUND >STATEMENT OF INVESTMENTS (UNAUDITED), CONTINUED NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >LOGISTICS--CONTINUED 759,000 Hub Group (b)(c) $ 6,664 TRUCK & RAIL FREIGHT FORWARDER ---------------------------------------------------------------------------- 197,984 >WATER: 1.4% 2,400,000 Tetra Tech (b) 41,112 RESOURCE MANAGEMENT & INFRASTRUCTURE CONSULTING 855,000 Cuno (b)(c) 30,883 FILTRATION & FLUIDS CLARIFICATION 730,000 Pall 16,425 FILTRATION & FLUIDS CLARIFICATION 900,000 Insituform Technologies (b) 15,912 WATER/SEWER PIPE REPAIR ---------------------------------------------------------------------------- 104,332 >OTHER INDUSTRIAL SERVICES: 1.0% 725,000 G&K Services 21,460 UNIFORM RENTAL 1,500,000 Clark (b)(c) 17,925 EXECUTIVE COMPENSATION & BENEFITS CONSULTING 825,000 Mobile Mini (b)(c) 13,472 LEASES PORTABLE STORAGE UNITS 605,000 Zardoya Otis (Spain) 9,116 605,000 Zardoya Otis Bonus Rights (Spain) 905 ELEVATOR MANUFACTURER & SERVICE PROVIDER 290,000 Munters (Sweden) 6,311 MOISTURE & HUMIDITY CONTROL 31,000 Schindler (Switzerland) 5,000 ELEVATOR MANUFACTURER & SERVICE PROVIDER ---------------------------------------------------------------------------- 74,189 ---------- INDUSTRIAL GOODS/SERVICES: TOTAL 895,128 ---------------------------------------------------------------------------- ENERGY/MINERALS: 7.0% >INDEPENDENT POWER: 0.2% 570,000 Gamesa (Spain) 12,752 SPANISH WIND TURBINES 720,000 Millennium Cell (b) 1,310 FUEL CELL TECHNOLOGY ---------------------------------------------------------------------------- 14,062 >OIL/GAS PRODUCERS: 3.9% 6,300,000 XTO Energy 126,693 NATURAL GAS PRODUCER 730,000 Evergreen Resources (b) 39,646 COAL SEAM GAS PRODUCER 1,000,000 Western Gas 39,600 OIL PRODUCER & COAL SEAM GAS PRODUCER 2,550,000 Ultra Petroleum (b) 32,921 NATURAL GAS PRODUCER 1,200,000 Southwestern Energy (b) 18,012 NATURAL GAS PRODUCER 365,000 Talisman Energy (Canada) 16,557 OIL & GAS PRODUCER 342,000 Westport Resources (b) 7,781 OIL & GAS PRODUCER 2,265,000 Tipperary (b)(c) 5,889 COAL SEAM GAS PRODUCER 450,000 McMoran Exploration (b) 5,013 NATURAL GAS PRODUCERS & LNG DEVELOPER NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- 3,000,000 Tullow Oil (United Kingdom) (b) $ 3,915 OIL & GAS PRODUCER 135,000 Quicksilver (b) 3,233 NATURAL GAS & COAL SEAM GAS PRODUCER ---------------------------------------------------------------------------- 299,260 >DISTRIBUTION/MARKETING/REFINING: 1.1% 1,400,000 Equitable Resources 57,036 NATURAL GAS UTILITY & PRODUCER 761,000 Atmos Energy 18,873 NATURAL GAS UTILITY 1,270,000 Aquila (b) 7,861 ELECTRIC UTILITY HOLDING COMPANY ---------------------------------------------------------------------------- 83,770 >OIL SERVICES: 1.8% 1,400,000 FMC Technologies (b) 29,470 OIL & GAS WELL HEAD MANUFACTURER 4,500,000 Newpark Resources (b)(c) 24,660 DRILLING FLUID SERVICES TO OIL & GAS INDUSTRY 650,000 Carbo Ceramics 24,212 NATURAL GAS WELL STIMULANTS 3,000,000 Saipem (Italy) 22,499 OFFSHORE CONSTRUCTION & DRILLING 1,300,000 Key Energy Services (b) 13,936 OIL & GAS WELL WORKOVER SERVICES 850,000 Enerflex Systems (Canada) 10,219 NATURAL GAS COMPRESSOR 900,000 Hanover Compressor (b) 10,170 NATURAL GAS COMPRESSOR RENTAL ---------------------------------------------------------------------------- 135,166 ---------- ENERGY/MINERALS: TOTAL 532,258 ---------------------------------------------------------------------------- OTHER INDUSTRIES: 5.5% >REAL ESTATE: 4.9% 1,160,000 The Rouse Company 44,196 REGIONAL SHOPPING MALLS 615,000 General Growth Properties 38,401 REGIONAL SHOPPING MALLS 875,000 SL Green Realty 30,529 MANHATTAN OFFICE BUILDINGS 699,000 Forest City Enterprises, Cl. B 29,113 COMMERCIAL & RESIDENTIAL PROPERTY DEVELOPER 800,000 Macerich Company 28,104 REGIONAL SHOPPING MALLS 700,000 Manufactured Home Communities 24,577 MANUFACTURED HOME COMMUNITIES 725,000 Mills 24,324 REGIONAL SHOPPING MALLS 1,375,000 Crescent Real Estate Equities 22,839 CLASS A OFFICE BUILDINGS 690,000 Federal Realty Investment Trust 22,080 SHOPPING CENTERS 975,000 Glimcher Realty Trust 21,840 REGIONAL SHOPPING MALLS 400,000 Chelsea Properties Group 16,124 OUTLET MALLS 540,000 AMB Property 15,212 INDUSTRIAL PROPERTIES 28 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >REAL ESTATE--CONTINUED 700,000 Keystone Property Trust $ 12,957 INDUSTRIAL PROPERTIES 200,000 Essex Property Trust 11,450 WEST COAST APARTMENTS 650,000 United Dominion Realty 11,193 APARTMENTS 574,000 LaSalle Hotel Properties 8,484 UPSCALE/FULL SERVICE HOTELS 348,805 Security Capital European Realty (Luxembourg) (b) 5,058 REAL ESTATE INVESTMENTS 190,000 Consolidated Tomoka 4,773 16,000 ACRES OF FLORIDA LAND ---------------------------------------------------------------------------- 371,254 >TRANSPORTATION: 0.2% 100,000 Kobenhavns Lufthavne (Denmark) 8,125 COPENHAGEN AIRPORT AUTHORITY 15,000,000 Comfort Group (Singapore) (b) 6,858 TAXI SERVICE ---------------------------------------------------------------------------- 14,983 >REGULATED UTILITIES: 0.4% 1,200,000 Unisource Energy 22,560 ELECTRIC UTILITY IN ARIZONA 829,800 Red Electrica (Spain) 10,881 SPANISH POWER GRID ---------------------------------------------------------------------------- 33,441 ---------- OTHER INDUSTRIES: TOTAL 419,678 TOTAL COMMON STOCKS AND OTHER ---------- EQUITY-LIKE SECURITIES: 94.0% 7,114,763 (COST: $5,302,050) PRINCIPAL AMOUNT (000) VALUE (000) ---------------------------------------------------------------------------- SHORT-TERM OBLIGATIONS: 5.8% Yield 0.87%: 1.20% Due 7/01/03 - 8/07/03 $ 70,000 American General Finance $ 69,984 70,000 Campbell Soup 69,969 50,000 Bayer 49,999 45,000 Citigroup 44,987 25,000 Citicorp 24,999 25,000 Marshall & Ilsley 24,995 25,000 Coca Cola 24,994 24,710 Sara Lee 24,698 20,000 Prudential Funding 19,996 20,000 General Electric Capital Services 19,995 16,968 Baxter International 16,964 15,600 John Hancock Financial 15,596 15,000 Virginia Electric & Power 14,992 10,000 US Treasury Bill 9,991 4,902 Repurchase agreement with State Street Bank & Trust Co., dated 6/30/03, due 7/01/03 at 1.10%, collateralized by Federal Home Loan Mortgage Notes maturing 1/28/05, market value $5,001 (repurchase proceeds: $4,902) 4,902 ---------------------------------------------------------------------------- (AMORTIZED COST: $437,061) 437,061 ---------- TOTAL INVESTMENTS: 99.8% 7,551,824 (COST: $5,739,111) (a) CASH AND OTHER ASSETS LESS LIABILITIES: 0.2% 12,926 ---------- TOTAL NET ASSETS: 100% $7,564,750 ============================================================================ 29 LIBERTY ACORN FUND >STATEMENT OF INVESTMENTS (UNAUDITED), CONTINUED ---------------------------------------------------------------------------- >Notes to Statement of Investments (in thousands) (a) At June 30, 2003, for federal income tax purposes cost of investment is $5,739,520 and net unrealized appreciation was $1,812,304, consisting of gross unrealized appreciation of $2,282,814 and gross unrealized depreciation of $470,510. (b) Non-income producing security. (c) On June 30, 2003, the fund held the following percentages of the outstanding voting shares of the companies listed below: World Acceptance 10.19% Sequenom 7.10% AnswerThink Consulting 10.12% Witness Systems 6.85% Hub Group 9.85% E.Piphany 6.83% Skillsoft Publishing 9.94% Spartech 6.80% Indus International 9.71% Monarch Casino & Resort 6.68% MAPICS 9.68% Sangamo Biosciences 6.47% Analysts International 9.50% Princeton Review 6.42% Seachange International 9.28% Ciphergen Biosystems 6.38% Novoste 9.15% Micros Systems 6.06% Systems & Computer Technology 9.07% Northwest Pipe Company 6.03% BSQUARE 8.91% Labor Ready 6.00% Christopher & Banks 8.60% Steven Madden 6.00% Igate Corp. 8.47% Kronos 5.96% NuCo2 8.46% DVI Health Services 5.93% MRO Software 8.33% Newpark Resources 5.78% Gadzooks 8.20% Glacier Bancorp 5.78% Clark 8.06% Tipperary 5.77% Gibraltar Steel 8.05% Mobile Mini 5.77% Quaker City Bancorp 8.02% Aclara Biosciences 5.75% JDA Software 7.72% Avid Technology 5.65% Helen of Troy 7.69% Clarcor 5.62% Steiner Leisure 7.65% ClickSoftware Technologies 5.47% COMARCO 7.58% Ciber 5.42% New Horizons Worldwide 7.57% Navigant Consulting 5.35% Actuate 7.53% Hawthorne Financial 5.28% Pinnacle Entertainment 7.42% InfoUSA 5.24% NDCHealth Group 7.30% THQ 5.23% Aspect Communications 7.28% Monaco Coach 5.15% Bally Total Fitness 7.28% Cuno 5.12% Esco Technologies 7.27% Navigant International 5.08% First Years 7.23% GP Strategies 5.08% Action Performance 7.15% Anchor Bancorp Wisconsin 5.02% Shuffle Master 5.01% The aggregate cost and value of these companies (in thousands) at June 30, 2003, was $1,177 and $1,344, respectively. Investments in affiliate companies represent 0.02% of total net assets at June 30, 2003. Investment activity and income amounts relating to affiliates during the period ended June 30, 2003 were as follows: Dividend Income $ 1,728 Net realized gain or loss $ 8,938 Change in unrealized gain $ 283,647 Purchases $ 98,388 Proceeds from sales $ 94,853 In addition, additional purchases of existing portfolio holdings that were considered affiliates in prior years, resulted in the fund owning more than 5% of the outstanding shares of certain issues at June 30, 2003. Therefore, the cost and market value affiliate disclosure amounts include both acquisitions of new investments in affiliates during the year, as well as prior year investment holdings that became affiliates during the current year. (d) On June 30, 2003, the market value of foreign securities (in thousands) represents 10.34% of total net assets. VALUE PERCENT ======= ======= Canada $99,757 1.32% United Kingdom 87,838 1.16 Ireland 79,053 1.05 Switzerland 56,212 0.74 Italy 51,123 0.68 France 49,731 0.66 Singapore 34,605 0.46 Spain 33,654 0.44 Japan 32,238 0.43 Hong Kong 31,273 0.41 Sweden 29,726 0.39 Germany 29,538 0.39 VALUE PERCENT ======= ======= Netherlands $29,315 0.39% South Korea 20,985 0.28 Australia 18,836 0.25 New Zealand 17,722 0.23 Luxembourg 16,533 0.22 Denmark 15,554 0.20 India 15,007 0.20 China 11,694 0.15 Belgium 8,565 0.11 Norway 7,624 0.10 Mexico 5,957 0.08 --------- ------- Total Foreign Portfolio $782,540 10.34% ========= ======= 30 LIBERTY ACORN INTERNATIONAL >MAJOR PORTFOLIO CHANGES IN THE SECOND QUARTER (UNAUDITED) NUMBER OF SHARES ------------------------------ 03/31/03 06/30/03 Additions ---------------------------------------------------------------------------- EUROPE >NORWAY Ekornes 0 156,000 Tomra Systems 0 1,050,000 >SWEDEN Hexagon 0 212,000 Intrum Justitia 1,505,000 1,730,000 Munters 0 240,000 Nobia 0 550,000 >FRANCE Bonduelle 0 36,000 Euronext 425,000 575,000 >UNITED KINGDOM/IRELAND Anglo Irish Bank (Ireland) 2,200,000 2,300,000 Business Post 85,000 600,000 Depfa Bank (Ireland) 0 125,000 Euro Money Institutional Investor 1,590,000 1,700,000 Expro International 1,600,000 2,500,000 Grafton Group (Ireland) 2,280,000 2,600,000 Hit Entertainment 3,315,000 3,400,000 Jurys Doyle Hotel (Ireland) 0 500,000 Marconi 0 5,375,000 McCarthy & Stone 0 450,000 Nestor Healthcare 1,400,000 1,500,000 RPS Group 4,700,000 5,500,000 Xstrata 700,000 1,550,000 >SWITZERLAND BKW Energie 0 33,500 >ITALY De Longhi 800,000 1,700,000 Parmalat Finanziaria 1,200,000 2,700,000 >SPAIN Abengoa 1,199,500 2,000,000 Prosegur 685,000 757,000 Red Electrica 0 600,000 Telefonica Publicidado Info 1,062,588 1,600,000 >NETHERLANDS Aalberts Industrie 0 409,000 Fugro 220,000 230,476 Hunter Douglas 520,000 545,000 United Services Group 666,000 686,122 Vopak 500,000 800,000 NUMBER OF SHARES ------------------------------ 03/31/03 06/30/03 ---------------------------------------------------------------------------- ASIA >HONG KONG Global Bio-Chem Technology Group 30,000,000 35,000,000 Lianhua Supermarket 0 5,802,000 >JAPAN Toyo Technica 870,000 1,005,000 >INDIA Housing Development Finance 1,700,000 2,000,000 ---------------------------------------------------------------------------- OTHER COUNTRIES >AUSTRALIA/NEW ZEALAND Billabong International 0 2,500,000 Perpetual Trustees 350,000 420,000 The Warehouse Group (New Zealand) 2,500,000 3,500,000 >CANADA Esprit Exploration 0 5,000,000 Shawcor 600,000 700,000 31 LIBERTY ACORN INTERNATIONAL >MAJOR PORTFOLIO CHANGES IN THE SECOND QUARTER (UNAUDITED), CONTINUED NUMBER OF SHARES ------------------------------- 03/31/03 06/30/03 Sales ---------------------------------------------------------------------------- EUROPE >GERMANY Jenoptik 970,000 0 Norddeutsche Affinerie 136,900 0 Rhoen-Klinikum 350,000 335,000 Rhoen-Klinikum Pfd. 435,000 300,000 >NORWAY Orkla 681,000 456,000 >SWEDEN Perbio Science 1,090,000 905,000 >FRANCE/BELGIUM Essilor International 320,000 270,000 Grandvision 327,500 315,000 IPSO 35,453 0 Neopost 600,000 500,000 RTL Group (Belgium) 250,000 100,000 Technip-Coflexip 110,000 0 >UNITED KINGDOM/IRELAND Charles Taylor Consulting 500,000 0 Exel 1,300,000 1,000,000 Serco Group 2,250,000 0 Spectris 2,320,000 1,420,000 SSL International 2,250,000 1,490,900 Waterford Wedgwood (Ireland) 10,180,000 0 >SWITZERLAND Geberit International 50,000 40,000 Kuoni Reisen 23,000 0 >ITALY Autogrill 1,350,000 1,200,000 Permasteelisa 385,000 0 >SPAIN Amadeus Global Travel 1,260,000 0 NH Hoteles 1,000,000 0 Zardoya Otis 640,000 425,000 >NETHERLANDS Hagemeyer 1,185,000 0 IM Tech 670,000 585,000 NUMBER OF SHARES ------------------------------- 03/31/03 06/30/03 ---------------------------------------------------------------------------- ASIA >HONG KONG Aeon Credit Service 5,000,000 0 Jiangsu Express 17,000,000 12,000,000 Techtronic Industries 6,500,000 5,600,000 Tingyi Holding 22,000,000 0 Travelsky Technology 8,500,000 0 Wing Hang Bank 2,000,000 0 Zhejiang Expressway 15,000,000 11,000,000 >JAPAN Fuji Seal 390,000 292,500 (INCLUDES THE EFFECT OF A 2 FOR 1 STOCK SPLIT) Maruichi Steel Tube 730,000 0 Orix 180,000 0 >TAIWAN Advantech 5,850,000 0 Ase Test 2,200,000 1,750,000 >SOUTH KOREA Hyundai Mobis 675,000 575,000 >SINGAPORE Comfort Group 27,065,115 27,000,000 Star Cruises 15,000,000 0 >INDIA Hero Honda Motors 1,500,000 0 OTHER COUNTRIES ---------------------------------------------------------------------------- >AUSTRALIA Goodman Fielder 5,000,000 0 >CANADA Canadian 88 5,000,000 0 Power Financial 600,000 300,000 >SOUTH AFRICA Harmony Gold 700,000 500,000 32 LIBERTY ACORN INTERNATIONAL >STATEMENT OF INVESTMENTS (UNAUDITED), JUNE 30, 2003 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- COMMON STOCKS AND OTHER EQUITY-LIKE SECURITIES: 96.0% ---------------------------------------------------------------------------- EUROPE: 60.4% >GERMANY/AUSTRIA: 7.6% 275,000 Deutsche Boerse $ 14,592 TRADING, CLEARING & SETTLEMENT SERVICES FOR FINANCIAL MARKETS 335,000 Rhoen-Klinikum Pfd. 13,467 300,000 Rhoen-Klinikum 11,646 HOSPITAL MANAGEMENT 500,000 GFK 9,432 MARKET RESEARCH SERVICES 655,000 Software AG 9,049 DATABASE SOFTWARE 240,000 Zapf Creation 8,944 TOY MANUFACTURER 550,000 Hugo Boss Designs 8,136 FASHION APPAREL 200,000 Flughafen Wien (Austria) 7,281 VIENNA AIRPORT AUTHORITY 325,000 Kali & Salz 6,621 POTASH PRODUCTS, FERTILIZERS, SALT & WASTE MANAGEMENT 1,000,000 Takkt 5,211 MAIL ORDER RETAILER OF OFFICE & WAREHOUSE DURABLES 80,000 Henkel 4,961 CHEMICALS, DETERGENTS & NON-FOOD CONSUMER BRANDS 70,000 Beru 4,038 AUTO PARTS & ELECTRONICS 200,000 Lion Bioscience (b) 925 BIOINFORMATICS ---------------------------------------------------------------------------- 104,303 >DENMARK: 0.6% 100,000 Kobenhavns Lufthavne 8,126 COPENHAGEN AIRPORT AUTHORITY ---------------------------------------------------------------------------- >NORWAY: 1.8% 2,190,000 Den Norske Bank 10,808 BANK 456,000 Orkla 7,902 DIVERSIFIED CONSUMER GOODS 1,050,000 Tomra Systems 4,512 REVERSE VENDING MACHINES 156,000 Ekornes 2,087 NICHE FURNITURE MANUFACTURER ---------------------------------------------------------------------------- 25,309 >FINLAND: 1.5% 384,000 Amer Group 11,758 BRANDED SPORTING GOODS 475,000 Jaakko Poyry 8,387 ENGINEERING CONSULTANTS IN FORESTRY, ENERGY ---------------------------------------------------------------------------- 20,145 >SWEDEN: 3.6% 905,000 Perbio Science 16,866 CONSUMABLES TO BIOTECH/PHARMACEUTICAL INDUSTRIES 1,730,000 Intrum Justitia 9,434 RECEIVABLES MANAGEMENT & DEBT COLLECTION 520,000 Castellum 8,943 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- OFFICE, WAREHOUSE & RETAIL PROPERTY COMPANY 240,000 Munters $ 5,223 MOISTURE & HUMIDITY CONTROL 212,000 Hexagon 4,680 DIVERSIFIED ENGINEERING 550,000 Nobia 4,127 KITCHEN INTERIORS MANUFACTURING & DISTRIBUTION ---------------------------------------------------------------------------- 49,273 >FRANCE/BELGIUM: 8.0% 500,000 Neopost (b) 21,280 POSTAGE METER MACHINES 575,000 Euronext 14,280 TRADING SERVICES FOR FINANCIAL MARKETS 445,000 Omega Pharma (Belgium) 13,564 OTC PRODUCTS, PHARMACY & DENTAL SUPPLIES 130,000 Bacou Dalloz 12,755 SAFETY EQUIPMENT 270,000 Essilor International 10,895 EYEGLASS LENSES 500,000 Fininfo 8,909 DATA FEEDS FOR FRENCH BANKS & BROKERS 100,000 Groupe Bourbon 7,574 FOOD RETAILER 315,000 Grandvision 6,522 EUROPEAN EYEGLASS RETAILER 90,000 Vallourec 5,880 SEAMLESS TUBES 100,000 RTL Group (Belgium) 4,785 TV & RADIO BROADCASTER 36,000 Bonduelle 2,878 PRODUCER OF CANNED, FROZEN & FRESH VEGETABLES ---------------------------------------------------------------------------- 109,322 >UNITED KINGDOM/IRELAND: 15.8% 2,300,000 Anglo Irish Bank (Ireland) 20,371 CORPORATE LENDING: PRIVATE BANKING 1,300,000 Kerry Group (Ireland) 20,127 FOOD INGREDIENTS 3,400,000 Hit Entertainment 13,893 CHILDREN'S TELEVISION SHOWS 5,500,000 RPS Group 12,409 ENVIRONMENTAL CONSULTING 2,500,000 Expro International 11,648 OFFSHORE OIL FIELD SERVICES 2,600,000 Grafton Group (Ireland) 11,514 BUILDERS, WHOLESALERS & DIY RETAILING 1,550,000 Xstrata 10,312 DIVERSIFIED MINING HOLDING COMPANY 1,000,000 Exel 10,281 GLOBAL LOGISTICS & FREIGHT FORWARDING 1,200,000 Torex 9,917 APPLICATION SOFTWARE FOR HOSPITAL MANAGEMENT & RETAIL 125,000 Depfa Bank (Ireland) 9,741 INTERNATIONAL PUBLIC SECTOR FINANCE 1,420,000 Spectris 9,694 ELECTRONIC INSTRUMENTS & CONTROLS 6,500,000 Tullow Oil (b) 8,483 OIL & GAS PRODUCER 1,150,000 Bunzl 8,074 DISTRIBUTION OF DISPOSABLE PRODUCTS TO FOOD INDUSTRY 33 LIBERTY ACORN INTERNATIONAL >STATEMENT OF INVESTMENTS (UNAUDITED), CONTINUED NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >UNITED KINGDOM/IRELAND--CONTINUED 420,000 Cobham $ 8,021 AEROSPACE 1,700,000 Euro Money Institutional Investor 7,973 FINANCIAL PUBLICATIONS 1,490,900 SSL International 7,220 MEDICAL & FOOTCARE PRODUCTS 1,200,000 Smith & Nephew 6,907 MEDICAL EQUIPMENT & SUPPLIES 1,500,000 Nestor Healthcare 6,902 HEALTHCARE STAFFING COMPANY 5,375,000 Marconi (b) 5,464 TELECOMMUNICATIONS EQUIPMENT 500,000 Irish Life & Permanent (Ireland) 5,406 SAVINGS PRODUCTS 500,000 Jurys Doyle Hotel (Ireland) 4,848 HOTEL GROUP 600,000 Business Post 4,116 PARCEL & EXPRESS MAIL SERVICE 450,000 McCarthy & Stone 3,652 BUILDER OF RETIREMENT APARTMENTS 55,000 Intermediate Capital 884 EUROPEAN PROVIDER OF MEZZANINE CAPITAL ---------------------------------------------------------------------------- 217,857 >SWITZERLAND: 6.3% 21,000 Synthes-Stratec 15,118 PRODUCTS FOR ORTHOPEDIC SURGERY 30,000 Givaudan 12,652 INDUSTRIAL FRAGRANCES & FLAVORS 40,000 Geberit International 12,341 PLUMBING SUPPLIES 80,000 Kaba Holdings 11,423 BUILDING SECURITY SYSTEMS 5,250 Pargesa 10,725 INDUSTRIAL & MEDIA CONGLOMERATE 33,500 BKW Energie 8,105 ELECTRIC UTILITY 40,000 Schindler 6,452 ELEVATOR MANUFACTURER & SERVICE PROVIDER 110,000 Bachem 5,420 PEPTIDES 90,000 Bon Appetit 4,075 WHOLESALE FOOD DISTRIBUTOR AND SPECIALTY RESTAURANT/RETAILER ---------------------------------------------------------------------------- 86,311 >ITALY: 3.5% 1,200,000 Autogrill 13,113 RESTAURANTS & CATERING FOR TRAVELERS 1,500,000 Saipem 11,249 OFFSHORE OIL CONSTRUCTION & DRILLING 2,700,000 Parmalat Finanziaria 8,510 DAIRY PRODUCER 212,000 Davide Campari 8,133 BEVERAGES 1,700,000 De Longhi 7,489 CONSUMER APPLIANCES FOR HEATING, AIR CONDITIONING & COOKING ---------------------------------------------------------------------------- 48,494 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >SPAIN: 4.8% 2,000,000 Abengoa $ 11,963 ENGINEERING & CONSTRUCTION 530,000 Gamesa 11,857 SPANISH WIND TURBINES 757,000 Prosegur 11,207 SECURITY GUARDS 600,000 Red Electrica 7,868 SPANISH POWER GRID 1,137,045 Cortefiel 7,847 APPAREL RETAILER 1,600,000 Telefonica Publicidado Info 7,748 SPANISH TELEPHONE DIRECTORIES 425,000 Zardoya Otis 6,404 425,000 Zardoya Otis Bonus Rights 636 ELEVATOR MANUFACTURER & SERVICE PROVIDER ---------------------------------------------------------------------------- 65,530 >NETHERLANDS: 5.5% 545,000 Hunter Douglas 18,180 DECORATIVE WINDOW COVERINGS 377,000 OPG Groep 11,479 PHARMACEUTICAL WHOLESALER & RETAILER 800,000 Vopak 10,895 OIL & CHEMICAL STORAGE 585,000 IM Tech 10,854 TECHNICAL ENGINEERING 230,476 Fugro 9,544 SURVEY & GPS SERVICES 686,122 United Services Group 8,089 TEMPORARY STAFFING SERVICES 409,000 Aalberts Industrie 7,198 FLOW CONTROL & HEAT TREATMENT ---------------------------------------------------------------------------- 76,239 >LUXEMBOURG: 1.4% 420,000 Tenaris (b) 10,710 STEEL PIPE FOR OIL WELLS & PIPELINES 1,280,000 Ses Global 8,319 SATELLITE BROADCASTING SERVICES ---------------------------------------------------------------------------- 19,029 ---------- EUROPE: TOTAL 829,938 ---------------------------------------------------------------------------- ASIA: 22.2% >HONG KONG/CHINA: 5.3% 35,000,000 Global Bio-Chem Technology Group 11,333 CORN-BASED FOOD PRODUCTS 3,000,000 TVB 10,714 TELEVISION PROGRAMMING & BROADCASTING 5,600,000 Techtronic Industries 9,371 POWER TOOL MANUFACTURER 4,000,000 Hong Kong Exchanges & Clearing 5,796 TRADING, CLEARING & SETTLEMENT SERVICES FOR FINANCIAL MARKETS 20,000,000 Sinotrans (China) (b) 5,642 INTEGRATED LOGISTICS IN CHINA 12,000,000 JCG Holding 5,617 CONSUMER FINANCE 11,000,000 Zhejiang Expressway 4,549 TOLL ROAD BUILDER & OPERATOR 34 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >HONG KONG/CHINA--CONTINUED 15,000,000 Linmark $ 4,520 APPAREL/HARD GOODS SOURCING AGENT 12,000,000 Jiangsu Expressway 4,501 TOLL ROAD BUILDER & OPERATOR 25,000,000 Lerado Group 4,168 BABY PARAPHERNALIA 8,000,000 Hainan Meilan Airport 3,770 CHINESE AIRPORT OPERATOR 5,802,000 Lianhua Supermarket (b) 3,088 CHINESE SUPERMARKET CHAIN ---------------------------------------------------------------------------- 73,069 >JAPAN: 8.2% 875,000 Yakult Honsha 11,754 DAIRY BASED BEVERAGES 267,000 Uni-Charm 11,562 INFANT HYGIENE & FEMININE CARE PRODUCTS 1,005,000 Toyo Technica 9,878 VALUE ADDED RESELLER OF IMPORTED INSTRUMENTATION 190,000 USS 9,638 USED CAR AUCTIONEER 292,500 Fuji Seal 8,981 PACKAGING MATERIALS & MACHINERY 410,000 Daito Trust Construction 8,638 APARTMENT BUILDER 220,000 ARRK 7,691 PROTOTYPES & MOLDS FOR NEW PRODUCT DEVELOPMENT 700,000 NIFCO 7,522 MOLDED PLASTIC COMPONENTS 385,000 Daiseki 5,801 WASTE DISPOSAL & RECYCLING 35,000 Bellsystem24 5,621 CALL CENTERS 325,000 Aderans 5,776 HAIR PIECES 135,000 Sugi Pharmacy 5,508 DRUGSTORES 150,000 Eneserve 5,419 IN-HOUSE POWER GENERATORS 140,000 Goldcrest 3,679 APARTMENT DEVELOPER 1,150,000 OMC Card 3,521 CREDIT CARD ISSUER 100,000 Taisei Lamick 2,340 PACKAGING MATERIALS & MACHINERY ---------------------------------------------------------------------------- 113,329 >TAIWAN: 1.0% 1,750,000 Ase Test (b) 9,625 SEMICONDUCTOR PACKAGING & TEST SERVICES 6,150,000 Chroma Ate (b) 3,856 TEST & MEASUREMENT INSTRUMENTS ---------------------------------------------------------------------------- 13,481 >SOUTH KOREA: 4.0% 575,000 Hyundai Mobis 14,754 AUTO PARTS 140,000 Cheil Communications 13,771 ADVERTISING 500,000 S1 Corporation 9,460 SECURITY SERVICES NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- 156,264 Yuhan $ 7,417 ETHICAL DRUG PRODUCER 100,000 Samsumg Fire & Marine 4,864 NON-LIFE INSURANCE 475,000 Samyoung Heat Exchange (c) 4,732 POWER PLANT RELATED MACHINERY ---------------------------------------------------------------------------- 54,998 >SINGAPORE: 2.4% 27,000,000 Comfort Group (b) 12,344 TAXI SERVICE 1,200,000 Venture 10,973 ELECTRONIC MANUFACTURING SERVICES 9,000,000 Sembcorp Logistics 9,610 LOGISTIC SERVICES FOR MARINE TRANSPORT ---------------------------------------------------------------------------- 32,927 >INDIA: 1.3% 2,000,000 Housing Development Finance 17,655 MORTGAGE LOAN PROVIDER IN INDIA ---------------------------------------------------------------------------- ---------- ASIA: TOTAL 305,459 ---------------------------------------------------------------------------- LATIN AMERICA: 1.3% >MEXICO: 1.1% 600,000 Grupo Aeroportuario 8,778 MEXICAN AIRPORT AUTHORITY 3,500,000 Consorcio ARA (b) 6,950 LOW/MEDIUM INCOME HOUSE BUILDER ---------------------------------------------------------------------------- 15,728 >BRAZIL: 0.2% 835,000 Cia De Consessoes Rodoviaria 2,654 BRAZILIAN TOLLROADS ---------------------------------------------------------------------------- ---------- LATIN AMERICA: TOTAL 18,382 ---------------------------------------------------------------------------- OTHER COUNTRIES: 12.1% >AUSTRALIA/NEW ZEALAND: 4.8% 2,500,000 Jupiters 10,760 CASINO 3,500,000 The Warehouse Group (New Zealand) 10,638 WAREHOUSE CLUB 2,500,000 Billabong International 10,307 SURFWEAR APPAREL MANUFACTURER 1,800,000 Sky City Entertainment (New Zealand) 9,959 CASINO/ENTERTAINMENT COMPLEX 2,500,000 Lion Nathan 8,997 BEER BREWER/DISTRIBUTOR 420,000 Perpetual Trustees 8,658 INVESTMENT MANAGEMENT 5,000,000 Computershare 6,278 FINANCIAL SOFTWARE/SERVICES ---------------------------------------------------------------------------- 65,597 >CANADA: 6.6% 1,000,000 Corus Entertainment (b) 16,780 CATV PROGRAMMING 365,000 Talisman Energy 16,557 OIL & GAS PRODUCER 300,000 Power Financial 9,681 LIFE INSURANCE & MUTUAL FUNDS 35 LIBERTY ACORN INTERNATIONAL >STATEMENT OF INVESTMENTS (UNAUDITED), CONTINUED NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >CANADA--CONTINUED 5,000,000 Esprit Exploration (b) $ 8,850 NATURAL GAS PRODUCER 700,000 Shawcor 7,745 OIL & GAS PIPELINE PRODUCTS 600,000 Patheon (b) 6,638 PHARMACEUTICAL CONTRACT MANUFACTURER 450,000 Moore-Wallace (b) 6,536 COMMERCIAL PRINTING 500,000 Kingsway Financial (b) 6,030 AUTO & SPECIALTY INSURANCE 750,000 Altagas Services 5,947 NATURAL GAS GATHERER & PROCESSOR 450,000 Intrawest 5,898 OWNER/OPERATOR OF SKI RESORTS ---------------------------------------------------------------------------- 90,662 >RUSSIA: 0.2% 8,666 Khanty Mansiysk (b) 3,596 OIL PRODUCTION IN RUSSIA ---------------------------------------------------------------------------- >SOUTH AFRICA: 0.5% 500,000 Harmony Gold 6,580 GOLD MINING ---------------------------------------------------------------------------- ---------- OTHER: TOTAL 166,435 TOTAL COMMON STOCKS AND OTHER ---------- EQUITY-LIKE SECURITIES: 96.0% 1,320,214 (COST: $1,224,127) PRINCIPAL AMOUNT (000) VALUE (000) ---------------------------------------------------------------------------- SHORT-TERM OBLIGATIONS: 2.8% $ 35,000 Household Finance 1.31% Due 7/01/03 $ 35,000 3,707 Repurchase Agreement with State Street Bank & Trust Co., dated 6/30/03, due 7/01/03 at 1.10%, collateralized by Federal Home Loan Mortgage Notes maturing 1/28/05, market value $3,783 (repurchase proceeds: $3,707) 3,707 ---------------------------------------------------------------------------- (AMORTIZED COST: $38,707) 38,707 ---------- TOTAL INVESTMENTS: 98.8% 1,358,921 (COST: $1,262,834) (a) CASH AND OTHER ASSETS LESS LIABILITIES: 1.2% 16,019 ---------- TOTAL NET ASSETS: 100% $1,374,940 -------------------------------------------------------------------------------- >NOTES TO STATEMENT OF INVESTMENTS (IN THOUSANDS) (a) A t June 30, 2003, for federal income tax purposes cost of investment was $1,270,059 and net unrealized appr eciation was $88, 862 consisting of gross unrealized appreciation of $217,990 and gross unrealized depreciation of $129,128. (b) Non-income producing security. (c) On June 30, 2003, the fund held the following per centages of the outstanding voting shar es of the companies listed below: Samyoung Heat Exchange (South Korea) 6.33% The aggregate cost and value of this company at June 30, 2003, was $8,990 and $4,732, respectively. Investments in affiliate companies represent 0.34% of total net assets at June 30, 2003. The change in unrealized gain in this company amounted to $6 for the period ended June 30, 2003. There was no other investment activity during the period. (d) On June 30, 2003, $504,690 or 36.7% of the Fund's net assets was denominated in the Euro currency. 36 LIBERTY ACORN INTERNATIONAL >PORTFOLIO DIVERSIFICATION (UNAUDITED) At June 30, 2003, the Fund's portfolio investments as a percent of net assets was diversified as follows: VALUE (000) PERCENT ------------------------------------------------------------------------- >COMPUTER HARDWARE Semiconductors $ 9,625 0.7% ------------------------------------------------------------------------- 9,625 0.7 >TECHNOLOGY SERVICES Full Service 9,917 0.7 Embedded Systems 9,049 0.7 ------------------------------------------------------------------------- 18,966 1.4 >TELECOM Cable 8,319 0.6 ISP 5,464 0.4 ------------------------------------------------------------------------- 13,783 1.0 >BROADCASTING/MEDIA CONTENT Radio & TV Broadcasting 29,392 2.1 Hybrid Internet 24,630 1.8 Media Content Providers 16,780 1.2 Market Research 9,432 0.7 ------------------------------------------------------------------------- 80,234 5.8 >HEALTH CARE Services 54,389 4.0 Drugs 49,993 3.6 Devices & Consumables 29,245 2.1 Biotech 6,345 0.5 ------------------------------------------------------------------------- 139,972 10.2 >BUSINESS SERVICES Business Services 53,299 3.9 BPO 26,491 1.9 Logistics 19,891 1.4 Consumer Services 9,638 0.7 ------------------------------------------------------------------------- 109,319 7.9 Value (000) Percent ------------------------------------------------------------------------- >FINANCIALS Lending Institutions $ 60,376 4.4% Asset Management 28,734 2.1 Insurance 25,981 1.9 ------------------------------------------------------------------------- 115,091 8.4 >CONSUMER GOODS/SERVICES Branded Goods 166,788 12.1 Leisure 56,682 4.1 Retail Outlets 47,187 3.4 Distribution/ E-Commerce 16,155 1.2 ------------------------------------------------------------------------- 286,812 20.8 >INDUSTRIALS Goods 221,460 16.1 R&D Design Firms 17,715 1.3 Construction 16,001 1.2 Electronic Manufacturing 13,734 1.0 EMS Design 10,973 0.8 Distribution 5,642 0.4 ------------------------------------------------------------------------- 285,525 20.8 >OTHER INDUSTRIES Energy 118,632 8.6 Real Estate 46,472 3.4 Utilities 44,890 3.3 Not-Classified 40,168 2.9 Conglomerate 10,725 0.8 ------------------------------------------------------------------------- 260,887 19.0 TOTAL COMMON STOCKS AND ------------------------ OTHER EQUITY-LIKE SECURITIES: 1,320,214 96.0 SHORT-TERM OBLIGATIONS: 38,707 2.8 ------------------------ TOTAL INVESTMENTS: 1,358,921 98.8 CASH AND OTHER ASSETS LESS LIABILITIES: 16,019 1.2 ------------------------ TOTAL NET ASSETS: $1,374,940 100.0% ========================================================================= 37 LIBERTY ACORN USA >MAJOR PORTFOLIO CHANGES IN THE SECOND QUARTER (UNAUDITED) NUMBER OF SHARES ------------------------- 03/31/03 06/30/03 Additions ------------------------------------------------------------------------- Information Cable Design Technologies 0 150,000 Crown Castle International 490,000 550,000 JDA Software 864,000 974,000 MRO Software 348,500 473,500 ------------------------------------------------------------------------- CONSUMER GOODS/SERVICES Aeropostale 110,500 135,500 Oxford Industries 0 28,000 ------------------------------------------------------------------------- FINANCE AmeriCredit 846,500 931,500 Harleysville Group 0 97,000 ------------------------------------------------------------------------- ENERGY/MINERALS FMC Technologies 30,700 110,700 Ultra Petroleum 135,000 215,000 NUMBER OF SHARES ------------------------- 03/31/03 06/30/03 Sales ------------------------------------------------------------------------- FINANCE World Acceptance 590,000 550,000 38 LIBERTY ACORN USA >STATEMENT OF INVESTMENTS (UNAUDITED), JUNE 30, 2003 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- COMMON STOCKS: 92.6% ---------------------------------------------------------------------------- INFORMATION: 39.1% >BROADCASTING: 2.2% 333,100 Salem Communications (b) $ 6,666 RADIO STATIONS FOR RELIGIOUS PROGRAMMING 138,500 Gray Television 1,717 MID MARKET AFFILIATED TV STATIONS 57,000 Saga Communications (b) 1,109 RADIO STATIONS IN SMALL & MID-SIZED CITIES ---------------------------------------------------------------------------- 9,492 >TELEVISION PROGRAMMING: 1.4% 600,000 Mediacom Communications (b) 5,922 CABLE TELEVISION FRANCHISES ---------------------------------------------------------------------------- >TELECOMMUNICATIONS/WIRELINE COMMUNICATIONS: 2.4% 227,800 Commonwealth Telephone (b) 10,016 RURAL PHONE FRANCHISES & CLEC ---------------------------------------------------------------------------- >MOBILE COMMUNICATIONS: 4.5% 927,000 Western Wireless (b) 10,688 PHONE SERVICES 550,000 Crown Castle International (b) 4,273 COMMUNICATION TOWERS IN USA & UK 60,000 Telephone & Data Systems 2,982 CELLULAR & TELEPHONE SERVICES 182,700 COMARCO (b) 1,297 WIRELESS NETWORK TESTING ---------------------------------------------------------------------------- 19,240 >COMPUTER SERVICES: 2.2% 232,000 American Management Systems (b) 3,313 SOFTWARE DEVELOPMENT SERVICES 786,000 RCM Technologies (b)(c) 3,065 TECHNOLOGY STAFFING SERVICES 670,000 AnswerThink Consulting (b) 1,293 IT INTEGRATOR FOR FORTUNE 2000 149,600 Ciber (b) 1,050 SOFTWARE SERVICES & STAFFING 256,600 Analysts International (b) 639 TECHNOLOGY STAFFING SERVICES ---------------------------------------------------------------------------- 9,360 >BUSINESS/CONSUMER SOFTWARE: 15.9% 527,600 Micros Systems (b) 17,400 INFORMATION SYSTEMS FOR RESTAURANTS & HOTELS 221,100 Kronos (b) 11,234 LABOR MANAGEMENT SOLUTIONS 974,000 JDA Software (b) 10,899 APPLICATIONS/SOFTWARE & SERVICES FOR RETAILERS 370,000 JD Edwards (b) 5,302 MID MARKET ERP & SUPPLY CHAIN SOFTWARE 1,330,000 Novell (b) 4,096 SECURITY & IDENTITY MANAGEMENT SOFTWARE 473,500 MRO Software (b) 4,086 ENTERPRISE MANAGEMENT SOFTWARE 206,000 Group 1 Software (b) 3,805 ADDRESS VERIFICATION SOFTWARE 192,500 THQ (b) 3,465 ENTERTAINMENT SOFTWARE NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- 505,000 E.Piphany (b) $ 2,581 CRM SOFTWARE 140,000 SPSS (b) 2,344 STATISTICAL ANALYSIS SOFTWARE 102,000 Activision (b) 1,318 ENTERTAINMENT SOFTWARE 65,000 MAPICS (b) 533 MID MARKET ERP SOFTWARE 100,000 Aspect Communications (b) 387 CALL CENTER SOFTWARE ---------------------------------------------------------------------------- 67,450 >TRANSACTION PROCESSORS: 2.2% 211,640 Global Payments 7,513 CREDIT CARD PROCESSOR 170,000 Euronet Worldwide (b) 1,838 ATM PROCESSOR ---------------------------------------------------------------------------- 9,351 >BUSINESS INFORMATION/MARKETING SERVICES/PUBLISHING: 2.1% 102,800 Getty Images (b) 4,246 PHOTOGRAPHS FOR PUBLICATIONS & ELECTRONIC MEDIA 240,000 Navigant Consulting (b) 2,844 CONSULTING FIRM 108,600 Information Holdings (b) 1,982 PATENT & OTHER BUSINESS INFORMATION ---------------------------------------------------------------------------- 9,072 >CONTRACT MANUFACTURING: 0.4% 140,000 Plexus (b) 1,614 ELECTRONIC MANUFACTURING SERVICES ---------------------------------------------------------------------------- >INSTRUMENTATION: 0.3% 60,000 Trimble Navigation (b) 1,376 GPS-BASED INSTRUMENTS ---------------------------------------------------------------------------- >COMPUTER HARDWARE/SEMICONDUCTORS/ RELATED EQUIPMENT: 5.5% 129,000 Zebra Technologies (b) 9,700 BAR CODE PRINTERS 175,300 Integrated Circuit Systems (b) 5,510 SILICON TIMING DEVICES 424,100 Seachange International (b) 4,046 SYSTEMS FOR VIDEO ON DEMAND & AD INSERTION 70,000 LittelFuse (b) 1,565 FUSES FOR OVERCURRENT & OVERVOLTAGE PROTECTION 40,000 Rogers (b) 1,332 PCB LAMINATES & HIGH PERFORMANCE FOAMS 150,000 Cable Design Technologies (b) 1,072 NETWORKING & SPECIALTY CABLES ---------------------------------------------------------------------------- 23,225 ----------- INFORMATION: TOTAL 166,118 ---------------------------------------------------------------------------- HEALTH CARE: 17.2% >BIOTECHNOLOGY/DRUG DELIVERY: 2.9% 720,000 Nektar Therapeutics (b) 6,646 PULMONARY DRUG DELIVERY 211,400 Enzon (b) 2,647 POLYMER DELIVERY TECHNOLOGY FOR IMPROVED DRUGS 39 LIBERTY ACORN USA >STATEMENT OF INVESTMENTS (UNAUDITED), CONTINUED NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >BIOTECHNOLOGY/DRUG DELIVERY--CONTINUED 375,000 Locus Discovery, Series D, Pfd. (b) $ 1,500 HIGH THROUGHPUT RATIONAL DRUG DESIGN 90,000 Applera-Celera Genomics (b) 929 DIAGNOSTICS & DRUG DEVELOPMENT 154,000 SYRRX, Series C (b) 348 X-RAY CRYSTALLOGRAPHY 363,636 Metabolex, Series F (b) 44 DRUGS FOR DIABETES ---------------------------------------------------------------------------- 12,114 >MEDICAL EQUIPMENT: 4.9% 335,000 Edwards Lifesciences (b) 10,767 HEART VALVES 220,000 Viasys Healthcare (b) 4,554 RESPIRATORY & NEUROLOGY MEDICAL EQUIPMENT 135,600 Visx (b) 2,353 LASER EYE SURGERY 345,000 Novoste (b) 2,070 RADIATION CATHETERS FOR IN-STENT RESTENOSIS 30,000 Diagnostic Products 1,231 IMMUNODIAGNOSTIC KITS ---------------------------------------------------------------------------- 20,975 >MEDICAL SUPPLIES: 1.6% 222,800 Techne (b) 6,760 CYTOKINES, ANTIBODIES, OTHER REAGENTS FOR LIFE SCIENCES ---------------------------------------------------------------------------- >SERVICES: 7.8% 639,000 First Health Group (b) 17,636 PPO NETWORK 246,800 Lincare Holdings (b) 7,777 HOME HEALTH CARE SERVICES 323,300 NDCHealth Group 5,933 HEALTH CLAIMS PROCESSING & DRUG MARKETING SERVICES 100,000 Dendrite International (b) 1,288 SOFTWARE FOR PHARMACEUTICAL SALES FORCE 26,000 Medquist (b) 526 MEDICAL TRANSCRIPTION SERVICES ---------------------------------------------------------------------------- 33,160 ----------- HEALTH CARE: TOTAL 73,009 ---------------------------------------------------------------------------- CONSUMER GOODS/SERVICES: 13.8% >CONSUMER SERVICES: 3.1% 430,000 ITT Educational Services (b) 12,578 POST-SECONDARY DEGREE PROGRAM 48,900 Bally Total Fitness (b) 442 NATIONAL CHAIN OF FITNESS CENTERS ---------------------------------------------------------------------------- 13,020 >APPAREL: 1.7% 197,600 Steven Madden (b) 4,316 WHOLESALER/RETAILER OF FASHION FOOTWARE 32,000 Coach (b) 1,592 DESIGNER & RETAILER OF BRANDED LEATHER ACCESSORIES 28,000 Oxford Industries 1,163 BRANDED & PRIVATE LABEL APPAREL ---------------------------------------------------------------------------- 7,071 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >ENTERTAINMENT: 1.2% 91,300 International Speedway Motors $ 3,607 LARGEST MOTORSPORT RACETRACK OWNER & OPERATOR 70,000 Action Performance 1,330 MOTORSPORT COLLECTIBLES & MERCHANDISING ---------------------------------------------------------------------------- 4,937 >DURABLE GOODS: 0.3% 30,000 American Woodmark 1,397 KITCHEN CABINET ---------------------------------------------------------------------------- >FURNITURE: 0.5% 60,000 Herman Miller 1,213 OFFICE FURNITURE 20,000 Mohawk Industries (b) 1,111 CARPET & FLOORING ----------------------------------------------------------------------------- 2,324 >NONDURABLES: 1.9% 167,200 Scotts Company (b) 8,276 CONSUMER LAWN & GARDEN PRODUCTS ----------------------------------------------------------------------------- >RETAIL: 5.1% 212,500 Christopher & Banks (b) 7,860 WOMEN'S APPAREL RETAILER 135,500 Aeropostale (b) 2,911 MALL BASED TEEN RETAILER 58,300 Urban Outfitters (b) 2,093 MULTI CHANNEL LIFESTYLE RETAILER 347,000 Gadzooks (b) 1,971 TEEN APPAREL RETAILER 50,000 Michaels Stores 1,903 CRAFT & HOBBY SPECIALTY RETAILER 50,000 Ann Taylor (b) 1,447 WOMEN'S APPAREL RETAILER 50,000 Abercrombie & Fitch (b) 1,420 TEEN APPAREL RETAILER 75,000 Genesco (b) 1,327 MULTI-CONCEPT BRANDED FOOTWEAR RETAILER 25,000 Petco Animal Supplies (b) 544 PET SUPPLIES & SERVICES ---------------------------------------------------------------------------- 21,476 ----------- CONSUMER GOODS/SERVICES: TOTAL 58,501 ---------------------------------------------------------------------------- FINANCE: 11.2% >BANKS: 1.1% 158,125 Chittenden 4,325 VERMONT & WEST MASSACHUSETTS BANK 10,000 TCF Financial 398 GREAT LAKES BANK ---------------------------------------------------------------------------- 4,723 >FINANCE COMPANIES: 4.0% 550,000 World Acceptance (b) 8,954 PERSONAL LOANS 931,500 AmeriCredit (b) 7,964 AUTO LENDING ---------------------------------------------------------------------------- 16,918 40 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >SAVINGS & LOAN: 1.5% 75,000 Downey Financial $ 3,097 CALIFORNIA HOME LENDER 116,400 Anchor Bancorp Wisconsin 2,781 WISCONSIN THRIFT 16,500 Peoples Bank Bridgeport 478 CONNECTICUT SAVINGS & LOAN ---------------------------------------------------------------------------- 6,356 >MONEY MANAGEMENT: 0.3% 40,000 SEI Investments 1,280 MUTUAL FUND ADMINISTRATION & INVESTMENT MANAGEMENT ---------------------------------------------------------------------------- >INSURANCE: 4.3% 350,000 HCC Insurance Holdings 10,350 AVIATION INSURANCE 17,000 Markel (b) 4,352 SPECIALTY INSURANCE 97,000 Harleysville Group 2,233 COMMERCIAL & PERSONAL LINES INSURANCE 35,000 Philadelphia Consolidated Holding (b) 1,414 SPECIALTY INSURANCE ---------------------------------------------------------------------------- 18,349 ----------- FINANCE: TOTAL 47,626 ---------------------------------------------------------------------------- INDUSTRIAL GOODS/SERVICES: 5.0% >SPECIALTY CHEMICALS/INDUSTRIAL MATERIALS: 0.7% 95,000 Spartech 2,015 PLASTICS DISTRIBUTION & COMPOUNDING 70,000 Schulman 1,124 PLASTICS DISTRIBUTION & COMPOUNDING ---------------------------------------------------------------------------- 3,139 >INDUSTRIAL DISTRIBUTION: 0.2% 100,000 NuCo2 (b) 941 BULK CO2 GAS DISTRIBUTION TO RESTAURANTS ---------------------------------------------------------------------------- >CONSTRUCTION: 0.3% 30,000 Florida Rock Industries 1,238 CONCRETE & AGGREGATES ---------------------------------------------------------------------------- >MACHINERY: 0.6% 59,000 Esco Technologies (b) 2,596 FILTRATION & TEST EQUIPMENT ---------------------------------------------------------------------------- >WATER: 1.1% 134,000 Cuno (b) 4,840 FILTRATION & FLUIDS CLARIFICATION ---------------------------------------------------------------------------- >INDUSTRIAL GOODS: 0.1% 10,300 Intermagnetics General (b) 204 SUPERCONDUCTING WIRE ---------------------------------------------------------------------------- NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >LOGISTICS: 1.1% 346,000 Hub Group (b) $ 3,038 TRUCK & RAIL FREIGHT FORWARDER 59,600 Forward Air (b) 1,512 FREIGHT TRANSPORTATION BETWEEN AIRPORTS ---------------------------------------------------------------------------- 4,550 >INDUSTRIAL SERVICES: 0.9% 206,900 Insurance Auto Auctions (b) 2,599 AUTO SALVAGE SERVICES 95,000 Clark (b) 1,135 EXECUTIVE COMPENSATION & BENEFITS CONSULTING ---------------------------------------------------------------------------- 3,734 ----------- INDUSTRIAL GOODS/SERVICES: TOTAL 21,242 ---------------------------------------------------------------------------- ENERGY/MINERALS: 5.5% >OIL SERVICES: 1.5% 651,000 Newpark Resources (b) 3,567 DRILLING FLUID SERVICES TO OIL & GAS INDUSTRY 110,700 FMC Technologies (b) 2,330 OIL & GAS WELL HEAD MANUFACTURER 10,000 Carbo Ceramics 372 NATURAL GAS WELL STIMULANTS ---------------------------------------------------------------------------- 6,269 >OIL & GAS PRODUCERS: 1.6% 215,000 Ultra Petroleum (b) 2,776 NATURAL GAS PRODUCER 68,000 Western Gas 2,693 OIL & COAL SEAM GAS PRODUCER 82,100 Southwestern Energy (b) 1,232 NATURAL GAS PRODUCER ---------------------------------------------------------------------------- 6,701 >DISTRIBUTION/MARKETING/REFINING: 2.4% 122,600 Equitable Resources 4,995 NATURAL GAS UTILITY & PRODUCER 193,000 Atmos Energy 4,786 NATURAL GAS UTILITY 115,000 Aquila (b) 712 ELECTRIC UTILITY HOLDING COMPANY ---------------------------------------------------------------------------- 10,493 ----------- ENERGY/MINERALS: TOTAL 23,463 ---------------------------------------------------------------------------- OTHER INDUSTRIES: 0.8% >REAL ESTATE: 0.8% 47,000 The Rouse Company 1,791 REGIONAL SHOPPING MALLS 100,000 Crescent Real Estate Equities 1,661 CLASS A OFFICE BUILDINGS ---------------------------------------------------------------------------- 3,452 ----------- OTHER INDUSTRIES: TOTAL 3,452 ---------------------------------------------------------------------------- TOTAL COMMON STOCKS: 92.6% 393,411 (COST: $343,663) 41 LIBERTY ACORN USA >STATEMENT OF INVESTMENTS (UNAUDITED), CONTINUED PRINCIPAL AMOUNT(000) VALUE (000) ---------------------------------------------------------------------------- SHORT-TERM OBLIGATIONS: 7.5% $ 30,000 Household Finance 1.03% - 1.31% Due 7/01 - 7/02/03 $ 30,000 1,750 Repurchase Agreement with State Street Bank & Trust Co., dated 6/30/03, due 7/01/03 at 1.10%, collateralized by Federal Home Loan Mortgage Notes maturing 1/28/05, market value $1,785 (repurchase proceeds: $1,750) 1,750 ---------------------------------------------------------------------------- (AMORTIZED COST: $31,750) 31,750 ----------- TOTAL INVESTMENTS: 100.1% 425,161 (COST: $375,413) (a) CASH AND OTHER ASSETS LESS LIABILITIES: (0.1%) (256) ----------- TOTAL NET ASSETS: 100% $ 424,905 ============================================================================ -------------------------------------------------------------------------------- >Notes to Statement of Investments (in thousands) (a) At June 30, 2003, for federal income tax purposes cost of investment is the same and net unrealized appreciation was $49,748 consisting of gross unrealized appreciation of $92,647 and gross unrealized depreciation of $42,899. (b) Non-income producing security. (c) On June 30, 2003, the fund held the following percentages of the outstanding voting shares of the companies listed below: RCM Technologies 7.42% The aggregate cost and value of this company at June 30, 2003, was $5,636 and $3,065, respectively. Investments in affiliate companies represent 0.72% of total net assets at June 30, 2003. The change in unrealized gain in this company amounted to $8 during the period ended June 30, 2003. There was no other investment activity during the period. 42 LIBERTY ACORN FOREIGN FORTY >MAJOR PORTFOLIO CHANGES IN THE SECOND QUARTER (UNAUDITED) NUMBER OF SHARES -------------------------------- 03/31/03 06/30/03 Additions ---------------------------------------------------------------------------- EUROPE >FRANCE Euronext 20,000 35,000 >UNITED KINGDOM/IRELAND British Sky Broadcasting 0 60,000 Depfa Bank (Ireland) 0 13,000 Grafton Group (Ireland) 0 170,000 Hit Entertainment 0 190,000 Marconi 0 270,000 >SPAIN Red Electrica 0 60,000 >LUXEMBOURG Tenaris 0 35,000 ---------------------------------------------------------------------------- ASIA >JAPAN Daito Trust Construction 0 25,000 Hoya 0 10,000 USS 0 10,000 NUMBER OF SHARES -------------------------------- 03/31/03 06/30/03 Sales ---------------------------------------------------------------------------- EUROPE >NORWAY Orkla 78,000 0 >UNITED KINGDOM Exel 140,000 45,000 -------------------------------------------------------------------------------- ASIA >JAPAN Oriental Land 21,000 0 Orix 17,000 0 43 LIBERTY ACORN FOREIGN FORTY >STATEMENT OF INVESTMENTS (UNAUDITED) JUNE 30, 2003 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- COMMON STOCKS: 95.3% ---------------------------------------------------------------------------- EUROPE: 70.3% >GERMANY: 7.2% 30,000 Rhoen-Klinikum $ 1,206 HOSPITAL MANAGEMENT 17,000 Deutsche Boerse 902 TRADING, CLEARING & SETTLEMENT SERVICES FOR FINANCIAL MARKETS 5,000 Henkel 310 CHEMICALS, DETERGENTS & NON-FOOD CONSUMER BRANDS ---------------------------------------------------------------------------- 2,418 >NORWAY: 2.9% 201,000 Den Norske Bank 992 BANK ---------------------------------------------------------------------------- >FRANCE/BELGIUM: 7.4% 25,000 Neopost (b) 1,064 POSTAGE METER MACHINES 35,000 Euronext 869 TRADING SERVICES FOR FINANCIAL MARKETS 14,000 Essilor International 565 EYEGLASS LENSES ---------------------------------------------------------------------------- 2,498 >UNITED KINGDOM/IRELAND: 33.9% 160,000 Anglo Irish Bank (Ireland) 1,417 CORPORATE LENDING: PRIVATE BANKING 90,000 Kerry Group (Ireland) 1,393 FOOD INGREDIENTS 13,000 Depfa Bank (Ireland) 1,013 INTERNATIONAL PUBLIC SECTOR FINANCE 185,000 Compass Group 999 INTERNATIONAL CONCESSION & CONTRACT CATERER 200,000 BG Group 888 OIL & GAS PRODUCER 190,000 Hit Entertainment 776 CHILDREN'S TELEVISION SHOWS 170,000 Grafton Group (Ireland) 753 BUILDERS, WHOLESALERS & DIY RETAILING 90,000 Reed Elsevier 750 SCIENTIFIC, LEGAL, EDUCATION & BUSINESS PUBLISHER 60,000 British Sky Broadcasting (b) 666 DIGITAL SATELLITE BROADCASTING 90,000 Bunzl 632 DISTRIBUTION OF DISPOSABLE PRODUCTS TO FOOD INDUSTRY 100,000 Smith & Nephew 576 MEDICAL EQUIPMENT & SUPPLIES 45,000 Exel 463 GLOBAL LOGISTICS & FREIGHT FORWARDING 18,000 Cobham 344 AEROSPACE 40,000 Amersham 301 HEALTH & BIOSCIENCES 270,000 Marconi (b) 274 TELECOMMUNICATIONS EQUIPMENT 15,000 Irish Life & Permanent (Ireland) 162 SAVINGS PRODUCTS ---------------------------------------------------------------------------- 11,407 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >SWITZERLAND: 8.6% 1,700 Synthes-Stratec $ 1,224 PRODUCTS FOR ORTHOPEDIC SURGERY 1,700 Givaudan 717 INDUSTRIAL FRAGRANCES & FLAVORS 4,000 Schindler 645 ELEVATOR MANUFACTURER & SERVICE PROVIDER 1,000 Geberit International 309 PLUMBING SUPPLIES ---------------------------------------------------------------------------- 2,895 >ITALY: 4.3% 230,000 Parmalat Finanziaria 725 DAIRY PRODUCER 65,000 Autogrill 710 RESTAURANTS & CATERING FOR TRAVELERS ---------------------------------------------------------------------------- 1,435 >SPAIN: 2.3% 60,000 Red Electrica 787 SPANISH POWER GRID ---------------------------------------------------------------------------- >NETHERLANDS: 1.0% 28,000 Wolters Kluwer 338 LEGAL & BUSINESS PUBLISHER ---------------------------------------------------------------------------- >LUXEMBOURG: 2.7% 35,000 Tenaris (b) 892 STEEL PIPE FOR OIL WELLS & PIPELINES ---------------------------------------------------------------------------- ----------- EUROPE: TOTAL 23,662 ---------------------------------------------------------------------------- ASIA: 14.0% >HONG KONG: 3.2% 300,000 TVB 1,071 TELEVISION PROGRAMMING & BROADCASTING ---------------------------------------------------------------------------- >JAPAN: 8.7% 10,000 Hoya 690 OPTO-ELECTRICAL COMPONENTS & EYEGLASS LENSES 40,000 Terumo 666 MEDICAL SUPPLIES 8,000 Nidec 529 ELECTRIC MOTORS 25,000 Daito Trust Construction 527 APARTMENT BUILDER 10,000 USS 507 USED CAR AUCTIONEER ---------------------------------------------------------------------------- 2,919 >SINGAPORE: 2.1% 78,000 Venture 713 ELECTRONIC MANUFACTURING SERVICES ---------------------------------------------------------------------------- ----------- ASIA: TOTAL 4,703 44 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- OTHER COUNTRIES: 11.0% >AUSTRALIA: 2.8% 260,000 Lion Nathan $936 BEER BREWER/DISTRIBUTOR ---------------------------------------------------------------------------- >CANADA: 8.2% 30,000 Talisman Energy 1,361 OIL & GAS PRODUCER 64,000 Corus Entertainment (b) 1,074 CATV PROGRAMMING 10,000 Power Financial 323 LIFE INSURANCE & MUTUAL FUNDS ---------------------------------------------------------------------------- 2,758 ----------- OTHER: TOTAL 3,694 ----------- TOTAL COMMON STOCKS: 95.3% 32,059 (COST: $27,641) Principal Amount(000) Value (000) ---------------------------------------------------------------------------- SHORT-TERM OBLIGATIONS: 3.0% $ 1,018 Repurchase Agreement with State Street Bank & Trust Co., dated 6/30/03, due 7/01/03 at 1.10%, collateralized by Federal National Mortgage Association maturing 1/28/05, market value $1,039 (repurchase proceeds: $1,018) $ 1,018 ---------------------------------------------------------------------------- (AMORTIZED COST: $1,018) 1,018 ----------- TOTAL INVESTMENTS: 98.3% 33,077 (COST: $28,659) (a) CASH AND OTHER ASSETS LESS LIABILITIES: 1.7% 561 ----------- TOTAL NET ASSETS: 100% $ 33,638 ============================================================================ -------------------------------------------------------------------------------- >Notes to Statement of Investments (in thousands) (a) At June 30, 2003, for federal income tax purposes cost of investments is the same and net unrealized appreciation was $4,418, consisting of gross unrealized appreciation of $4,811 and gross unrealized depreciation of $393. (b) Non-income producing security. (c) At June 30, 2003, $12,229 or 36.4% of the Fund's net assets was denominated in Euro currency. 45 LIBERTY ACORN FOREIGN FORTY >PORTFOLIO DIVERSIFICATION (UNAUDITED) At June 30, 2003, the Fund's portfolio investments as a percent of net assets was diversified as follows: VALUE (000) PERCENT ------------------------------------------------------------------------- >INFORMATION TECHNOLOGY Television Programming $ 1,850 5.5% Financial Processors 1,771 5.3 Television Broadcasting 1,737 5.2 Computer Hardware and Related Equipment 1,593 4.7 Publishing 1,088 3.2 Contract Manufacturing 713 2.1 Semiconductors and Related Equipment 690 2.1 ------------------------------------------------------------------------- 9,442 28.1 >HEALTH CARE Medical Equipment 2,364 7.0 Hospital Management 1,206 3.6 Hospital/ Laboratory Supplies 967 2.9 ------------------------------------------------------------------------- 4,537 13.5 >CONSUMER GOODS/SERVICES Food 2,118 6.3 Restaurants 1,709 5.1 Beverage 936 2.8 Goods Distribution 507 1.5 Nondurables 310 0.9 ------------------------------------------------------------------------- 5,580 16.6 >FINANCE Banks 3,422 10.2 Money Management 323 0.9 Insurance 162 0.5 ------------------------------------------------------------------------- 3,907 11.6 VALUE (000) PERCENT ------------------------------------------------------------------------- >INDUSTRIAL GOODS/SERVICES Other Industrial Services $ 1,108 3.3% Steel 893 2.7 Construction 753 2.2 Specialty Chemicals 717 2.1 Outsourcing and Training Services 632 1.9 Electrical Components 618 1.8 Industrial Materials 309 0.9 ------------------------------------------------------------------------- 5,030 14.9 >ENERGY/MINERALS Oil/Gas Producers 2,249 6.7 ------------------------------------------------------------------------- 2,249 6.7 >OTHER Regulated Utilities 787 2.3 Real Estate 527 1.6 ------------------------------------------------------------------------- 1,314 3.9 -------------------------- TOTAL COMMON STOCKS: 32,059 95.3 SHORT-TERM OBLIGATIONS: 1,018 3.0 -------------------------- TOTAL INVESTMENTS: 33,077 98.3 CASH AND OTHER ASSETS LESS LIABILITIES: 561 1.7 ------------------------------------------------------------------------- NET ASSETS: $ 33,638 100.0% ========================================================================= 46 LIBERTY ACORN TWENTY >MAJOR PORTFOLIO CHANGES IN THE SECOND QUARTER (UNAUDITED) NUMBER OF SHARES -------------------------- 03/31/03 06/30/03 Additions ------------------------------------------------------------------------- INFORMATION Electronic Arts 105,000 240,000 Interpublic Group 0 1,800,000 JD Edwards 310,000 550,000 Moody's 220,000 235,000 Synopsys 240,000 330,000 Tektronix 225,000 360,000 ------------------------------------------------------------------------- HEALTH CARE First Health Group 700,000 1,330,000 Guidant 500,000 600,000 Lincare Holdings 265,000 385,000 Techne 160,000 340,000 ------------------------------------------------------------------------- CONSUMER GOODS/SERVICES Abercrombie & Fitch 200,000 330,000 Coach 0 240,000 Costco 280,000 400,000 Harley-Davidson 205,000 400,000 Herman Miller 0 780,000 International Speedway Motors 185,000 260,000 Mohawk Industries 160,000 270,000 Safeway 0 650,000 ------------------------------------------------------------------------- FINANCE Associated Banc-Corp 330,000 410,000 SEI Investments 175,000 260,000 TCF Financial 290,000 390,000 ------------------------------------------------------------------------- INDUSTRIAL GOODS/SERVICES Expeditors International of Washington 370,000 465,000 NUMBER OF SHARES -------------------------- 03/31/03 06/30/03 Sales ------------------------------------------------------------------------- INFORMATION Liberty Media 1,950,000 0 Waters 170,000 0 ------------------------------------------------------------------------- HEALTH CARE IMS Health 485,000 0 ------------------------------------------------------------------------- CONSUMER GOODS/SERVICES Jones Apparel 165,000 0 47 LIBERTY ACORN TWENTY >STATEMENT OF INVESTMENTS (UNAUDITED) JUNE 30, 2003 NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- COMMON STOCKS: 92.1% ---------------------------------------------------------------------------- INFORMATION: 25.9% >INSTRUMENTATION: 2.0% 360,000 Tektronix (b) $ 7,776 ANALYTICAL INSTRUMENTS ---------------------------------------------------------------------------- >GAMING EQUIPMENT: 2.6% 100,000 International Game Technology 10,233 SLOT MACHINES & PROGRESSIVE JACKPOTS ---------------------------------------------------------------------------- >CONSUMER SOFTWARE: 4.6% 240,000 Electronic Arts (b) 17,757 ENTERTAINMENT SOFTWARE ---------------------------------------------------------------------------- >BUSINESS SOFTWARE: 7.3% 330,000 Synopsys (b) 20,410 SOFTWARE FOR DESIGNING SEMICONDUCTOR CHIPS 550,000 JD Edwards (b) 7,881 MID MARKET ERP & SUPPLY CHAIN SOFTWARE ---------------------------------------------------------------------------- 28,291 >ADVERTISING: 6.2% 1,800,000 Interpublic Group 24,084 ADVERTISING ---------------------------------------------------------------------------- >BUSINESS INFORMATION: 3.2% 235,000 Moody's 12,387 RATINGS SERVICE FOR CREDIT OBLIGATIONS ---------- INFORMATION: TOTAL 100,528 ---------------------------------------------------------------------------- HEALTH CARE: 22.1% >MEDICAL EQUIPMENT: 6.8% 600,000 Guidant 26,634 STENTS, DEFIBRILLATORS & OTHER CARDIAC MEDICAL DEVICES ---------------------------------------------------------------------------- >SERVICES: 12.6% 1,330,000 First Health Group (b) 36,708 PPO NETWORK 385,000 Lincare Holdings (b) 12,131 HOME HEALTH CARE SERVICES ---------------------------------------------------------------------------- 48,839 >HOSPITAL/LABORATORY SUPPLIES: 2.7% 340,000 Techne (b) 10,316 CYTOKINES, ANTIBODIES, OTHER REAGENTS FOR LIFE SCIENCES ---------------------------------------------------------------------------- ---------- HEALTH CARE: TOTAL 85,789 ---------------------------------------------------------------------------- CONSUMER GOODS/SERVICES: 27.3% >LEISURE VEHICLES: 4.1% 400,000 Harley-Davidson 15,944 MOTORCYCLES & RELATED MERCHANDISE ---------------------------------------------------------------------------- NUMBER OF SHARES VALUE (000) ---------------------------------------------------------------------------- >RETAIL: 9.6% 400,000 Costco (b) $ 14,640 WAREHOUSE SUPERSTORES 650,000 Safeway (b) 13,299 RETAIL FOOD & DRUG STORES 330,000 Abercrombie & Fitch (b) 9,375 TEEN APPAREL RETAILER ---------------------------------------------------------------------------- 37,314 >ENTERTAINMENT: 2.6% 260,000 International Speedway Motors 10,273 LARGEST MOTORSPORT RACETRACK OWNER & OPERATOR ---------------------------------------------------------------------------- FURNITURE & MANUFACTURERS: 11.0% 780,000 Herman Miller 15,764 OFFICE FURNITURE 270,000 Mohawk Industries (b) 14,993 CARPET & FLOORING 240,000 Coach (b) 11,938 DESIGNER & RETAILER OF BRANDED LEATHER ACCESSORIES ---------------------------------------------------------------------------- 42,695 ---------- CONSUMER GOODS/SERVICES: TOTAL 106,226 ---------------------------------------------------------------------------- FINANCE: 12.7% >BANKS: 7.9% 390,000 TCF Financial 15,538 GREAT LAKES BANK 410,000 Associated Banc-Corp 15,121 MIDWEST BANK ---------------------------------------------------------------------------- 30,659 >INSURANCE: 2.7% 41,000 Markel (b) 10,496 SPECIALTY INSURANCE ---------------------------------------------------------------------------- >MONEY MANAGEMENT: 2.1% 260,000 SEI Investments 8,320 MUTUAL FUND ADMINISTRATION & INVESTMENT MANAGEMENT ---------------------------------------------------------------------------- ---------- FINANCE: TOTAL 49,475 ---------------------------------------------------------------------------- INDUSTRIAL GOODS/SERVICES: 4.1% >LOGISTICS: 4.1% 465,000 Expeditors International of Washington 16,108 INTERNATIONAL FREIGHT FORWARDER ---------------------------------------------------------------------------- ---------- INDUSTRIAL GOODS/SERVICES: TOTAL 16,108 ---------- TOTAL COMMON STOCKS: 92.1% (COST: $308,864) 358,126 48 PRINCIPAL AMOUNT (000) VALUE (000) ---------------------------------------------------------------------------- SHORT-TERM OBLIGATIONS: 6.8% $ 18,000 Household Finance 1.03% Due 7/01/03 $ 17,999 8,231 Repurchase Agreement with State Street Bank & Trust Co., dated 6/30/03, due 7/01/03 at 1.10%, collateralized by Federal Home Loan Mortgage Notes maturing 1/28/05, market value $8,399 (repurchase proceeds: $8,231) 8,231 ---------------------------------------------------------------------------- (AMORTIZED COST: $26,230) 26,230 ---------- TOTAL INVESTMENTS: 98.9% 384,356 (COST: $335,094) (a) CASH AND OTHER ASSETS LESS LIABILITIES: 1.1% 4,356 ---------- TOTAL NET ASSETS: 100% $ 388,712 ---------------------------------------------------------------------------- >Notes to Statement of Investments (in thousands) (a) At June 30, 2003, for federal income tax purposes cost of investments is the same and net unrealized appreciation was $49,262, consisting of gross unrealized appreciation of $51,895 and gross unrealized depreciation of $2,633. (b) Non-income producing security. 49 LIBERTY ACORN FAMILY OF FUNDS >STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
LIBERTY LIBERTY LIBERTY LIBERTY LIBERTY ACORN ACORN ACORN ACORN ACORN JUNE 30, 2003 FUND INTERNATIONAL USA FOREIGN FORTY TWENTY ------------------- ------------------ ---------------- -------------- ---------------- (IN THOUSANDS) ASSETS Investments, at value (cost: Liberty Acorn Fund $5,739,111; Liberty Acorn International $1,262,834; Liberty Acorn USA $375,413; Liberty Acorn Foreign Forty $28,659; Liberty Acorn Twenty $335,094) $ 7,551,824 $ 1,358,921 $ 425,161 $ 33,077 $ 384,356 Cash -- 71 1 1 496 Foreign currency (cost: Liberty Acorn Fund $575; Liberty Acorn International $13,090, Liberty Acorn Foreign Forty $50) 577 13,088 -- 50 -- Receivable for: Investments sold 5,969 8,925 -- 433 -- Fund shares sold 30,538 1,232 1,538 26 5,584 Dividends and interest 3,928 2,196 44 125 11 Expense reimbursement due from Advisor -- -- -- 10 -- Deferred Trustees' Compensation Investments 686 317 48 -- -- Other assets 34 8 2 -- 30 ------------------- ------------------ ---------------- -------------- ---------------- Total Assets 7,593,556 1,384,758 426,794 33,722 390,477 LIABILITIES Payable to custodian bank 509 -- -- -- -- Payable for: Investments purchased 19,264 7,221 96 -- 1,393 Fund shares redeemed 6,261 1,461 1,588 11 308 Foreign capital gains tax 486 21 -- -- -- Custodian 60 181 10 8 -- Management fee -- 2 -- -- -- Administration fee 4 -- -- -- -- 12b-1 Service & Distribution fees 177 -- 2 -- 23 Legal and audit fees 78 71 8 18 14 Reports to shareholders 219 126 39 22 27 Deferred Trustees' fees 686 317 48 -- -- Transfer agent fee 884 201 94 25 -- Other liabilities 178 217 4 -- -- ------------------- ------------------ ---------------- -------------- ---------------- Total Liabilities 28,806 9,818 1,889 84 1,765 ------------------- ------------------ ---------------- -------------- ---------------- NET ASSETS $ 7,564,750 $ 1,374,940 $ 424,905 $ 33,638 $ 388,712 =================== ================== ================ ============== ================ COMPOSITION OF NET ASSETS Paid in capital $ 5,735,670 $ 1,557,140 $ 395,001 $ 68,620 $ 332,222 Undistributed net investment income (Accumulated net investment loss) 3,520 13,287 (1,743) 173 (1,091) Accumulated net realized gain (loss) 13,719 (284,480) (18,101) (39,588) 8,319 Net unrealized appreciation (depreciation) on: Investments (net of unrealized PFIC gains of $409 for Liberty Acorn Fund and $7,225 for Liberty Acorn International Fund) 1,812,304 88,862 49,748 4,418 49,262 Foreign currency transactions (463) 131 -- 15 -- ------------------- ------------------ ---------------- -------------- ---------------- NET ASSETS $ 7,564,750 $ 1,374,940 $ 424,905 $ 33,638 $ 388,712 =================== ================== ================ ============== ================ Net asset value per share-- Class A (a) $ 17.87 $ 17.32 $ 16.97 $ 11.25 $ 16.19 (Net assets/shares) ($1,115,904/62,438) ($41,071/2,371) ($46,021/2,711) ($2,262/201) ($93,436/5,772) Maximum offering price per share-- Class A (b) $ 18.96 $ 18.38 $ 18.01 $ 11.94 $ 17.18 (Net asset value per share/ front-end sales charge) ($17.87/.9425) ($17.32/.9425) ($16.97/.9425) ($11.25/.9425) ($16.19/.9425) Net asset value and offering price per share-- Class B (a) $ 17.57 $ 17.07 $ 16.71 $ 11.04 $ 15.91 (Net assets/shares) ($830,970/47,300) ($26,745/1,567) ($44,679/2,673) ($1,850/167) ($62,714/3,942) Net asset value and offering price per share-- Class C (a) $ 17.57 $ 17.07 $ 16.71 $ 11.06 $ 15.91 (Net assets/shares) ($545,231/31,040) ($16,379/959) ($22,129/1,324) ($3,067/278) ($27,111/1,704) Net asset value, offering price and redemption price per share-- Class Z $ 18.11 $ 17.43 $ 17.14 $ 11.34 $ 16.36 (Net assets/shares) ($5,072,645/280,041) ($1,290,745/74,055) ($312,076/18,202) ($26,459/2,333) ($205,451/12,559)
(a) Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (b) On sales of $50,000 or more the offering price is reduced. See accompanying notes to financial statements. 50 LIBERTY ACORN FAMILY OF FUNDS > STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2003
LIBERTY LIBERTY LIBERTY LIBERTY LIBERTY ACORN ACORN ACORN ACORN ACORN (IN THOUSANDS) FUND INTERNATIONAL USA FOREIGN FORTY TWENTY ------------ ------------- --------- ------------- --------- INVESTMENT INCOME: Dividend income $ 31,190 $ 23,170 $ 569 $ 480 $ 571 Interest income 3,213 418 141 9 101 ------------ ------------- --------- ------------- --------- 34,403 23,588 710 489 672 Foreign taxes withheld (870) (2,435) -- (45) -- ------------ ------------- --------- ------------- --------- Total Investment Income 33,533 21,153 710 444 672 EXPENSES: Management fees 20,805 5,480 1,617 151 1,071 Administration fees 1,549 324 87 8 60 12b-1 Service & Distribution fees 6,968 249 344 26 379 Custody fees 247 506 5 22 4 Legal and audit fees 151 65 20 16 14 Transfer agent fee 3,250 552 244 43 154 Trustees' fee 100 32 4 1 1 Registration and blue sky 221 39 40 39 43 Reports to shareholders 216 110 36 19 24 Other expenses 108 34 6 1 2 ------------ ------------- --------- ------------- --------- Total expenses 33,615 7,391 2,403 326 1,752 Less custody fees paid indirectly (1) --* --* --* --* Less reimbursement of expenses by Advisor -- -- -- (69) -- ------------ ------------- --------- ------------- --------- Net Expenses 33,614 7,391 2,403 257 1,752 ------------ ------------- --------- ------------- --------- Net Investment Income (Loss) (81) 13,762 (1,693) 187 (1,080) ------------ ------------- --------- ------------- --------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS: Net realized gain (loss) on: Investments 69,836 (60,137) 5,769 (1,696) 8,871 Foreign currency transactions (153) (7) -- 9 -- ------------ ------------- --------- ------------- --------- Net realized gain (loss) 69,683 (60,144) 5,769 (1,687) 8,871 ============ ============= ========= ============= ========= Net change in net unrealized appreciation/ depreciation on: Investments 968,294 218,808 63,661 4,600 34,073 Foreign currency transactions (202) 315 -- 1 -- ------------ ------------- --------- ------------- --------- Net change in unrealized appreciation/ depreciation 968,092 219,123 63,661 4,601 34,073 ============ ============= ========= ============= ========= Net realized and unrealized gain 1,037,775 158,979 69,430 2,914 42,944 ------------ ------------- --------- ------------- --------- Net Increase in Net Assets resulting from Operations $ 1,037,694 $ 172,741 $ 67,737 $ 3,101 $ 41,864 ============ ============= ========= ============= =========
* Rounds to less than $500. See accompanying notes to financial statements. 51 LIBERTY ACORN FAMILY OF FUNDS > STATEMENTS OF CHANGES IN NET ASSETS
LIBERTY LIBERTY ACORN LIBERTY ACORN FUND INTERNATIONAL ACORN USA (UNAUDITED) (UNAUDITED) (UNAUDITED) SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED INCREASE (DECREASE) IN NET ASSETS JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, ----------- ------------ ----------- ------------ ----------- ------------ (IN THOUSANDS) 2003 2003 2002 2003 2002 2003 OPERATIONS: Net investment income (loss) $ (81) $ (5,079) $ 13,762 $ 11,854 $ (1,693) $ (2,949) Net realized gain (loss) on investments, forward foreign currency contracts and foreign currency transactions 69,683 (57,609) (60,144) (88,618) 5,769 (17,552) Change in net unrealized appreciation (depreciation)of investments and foreign currency transactions 968,092 (778,655) 219,123 (188,391) 63,661 (56,039) ----------- ------------ ----------- ------------ ----------- ------------ Net Increase (Decrease) from Operations 1,037,694 (841,343) 172,741 (265,155) 67,737 (76,540) DISTRIBUTION TO SHAREHOLDERS FROM: Net investment income -- Class A -- -- (106) (24) -- -- Net investment income -- Class Z -- -- (5,829) (9,265) -- -- ----------- ------------ ----------- ------------ ----------- ------------ Total Distribution to Shareholders -- -- (5,935) (9,289) -- -- SHARE TRANSACTIONS: Subscriptions--Class A 349,996 645,380 27,305 264,875 15,797 35,469 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- -- -- -- -- 22 Distributions reinvested -- Class A -- -- 80 17 -- -- Redemptions-- Class A (105,500) (134,555) (24,566) (251,764) (9,095) (15,616) ----------- ------------ ----------- ------------ ----------- ------------ Net Increase (Decrease) -- Class A 244,496 510,825 2,819 13,128 6,702 19,875 Subscriptions-- Class B 147,145 490,366 4,559 15,847 5,097 33,711 Redemptions-- Class B (45,126) (67,763) (3,376) (6,194) (4,823) (13,914) ----------- ------------ ----------- ------------ ----------- ------------ Net Increase (Decrease) -- Class B 102,019 422,603 1,183 9,653 274 19,797 Subscriptions-- Class C 135,132 330,698 9,443 43,176 2,748 14,839 Redemptions-- Class C (37,166) (53,861) (9,612) (40,348) (2,414) (5,070) ----------- ------------ ----------- ------------ ----------- ------------ Net Increase (Decrease) -- Class C 97,966 276,837 (169) 2,828 334 9,769 Subscriptions-- Class Z 626,204 917,983 132,423 649,314 59,485 125,400 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- -- -- -- -- 10,075 Distributions reinvested -- Class Z -- -- 5,337 8,562 -- -- Redemptions-- Class Z (284,270) (509,628) (244,903) (768,033) (33,150) (75,563) ----------- ------------ ----------- ------------ ----------- ------------ Net Increase (Decrease) -- Class Z 341,934 408,355 (107,143) (110,157) 26,335 59,912 ----------- ------------ ----------- ------------ ----------- ------------ Net Increase (Decrease) from Share Transactions 786,415 1,618,620 (103,310) (84,548) 33,645 109,353 ----------- ------------ ----------- ------------ ----------- ------------ Total Increase (Decrease) in Net Assets 1,824,109 777,277 63,496 (358,992) 101,382 32,813 NET ASSETS: Beginning of period 5,740,641 4,963,364 1,311,444 1,670,436 323,523 290,710 ----------- ------------ ----------- ------------ ----------- ------------ End of period $ 7,564,750 $ 5,740,641 $ 1,374,940 $ 1,311,444 $ 424,905 $ 323,523 =========== ============ =========== ============ =========== ============ UNDISTRIBUTED NET INVESTMENT INCOME (ACCUMULATED NET INVESTMENT LOSS OR OVERDISTRIBUTED NET INVESTMENT INCOME) $ 3,520 $ 3,601 $ 13,287 $ 5,460 $ (1,743) $ (50) =========== ============ =========== ============ =========== ============
LIBERTY ACORN LIBERTY FOREIGN FORTY ACORN TWENTY (UNAUDITED) (UNAUDITED) SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED INCREASE (DECREASE) IN NET ASSETS JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, ----------- ------------ ----------- ------------ (IN THOUSANDS) 2003 2002 2003 2002 OPERATIONS: Net investment income (loss) $ 187 $ 39 $ (1,080) $ (1,224) Net realized gain (loss) on investments, forward foreign currency contracts and foreign currency transactions (1,687) (6,845) 8,871 (508) Change in net unrealized appreciation (depreciation)of investments and foreign currency transactions 4,601 1,151 34,073 (7,857) ----------- ------------ ----------- ------------ Net Increase (Decrease) from Operations 3,101 (5,655) 41,864 (9,589) DISTRIBUTION TO SHAREHOLDERS FROM: Net investment income -- Class A -- -- -- -- Net investment income -- Class Z (19) -- -- -- ----------- ------------ ----------- ------------ Total Distribution to Shareholders (19) -- -- -- SHARE TRANSACTIONS: Subscriptions--Class A 1,209 54,708 63,814 31,504 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- -- -- -- Distributions reinvested -- Class A -- -- -- -- Redemptions-- Class A (1,774) (54,724) (11,671) (10,199) ----------- ------------ ----------- ------------ Net Increase (Decrease) -- Class A (565) (16) 52,143 21,305 Subscriptions-- Class B 555 2,363 27,206 27,565 Redemptions-- Class B (685) (2,245) (4,447) (5,862) ----------- ------------ ----------- ------------ Net Increase (Decrease) -- Class B (130) 118 22,759 21,703 Subscriptions-- Class C 2,268 5,117 14,743 8,806 Redemptions-- Class C (2,401) (5,510) (1,246) (2,268) ----------- ------------ ----------- ------------ Net Increase (Decrease) -- Class C (133) (393) 13,497 6,538 Subscriptions-- Class Z 19,902 72,837 106,843 46,496 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- -- -- -- Distributions reinvested -- Class Z 19 -- -- -- Redemptions-- Class Z (21,889) (79,344) (16,704) (17,872) ----------- ------------ ----------- ------------ Net Increase (Decrease) -- Class Z (1,968) (6,507) 90,139 28,624 ----------- ------------ ----------- ------------ Net Increase (Decrease) from Share Transactions (2,796) (6,798) 178,538 78,170 ----------- ------------ ----------- ------------ Total Increase (Decrease) in Net Assets 286 (12,453) 220,402 68,581 NET ASSETS: Beginning of period 33,352 45,805 168,310 99,729 ----------- ------------ ----------- ------------ End of period $ 33,638 $ 33,352 $ 388,712 $ 168,310 =========== ============ =========== ============ UNDISTRIBUTED NET INVESTMENT INCOME (ACCUMULATED NET INVESTMENT LOSS OR OVERDISTRIBUTED NET INVESTMENT INCOME) $ 173 $ 5 $ (1,091) $ (11) =========== ============ =========== ============
See accompanying notes to financial statements. 52-53 Spread LIBERTY ACORN FAMILY OF FUNDS > STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
LIBERTY LIBERTY ACORN LIBERTY ACORN FUND INTERNATIONAL ACORN USA (UNAUDITED) (UNAUDITED) (UNAUDITED) SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED CHANGES IN SHARES OF BENEFICIAL INTEREST: JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, ----------- ------------ ----------- ------------ ----------- ------------ (IN THOUSANDS) 2003 2002 2003 2002 2003 2002 Subscriptions-- Class A 21,908 38,478 1,770 15,488 1,022 2,124 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- -- -- -- -- 2 Shares issued in reinvestment and capital gains -- Class A -- -- 5 1 -- -- Less shares redeemed -- Class A (6,681) (8,482) (1,610) (14,677) (597) (1,009) ----------- ------------ ----------- ------------ ----------- ------------ Net Increase (Decrease) -- Class A 15,227 29,996 165 812 425 1,117 Subscriptions-- Class B 9,351 29,099 298 923 340 2,019 Less shares redeemed -- Class B (2,954) (4,407) (224) (376) (342) (937) ----------- ------------ ----------- ------------ ----------- ------------ Net Increase (Decrease) -- Class B 6,397 24,692 74 547 (2) 1,082 Subscriptions -- Class C 8,551 19,804 631 2,573 181 892 Less shares redeemed -- Class C (2,373) (3,475) (636) (2,396) (164) (335) ----------- ------------ ----------- ------------ ----------- ------------ Net Increase (Decrease) -- Class C 6,178 16,329 (5) 177 17 557 Subscriptions -- Class Z 38,473 54,769 8,580 38,166 3,898 7,498 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- -- -- -- -- 724 Shares issued in reinvestment and capital gains -- Class Z -- -- 313 484 -- -- Less shares redeemed -- Class Z (17,828) (31,314) (15,403) (45,408) (2,170) (4,844) ----------- ------------ ----------- ------------ ----------- ------------ Net Increase (Decrease) -- Class Z 20,645 23,455 (6,510) (6,758) 1,728 3,378 ----------- ------------ ----------- ------------ ----------- ------------ Net Increase (Decrease) in Shares of Beneficial Interest 48,447 94,472 (6,276) (5,222) 2,168 6,134 ----------- ------------ ----------- ------------ ----------- ------------
LIBERTY ACORN LIBERTY FOREIGN FORTY ACORN TWENTY (UNAUDITED) (UNAUDITED) SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED CHANGES IN SHARES OF BENEFICIAL INTEREST: JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, ----------- ------------ ----------- ------------ (IN THOUSANDS) 2003 2002 2003 2002 Subscriptions -- Class A 122 4,749 4,298 2,229 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- -- -- -- Shares issued in reinvestment and capital gains -- Class A -- -- -- -- Less shares redeemed -- Class A (176) (4,731) (805) (735) ----------- ------------ ----------- ------------ Net Increase (Decrease) -- Class A (54) 18 3,493 1,494 Subscriptions -- Class B 56 220 1,848 1,955 Less shares redeemed -- Class B (71) (211) (317) (431) ----------- ------------ ----------- ------------ Net Increase (Decrease) -- Class B (15) 9 1,531 1,524 Subscriptions -- Class C 232 459 997 630 Less shares redeemed -- Class C (243) (495) (88) (164) ----------- ------------ ----------- ------------ Net Increase (Decrease) -- Class C (11) (36) 909 466 Subscriptions -- Class Z 1,970 6,884 7,115 3,286 Proceeds from shares issued in connection with the tax-free transfer of assets from Stein Roe Small Company Growth Fund -- -- -- -- Shares issued in reinvestment and capital gains -- Class Z 2 -- -- -- Less shares redeemed -- Class Z (2,164) (7,419) (1,145) (1,263) ----------- ------------ ----------- ------------ Net Increase (Decrease) -- Class Z (192) (535) 5,970 2,023 ----------- ------------ ----------- ------------ Net Increase (Decrease) in Shares of Beneficial Interest (272) (544) 11,903 5,507 ----------- ------------ ----------- ------------
See accompanying notes to financial statements. 54-55 Spread LIBERTY ACORN FAMILY OF FUNDS > FINANCIAL HIGHLIGHTS
LIBERTY ACORN FUND (UNAUDITED) SIX MONTHS Class A Shares ENDED JUNE 30, YEAR ENDED DECEMBER 31, ----------- ------------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT 2003 2002 2001 2000(a) EACH PERIOD NET ASSET VALUE, BEGINNING OF PERIOD $ 15.34 $ 17.80 $ 17.19 $ 17.88 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (b) (0.02) (0.07) (0.05) 0.01 Net realized and unrealized gain (loss) 2.55 (2.39) 1.01 1.22 ----------- --------- --------- -------- Total from Investment Operations 2.53 (2.46) 0.96 1.23 ----------- --------- --------- -------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income -- -- -- (0.06) From net realized gains -- -- (0.35) (1.86) ----------- --------- --------- -------- Total Distributions Declared to Shareholders -- -- (0.35) (1.92) ----------- --------- --------- -------- NET ASSET VALUE, END OF PERIOD $ 17.87 $ 15.34 $ 17.80 $ 17.19 =========== ========= ========= ======== Total Return (c) 16.49%(d) (13.82)% 5.56% 7.40%(d) ----------- --------- --------- -------- RATIOS TO AVERAGE NET ASSETS Expenses (e) 1.34%(f) 1.42% 1.42% 1.25%(f)(g) Net investment income (loss) (e) (0.23)%(f) (0.45)% (0.33)% 0.17%(f)(g) Portfolio turnover rate 7%(d) 13% 20% 29%(d) Net assets at end of period (000'S) $ 1,115,904 $ 724,121 $ 306,405 $ 18,252
(a) Class A Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) The benefits derived from custody fees paid indirectly had no impact. (f) Annualized. (g) The ratios of expenses and net investment income to average net assets, previously reported as 1.03% and 0.39% respectively, were revised to reflect all class specific expenses in this period.
(UNAUDITED) SIX MONTHS ENDED Class B Shares JUNE 30, YEAR ENDED DECEMBER 31, ----------- ------------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT 2003 2002 2001 2000(a) EACH PERIOD NET ASSET VALUE, BEGINNING OF PERIOD $ 15.13 $ 17.67 $ 17.17 $ 17.88 INCOME FROM INVESTMENT OPERATIONS Net investment loss (b) (0.07) (0.17) (0.16) (0.01) Net realized and unrealized gain (loss) 2.51 (2.37) 1.01 1.22 ----------- --------- -------- -------- Total from Investment Operations 2.44 (2.54) 0.85 1.21 ----------- --------- -------- -------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income -- -- -- (0.06) From net realized gains -- -- (0.35) (1.86) ----------- --------- -------- -------- Total Distributions Declared to Shareholders -- -- (0.35) (1.92) ----------- --------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 17.57 $ 15.13 $ 17.67 $ 17.17 =========== ========= ======== ======== Total Return (c) 16.13%(d) (14.37)% 4.92% 7.27%(d) ----------- --------- -------- -------- RATIOS TO AVERAGE NET ASSETS Expenses (e) 1.99%(f) 2.07% 2.07% 1.90%(f)(g) Net investment loss (e) (0.88)%(f) (1.10)% (0.98)% (0.48)%(f)(g) Portfolio turnover rate 7%(d) 13% 20% 29%(d) Net assets at end of period (000'S) $ 830,970 $ 618,727 $286,422 $ 15,951
(a) Class B Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) The benefits derived from custody fees paid indirectly had no impact. (f) Annualized. (g) The ratios of expenses and net investment loss to average net assets, previously reported as 1.68% and (0.26)% respectively, were revised to reflect all class specific expenses in this period.
(UNAUDITED) SIX MONTHS Class C Shares ENDED JUNE 30, YEAR ENDED DECEMBER 31, ----------- ------------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING 2003 2002 2001 2000(a) THROUGHOUT EACH PERIOD NET ASSET VALUE, BEGINNING OF PERIOD $ 15.12 $ 17.66 $ 17.17 $ 17.88 INCOME FROM INVESTMENT OPERATIONS Net investment loss (b) (0.07) (0.17) (0.17) (0.01) Net realized and unrealized gain (loss) 2.52 (2.37) 1.01 1.22 ----------- --------- --------- ------- Total from Investment Operations 2.45 (2.54) 0.84 1.21 ----------- --------- --------- ------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income -- -- -- (0.06) From net realized gains -- -- (0.35) (1.86) ----------- --------- --------- ------- Total Distributions Declared to Shareholders -- -- (0.35) (1.92) ----------- --------- --------- ------- NET ASSET VALUE, END OF PERIOD $ 17.57 $ 15.12 $ 17.66 $ 17.17 =========== ========= ========= ======= Total Return (c) 16.20%(d) (14.38)% 4.86% 7.27%(d) ----------- --------- --------- ------- RATIOS TO AVERAGE NET ASSETS Expenses (e) 1.99%(f) 2.07% 2.07% 1.90%(f)(g) Net investment loss (e) (0.88)%(f) (1.10)% (0.98)% (0.48)%(f)(g) Portfolio turnover rate 7%(d) 13% 20% 29%(d) Net assets at end of period (000'S) $ 545,231 $ 376,024 $ 150,727 $ 8,510
(a) Class C Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) The benefits derived from custody fees paid indirectly had no impact. (f) Annualized. (g) The ratios of expenses and net investment loss to average net assets, previously reported as 1.68% and (0.26)% respectively, were revised to reflect all class specific expenses in this period. See accompanying notes to financial statements. 56 LIBERTY ACORN INTERNATIONAL
(UNAUDITED) SIX MONTHS Class A Shares ENDED JUNE 30, YEAR ENDED DECEMBER 31, ----------- ------------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000(a) NET ASSET VALUE, BEGINNING OF PERIOD $ 15.32 $ 18.35 $ 23.84 $ 28.67 INCOME FROM INVESTMENT OPERATIONS Net investment income (b) 0.12 0.05 0.01 0.02 Net realized and unrealized loss 1.93 (3.07) (5.11) (1.26) ----------- -------- -------- ------- Total from Investment Operations 2.05 (3.02) (5.10) (1.24) ----------- -------- -------- ------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income (0.05) (0.01) -- -- From net realized gains -- -- (0.39) (3.59) ----------- -------- -------- ------- Total Distributions Declared to Shareholders (0.05) (0.01) (0.39) (3.59) ----------- -------- -------- ------- NET ASSET VALUE, END OF PERIOD $ 17.32 $ 15.32 $ 18.35 $ 23.84 =========== ======== ======== ======= Total Return (c) 13.37%(d) (16.46)% (21.59)% (4.85)%(d) ----------- -------- -------- ------- RATIOS TO AVERAGE NET ASSETS Expenses (e) 1.66%(f) 1.56% 1.65% 1.26%(f)(g) Net investment income (e) 1.60%(f) 0.30% 0.03% 0.73%(f)(g) Portfolio turnover rate 22%(d) 52% 45% 63%(d) Net assets at end of period (000'S) $ 41,071 $ 33,806 $ 25,587 $10,323
(a) Class A Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) The benefits derived from custody fees paid indirectly had no impact. (f) Annualized. (g) The ratios of expenses and net investment income to average net assets, previously reported as 1.59% and 0.40% respectively, were revised to reflect all class specific expenses in this period.
(UNAUDITED) SIX MONTHS Class B Shares ENDED JUNE 30, YEAR ENDED DECEMBER 31, ----------- ------------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000(a) NET ASSET VALUE, BEGINNING OF PERIOD $ 15.11 $ 18.22 $ 23.81 $ 28.67 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (b) 0.07 (0.06) (0.12) 0.01 Net realized and unrealized loss 1.89 (3.05) (5.08) (1.28) ----------- -------- -------- ------- Total from Investment Operations 1.96 (3.11) (5.20) (1.27) ----------- -------- -------- ------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net realized gains -- -- (0.39) (3.59) ----------- -------- -------- ------- Total Distributions Declared to -- -- (0.39) (3.59) ----------- -------- -------- ------- Shareholders NET ASSET VALUE, END OF PERIOD $ 17.07 $ 15.11 $ 18.22 $ 23.81 =========== ======== ======== ======= Total Return (c) 12.97%(d) (17.07)% (22.04)% (4.97)%(d) ----------- -------- -------- ------- RATIOS TO AVERAGE NET ASSETS Expenses (e) 2.31%(f) 2.21% 2.30% 1.91%(f)(g) Net investment loss (e) 0.95%(f) (0.35)% (0.62)% 0.08%(f)(g) Portfolio turnover rate 22%(d) 52% 45% 63%(d) Net assets at end of period (000'S) $ 26,745 $ 22,560 $ 17,235 $ 5,675
(a) Class B Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) The benefits derived from custody fees paid indirectly had no impact. (f) Annualized. (g) The ratios of expenses and net investment loss to average net assets, previously reported as 2.24% and (0.25)% respectively, were revised to reflect all class specific expenses in this period.
(UNAUDITED) SIX MONTHS Class C Shares ENDED JUNE 30, YEAR ENDED DECEMBER 31, ----------- -------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000(a) NET ASSET VALUE, BEGINNING OF PERIOD $ 15.11 $ 18.21 $ 23.81 $ 28.67 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (b) 0.07 (0.06) (0.13) 0.01 Net realized and unrealized loss 1.89 (3.04) (5.08) (1.28) ----------- -------- -------- ------- Total from Investment Operations 1.96 (3.10) (5.21) (1.27) ----------- -------- -------- ------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net realized gains -- -- (0.39) (3.59) ----------- -------- -------- ------- Total Distributions Declared to Shareholders -- -- (0.39) (3.59) ----------- -------- -------- ------- NET ASSET VALUE, END OF PERIOD $ 17.07 $ 15.11 $ 18.21 $ 23.81 =========== ======== ======== ======= Total Return (c) 12.97%(d) (17.02)% (22.08)% (4.97)%(d) ----------- -------- -------- ------- RATIOS TO AVERAGE NET ASSETS Expenses (e) 2.31%(f) 2.21% 2.30% 1.91%(f)(g) Net investment loss (e) 0.95%(f) (0.35)% (0.62)% 0.08%(f)(g) Portfolio turnover rate 22%(d) 52% 45% 63%(d) Net assets at end of period (000'S) $16,379 $ 14,575 $ 14,327 $ 3,965
(a) Class C Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) The benefits derived from custody fees paid indirectly had no impact. (f) Annualized. (g) The ratios of expenses and net investment loss to average net assets, previously reported as 2.24% and (0.25)% respectively, were revised to reflect all class specific expenses in this period. See accompanying notes to financial statements. 57 LIBERTY ACORN FAMILY OF FUNDS > FINANCIAL HIGHLIGHTS CONTINUED
LIBERTY ACORN USA (UNAUDITED) SIX MONTHS Class A Shares ENDED JUNE 30, YEAR ENDED DECEMBER 31, ----------- ----------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000(a) NET ASSET VALUE, BEGINNING OF PERIOD $ 14.18 $ 17.50 $ 14.88 $ 13.83 INCOME FROM INVESTMENT OPERATIONS Net investment loss (b) (0.10) (0.19) (0.19) (0.01) Net realized and unrealized gain (loss) 2.89 (3.13) 2.96 1.06 ----------- -------- -------- ------- Total from Investment Operations 2.79 (3.32) 2.77 1.05 ----------- -------- -------- ------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net realized gains -- -- (0.15) -- ----------- -------- -------- ------- Total Distributions Declared to Shareholders -- -- (0.15) -- ----------- -------- -------- ------- NET ASSET VALUE, END OF PERIOD $ 16.97 $ 14.18 $ 17.50 $ 14.88 =========== ======== ======== ======= Total Return (c) 19.68%(d) (18.97)% 18.65% 7.59%(d) ----------- -------- -------- ------- RATIOS TO AVERAGE NET ASSETS Expenses 1.71%(e) 1.74%(f) 1.84%(f) 1.41%(e)(f)(g) Net investment loss (1.30)%(e) (1.21)%(f) (1.13)%(f) (0.73)%(e)(f)(g) Portfolio turnover rate 6%(d) 31% 24% 45%(d) Net assets at end of period (000'S) $46,021 $ 32,422 $ 20,455 $ 798
(a) Class A Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) Annualized. (f) The benefits derived from custody fees paid indirectly had no impact. (g) The ratios of expenses and net investment loss to average net assets, previously reported as 1.17% and (0.49)% respectively, were revised to reflect all class specific expenses in this period.
(UNAUDITED) SIX MONTHS Class B Shares ENDED JUNE 30, YEAR ENDED DECEMBER 31, ----------- ----------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000(a) NET ASSET VALUE, BEGINNING OF PERIOD $ 14.01 $ 17.40 $ 14.87 $ 13.83 INCOME FROM INVESTMENT OPERATIONS Net investment loss (b) (0.14) (0.29) (0.30) (0.03) Net realized and unrealized gain (loss) 2.84 (3.10) 2.96 1.07 ----------- -------- -------- ------- Total from Investment Operations 2.70 (3.39) 2.66 1.04 ----------- -------- -------- ------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net realized gains -- -- (0.13) -- ----------- -------- -------- ------- Total Distributions Declared to Shareholders -- -- (0.13) -- ----------- -------- -------- ------- NET ASSET VALUE, END OF PERIOD $ 16.71 $ 14.01 $ 17.40 $ 14.87 =========== ======== ======== ======= Total Return (c) 19.27%(d) (19.48)% 17.92% 7.52%(d) ----------- -------- -------- ------- RATIOS TO AVERAGE NET ASSETS Expenses 2.36%(e) 2.39%(f) 2.49%(f) 2.06%(e)(f)(g) Net investment loss (1.95)%(e) (1.86)%(f) (1.78)%(f) (1.38)%(e)(f)(g) Portfolio turnover rate 6%(d) 31% 24% 45%(d) Net assets at end of period (000'S) $ 44,679 $ 37,478 $ 27,722 $ 685
(a) Class B Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) Annualized. (f) The benefits derived from custody fees paid indirectly had no impact. (g) The ratios of expenses and net investment loss to average net assets, previously reported as 1.82% and (1.14)% respectively, were revised to reflect all class specific expenses in this period.
(UNAUDITED) SIX MONTHS Class C Shares ENDED JUNE 30, YEAR ENDED DECEMBER 31, ----------- ----------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000(a) NET ASSET VALUE, BEGINNING OF PERIOD $ 14.01 $ 17.40 $ 14.87 $ 13.83 INCOME FROM INVESTMENT OPERATIONS Net investment loss (b) (0.14) (0.29) (0.30) (0.03) Net realized and unrealized gain (loss) 2.84 (3.10) 2.96 1.07 ----------- -------- -------- ------- Total from Investment Operations 2.70 (3.39) 2.66 1.04 ----------- -------- -------- ------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net realized gains -- -- (0.13) -- ----------- -------- -------- ------- Total Distributions Declared to Shareholders -- -- (0.13) -- ----------- -------- -------- ------- NET ASSET VALUE, END OF PERIOD $ 16.71 $ 14.01 $ 17.40 $ 14.87 =========== ======== ======== ======= Total Return (c) 19.27%(d) (19.48)% 17.92% 7.52%(d) ----------- -------- -------- ------- RATIOS TO AVERAGE NET ASSETS Expenses 2.36%(e) 2.39%(f) 2.49%(f) 2.06%(e)(f)(g) Net investment loss (1.95)%(e) (1.86)%(f) (1.78)%(f) (1.38)%(e)(f)(g) Portfolio turnover rate 6%(d) 31% 24% 45%(d) Net assets at end of period (000'S) $ 22,129 $ 18,313 $ 13,049 $ 347
(a) Class C Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) Annualized. (f) The benefits derived from custody fees paid indirectly had no impact. (g) The ratios of expenses and net investment loss to average net assets, previously reported as 1.82% and (1.14)% respectively, were revised to reflect all class specific expenses in this period. See accompanying notes to financial statements. 58
LIBERTY ACORN FOREIGN FORTY (UNAUDITED) SIX MONTHS CLASS A SHARES ENDED JUNE 30, YEAR ENDED DECEMBER 31, ----------- --------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000(a) NET ASSET VALUE, BEGINNING OF PERIOD $ 10.24 $ 12.07 $ 17.15 $ 17.71 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (b) 0.05 (0.01) (0.09) (0.03) Net realized and unrealized loss 0.96 (1.82) (4.90) (0.53) ----------- ------- ------- ------- Total from Investment Operations 1.01 (1.83) (4.99) (0.56) ----------- ------- ------- ------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income -- -- (0.01) -- From net realized gains -- -- (0.08) -- ----------- ------- ------- ------- Total Distributions Declared to Shareholders -- -- (0.09) -- ----------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 11.25 $ 10.24 $ 12.07 $ 17.15 =========== ======= ======= ======= Total Return (c) 9.86%(d)(e) (15.16)%(e) (29.17)%(e) (3.16)%(d) ----------- ------- ------- ------- RATIOS TO AVERAGE NET ASSETS Expenses 1.80%(f) 1.80%(g) 1.80%(g) 1.68%(f)(g)(h) Net investment income (loss) 0.99%(f) (0.09)%(g) (0.67)%(g) (1.18)%(f)(g)(h) Reimbursement 0.55%(f) 0.33% 0.23% -- Portfolio turnover rate 50%(d) 102% 82% 79%(d) Net assets at end of period (000'S) $ 2,262 $ 2,612 $ 2,861 $ 3,172
(a) Class A Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) Had the Advisor not reimbursed a portion of expenses, total return would have been reduced. (f) Annualized. (g) The benefits derived from custody fees paid indirectly had no impact. (h) The ratios of expenses and net investment loss to average net assets, previously reported as 1.29% and (0.79)% respectively, were revised to reflect all class specific expenses in this period.
(UNAUDITED) SIX MONTHS Class B Shares ENDED JUNE 30, YEAR ENDED DECEMBER 31, ----------- --------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000(a) NET ASSET VALUE, BEGINNING OF PERIOD $ 10.08 $ 11.96 $ 17.13 $ 17.71 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (b) 0.02 (0.08) (0.18) (0.05) Net realized and unrealized loss 0.94 (1.80) (4.90) (0.53) ----------- ------- ------- ------- Total from Investment Operations 0.96 (1.88) (5.08) (0.58) ----------- ------- ------- ------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income -- -- (0.01) -- From net realized gains -- -- (0.08) -- ----------- ------- ------- ------- Total Distributions Declared to Shareholders -- -- (0.09) -- ----------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 11.04 $ 10.08 $ 11.96 $ 17.13 =========== ======= ======= ======= Total Return (c) 9.52%(d)(e) (15.72)%(e) (29.73)%(e) (3.27)%(d) ----------- ------- ------- ------- RATIOS TO AVERAGE NET ASSETS Expenses 2.45%(f) 2.45%(g) 2.45%(g) 2.33%(f)(g)(h) Net investment income (loss) 0.34%(f) (0.74)%(g) (1.32)%(g) (1.83)%(f)(g)(h) Reimbursement 0.55%(f) 0.33% 0.23% -- Portfolio turnover rate 50%(d) 102% 82% 79%(d) Net assets at end of period (000'S) $ 1,850 $ 1,835 $ 2,069 $ 1,551
(a) Class B Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) Had the Advisor not reimbursed a portion of expenses, total return would have been reduced. (f) Annualized. (g) The benefits derived from custody fees paid indirectly had no impact. (h) The ratios of expenses and net investment loss to average net assets, previously reported as 1.94% and (1.44)% respectively, were revised to reflect all class specific expenses in this period.
(UNAUDITED) SIX MONTHS Class C Shares ENDED JUNE 30, YEAR ENDED DECEMBER 31, ----------- --------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000(a) NET ASSET VALUE, BEGINNING OF PERIOD $ 10.09 $ 11.97 $ 17.14 $ 17.71 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (b) 0.02 (0.08) (0.18) (0.05) Net realized and unrealized loss 0.95 (1.80) (4.90) (0.52) ----------- ------- ------- ------- Total from Investment Operations 0.97 (1.88) (5.08) (0.57) ----------- ------- ------- ------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income -- -- (0.01) -- From net realized gains -- -- (0.08) -- ----------- ------- ------- ------- Total Distributions Declared to Shareholders -- -- (0.09) -- ----------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 11.06 $ 10.09 $ 11.97 $ 17.14 =========== ======= ======= ======= Total Return (c) 9.61%(d)(e) (15.71)%(e) (29.71)%(e) (3.22)%(d) ----------- ------- ------- ------- RATIOS TO AVERAGE NET ASSETS Expenses (f) 2.45%(f) 2.45%(g) 2.45%(g) 2.33%(f)(g)(h) Net investment income (loss) (f) 0.34%(f) (0.74)%(g) (1.32)%(g) (1.83)%(f)(g)(h) Reimbursement 0.55%(f) 0.33% 0.23% -- Portfolio turnover rate 50%(d) 102% 82% 79%(d) Net assets at end of period (000'S) $ 3,067 $ 2,915 $ 3,885 $ 3,399
(a) Class C Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) Had the Advisor not reimbursed a portion of expenses, total return would have been reduced. (f) Annualized. (g) The benefits derived from custody fees paid indirectly had no impact. (h) The ratios of expenses and net investment loss to average net assets, previously reported as 1.94% and (1.44)% respectively, were revised to reflect all class specific expenses in this period. See accompanying notes to financial statements. 59 LIBERTY ACORN FAMILY OF FUNDS > FINANCIAL HIGHLIGHTS CONTINUED
LIBERTY ACORN TWENTY (UNAUDITED) SIX MONTHS Class A Shares ENDED JUNE 30, YEAR ENDED DECEMBER 31, ----------- ---------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000(a) NET ASSET VALUE, BEGINNING OF PERIOD $ 13.93 $ 15.17 $ 14.12 $ 13.47 INCOME FROM INVESTMENT OPERATIONS Net investment loss (b) (0.07) (0.16) (0.10) (0.01) Net realized and unrealized gain (loss) 2.33 (1.08) 1.18 0.86 ----------- ------- -------- ------- Total from Investment Operations 2.26 (1.24) 1.08 0.85 ----------- ------- -------- ------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income -- -- -- (0.01) From net realized gains -- -- (0.03) (0.19) ----------- ------- -------- ------- Total Distributions Declared to Shareholders -- -- (0.03) (0.20) ----------- ------- -------- ------- NET ASSET VALUE, END OF PERIOD $ 16.19 $ 13.93 $ 15.17 $ 14.12 =========== ======= ======== ======= Total Return (c) 16.22%(d) (8.17)%(e) 7.65%(e) 6.32%(d) ----------- ------- -------- ------- RATIOS TO AVERAGE NET ASSETS Expenses 1.56%(f) 1.70%(g) 1.70% 1.61%(f)(g)(h) Net investment loss (1.00)%(f) (1.11)%(g) (0.79)% (0.62)%(f)(g)(h) Reimbursement -- 0.10% 0.18% -- Portfolio turnover rate 25%(d) 40% 82% 116%(d) Net assets at end of period (000'S) $ 93,436 $31,742 $ 11,900 $ 3,267
(a) Class A Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) Had the Advisor not reimbursed a portion of expenses, total return would have been reduced. (f) Annualized. (g) The benefits derived from custody fees paid indirectly had no impact. (h) The ratios of expenses and net investment loss to average net assets, previously reported as 0.76% and 0.23% respectively, were revised to reflect all class specific expenses in this period.
(UNAUDITED) SIX MONTHS Class B Shares ENDED JUNE 30, YEAR ENDED DECEMBER 31, ----------- ---------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000(a) NET ASSET VALUE, BEGINNING OF PERIOD $ 13.73 $ 15.05 $ 14.10 $ 13.47 INCOME FROM INVESTMENT OPERATIONS Net investment loss (b) (0.12) (0.25) (0.20) (0.01) Net realized and unrealized gain (loss) 2.30 (1.07) 1.18 0.84 ----------- -------- -------- ------- Total from Investment Operations 2.18 (1.32) 0.98 0.83 ----------- -------- -------- ------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income -- -- -- (0.01) From net realized gains -- -- (0.03) (0.19) ----------- -------- -------- ------- Total Distributions Declared to Shareholders -- -- (0.03) (0.20) ----------- -------- -------- ------- NET ASSET VALUE, END OF PERIOD $ 15.91 $ 13.73 $ 15.05 $ 14.10 =========== ======== ======== ======= Total Return (c) 15.88%(d) (8.77)%(e) 6.95%(e) 6.17%(d) ----------- -------- -------- ------- RATIOS TO AVERAGE NET ASSETS Expenses 2.21%(f) 2.35%(g) 2.35% 2.26%(f)(g)(h) Net investment loss (1.65)%(f) (1.76)%(g) (1.44)% (1.27)%(f)(g)(h) Reimbursement -- 0.10% 0.18% -- Portfolio turnover rate 25%(d) 40% 82% 116%(d) Net assets at end of period (000'S) $ 62,714 $ 33,106 $ 13,358 $ 4,249
(a) Class B Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) Had the Advisor not reimbursed a portion of expenses, total return would have been reduced. (f) Annualized. (g) The benefits derived from custody fees paid indirectly had no impact. (h) The ratios of expenses and net investment loss to average net assets, previously reported as 1.41% and (0.42)% respectively, were revised to reflect all class specific expenses in this period. See accompanying notes to financial statements. 60
LIBERTY ACORN TWENTY (continued) (UNAUDITED) SIX MONTHS Class C Shares ENDED JUNE 30, YEAR ENDED DECEMBER 31, ----------- ---------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002 2001 2000(a) NET ASSET VALUE, BEGINNING OF PERIOD $ 13.73 $ 15.05 $ 14.10 $ 13.47 INCOME FROM INVESTMENT OPERATIONS Net investment loss (b) (0.12) (0.25) (0.20) (0.01) Net realized and unrealized gain (loss) 2.30 (1.07) 1.18 0.84 ----------- -------- -------- ------- Total from Investment Operations 2.18 (1.32) 0.98 0.83 ----------- -------- -------- ------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income -- -- -- (0.01) From net realized gains -- -- (0.03) (0.19) ----------- -------- -------- ------- Total Distributions Declared to Shareholders -- -- (0.03) (0.20) ----------- -------- -------- ------- NET ASSET VALUE, END OF PERIOD $ 15.91 $ 13.73 $ 15.05 $ 14.10 =========== ======== ======== ======= Total Return (c) 15.88%(d) (8.77)%(e) 6.95%(e) 6.17%(d) ----------- -------- -------- ------- RATIOS TO AVERAGE NET ASSETS Expenses 2.21%(f) 2.35%(g) 2.35% 2.26%(f)(g)(h) Net investment loss (1.65)%(f) (1.76)%(g) (1.44)% (1.27)%(f)(g)(h) Reimbursement -- 0.10% 0.18% -- Portfolio turnover rate 25%(d) 40% 82% 116%(d) Net assets at end of period (000'S) $ 27,111 $ 10,919 $ 4,945 $ 1,070
(a) Class C Shares were initially offered on October 16, 2000. Per share data reflects activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Not annualized. (e) Had the Advisor not reimbursed a portion of expenses, total return would have been reduced. (f) Annualized. (g) The benefits derived from custody fees paid indirectly had no impact. (h) The ratios of expenses and net investment loss to average net assets, previously reported as 1.41% and (0.42)% respectively, were revised to reflect all class specific expenses in this period. See accompanying notes to financial statements. 61 Liberty Acorn Family of Funds > Notes to Financial Statements (Unaudited) 1. Nature of Operations Liberty Acorn Fund, Liberty Acorn International, Liberty Acorn USA, Liberty Acorn Foreign Forty, Liberty Acorn Twenty (the "Funds") are series of Liberty Acorn 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. The Funds may issue an unlimited number of shares. The Funds offer four classes of shares: Class A, Class B, Class C and Class Z. Class A shares are sold with a front-end sales charge. A contingent deferred sales charge is assessed to Class A shares purchased without an initial sales charge on redemptions made within eighteen months on an original purchase of $1 million to $25 million. Class B shares are subject to a contingent deferred sales charge. Class B shares will convert to Class A shares in three, four or eight years after purchase, depending on the program under which shares are purchased. Class C shares are subject to a contingent deferred sales charge on redemptions made within one year after purchase. Class Z shares are offered continuously at net asset value. There are certain restrictions on the purchase of Class Z shares. The financial highlights for Class Z shares are presented in a separate semi-annual report. The semi-annual report for Columbia Thermostat Fund, another Fund of the Trust, is presented on page 66 of this report. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are borne pro rata on the basis of the relative net assets of all classes, except each class bears certain expenses unique to that class such as distribution services, transfer agent, and certain other class specific expenses. Differences in class expenses may result in payment of different dividend distributions for each class. All the share classes of the Trust have equal rights with respect to voting subject to class specific arrangements. On July 26, 2002, Liberty Acorn USA acquired all of the net assets of the Stein Roe Small Company Growth Fund ("Stein Roe Fund") pursuant to a plan of reorganization approved by the Stein Roe Fund shareholders on June 28, 2002. The acquisition was accomplished by a tax-free exchange of 1,139,488 shares of the Stein Roe Fund (valued at $10,096,640) for 726,123 shares of Liberty Acorn USA. The net assets of the Stein Roe Fund were combined with the net assets of the Liberty Acorn USA on the acquisition date and included $3,125,202 of unrealized depreciation on investment. The aggregate net assets of Liberty Acorn USA immediately before and after acquisition were $306,945,066 and $317,041,706, respectively. 2. Significant Accounting Policies >Security valuation Investments are stated at fair 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 latest 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. >Repurchase agreements The Funds may engage in repurchase transactions. The Funds, through their custodians, receive delivery of underlying securities collateralizing repurchase agreements. The Funds' investment advisor determines that the value of the underlying securities is at all time at least equal to the resale price. In the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings. >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 and premiums (if any) 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. 62 >Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. >Financial instruments Each Fund may purchase or sell exchange-traded financial futures contracts, which are contracts that obligate that Fund to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Funds enter into such contracts to hedge a portion of their portfolio. Gains and losses are reflected as "Net Realized Gain (Loss) on Futures" in the Statements of Operations. Additionally, each Fund, except for Liberty Acorn USA and Liberty Acorn Twenty may engage in portfolio hedging with respect to changes in foreign 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. The Funds bear the market risk that arises from changes in the value of financial instruments and securities indices (futures contracts) or from changes in foreign currency rates (forward foreign currency contracts) and the credit risk should a counterparty fail to perform under such contracts. None of the Funds entered into any futures contracts or forward foreign currency contracts during the six months ended June 30, 2003. >Fund share valuation Fund shares are sold and redeemed on a continuing basis at net asset value. Net asset value per share is determined daily as of the close of trading on the New York Stock Exchange on each day the Exchange is open for trading. All income, expenses (other than the Class A, Class B and Class C shares 12b-1 service and distribution fees, and Class A, Class B, Class C and Class Z shares Transfer Agent fee) and realized and unrealized gains (losses) are allocated to each class proportionately based on relative net assets for purposes of determining the net asset value for each class of shares. >Custody fees Custody fees are reduced based on each Fund's cash balances maintained with the custodian. The amount is disclosed as a reduction of total expenses in the Statement of Operations. >Federal income taxes The Funds have complied with the special provisions of the Internal Revenue Code available to regulated investment companies and, in the manner provided therein, distribute all their taxable income, as well as any net realized gain on sales of investments and foreign currency transactions reportable for federal income tax purposes. Accordingly, the Fund paid no federal income taxes and no federal income tax provision was required. >Distributions to Shareholders Distributions to shareholders are recorded on the ex-date. 3. Federal Tax Information The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. For the year ended December 31, 2002,the following capital loss carryforwards are available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code: YEAR OF LIBERTY LIBERTY ACORN LIBERTY ACORN EXPIRATION ACORN FUND INTERNATIONAL USA -------------- ---------- --------------- -------------- (IN THOUSANDS) 2008 $ -- $ -- $ 126 2009 -- 111,479 3,634 2010 38,238 76,335 17,936 ------------- ---------- --------------- -------------- TOTAL $ 38,238 $ 187,814 $ 21,696 YEAR OF LIBERTY LIBERTY EXPIRATION FOREIGN FORTY TWENTY ------------- --------------- -------------- (IN THOUSANDS) 2009 $ 23,084 $ -- 2010 12,528 530 ------------- --------------- -------------- TOTAL $ 35,612 $ 530 During the year ended December 31, 2002, the capital loss carryforward acquired by Liberty Acorn USA as a result of the merger with Stein Roe Fund was $3,760. Expired capital loss carryforwards, if any, are recorded as a reduction of paid-in capital. 63 LIBERTY ACORN FAMILY OF FUNDS > NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED Under current tax rules, certain capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As of December 31, 2002, for federal income tax purposes, post-October losses were deferred to January 1, 2003 as follows: AMOUNT ----------------------------------------------------- (IN THOUSANDS) Liberty Acorn Fund $ 15,346 Liberty Acorn International 32,617 Liberty Acorn USA 1,921 Liberty Acorn Foreign Forty 1,251 Liberty Acorn Twenty -- ----------------------------------------------------- Liberty Acorn Fund and Liberty Acorn International have elected to mark-to-market their investments in Passive Foreign Investment Companies ("PFIC's") for federal income tax purposes. Gains and losses relating to PFIC's are treated as ordinary income for federal income tax purposes. A summary of transactions relating to PFIC's is as follows (in thousands): LIBERTY ACORN FUND -------------------------------------------------------- Cumulative unrealized appreciation on PFIC's recognized in prior years at December 31, 2001 $ -- Unrealized appreciation (depreciation) on PFIC's recognized for federal income tax purposes during 2002 409 Unrealized appreciation recognized in prior years on PFIC's sold during 2002 -- --------- Cumulative unrealized appreciation on PFIC's carried forward at December 31, 2002 $ 409 --------- LIBERTY ACORN INTERNATIONAL -------------------------------------------------------- Cumulative unrealized appreciation on PFIC's recognized in prior years at December 31, 2001 $ 8,026 Unrealized appreciation (depreciation) on PFIC's recognized for federal income tax purposes during 2002 319 Unrealized appreciation recognized in prior years on PFIC's sold during 2002 (1,120) --------- Cumulative unrealized appreciation on PFIC's carried forward at December 31, 2002 $ 7,225 --------- 4. Transactions with Affiliates The Funds' investment adviser, Liberty Wanger Asset Management, L.P. ("Liberty WAM"), a wholly-owned subsidiary of Columbia Management Group, Inc., which in turn is a wholly-owned subsidiary of Fleet National Bank, which in turn is a wholly-owned subsidiary of FleetBoston Financial Corporation ("Fleet"), furnishes continuing invest-ment supervision to each Fund and is responsible for the overall management of the Funds' business affairs. Under the Funds' investment management agreement, fees are accrued daily and paid monthly to Liberty WAM at the annual rates shown in the table below for each fund. LIBERTY ACORN FUND -------------------------------------------------------- Net asset value: For the first $700 million .75% Next $1.300 billion .70% Net assets in excess of $2 billion .65% LIBERTY ACORN INTERNATIONAL -------------------------------------------------------- Net asset value: For the first $100 million 1.20% Next $400 million .95% Net assets in excess of $500 million .75% LIBERTY ACORN USA -------------------------------------------------------- Net asset value: For the first $200 million .95% Net assets in excess of $200 million .90% LIBERTY ACORN FOREIGN FORTY -------------------------------------------------------- On average daily net assets: .95% LIBERTY ACORN TWENTY -------------------------------------------------------- On average daily net assets: .90% >Expense Limit Liberty WAM has voluntarily agreed to reimburse the ordinary operating expenses (exclusive of distribution and service fees, interest, taxes and extraordinary expenses, if any) exceeding 1.45% of the average annual net assets for Liberty Acorn Foreign Forty Class A, Class B and Class C shares and 1.35% of the average annual net assets for Liberty Acorn Twenty Class A, Class B and Class C shares, respectively. Liberty WAM has also contracted to provide administrative services to each Fund at an annual rate of .05% of average daily net assets. Liberty Funds Distributor, Inc. (the Distributor), an indirect subsidiary of Fleet, is each Fund's principal underwriter. For the six months ended June 30, 2003, Liberty Acorn Fund, Liberty Acorn International, Liberty Acorn USA, Liberty Acorn Foreign Forty and Liberty Acorn Twenty have been advised that the Distributor retained $470,252 underwriting discounts on the sale of Class A shares and received contingent deferred sales charges of $1,114,720, $50,178, $68,331, $7,656, and $67,192, respectively, on Class A, Class B and Class C share redemptions. Each Fund has adopted a 12b-1 plan which requires the payment of a monthly service fee to the Distributor equal to 0.25% annually, of the average daily net assets attributable to Class A, Class B and Class C shares. The plan also requires 64 the payment of a monthly distribution fee to the Distributor equal to 0.10%, 0.75%, 0.75% annually, of the average daily net assets attributable to Class A, Class B and Class C shares, respectively. The contingent deferred sales charges and the fees received from the 12b-1 plan are used principally as repayment to the Distributor for amounts paid by the Distributor to dealers who sold such shares. Liberty Funds Services, Inc. (the Transfer Agent), an affiliate of the Advisor, provides shareholder services to the Fund and receives reimbursement for certain out of pocket expenses. Transfer agent fees are comprised of 0.07% annually of the average daily net assets attributable to Class A, Class B and Class C shares plus charges based on the number of shareholder accounts and transactions. Certain officers and trustees of the Trust are also officers of Liberty WAM. The Trust makes no direct payments to its officers and trustees who are affiliated with Liberty WAM. Trustees' fees and expenses for the six months ended June 30, 2003 are as follows: SIX MONTHS ENDED JUNE 30, 2003 ----------------------------------------------- (IN THOUSANDS) Liberty Acorn Fund $ 100 Liberty Acorn International 32 Liberty Acorn USA 4 Liberty Acorn Foreign Forty 1 Liberty Acorn Twenty 1 ----------------------------------------------- The Trust provides a deferred compensation plan for its independent trustees. Under this deferred compensation plan, a trustee may elect to defer all or a portion of his or her compensation. Amounts deferred are retained by the Trust and represent an unfunded obligation of the Trust. The value of amounts deferred is determined by reference to the change in value of Class Z shares of one or more series of the Trust or a money market fund as specified by the participant. Benefits are payable upon retirement. During the six months ended June 30, 2003, the Funds engaged in purchases and sales transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions complied with Rule 17a-7 under the Investment Company Act of 1940 and were as follows: FUNDS PURCHASES SALES -------------------------------------------------------- (IN THOUSANDS) Liberty Acorn Fund $ 29,399 $ -- Liberty Acorn International 1,778 31,855 Liberty Acorn USA -- -- Liberty Acorn Foreign Forty -- 45 Liberty Acorn Twenty -- 512 -------------------------------------------------------- 5. Borrowing Arrangements The Trust participates in a $150,000,000 credit facility which was entered into to facilitate portfolio liquidity. No amounts were borrowed under this facility for the six months ended June 30, 2003. 6. Investment Transactions The aggregate cost of purchases and proceeds from sales other than short-term obligations for the six months ended June 30, 2003 were: LIBERTY ACORN FUND ------------------------------------------------------ (IN THOUSANDS) 2003 Investment securities Purchases $1,336,950 Proceeds from sales 426,789 ====================================================== LIBERTY ACORN INTERNATIONAL ------------------------------------------------------ (IN THOUSANDS) 2003 Investment securities Purchases $ 274,216 Proceeds from sales 344,080 ====================================================== LIBERTY ACORN USA ------------------------------------------------------ (IN THOUSANDS) 2003 Investment securities Purchases $ 45,375 Proceeds from sales 19,976 ====================================================== LIBERTY ACORN FOREIGN FORTY ------------------------------------------------------ (IN THOUSANDS) 2003 Investment securities Purchases $ 15,108 Proceeds from sales 17,047 ====================================================== LIBERTY ACORN TWENTY ------------------------------------------------------ (IN THOUSANDS) 2003 Investment securities Purchases $ 215,145 Proceeds from sales 58,315 ====================================================== 65 COLUMBIA THERMOSTAT FUND >STATEMENT OF INVESTMENTS (UNAUDITED), JUNE 30, 2003 NUMBER OF SHARES OR PRINCIPAL AMOUNT (000) VALUE (000) ----------------------------------------------------------------------- > STOCK FUNDS: 58.1% 454 Liberty Growth & Income Fund, Class Z $ 6,711 273 Liberty Growth Stock Fund, Class Z (b) 6,711 296 Liberty Acorn Fund, Class Z 5,374 246 Liberty Acorn Twenty, Class Z (b) 4,037 197 Liberty Select Value Fund, Class Z 4,035 ----------------------------------------------------------------------- TOTAL STOCK FUNDS (COST: $24,931) 26,868 > BOND FUNDS: 38.8% 977 Liberty Intermediate Bond Fund, Class Z 8,975 488 Liberty Federal Securities Fund, Class Z 5,389 412 Columbia High Yield Fund, Class Z 3,582 ----------------------------------------------------------------------- TOTAL BOND FUNDS (COST: $17,836) 17,946 > SHORT-TERM OBLIGATION: 1.1% $ 503 Repurchase agreement with State Street Bank & Trust Co., dated 06/30/03, due 07/01/03 at 1.10%, collateralized by Federal National Mortgage Association Notes maturing 03/24/05, market value $513 (repurchase proceeds $503) 503 ----------------------------------------------------------------------- (AMORTIZED COST: $503) 503 ----------- TOTAL INVESTMENTS: 98.0% (COST: $43,270) (a) 45,317 CASH AND OTHER ASSETS LESS LIABILITIES: 2.0% 944 ----------- TOTAL NET ASSETS: 100% $ 46,261 ======================================================================= >Notes to Statement of Investments (in thousands) (a) At June 30, 2003, for federal income tax purposes cost of investments is the same and net unrealized appreciation was $2,047, consisting of gross unrealized appreciation of $2,047 and gross unrealized depreciation of $0. (b) Non-income producing. 66 Columbia Thermostat Fund >Statements of Assets and Liabilities (Unaudited)
JUNE 30, 2003 ------------------------------------------------------------------------------------------- (IN THOUSANDS) ASSETS Investments, at value (cost: $43,270) $ 45,317 Cash 1 Receivable for: Fund shares sold 2,522 Dividends 57 Expense reimbursement due from Advisor 5 Other assets 56 ------------------------------------------------------------------------------------------- Total Assets 47,958 LIABILITIES Payable for: Investments purchased 1,635 Fund shares redeemed 13 12b-1 Service & Distribution fees 7 Legal and audit fee 26 Trustees' fee 5 Transfer agent fee 10 Other liabilities 1 ------------------------------------------------------------------------------------------- Total Liabilities 1,697 ------------------------------------------------------------------------------------------- NET ASSETS $ 46,261 =========================================================================================== COMPOSITION OF NET ASSETS Paid in capital $ 44,174 Undistributed net investment income 40 Net unrealized appreciation on investments 2,047 ------------------------------------------------------------------------------------------- NET ASSETS $ 46,261 =========================================================================================== Net asset value per share-- Class A (a) $ 11.33 (Net assets/shares) ($13,708/1,211) Maximum offering price per share-- Class A (b) $ 12.02 (Net asset value per share/front-end sales charge) ($11.33/0.9425) Net asset value and offering price per share-- Class B (a) $ 11.30 (Net assets/shares) ($17,589/1,556) Net asset value per share-- Class D (a) $ 11.30 (Net assets/shares) ($5,717/506) Maximum offering price per share-- Class D (b) $ 11.41 (Net asset value per share/front-end sales charge) ($11.30/0.99) Net asset value, offering price and redemption price per share -- Class Z $ 11.34 (Net assets/shares) ($9,247/815)
(a) Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (b) On sales of $50,000 or more the offering price is reduced. See accompanying notes to financial statements. 67 COLUMBIA THERMOSTAT FUND > STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2003 (IN THOUSANDS) ---------------------------------------------------------------------------- INVESTMENT INCOME: Dividends from investment company shares $ 122 Interest income --* ---------------------------------------------------------------------------- Total Investment Income 122 EXPENSES: Management fees 8 Administration fees 4 12-1b Services & Distribution fees 33 Custody fees 3 Legal and audit fees 15 Transfer agent fee 17 Trustees fee 3 Registration and blue sky 67 Reports to shareholders 14 Organization expense 43 Other expenses 2 ---------------------------------------------------------------------------- Total expenses 209 Less custody fees paid indirectly --* Less reimbursement of expenses by Advisor (128) ---------------------------------------------------------------------------- Net Expenses 81 ---------------------------------------------------------------------------- Net Investment Income 41 NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Realized gain distributions from investment company shares 1 Net unrealized appreciation on investments 1,987 ---------------------------------------------------------------------------- Net realized and unrealized gain 1,988 ---------------------------------------------------------------------------- Net Increase in Net Assets resulting from Operations $ 2,029 ============================================================================ *Rounds to less than $500. See accompanying notes to financial statements. 68 COLUMBIA THERMOSTAT FUND > STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED) SIX MONTHS PERIOD ENDED INCREASE IN NET ASSETS ENDED JUNE 30, DECEMBER 31, ------------------------------------------------------------------------------ (IN THOUSANDS) 2003 (a) 2002 (b) OPERATIONS: Net investment income $ 41 $ 9 Net realized gain on investments 1 10 Net unrealized appreciation 1,987 60 ------------------------------------------------------------------------------ Net Increase from Operations 2,029 79 DISTRIBUTION TO SHAREHOLDERS FROM: Net investment income -- Class A (2) -- Net realized gain -- Class A (3) -- Net investment income -- Class B (4) -- Net realized gain -- Class B (4) -- Net investment income -- Class D (1) -- Net realized gain -- Class D (1) -- Net investment income -- Class Z (3) -- Net realized gain -- Class Z (3) -- ------------------------------------------------------------------------------ Total Distribution to Shareholders (21) -- SHARE TRANSACTIONS: Subscriptions -- Class A 13,352 -- Distributions reinvested -- Class A 5 -- Redemptions -- Class A (37) -- ------------------------------------------------------------------------------ Net Increase -- Class A 13,320 -- Subscriptions -- Class B 16,945 -- Distributions reinvested -- Class B 8 -- Redemptions -- Class B (63) -- ------------------------------------------------------------------------------ Net Increase -- Class B 16,890 -- Subscriptions -- Class D 5,544 -- Distributions reinvested -- Class D 2 -- Redemptions -- Class D (21) -- ------------------------------------------------------------------------------ Net Increase -- Class D 5,525 -- Subscriptions -- Class Z 4,802 4,089 Distributions reinvested -- Class Z 6 -- Redemptions -- Class Z (442) (16) ------------------------------------------------------------------------------ Net Increase -- Class Z 4,366 4,073 ------------------------------------------------------------------------------ Net Increase from Share Transactions 40,101 4,073 ------------------------------------------------------------------------------ Total Increase in Net Assets 42,109 4,152 ------------------------------------------------------------------------------ NET ASSETS: Beginning of period 4,152 -- ------------------------------------------------------------------------------ End of period $ 46,261 $ 4,152 ============================================================================== UNDISTRIBUTED NET INVESTMENT INCOME $ 40 $ 9 ============================================================================== (a) Class A, Class B, and Class D commenced operations March 3, 2003. (b) Class Z commenced operations September 25, 2002. See accompanying notes to financial statements. 69 COLUMBIA THERMOSTAT FUND > STATEMENT OF CHANGES IN NET ASSETS CONTINUED
(UNAUDITED) SIX MONTHS PERIOD ENDED CHANGES IN SHARES OF BENEFICIAL INTEREST: ENDED JUNE 30, DECEMBER 31, -------------------------------------------------------------------------------------------------- (IN THOUSANDS) 2003 (a) 2002 (b) Subscriptions -- Class A 1,214 -- Shares issued in reinvestment and capital gains -- Class A --(c) -- Less shares redeemed -- Class A (3) -- -------------------------------------------------------------------------------------------------- Net Increase -- Class A 1,211 -- Subscriptions -- Class B 1,561 -- Shares issued in reinvestment and capital gains -- Class B 1 -- Less shares redeemed -- Class B (6) -- -------------------------------------------------------------------------------------------------- Net Increase -- Class B 1,556 -- Subscriptions -- Class D 508 -- Shares issued in reinvestment and capital gains -- Class D --(c) -- Less shares redeemed -- Class D (2) -- -------------------------------------------------------------------------------------------------- Net Increase -- Class D 506 -- Subscriptions -- Class Z 456 400 Shares issued in reinvestment and capital gains -- Class Z 1 -- Less shares redeemed -- Class Z (41) (1) -------------------------------------------------------------------------------------------------- Net Increase -- Class Z 416 399 -------------------------------------------------------------------------------------------------- Net Increase in Shares of Beneficial Interest 3,689 399 --------------------------------------------------------------------------------------------------
(a) Class A, Class B, Class D commenced operations March 3, 2003. (b) Class Z commenced operations September 25, 2002. (c) Rounds to less than 500 shares. See accompanying notes to financial statements 70 COLUMBIA THERMOSTAT FUND > FINANCIAL HIGHLIGHTS INCEPTION MARCH 3, 2003 THROUGH CLASS A SHARES JUNE30, ------------------------------------------------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD 2003 NET ASSET VALUE, BEGINNING OF PERIOD $ 10.10 INCOME FROM INVESTMENT OPERATIONS Net investment income (a) 0.03 Net realized and unrealized gain (loss) 1.20 ------------------------------------------------------------------------- Total from Investment Operations 1.23 ------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income (0.00)(b) From net realized gains (0.00)(b) ------------------------------------------------------------------------- Total Distributions Declared to Shareholders (0.00) ------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $ 11.33 ========================================================================= Total Return 12.26%(c)(d) ------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS Expenses (e)(f) 0.85%(g) Net investment income (f) 0.82%(g) Reimbursement (f) 0.62%(g) Portfolio turnover rate 26%(c) Net assets at end of period (000'S) $ 13,708 (a) Per share data was calculated using average shares outstanding during the period. Recognition of net investment income by the Fund is affected by the timing of the declaration of dividends by the underlying investment companies in which the Fund invests. (b) Represents less than $0.01. (c) Not annualized. (d) Had the Advisor not reimbursed a portion of expenses, total return would have been reduced. (e) Does not include expenses of the investment companies in which the Fund invests. (f) The benefits derived from custody fees paid indirectly had no impact. (g) Annualized. INCEPTION MARCH 3, 2003 THROUGH CLASS B SHARES JUNE30, ------------------------------------------------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD 2003 NET ASSET VALUE, BEGINNING OF PERIOD $ 10.10 INCOME FROM INVESTMENT OPERATIONS Net investment income (a) 0.00(b) Net realized and unrealized gain (loss) 1.20 ------------------------------------------------------------------------- Total from Investment Operations 1.20 ------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income (0.00)(b) From net realized gains (0.00)(b) ------------------------------------------------------------------------- Total Distributions Declared to Shareholders (0.00) ------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $ 11.30 ========================================================================= Total Return 11.96%(c)(d) ------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS Expenses (e)(f) 1.60%(g) Net investment income (f) 0.03%(g) Reimbursement (f) 0.62%(g) Portfolio turnover rate 26%(c) Net assets at end of period (000'S) $ 17,589 (a) Per share data was calculated using average shares outstanding during the period. Recognition of net investment income by the Fund is affected by the timing of the declaration of dividends by the underlying investment companies in which the Fund invests. (b) Represents less than $0.01. (c) Not annualized. (d) Had the Advisor not reimbursed a portion of expenses, total return would have been reduced. (e) Does not include expenses of the investment companies in which the Fund invests. (f) The benefits derived from custody fees paid indirectly had no impact. (g) Annualized. INCEPTION MARCH 3, 2003 THROUGH CLASS D SHARES JUNE30, ------------------------------------------------------------------------- SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD 2003 NET ASSET VALUE, BEGINNING OF PERIOD $ 10.10 INCOME FROM INVESTMENT OPERATIONS Net investment income (a) 0.00(b) Net realized and unrealized gain (loss) 1.20 ------------------------------------------------------------------------- Total from Investment Operations 1.20 ------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income (0.00)(b) From net realized gains (0.00)(b) ------------------------------------------------------------------------- Total Distributions Declared to Shareholders (0.00) ------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $ 11.30 ========================================================================= Total Return 11.96%(c)(d) ------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS Expenses (e)(f) 1.60%(g) Net investment income (f) 0.06%(g) Reimbursement (f) 0.62%(g) Portfolio turnover rate 26%(c) Net assets at end of period (000'S) $ 5,717 (a) Per share data was calculated using average shares outstanding during the period. Recognition of net investment income by the Fund is affected by the timing of the declaration of dividends by the underlying investment companies in which the Fund invests. (b) Represents less than $0.01. (c) Not annualized. (d) Had the Advisor not reimbursed a portion of expenses, total return would have been reduced. (e) Does not include expenses of the investment companies in which the Fund invests. (f) The benefits derived from custody fees paid indirectly had no impact. (g) Annualized. See accompanying notes to financial statements. 71 COLUMBIA THERMOSTAT FUND > NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. Nature of Operations Columbia Thermostat Fund (the "Fund"), a series of Liberty Acorn Trust (the "Trust"), an open-end management investment company organized as a Massachusetts business trust, commenced operations September 25, 2002. The Fund may issue an unlimited number of shares as of March 3, 2003. The Fund currently offers four classes of shares: Class A, Class B, Class D and Class Z. Class A shares are sold with a front-end sales charge. A contingent deferred sales charge is assessed to Class A shares purchased without an initial sales charge on redemptions made within eighteen months on an original purchase of $1 million to $25 million. Class B shares are subject to a contingent deferred sales charge. Class B shares will convert to Class A shares in three, four or eight years after purchase, depending on the program under which shares are purchased. Class D shares are sold with a front-end sales charge and are subject to a contingent deferred sales charge on redemptions made within one year after purchase. Class Z shares are offered continuously at net asset value. There are certain restrictions on the purchase of Class Z shares. The financial highlights for Class Z shares are presented in a separate semi-annual report. The semi-annual report for the other series of the Trust is also included in this report. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are borne pro rata on the basis of the relative net assets of all classes, except each class bears certain expenses unique to that class such as distribution services, transfer agent, and certain other class specific expenses. Difference in class expenses may result in payment of different dividend distributions for each class. All the share classes of the Trust have equal rights with respect to voting subject to class specific arrangements. The investment objective of the Fund is to provide long-term total return. The Fund pursues its investment objective by investing in shares of other mutual funds. As a `fund of funds', under normal circumstances, the Fund allocates at least 95% of its net assets among a selected group of stock and bond mutual funds (the "Portfolio Funds"). The Fund currently invests in five stock Porfolio Funds (Liberty Acorn Fund, Liberty Acorn Twenty Fund, Liberty Growth & Income Fund, Liberty Select Value Fund, Liberty Growth Stock Fund) and three bond Portfolio Funds (Liberty Federal Securities Fund, Liberty Intermediate Bond Fund and Columbia High-Yield Fund). The Fund may also invest up to 5% of its net assets plus any cash received that day in cash, repurchase agreements, high quality short-term paper and government securities. 2. Significant Accounting Policies >Security valuation Investments in Portfolio Funds are valued at their net asset value as reported by the underlying funds. High quality short-term paper and government securities having a maturity of 60 days or less from the valuation date are valued on an amortized cost basis. >Repurchase agreements The Fund may engage in repurchase agreement transactions. The Fund, through their custodians, receives delivery of underlying securities collateralizing repurchase agreements. The Fund's investment advisor determines that the value of the underlying securities is at all times at least equal to the resale price. In the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings. >Security transactions and investment income Portfolio Fund transactions are accounted for on the trade date (date the order to buy or sell is executed). Dividend income and realized gain distributions from other funds are recorded on the ex-dividend date. Interest income is recorded on the accrual basis and includes amortization of discounts on money market instruments and short-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. >Fund share valuation Fund shares are sold and redeemed on a continuing basis at net asset value. Net asset value per share is determined daily as of the close of trading on the New York Stock Exchange on each day the Exchange is open for trading. All income, expenses (other than the Class A, Class B and Class D shares 12b-1 service and distribution fees, and Class A, Class B, Class D and Class Z shares Transfer Agent fee) and realized gains (losses) are allocated to each class proportionately based on relative net assets for purposes of determining the net asset value for each class of shares. 72 >Custody fees The custody fees are reduced based on the Fund's cash balance maintained with the custodian. The amount is disclosed as a reduction of total expenses in the Statement of Operations. >Federal income taxes The Fund has complied with the special provisions of the Internal Revenue Code available to regulated investment companies and, in the manner provided therein, distributes all of its taxable income, as well as any net realized gain on sales of Portfolio Fund shares and any distributions of net realized gains received by the Fund from its Portfolio Funds, reportable for federal income tax purposes. Accordingly, the Fund paid no federal income taxes and no federal income tax provision was required. >Distributions to Shareholders Distributions to shareholders are recorded on the ex-date. 3. Federal Tax Information The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. 4. Transactions with Affiliates The Fund's investment adviser, Liberty Wanger Asset Management, L.P. ("Liberty WAM"), a wholly-owned subsidiary of Columbia Management Group, Inc., which in turn is a wholly-owned subsidiary of Fleet National Bank, which in turn is a wholly-owned subsidiary of FleetBoston Financial Corporation ("Fleet"), furnishes continuing investment supervision to each Fund and is responsible for the overall management of the Fund's business affairs. Under the Funds' investment management agreement, fees are accrued daily and paid monthly to Liberty WAM at the annual rate of 0.10% of the Fund's average daily net assets. >Expense Limit Liberty WAM has agreed to voluntary reimburse the direct operating expenses (exclusive of interest and fees on borrowings and expenses associated with the Fund's investment in other investment companies) exceeding 0.60% of the average annual net assets of the Fund. Liberty WAM has also contracted to provide administrative services at an annual rate of .05% of the Fund's average daily net assets. Liberty Funds Distributor, Inc. (the Distributor), an indirect subsidiary of Fleet, is the Fund's principal underwriter. For the period ended June 30, 2003, the Fund has been advised that the Distributor retained $63,388 underwriting discounts on the sale of Class A and Class D shares and received contingent deferred sales charges of $0, $1,211 and $50 on Class A, Class B and Class D share redemptions, respectively. The Fund has adopted a 12b-1 plan which requires the payment of a monthly service fee to the Distributor equal to 0.25% annually of the average daily net assets attributable to Class A, Class B and Class D shares. The plan also requires the payment of a monthly distribution fee to the Distributor equal to 0.25%, 0.75%, 0.75%, annually, of the average daily net assets attributable to Class A, Class B and Class D shares, respectively. The contingent deferred sales charges and the fees received from the 12b-1 plan are used principally as repayment to the Distributor for amounts paid by the Distributor to dealers who sold such shares. Liberty Funds Services, Inc. (the Transfer Agent), an affiliate of the Advisor, provides shareholder services to the Fund and receives reimbursement for certain out of pocket expenses. Transfer agent fees are comprised of 0.07% annually of the average daily net assets attributable to Class A, Class B and Class D shares plus charges based on the number of shareholder accounts and transactions. Certain officers and trustees of the Trust are also principles of Liberty WAM. The Trust makes no direct payments to its officers and trustees who are affiliated with Liberty WAM. Trustees' fees and expenses for the six months ended June 30, 2003, were $2,991. 5. Borrowing Arrangements The Trust participates in a $150,000,000 credit facility which was entered into to facilitate portfolio liquidity. No amounts have been borrowed under this facility for the six months ended June 30, 2003. 6. Investment Transactions The aggregate cost of purchases and proceeds from sales other than short-term obligations for the six months ended June 30, 2003 were: ------------------------------------------------------------------------------ (IN THOUSANDS) Purchases $ 43,332 Proceeds from sales $ 4,250 ============================================================================== 73 This page intentionally left blank. This page intentionally left blank. THE LIBERTY ACORN ------------------------ FAMILY OF FUNDS TRUSTEES Robert E. Nason CHAIRMAN Margaret Eisen Leo A. Guthart Jerome Kahn, Jr. Steven N. Kaplan David C. Kleinman Charles P. McQuaid Allan B. Muchin Ralph Wanger John A. Wing OFFICERS Ralph Wanger PRESIDENT Charles P. McQuaid SENIOR VICE PRESIDENT J. Kevin Connaughton ASSISTANT TREASURER P. Zachary Egan VICE PRESIDENT Kevin S. Jacobs ASSISTANT SECRETARY Kenneth A. Kalina ASSISTANT TREASURER Bruce H. Lauer VICE PRESIDENT, SECRETARY AND TREASURER Louis J. Mendes VICE PRESIDENT Robert A. Mohn VICE PRESIDENT Todd Narter VICE PRESIDENT Christopher Olson VICE PRESIDENT John H. Park VICE PRESIDENT Vincent P. Pietropaolo ASSISTANT SECRETARY Leah J. Zell VICE PRESIDENT INVESTMENT ADVISOR Liberty Wanger Asset Management, L.P. 227 West Monroe Street, Suite 3000 Chicago, Illinois 60606 1-800-922-6769 DISTRIBUTOR Liberty Funds Distributor, Inc. One Financial Center Boston, Massachusetts 02111-2621 TRANSFER AGENT, DIVIDEND DISBURSING AGENT Liberty Funds Services, Inc. P.O. Box 8081 Boston, Massachusetts 02266-8081 1-800-338-2550 LEGAL COUNSEL Bell, Boyd & Lloyd LLC Chicago, Illinois THIS REPORT, INCLUDING THE SCHEDULES OF INVESTMENTS, IS SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF LIBERTY ACORN TRUST. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION UNLESS PRECEDED OR ACCOMPANIED BY A PROSPECTUS. FIND OUT WHAT'S NEW - VISIT OUR WEB SITE AT: www.libertyfunds.com OUR E-MAIL ADDRESS IS: ServiceInquiries@ColumbiaManagement.Com SHAREHOLDERS SHOULD NOT INCLUDE PERSONAL INFORMATION SUCH AS ACCOUNT NUMBERS, SOCIAL SECURITY NUMBERS OR TAXPAYER IDENTIFICATION NUMBERS IN E-MAIL. WE ARE UNABLE TO ACCEPT ACCOUNT TRANSACTIONS SENT VIA E-MAIL. The Funds mail one shareholder report to each shareholder address. If you would like more than one report, please call 800-426-3750 and additional reports will be sent to you. THIS REPORT HAS BEEN PREPARED FOR SHAREHOLDERS OF LIBERTY ACORN FUNDS. THIS REPORT MAY ALSO BE USED AS SALES LITERATURE WHEN PRECEDED OR ACCOMPANIED BY THE CURRENT PROSPECTUS WHICH PROVIDES DETAILS OF SALES CHARGES, INVESTMENT OBJECTIVES AND OPERATING POLICIES OF THE FUNDS AND WITH THE MOST RECENT COPY OF THE LIBERTY FUNDS PERFORMANCE UPDATE. Semiannual Report: Liberty Acorn Funds 76 LIBERTY ACORN FUNDS SEMIANNUAL REPORT, JUNE 30, 2003 ------------- PRSRT STD U.S. POSTAGE PAID HOLLISTON, MA PERMIT NO. 20 ------------- [Eagle head LOGO] Liberty Funds A Member of Columbia Management Group (c)2003 Liberty Funds Distributor, Inc. A Member of Columbia Management Group One Financial Center, Boston, MA 02111-2621 ACN-03/629O-0603 (8/03) (03/2683) ITEM 2. CODE OF ETHICS. Not applicable at this time. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable at this time. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES Not applicable at this time. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS Not applicable at this time. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES Not applicable at this time. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) The Registrant's Chief Executive Officer and Chief Financial Officer, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, have concluded that such controls and procedures are adequately designed to ensure that information required to be disclosed by the Registrant in its reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the Registrant's management, including the Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. (b) There was no change in the registrant's internal control over financial reporting that occurred over the registrant's last fiscal half-year that has affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 10. EXHIBITS. (a) File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. (a)(1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit: Not applicable at this time. (a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)). Attached hereto as Exhibit 99.CERT. (b) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)). Attached hereto as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Liberty Acorn Trust ----------------------------------------------------------- By (Signature and Title)* /s/ Ralph Wanger ---------------------------------------------- Ralph Wanger, Trustee and President Date September 2, 2003 ------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ Ralph Wanger ---------------------------------------------- Ralph Wanger, Trustee and President Date September 2, 2003 ------------------------------------------------------------------- By (Signature and Title)* /s/ Bruce H. Lauer ---------------------------------------------- Bruce H. Lauer, Treasurer Date September 2, 2003 -------------------------------------------------------------------