-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EiP1bn90O4tbo+Opak0jXzKnviJ2I9SK5lWuM9DrylJHUt+OjzAc2zzlR7Dva28n or8riKxP+JP37ExqbmF3iQ== 0000950131-96-000689.txt : 19960228 0000950131-96-000689.hdr.sgml : 19960228 ACCESSION NUMBER: 0000950131-96-000689 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960227 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACORN INVESTMENT TRUST CENTRAL INDEX KEY: 0000002110 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 362692100 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30B-2 SEC ACT: 1940 Act SEC FILE NUMBER: 811-01829 FILM NUMBER: 96526237 BUSINESS ADDRESS: STREET 1: 227 W MONROE STE 3000 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3126349200 MAIL ADDRESS: STREET 1: 227 W MONROE ST STE 3000 STREET 2: ATTN: BRUCE LAUER CITY: CHICAGO STATE: IL ZIP: 60606 FORMER COMPANY: FORMER CONFORMED NAME: ACORN FUND INC DATE OF NAME CHANGE: 19920703 N-30B-2 1 ACORN FUND AND ACORN INT'L FUND Acorn Fund Annual Report 1995 In a Nutshell Acorn Fund had only a minor gain in net asset value per share in the fourth quarter. We went up 0.3%, trailing the four market averages displayed in the table on the right. The table shows that small company stocks, as represented by the S&P MidCap and Russell 2000 averages, lagged the big companies that are in the Dow-Jones Industrials or S&P 500. For the full year, our net asset value increased 20.8%. This is a good return in an absolute sense, but was substantially behind the market averages. Our performance for the year is analyzed in some detail in the next section of the report. Corporate earnings were very strong in 1995. This year is starting off with a weak economy, so many companies will have down earnings in the first half of 1996. Since this is an election year, we can expect the Fed to have an easy money policy, keeping the U.S. market strong, but not as strong as in 1995. Finally, we want our shareholders to know that Acorn Fund is now open to new investors. We have substantially increased our staff and improved our systems to manage additional investments effectively. Results to December 31, 1995 - ------------------------------------------------------- 4th quarter Last 12 mos. --------------------------- Acorn Fund 0.3% 20.8% Dow-Jones 7.5% 36.9% Standard & Poor's 500 6.0% 37.5% Standard & Poor's MidCap 1.4% 31.0% Russell 2000 2.2% 28.4% The Dow Jones Industrial Average includes 30 big companies. The S&P 500 is a broad market-weighted average, still blue chip dominated. The S&P MidCap 400 is a market value weighted index of 400 stocks that are in the next tier down from the S&P 500. The Russell 2000 is formed by taking 3,000 companies and then eliminating the largest 1,000 leaving a good small company index. All indices are unmanaged and returns include reinvested dividends. 1995 DISTRIBUTIONS Ex-Dividend Reinvestment Distribution Per Share Date Price - ------------------------------------------------------------------- Ordinary Income $0.03 7/18/95 $13.89 Long-Term Capital Gain $0.12 7/18/95 $13.89 Ordinary Income $0.06 12/13/95 $13.49 Long-Term Capital Gain $0.96 12/13/95 $13.49 U.S. Government Interest: 1.57%; Taxable N.A.V. for Florida Intangible Tax: $13.54; Taxable N.A.V. for Pennsylvania Personal Property Tax: $9.77; Dividend Received Deduction % for Corporate Shareholders: 71%. The Value of a $10,000 Investment in Acorn Fund June 10, 1970 through December 31, 1995 [GRAPH APPEARS HERE] DATE ACORN ($) S&P ($) -------- --------- ------- 6/10/70 10,000 10,000 12/31/71 17,828 13,837 12/31/72 19,368 16,192 12/31/73 14,765 14,466 12/31/74 10,691 10,630 12/31/75 13,945 14,595 12/31/76 23,045 18,092 12/31/77 27,168 16,789 12/31/78 31,777 17,877 12/31/79 47,790 21,205 12/31/80 62,594 28,098 12/31/81 58,005 26,701 12/31/82 68,208 32,464 12/31/83 85,389 38,577 12/31/84 89,045 42,028 12/31/85 117,142 55,470 12/31/86 136,843 65,987 12/31/87 142,923 69,441 12/31/88 178,370 80,960 12/31/89 222,681 106,584 12/31/90 183,674 103,479 12/31/91 270,641 135,053 12/31/92 336,210 144,111 12/31/93 444,889 158,635 12/31/94 411,750 160,733 12/31/95 497,407 221,131 This graph compares the results of $10,000 invested in Acorn Fund on June 10, 1970 (the date Fund shares were first offered to the public), with all dividends and capital gains reinvested, with the Standard & Poor's 500 Stock Index with dividends reinvested (source: Salomon Brothers Inc Stock Facts and Shaw Data Services, Inc.) 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. Average Annual Total Return 1 Year 5 Years 10 Years Life of Fund 20.8% 22.1% 15.5% 16.5% Acorn Fund Total Return Percentage for Each Year Net Asset Value Per Share on 12/31/95: $13.60 Squirrel Chatter Snow Job This winter's record blizzard on the East Coast certainly focused attention on the weather. A few days before the paralyzing storm, there was a story in The New York Times confirming that 1995 had been the warmest year on record. There may be an important connection between the two. Back in October, Swiss Re, one of the world's largest reinsurance companies, took an ad in The Financial Times of London: "Stop and think: giant storms are triggered by global warming; this is caused by the greenhouse effect; which is, in turn, accelerated by man."/1/ The first industry forced to notice the new climate may have been the insurance industry. Hurricane Andrew alone cost insurers $16.5 billion. The next might be agriculture; farmers have tuned their crop-raising practices to local conditions, and any change in climate is highly likely to hurt yields in the short run. Feeding the World In a new book by an old-time environmentalist,/2/ Lester Brown argues that China will be increasing its imports of grain very substantially over the next twenty years. Demand will increase as people upgrade their diets from rice to meat, requiring lots of livestock and poultry feed. A Chinese feed mill operator agrees, saying "When people have more money, the first thing they'll spend it on is food. Meat has status; it's a symbol of prosperity."/3/ Brown projects that grain consumption will increase from 360 million tons in 1995 to 460 million in 2010. At the same time that demand is increasing, the amount of prime agricultural land in China will shrink, and double-cropping will drop. This has happened under very similar conditions in Japan, Korea, and Taiwan. Farmland will turn into housing, shopping centers, roads, dams, parking lots, factories, and golf courses as China becomes prosperous. In the three countries cited, the conversion of farms to commercial real estate has outweighed improvements in yield per acre, requiring Japan, Korea, and Taiwan to import large quantities of grains and foodstuffs. World production of grain is about 1,800 million tons per year, of which 200 million tons are exported. An increase in demand of another 100 million tons would alter the supply-demand balance and greatly increase export tonnage. At the same time demand in China is rising, food demand will be increasing in most other countries as well. India and Indonesia are going through the same demand growth cycle as China. Can the world increase grain production enough to satisfy this demand increase? Brown thinks not, predicting a big rise in food prices. Julian Simon, an economist at the University of Maryland, disagrees; he has bet many environmental activists that commodity prices won't rise, and he has won all the bets so far. Supply may increase too: Who knows how much wheat a free Ukraine can grow? On balance, I think that the American farmer will see more favorable economics in the next decade than in the last as the volume of grain exported from the U.S. rises. We will be looking at investment opportunities in companies that will profit from this trend. Analysis of Investment Performance Our fund went up 20.8% in 1995. Acorn Fund underperformed most of the U.S. market averages. We were slightly behind our benchmark portfolio, which was up 21.9%. As a benchmark portfolio, we use this mix: Contributed to Index Weight 1995 Gain* Benchmark - --------------------------------------------------------- Russell 2000 53% +26.2% +13.9% S&P MidCap 400 20 +28.6 + 5.7 EAFE** 22 + 9.4 + 2.1 Cash 5 + 4.0 + 0.2 - --------------------------------------------------------- 100% +21.9% * Dividends not reinvested ** EAFE is Morgan Stanley's Europe, Australia and Far East Index, an unmanaged index of companies throughout the world in proportion to world stock market capitalization, excluding the U.S. and Canada. Our largest U.S. holdings at the start of the year returned only 15.7% for 1995, well below the market averages. We had no disasters, but not enough big winners. The rest of the domestic portfolio, 42.9% of our Fund, was up a very satisfactory 30.8%. These smaller positions include our newest ideas, a sign that our analysts are finding great new stocks, some of which will become large holdings in the future. Acorn's foreign portfolio was up 13.7% for the year. This was an excellent result for a foreign stock portfolio. Germany, Sweden, and Israel were our best markets, contributing 9.7% of the 13.7% total; Mexico, Brazil, and Japan hurt 3.0%. European markets as a group had modest returns in local currencies, but Acorn made money in them due to the dollar's decline and good stock-picking. Latin America was down, and Southeast Asia flat as emerging markets stayed weak for the second year in a row. 2 The Scarlet A The market was strong in 1995, and we had a bumper crop of great stocks. Every year we recognize skilled investment professionals who helped us harvest big returns. The Scarlet A goes to analysts and others who sowed the ideas that worked out the best over the year. In 1995, that meant that we made a high percentage return and at least $5 million in real money. Our best stock in 1995 was SAP, a German software company, on which we made $18 million. It returned 127% in percentage terms. Surprisingly, SAP was our best stock the previous year too, up 223% in 1994! We have sold most of our position on the theory that no stock could do that well three years in a row. The Scarlet A goes to our friend Charles Elliott of the Goldman Sachs office in London. It was a good year for European data processing companies. Mikael Randel of Carnegie Securities in Copenhagen brought us WM Data, a Swedish company in facilities management and data processing outsourcing. We made $14 million in 1995 when WM Data gained 217%. Our biggest percentage winner in 1995 was brought to us by Jon Raclin, now at Barrington Securities. We bought HA.LO on its IPO in 1992. The stock lay dormant for two years, then sprouted a spectacular 355% gain on the Fund's investment in 1995, the only stock Jon ever had go up faster than his golf handicap. The company, based in Skokie, Illinois, distributes specialty and premium advertising products. Our most profitable domestic stock was Silver King, a collection of UHF television broadcasting stations put together by the good folks who bring you the Home Shopping Network. The value of the company was taught to us by Peter Siris, now at Warnaco. In 1995 Silver King returned 204% and made us $13 million. Old friend Fred Holubow introduced us to Thermo Electron, a great company that has spawned a dozen fascinating spin-off companies. George Hatsopoulos, the founder of Thermo Electron, was one of Fred's professors at M.I.T. In 1995, ThermoTrex gained 223%, a $10 million winner. ThermoTrex is a venture capital unit, with success in Trex Medical (mammography) and Thermolase (hair removal). Fred works at Pegasus Associates in Chicago. A second winner from the Thermo Electron empire is Thermo Fibertek, a maker of paper recycling machinery. Fibertek ground out $9 million for us in 1995, up 110%. The Scarlet A goes to Paul Knight of NatWest Securities. And a third winner for Hatsopoulos! Thermedics makes food packaging inspection machines, bomb detectors, and artificial hearts. The diploma goes to Jeff Kessler of Lehman Brothers. Another Chicago winner is my former partner Peter Foreman, now at Sirius Associates. He helped us understand HBO & Co., a provider of hospital information services. Peter caught a big one. HBO & Co. made us $13 million, a 99% return. Many of the 1995 winners were in computer services or technology. That is not a surprise, given the technology stock strength in 1995. Demi Moore wore a Scarlet A in the movies this year, but she was not in our kind of stocks. /s/ RALPH WANGER Ralph Wanger President /1/ Quoted in Scientific American, February 1996, p. 27. /2/ Brown, Lester R., Who Will Feed China, W. W. Norton, New York, 1995. /3/ Liu Youhao, quoted in Forbes, January 1, 1996, p. 54. /4/ Computed by taking into account the changes in security price, trading activity and income earned.
Acorn's Best and Worst Stocks of 1995 $ gain/loss % change in 1995 Stock/Description in 1995/4/ (in millions) - -------------------------------------------------------------------- S A P +127% $18.3 MIS Software Packages WM Data Nordic +217 14.2 Computer Services/Consulting Silver King Communications +204 13.4 TV Stations HBO & Company +99 12.7 Hospital Information Systems ThermoTrex +223 9.8 Venture Capital Cash America International -41 (4.3) Pawn Shops American Media -58 (4.3) Tabloid Weeklies O'Sullivan Industries -45 (3.8) Do-It-Yourself Furniture Edison Brothers -66 (3.2) Retail--Men's Wear & Women's Shoes Spectrum HoloByte -37 (2.5) Computer Games
3 MAJOR PORTFOLIO CHANGES IN THE FOURTH QUARTER
Number of Shares or Principal Amount Held Sept. 30, 1995 Dec. 31, 1995 - ---------------------------------------------------------------------------------- ADDITIONS - ---------------------------------------------------------------------------------- Information Group - ---------------------------------------------------------------------------------- ACT Manufacturing 150,000 265,000 Altron - 150,000 Argyle Television - 300,000 Blonder Tongue Labs - 205,000 CACI International - 220,000 Cellular Communications of Puerto Rico 250,000 450,000 Centennial Cellular 200,000 300,000 COMARCO 20,000 285,000 GIGA Cv. Pfd. - 600,000 Granite Broadcasting - 300,000 Oak Industries 350,000 500,000 Palmer Wireless 15,000 200,000 PILTEL - 2,000,000 Planar Systems 250,000 350,000 Tele-Communications, Liberty Media Group 1,000,000 1,500,000 Thermo Optek, 5% Note Due 10/15/00 - $5,000,000 United International Holdings 250,000 425,000 Vanguard Cellular Systems 300,000 500,000 Health Care - ---------------------------------------------------------------------------------- AMSCO International 708,000 1,150,000 Fresenius USA - 25,000 Incyte Pharmaceutical - 66,000 Kinetic Concepts 15,000 607,000 Lincare Holding - 625,000 Paramount Bed - 45,000 Pet Practice - 90,000 RP Scherer - 95,000 Steris - 205,000 Trex Medical - 50,000 Consumer Goods - ---------------------------------------------------------------------------------- Borders 175,000 980,000 Genting International 3,800,000 4,500,000 Hollywood Park Cv. Pfd. - 201,000 Lands End - 210,000 Norwood Promotional - 150,000 Quality Food Centers 217,000 295,000 Quantum Restaurant Group - 300,000 Stanhome 120,000 180,000 Number of Shares Sept. 30, 1995 Dec. 31, 1995 - ---------------------------------------------------------------------------------- Universal Electronics - 25,000 Wolverine World Wide 150,000 190,000 Zale - 85,000 Finance - ---------------------------------------------------------------------------------- Liechtenstein Global Trust (formerly BIL GT Gruppe) 6,000 8,000 Phoenix Duff and Phelps - 710,000 National Data 283,000 580,000 Peoples Bank Bridgeport 519,000 675,000 Serco Group 900,000 1,200,000 Washington Federal 211,000 658,000 Industrial Goods and Services - ---------------------------------------------------------------------------------- Myers Industries 25,000 100,000 Schnitzer Steel Industries - 35,000 Wackenhut, Cl. B 141,000 318,600 Zoltek Companies - 180,000 Energy and Minerals - ---------------------------------------------------------------------------------- Abraxas Petroleum CVRs - 110,000 Global Natural Resources 600,000 750,000 Seacor Holdings - 19,000 The AES Corporation 820,000 995,000 United Meridan - 350,000 Veritas Energy Services - 200,000 SALES - ---------------------------------------------------------------------------------- Information Group - ---------------------------------------------------------------------------------- ADVO 800,000 520,000 Cellular Communications Cv. Pfd. 300,000 180,000 Homeowners Group 92,000 - International Game Technology 2,940,000 2,245,000 Philippine Long Distance Telephone 5.75% Cv. Pfd. 100,000 - Richardson Electronics 250,000 - Solectron 1,300,000 1,200,000 SAP 80,000 50,000 Tele-Communications, Series A TCI Group 2,800,000 2,000,000 Wo Kee Hong 8,350,000 -
4 MAJOR PORTFOLIO CHANGES IN THE FOURTH QUARTER
Number of Shares Sept. 30, 1995 Dec. 31, 1995 - ----------------------------------------------------------------- Health Care Group - ----------------------------------------------------------------- Apria Healthcare Group 656,000 456,000 Athens Medical Centre 79,880 - Kalbe Farma 120,000 - Orthofix International 98,500 - Teva Pharmaceutical Industries 275,000 - Consumer Goods and Services - ----------------------------------------------------------------- Best Products 320,000 - Burswood Property Trust 4,000,000 3,000,000 Cadenalco 500,000 - Cafe de Coral 800,000 - CML Group 300,000 - Genting 1,600,000 1,040,000 Gold Peak Batteries 1,100,000 - Harley-Davidson 1,175,000 1,100,000 Home Shopping Network 1,200,000 800,000 Little Switzerland 115,000 - Polygram 80,000 - Finance - ----------------------------------------------------------------- Jayhawk Acceptance 15,000 - Industrial Goods and Services - ----------------------------------------------------------------- Citation 100,000 - Logicon 270,000 - MEMTEC ADR 281,000 - Western Water 61,000 - Energy and Minerals - ----------------------------------------------------------------- Benton Oil & Gas 100,000 - Giant Industries 277,000 - International Colin Energy 85,000 - Louis Dreyfus Natural Gas 475,000 240,000 Plains Resources 230,000 - Seagull Energy 485,000 150,000 Tarragon Oil & Gas 160,000 - Weatherford International 600,000 200,000 Real Estate Group - ----------------------------------------------------------------- The Rouse Company 1,682,500 1,400,000
ACORN FUND STATEMENT OF INVESTMENTS DECEMBER 31, 1995
Number of Shares Value (000) - --------------------------------------------------------------------- Common Stocks and Other Equity-Like Securities--95.9% - --------------------------------------------------------------------- Information Group--20.8% - --------------------------------------------------------------------- Broadcasting and CATV--5.9% 1,500,000 Tele-Communications, Liberty Media Group (b) $40,313 2,000,000 Tele-Communications, Series A TCI Group (b) 39,750 50,000 Tele-Communications, Cum. Pfd. 3,613 300,000 Silver King Communications (b) 10,425 550,000 International Family Entertainment (b) 9,006 300,000 TCA Cable TV 8,288 300,000 BET Holdings (b) 6,863 440,000 Jones Intercable,Cl. A (b) 5,445 22,500 Jones Intercable (b) 281 300,000 Argyle Television (b) 5,250 635,000 Century Communications,Cl. A (b) 5,080 80,000 Cablevision Systems (b) 4,340 300,000 Granite Broadcasting (b) 3,188 270,000 DMX (b) 658 - --------------------------------------------------------------------- 142,500 Mobile Communications--3.5% 500,000 Telephone and Data Systems 19,750 700,000 Mobile Telecommunication Technologies (b) 14,963 450,000 Cellular Communications of Puerto Rico (b) 12,488 500,000 Vanguard Cellular Systems (b) 10,125 180,000 Cellular Communications Cv. Pfd. (b) 8,955 300,000 Centennial Cellular (b) 5,138 375,000 PriCellular (b) 4,875 200,000 Palmer Wireless (b) 4,400 400,000 Pittencrieff Communications (b) 1,525 375,000 Shared Technologies (b) 1,477 - --------------------------------------------------------------------- 83,696 Software--1.3% 750,000 Systems & Computer Technology (b) (c) 14,906 266,000 Business Records Corporation (b) 10,507
5 ACORN FUND STATEMENT OF INVESTMENTS DECEMBER 31, 1995 - ---------------------------------------------------------------------
Number of Shares or Principal Amount Value (000) - --------------------------------------------------------------------- 220,000 CACI International (b) $ 2,612 120,000 Computer Language Research 1,680 100,000 Tripos (b) 850 110,000 Kurzweil Applied Intelligence (b) 481 - --------------------------------------------------------------------- 31,036 Gaming Equipment--1.0% 2,245,000 International Game Technology 24,414 Computer Game Software--0.3% 150,000 Sierra On-Line (b) 4,313 250,000 Spectrum HoloByte (b) 1,625 - --------------------------------------------------------------------- 5,938 Marketing Services--0.8% 520,000 ADVO 13,520 340,000 American Business Information (b) 6,588 - --------------------------------------------------------------------- 20,108 Publishing--0.1% 600,000 GIGA Cv. Pfd. (b) 2,100 Computer Systems--2.7% 1,200,000 Solectron (b) 52,950 150,000 Altron (b) 4,500 700,000 Triad Systems (b) 4,288 265,000 ACT Manufacturing (b) 2,948 - --------------------------------------------------------------------- 64,686 Instrumentation--1.3% 505,000 Thermo Instrument Systems (b) 17,044 $5,000 Thermo Optek, 5% Note Due 10/15/00 5,200 285,000 COMARCO (b) (c) 4,133 200,000 IFR Systems (b) 1,850 $1,500 Thermoquest, 5% Note Due 8/15/00 1,568 60,000 Datum (b) 615 - --------------------------------------------------------------------- 30,410 Distribution--1.1% 900,000 Pioneer-Standard Electronics 11,925 152,000 Kent Electronics (b) 8,873 520,000 Bell Microproducts (b) (c) 3,770 200,000 Richey Electronics (b) 2,600 - --------------------------------------------------------------------- 27,168 Components and Peripherals--1.9% 300,000 Kronos (b) (c) 14,250 500,000 Oak Industries (b) 9,375 210,000 In Focus Systems (b) 7,586 350,000 Planar Systems (b) 6,694 350,000 Exide Electronics Group (b) 5,163 205,000 Blonder Tongue Labs (b) 1,999 80,000 Daktronics (b) 360 - --------------------------------------------------------------------- 45,427 Consumer Electronics--0.9% 500,000 Harman International 20,063 150,000 InterTAN (b) 1,088 - --------------------------------------------------------------------- 21,151 ===================================================================== Information Group--Total 498,634 Health Care Group--11.2% - --------------------------------------------------------------------- Biotechnology/Drug Delivery--3.2% 225,000 Watson Pharmaceuticals (b) 11,025 742,000 North American Biologicals (b) 7,976 380,000 Sepracor (b) 6,982 258,000 Cygnus 5,773 (formerly Cygnus Therapeutic Systems) (b) 85,000 Biogen (b) 5,227 130,000 Human Genome Sciences (b) 4,972 95,000 RP Scherer (b) 4,667 195,000 Protein Design Labs (b) 4,509 450,000 Inhale Therapeutic Systems (b) 4,387 260,000 Alteon (b) 4,192 223,000 TheraTech (b) 4,014 193,000 CellPro (b) 3,088 100,000 Vertex Pharmaceuticals (b) 2,650 159,000 Ligand Pharmaceuticals (b) 1,709 66,000 Incyte Pharmaceutical (b) 1,650 175,000 Anesta (b) 1,619 69,000 Serologicals (b) 1,138 - --------------------------------------------------------------------- 75,578 Medical Equipment--3.7% 1,150,000 AMSCO International (b) 17,106 552,000 Thermedics (b) 15,318 570,000 Invacare 14,392 554,000 Respironics (b) 11,634 345,000 Space Labs Medical (b) 9,919 607,000 Kinetic Concepts 7,284 205,000 Steris (b) 6,611 300,000 EP Technologies (b) 4,350 450,000 Affymetrix (b) 2,025 50,000 Trex Medical (b) 512 25,000 Fresenius USA (b) 497 - --------------------------------------------------------------------- 89,648
6 ACORN FUND STATEMENT OF INVESTMENTS DECEMBER 31, 1995
Number of Shares Value (000) - ---------------------------------------------------------------------------- Hospital/Laboratory Supplies--0.7% 273,000 Hillenbrand Industries $ 9,248 322,000 Sybron International (b) 7,648 - ---------------------------------------------------------------------------- 16,896 Services--3.6% 285,000 HBO & Company 21,838 625,000 Lincare Holding (b) 15,625 456,000 Apria Healthcare Group (b) 12,882 291,000 Renal Treatment Centers (b) 12,804 200,000 ThermoTrex (b) 10,000 450,000 Pharmaceuticals Marketing Services (b) 6,806 833,333 Walsh International, Cv. Pfd. (b) 5,000 90,000 Pet Practice (b) 923 43,000 Worker's Compensation Medical Centers (b) 22 - ---------------------------------------------------------------------------- 85,900 ============================================================================ Health Care Group--Total 268,022 Consumer Goods and Services Group--11.5% - ---------------------------------------------------------------------------- Retail--1.9% 980,000 Borders (b) 18,130 800,000 Home Shopping Network (b) 7,200 295,000 Quality Food Centers 6,490 425,000 Mikasa (b) 5,737 540,000 Cato Corporation 4,185 220,000 Duckwall Alco Stores (b) (c) 2,255 85,000 Zale (b) 1,371 70,000 Dave & Buster's 849 - ---------------------------------------------------------------------------- 46,217 Recreational Vehicles--1.6% 1,100,000 Harley-Davidson 31,625 300,000 Thor Industries 5,812 - ---------------------------------------------------------------------------- 37,437 Food--0.4% 634,000 Au Bon Pain (b) (c) 5,230 300,000 Quantum Restaurant Group (b) 3,375 - ---------------------------------------------------------------------------- 8,605 Entertainment and Leisure--4.0% 1,400,000 Carnival Cruise Lines 34,125 1,450,000 Alliance Entertainment (b) 13,775 215,000 GC Companies (b) 7,202 276,000 Carmike Cinemas (b) 6,210 265,000 Royal Caribbean Cruises 5,830 1,250,000 American Media 5,313 226,000 Anchor Gaming (b) 5,141 14,000 International Speedway 3,304 188,000 Station Casinos (b) 2,749 Number of Shares or Principal Amount Value (000) - ---------------------------------------------------------------------------- 236,000 Players International (b) $ 2,522 201,000 Hollywood Park Cv. Pfd. 2,110 167,000 Rio Hotel & Casino (b) 1,983 535,000 Monarch Casino & Resort (b) (c) 1,872 200,000 Playboy Enterprises, Cl. B (b) 1,675 $6,250 Grand Palais Casino 14% Note Due 2/25/98 (b) 938 - ---------------------------------------------------------------------------- 94,749 Manufacturers--3.6% 1,650,000 Newell Companies 42,694 225,000 First Brands 10,716 182,000 St. John Knits 9,669 190,000 Wolverine World Wide 5,985 180,000 Stanhome 5,242 700,000 O'Sullivan Industries (b) 4,637 105,000 Liz Claiborne 2,914 210,000 Lands End (b) 2,861 150,000 Norwood Promotional (b) 2,550 - ---------------------------------------------------------------------------- 87,268 ============================================================================ Consumer Group -- Total 274,276 Finance Group--15.3% - ---------------------------------------------------------------------------- Banks--1.8% 96,000 BayBanks 9,432 285,000 Union Planters 9,084 206,000 First Commerce Corporation 6,592 211,000 Bank South 6,409 309,000 Texas Regional Bancshares 5,330 105,000 First American 4,974 104,000 Riverside National Bank 1,430 - ---------------------------------------------------------------------------- 43,251 Savings & Loans--2.9% 658,000 Washington Federal 16,861 675,000 Peoples Bank Bridgeport 12,825 339,000 Coast Savings Financial (b) 11,738 390,000 Washington Mutual 11,261 260,000 TCF Financial 8,612 162,000 Bell Bancorp 5,791 156,000 Indiana Federal 3,315 - ---------------------------------------------------------------------------- 70,403 Insurance--2.0% 836,000 Baldwin & Lyons, Cl. B 13,585 234,000 United Fire & Casualty 9,828 296,000 Transnational Re 7,252 127,000 Foremost Corporation of America 6,445
7 ACORN FUND STATEMENT OF INVESTMENTS DECEMBER 31, 1995
Number of Shares Value (000) - ----------------------------------------------------------------- 318,000 ALLIED Life Financial (c) $ 5,764 216,000 Leucadia National 5,400 - ----------------------------------------------------------------- 48,274 Money Management--1.9% 440,000 United Asset Management 16,885 404,000 SEI Corporation 8,787 241,000 BISYS Group (b) 7,411 127,000 T. Rowe Price Associates 6,255 710,000 Phoenix Duff and Phelps 4,881 - ----------------------------------------------------------------- 44,219 Credit Cards--4.1% 832,000 ADVANTA, Cl. A 31,824 530,000 ADVANTA, Cl. B 19,279 600,000 First USA 26,625 580,000 National Data 14,355 165,000 Concord EFS (b) 6,971 - ----------------------------------------------------------------- 99,054 Other--2.6% 1,524,000 Mercury Finance 20,193 784,000 Baker Fentress 13,132 879,000 Americredit (b) 11,976 1,220,000 Cash America International 6,710 237,000 Aames Financial 6,606 280,000 DVI Health Services (b) 3,920 - ----------------------------------------------------------------- 62,537 ================================================================= Finance Group--Total 367,738 Industrial Goods and Services--7.8% - ----------------------------------------------------------------- Steel--1.2% 1,090,000 Worthington Industries 22,686 300,000 Gibraltar Steel (b) 3,637 40,000 UCAR International (b) 1,350 - ----------------------------------------------------------------- 27,673 Machinery--3.3% 735,000 Thermo Fibertek (b) 16,629 540,000 Sealed Air (b) 15,188 200,000 Nordson 11,250 525,000 Baldor Electric 10,566 120,000 Teleflex 4,920 96,000 Mine Safety Appliances 4,608 300,000 Douglas & Lomason (c) 3,450 109,000 Applied Power 3,270 180,000 Zoltek Companies (b) 3,015 535,000 Stevens International, Cl. A (b) (c) 2,341 34,000 Stevens International, Cl. B (b) (c) 145 100,000 Myers Industries 1,638 Number of Shares or Principal Amount Value (000) - ----------------------------------------------------------------- 35,000 Schnitzer Steel Industries $ 1,068 195,000 Hein-Werner (b) (c) 890 - ----------------------------------------------------------------- 78,978 Waste Disposal--0.2% 530,000 Thermo Terratech 6,029 (formerly Thermo Process Systems) (b) Furniture and Textiles--1.2% 900,000 Unifi 19,913 745,000 Lilly Industries, Cl. A 9,499 - ----------------------------------------------------------------- 29,412 Services--1.8% 600,000 Expeditors International of Washington 15,675 256,000 HA.LO Industries (c) 7,872 318,600 Wackenhut, Cl. B 4,938 57,000 Wackenhut, Cl. A 1,026 356,000 Thomas Group (b) (c) 4,806 154,000 Unitog 3,715 $2,900 Western Water, 9% Cv. Note Due 9/25/05 2,900 115,000 AG Services of America (b) 1,093 - ----------------------------------------------------------------- 42,025 Foundry--0.1% 264,000 Atchison Casting (b) 3,168 ================================================================= Industrial Group--Total 187,285 Energy and Minerals Group--7.5% - ----------------------------------------------------------------- Cogeneration--3.3% 800,000 Thermo Electron (b) 41,600 995,000 The AES Corporation (b) 23,756 580,000 Thermo Ecotek (b) 9,715 285,000 Thermo Power (b) 3,669 - ----------------------------------------------------------------- 78,740 Oil & Gas Producers--1.8% 750,000 Global Natural Resources (b) 7,875 277,000 Devon Energy 7,063 350,000 United Meridian (b) 6,081 600,000 Tesoro Petroleum (b) 5,175 240,000 Louis Dreyfus Natural Gas (b) 3,630 150,000 Seagull Energy (b) 3,337 650,000 Coho Resources (b) 3,169 200,000 St. Mary Land & Exploration 2,800 360,000 Abraxas Petroleum (b) (c) 2,250 110,000 Abraxas Petroleum CVRs (b) 898 115,000 Basin Exploration (b) 568 - ----------------------------------------------------------------- 42,846
8 ACORN FUND STATEMENT OF INVESTMENTS DECEMBER 31, 1995
Number of Shares Value (000) - ---------------------------------------------------------------------- Refining/Marketing--0.8% 455,000 Southern Union (b) $ 11,489 500,000 NGC Corporation 4,437 143,000 KN Energy 4,165 - ---------------------------------------------------------------------- 20,091 Oil Services--1.5% 290,000 Atwood Oceanics (b) 7,322 885,000 Digicon (b) (c) 7,080 255,000 Energy Ventures (b) 6,439 200,000 Weatherford International (b) 5,775 235,000 Landmark Graphics (b) 5,464 170,000 Petroleum Helicopters 2,422 19,000 Seacor Holdings (b) 513 - ---------------------------------------------------------------------- 35,015 Mining--0.1% 250,000 Zeigler Coal Holding 3,469 ====================================================================== Energy Group--Total 180,161 Real Estate Group--2.6% - ---------------------------------------------------------------------- 1,400,000 The Rouse Company 28,525 315,000 Weingarten Realty Investors 11,970 210,000 Equity Residential Properties Trust 6,431 155,000 Forest City Enterprises, Cl. B 4,999 123,000 Forest City Enterprises, Cl. A 3,982 120,000 First Washington Realty Trust, Cv. Pfd. 2,730 80,000 First Washington Realty Trust 1,450 243,000 Sunstone Hotel Investors 2,491 ====================================================================== Real Estate Group--Total 62,578 Foreign Securities--19.2% - ---------------------------------------------------------------------- Canada--0.6% 800,000 Shaw Communications 5,058 30,000 Shaw Communications Warrants (b) 1 125,000 BCE Mobile Communications (b) 4,227 250,000 Enserv (b) 2,154 200,000 Cogeco Cable 1,283 200,000 Veritas Energy Services (b) 1,100 - ---------------------------------------------------------------------- 13,823 United Kingdom / Ireland--3.1% 400,000 International CableTel (b) 9,800 600,000 Comcast UK Cable Partners (b) 7,500 1,200,000 Serco Group 6,838 450,000 ADT (b) 6,750 490,000 Securicor Group, Cl. A 6,733 1,700,000 Invesco 6,691 68,000 Invesco ADS 2,635 3,750,000 Waterford Wedgwood (Ireland) 3,610 580,000 Powerscreen International 3,489 810,000 Medeva 3,370 800,000 N. Brown Group 3,329 500,000 Oriflame 3,144 1,000,000 Capital Corporation 3,136 345,000 Ethical Holdings (b) 3,105 1,200,000 Body Shop International 2,832 4,500,000 Rhino Group (b) 978 995,000 North American Gas Investors Trust (b) 850 700,000 Pittencrieff Resources 533 - ---------------------------------------------------------------------- 75,323 Germany / Austria--1.0% 50,000 SAP 7,773 425,000 United International Holdings (Austria) (b) 6,269 60,000 Flughafen Wien (Austria) 4,051 8,000 Binding-Brauerei 3,382 13,000 Escada 2,361 - ---------------------------------------------------------------------- 23,836 Nordic Countries--2.1% 460,000 WM Data Nordic (Sweden) 20,824 150,000 Hennes & Mauritz, Cl. B (Sweden) 8,375 800,000 SensoNor (Norway) (b) 6,458 39,000 Chr. Hansen's Laboratorium, Cl. B (Denmark) 3,800 150,000 Huhtamaki (Finland) 3,627 193,000 Pricer, Cl. B (Sweden) (b) 3,262 90,000 Benefon (Finland) 2,238 50,000 Sentra, Cl. A (Finland) (b) 979 27,000 OK Holding (Denmark) (b) 497 - ---------------------------------------------------------------------- 50,060 Netherlands / Belgium--0.3% 29,400 Telegraaf Holdings 4,145 77,000 Getronics 3,602 - ---------------------------------------------------------------------- 7,747 Switzerland--0.7% 3,500 Societe Generale de Surveillance 6,935 8,000 Liechtenstein Global Trust 4,728 (formerly BIL GT Gruppe) 13,200 Sece Cortaillod Holdings 4,359 - ---------------------------------------------------------------------- 16,022 France--0.8% 54,000 Guilbert 6,349 26,000 Cetelem 4,886 80,000 Ecco Travail Temporaire 4,654
9 ACORN FUND STATEMENT OF INVESTMENTS DECEMBER 31, 1995
Number of Shares Value (000) - ---------------------------------------------------------------------- 27,000 Sligos $ 2,230 96,000 Coflexip 1,812 - ---------------------------------------------------------------------- 19,931 Spain / Portugal--0.3% 375,000 Filmes Lusomundo (Portugal) 3,888 70,000 Cortefiel 1,835 60,000 Vallehermoso 1,115 - ---------------------------------------------------------------------- 6,838 Italy / Greece--1.1% 200,000 Hellenic Bottling (Greece) 6,552 150,000 Cellular Communications International (b) 6,413 110,000 Industrie Natuzzi 4,991 1,200,000 Costa Crociere Ord. 2,932 2,500,000 Banca Fideuram 2,892 1,100,000 Tecnost 1,803 - ---------------------------------------------------------------------- 25,583 Israel--0.1% 100,000 Pec Israel Economic Corporation (b) 2,413 India--0.2% 39,393 Housing Development Finance 3,029 298,700 Industrial Credit & Investment Corp. of India (b) 663 - ---------------------------------------------------------------------- 3,692 Hong Kong--0.6% 3,500,000 Varitronix International 6,496 1,150,000 Television Broadcasts 4,098 2,800,000 JCG Holdings 2,046 1,100,000 Johnson Electric Holdings 1,963 - ---------------------------------------------------------------------- 14,603 China--0.5% 810,000 AES China Generating (b) 6,480 2,200,000 New World Infrastructure (formerly New World China Fund) (b) 4,211 200,000 The Investment Company of China (b) 1,294 111,275 The China Investment Company (b) 1,029 - ---------------------------------------------------------------------- 13,014 Singapore--0.4% 4,500,000 Genting International 7,335 500,000 Clipsal Industries 1,130 - ---------------------------------------------------------------------- 8,465 Malaysia--1.3% 1,950,000 Resorts World 10,445 1,040,000 Genting 8,684 1,260,000 Kian Joo Can Factory 5,211 - ---------------------------------------------------------------------- 168,000 Kian Joo Can Factory Warrants 5/22/99 (b) 308 660,000 O.Y.L. Industries 5,121 745,000 New Straits Times Press 2,494 - ---------------------------------------------------------------------- 32,263 Thailand--0.6% 100,000 The Thailand Fund 9,837 3,300,000 Sinpinyo Fund V 2,391 200,000 Thai President Foods 1,231 110,000 International Cosmetics 1,004 375,000 Modernform 357 - ---------------------------------------------------------------------- 14,820 Korea / Taiwan--1.1% 104,000 Shinsegae 8,687 31,558 Shinsegae (New) (b) 2,603 5,000 Korea Mobile Telecom (b) 5,636 80,000 Seoul International Trust (b) 3,800 322,562 President Enterprises (Taiwan) (b) 3,709 300,000 Korea-Euro Fund 2,550 - ---------------------------------------------------------------------- 26,985 Philippines / Indonesia--0.4% 960,000 Tigaraksa Satria 3,359 195,501 Unilever Indonesia 2,351 2,000,000 PILTEL (b) 2,021 2,400,000 Mayora Indah 1,732 - ---------------------------------------------------------------------- 9,463 Japan--1.8% 75,000 Secom 5,220 160,000 Heiwa 4,172 50,000 Autobacs Seven 4,159 88,400 Sankyo 4,113 77,000 Aucnet 3,732 190,000 Mr. Max 3,665 110,000 Tostem 3,657 65,000 Sony Music Entertainment 3,402 45,000 Paramount Bed 3,141 60,000 Promise 2,891 36,000 Nichiei 2,687 47,000 Tsutsumi Jewelry 2,355 - ---------------------------------------------------------------------- 43,194 Australia / New Zealand--0.8% 400,000 Sky City (New Zealand) (b) 8,303 1,600,000 Village Roadshow 6,189 3,000,000 Burswood Property Trust 4,017 - ---------------------------------------------------------------------- 18,509
10 ACORN FUND STATEMENT OF INVESTMENTS DECEMBER 31, 1995
Number of Shares Value (000) - ----------------------------------------------------------------- Mexico-0.5% 300,000 Kimberly Clark de Mexico $ 4,532 1,000,000 Nadro, Series L 3,374 290,000 Grupo Radio Centro 2,139 4,200,000 Grupo Herdez, Series B (b) 872 600,000 Fondo Opcion, Series B (b) 607 170,000 Cofar, Series B 70 - ----------------------------------------------------------------- 11,594 Brazil-0.4% 175,000,000 Cemig 3,871 12,000,000 Itau Banco PN 3,346 1,900,000 Multibras PN 1,407 12,000,000 Casa Anglo Brasileira Pfd. 506 - ----------------------------------------------------------------- 9,130 Other Latin America-0.5% 130,000 Banco Latinoamericano de Export (Panama) 6,045 120,000 Panamerican Beverages (Panama) 3,840 125,000 IRSA (Argentina) 3,188 - ----------------------------------------------------------------- 13,073 ================================================================= Foreign Group - Total 460,381 25,000 Miscellaneous Securities-0.0% 187 Principal Amount Value (000) - ----------------------------------------------------------------- Total Common Stocks and Other Equity-Like Securities-95.9% $2,299,262 - ----------------------------------------------------------------- (Cost: $1,416,959) Money Market Instruments-4.3% - ----------------------------------------------------------------- Yield 5.4% - 6.0% Due January 1996 $55,185 General Motors Acceptance Corp. 55,113 $20,060 NYNEX Corporation 20,041 $10,415 Travelers Insurance 10,395 $10,000 US Treasury Bill 9,983 $8,535 Quaker Oats 8,532 - ----------------------------------------------------------------- (Amortized Cost: $104,064) 104,064 Total Investments-100.2% 2,403,326 - ----------------------------------------------------------------- (Cost: $1,521,023) Cash and Other Assets Less Liabilities-(0.2%) (4,731) - ----------------------------------------------------------------- Total Net Assets-100% $2,398,595 =================================================================
ACORN FUND NOTES TO STATEMENT OF INVESTMENTS DECEMBER 31, 1995 (a) At December 31, 1995, for federal income tax purposes cost of investments was $1,533,533,000 and net unrealized appreciation was $869,793,000, consisting of gross unrealized appreciation of $976,570,000 and gross unrealized depreciation of $106,777,000. (b) Non-income producing security. (c) On December 31, 1995, the Fund held the following percentages of the outstanding voting shares of the companies listed below: -------------------------------------- Digicon 8.34% Abraxas Petroleum 8.05 Hein-Werner 7.78 Douglas & Lomason 7.07 ALLIED Life Financial 6.90 Bell Microproducts 6.32 Stevens International 5.95 COMARCO 5.75 Thomas Group 5.68 Monarch Casino & Resort 5.61 Kronos 5.51 Duckwall Alco Stores 5.49 Au Bon Pain 5.47 Systems & Computer Technology 5.32 HA.LO Industries 5.15 The aggregate cost and value of investments in these companies at December 31, 1995, was $60,196,000 and $81,013,000, respectively. The market value of these securities represents 3.38% of the total net assets at December 31, 1995. During the period ended December 31, 1995, dividends received from these companies amounted to $174,000 and the net realized gain on sales of investments in such companies amounted to $92,000. See accompanying notes to financial statements. 11 REPORT OF INDEPENDENT AUDITORS To the Shareholders of Acorn Fund and the Trustees of Acorn Investment Trust We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Acorn Fund as of December 31, 1995, the related statements of operations and changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the ten years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of investments owned as of December 31, 1995, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Acorn Fund at December 31, 1995, the results of its operations and changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the ten years in the period then ended in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Chicago, Illinois January 31, 1996
ACORN FUND STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1995 (in thousands) - ----------------------------------------------------------------------------------------------- Assets Investments, at value (cost: $1,521,023) $2,403,326 Cash 1,333 Receivable for: Securities sold $ 6,376 Dividends and interest 2,227 Fund shares sold 372 Other 18 8,993 - ----------------------------------------------------------------------------------------------- Total assets 2,413,652 Liabilities and Net Assets Payable for: Securities purchased 12,187 Fund shares redeemed 2,358 Other 512 - ----------------------------------------------------------------------------------------------- Total liabilities 15,057 - ----------------------------------------------------------------------------------------------- Net assets applicable to Fund shares outstanding $2,398,595 =============================================================================================== Fund shares outstanding 176,315 =============================================================================================== Pricing of Shares Net asset value, offering and redemption price per share $ 13.60 =============================================================================================== Analysis of Net Assets Paid-in capital $1,498,780 Undistributed net realized gain on sales of investments 24,722 Net unrealized appreciation of investments and other assets (net of unrealized PFIC gain distributions of $12,510) 869,805 Undistributed net investment income 5,288 - ----------------------------------------------------------------------------------------------- Net assets applicable to Fund shares outstanding $2,398,595 ===============================================================================================
See accompanying notes to financial statements. 12
ACORN FUND STATEMENTS OF OPERATIONS DECEMBER 31, 1995 (in thousands) Years ended Dec. 31, ------------------------------ 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------- Investment Income: - ------------------------------------------------------------------------------------------------------------------------------- Dividends $ 22,948 $ 18,294 Interest 9,264 5,194 - ------------------------------------------------------------------------------------------------------------------------------- Total investment income 32,212 23,488 Expenses: Investment advisory fee 10,429 9,750 Custodian fees and expenses 737 998 Transfer and dividend disbursing agent fees and expenses 733 714 Legal and audit fees and expenses 118 219 Reports to shareholders 331 367 Registration and blue sky expenses 26 102 Trustees' fees and other 239 359 - ------------------------------------------------------------------------------------------------------------------------------- Total expenses 12,613 12,509 - ------------------------------------------------------------------------------------------------------------------------------- Net investment income 19,599 10,979 Net realized and unrealized gain (loss) on investments and foreign currency: Net realized gain on sales of investments 198,606 93,750 Net realized loss on foreign currency transactions (118) (2,835) Net realized gain (loss) on futures transactions (12,798) 5,856 Change in net unrealized appreciation 211,069 (264,879) - ------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments and foreign currency 396,759 (168,108) - ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 416,358 $ (157,129) =============================================================================================================================== ACORN FUND STATEMENTS OF CHANGES IN NET ASSETS DECEMBER 31, 1995 From operations: Net investment income $ 19,599 $ 10,979 Net realized gain on sales of investments, foreign currency transactions and futures 185,690 96,771 Change in net unrealized appreciation 211,069 (264,879) - ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 416,358 (157,129) Equalization - (284) Distributions to shareholders from: Net investment income (14,810) (16,634) Net realized gain (including distribution of unrealized PFIC gains of $592 in 1995 and $673 in 1994) (177,941) (86,776) - ------------------------------------------------------------------------------------------------------------------------------- Total distributions to shareholders (192,751) (103,410) From Fund share transactions: Reinvestment of dividends and capital gain distributions 173,543 91,378 Proceeds from other shares sold 292,683 284,766 - ------------------------------------------------------------------------------------------------------------------------------- 466,226 376,144 Payments for shares redeemed (274,314) (167,020) - ------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets from Fund share transactions 191,912 209,124 - ------------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 415,519 (51,699) Net Assets: Beginning of year 1,983,076 2,034,775 - ------------------------------------------------------------------------------------------------------------------------------- End of year (including undistributed net investment income of $5,288 in 1995 and $8,696 in 1994) $2,398,595 $1,983,076 ===============================================================================================================================
See accompanying notes to financial statements. 13
ACORN FUND FINANCIAL HIGHLIGHTS DECEMBER 31, 1995 For a share outstanding throughout each year. Years ended December 31, ------------------------------------------------------------------------------------- 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 - --------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, beginning of year $12.24 $13.95 $11.06 $ 9.32 $ 6.51 $ 8.58 $7.27 $6.48 $ 7.45 $ 7.56 Income From Investment Operations Net investment income .11 .06 .04 .07 .11 .12 .13 .12 .14 .13 Net realized and unrealized gain (loss) on investments, foreign currency and futures 2.42 (1.10) 3.50 2.16 2.95 (1.62) 1.65 1.47 .12 1.07 - --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.53 (1.04) 3.54 2.23 3.06 (1.50) 1.78 1.59 .26 1.20 Less Distributions Dividends from net investment income (.09) (.11) (.06) (.08) (.10) (.13) (.11) (.16) (.15) (.10) Distributions from net realized and unrealized gains reportable for federal income taxes (1.08) (.56) (.59) (.41) (.15) (.44) (.36) (.64) (1.08) (1.21) - --------------------------------------------------------------------------------------------------------------------------------- Total distributions (1.17) (.67) (.65) (.49) (.25) (.57) (.47) (.80) (1.23) (1.31) - --------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, end of year $13.60 $12.24 $13.95 $11.06 $ 9.32 $ 6.51 $8.58 $7.27 $ 6.48 $ 7.45 ================================================================================================================================= Total Return 21% -7% 32% 24% 47% -18% 25% 25% 4% 17% Ratios/Supplemental Data Ratio of expenses to average net assets .57% .62% .65% .67% .72% .82% .73% .80% .82% .79% Ratio of net investment income to average net assets .89% .55% .30% .72% 1.30% 1.60% 1.59% 1.52% 1.85% 1.71% Portfolio turnover rate 29% 18% 20% 25% 25% 36% 26% 36% 52% 34% Net assets at end of year (in millions) $2,399 $1,983 $2,035 $1,449 $1,150 $ 767 $ 855 $ 563 $ 418 $ 415
ACORN FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 1. NATURE OF OPERATIONS Acorn Fund (the "Fund") is a series of Acorn Investment Trust (the "Trust"), an open-end management investment company organized as a Massachusetts business trust. The investment objective of the Fund is to seek long-term growth of capital. 2. SIGNIFICANT ACCOUNTING POLICIES Security valuation Investments are stated at current value. Securities traded on securities exchanges or in over-the-counter markets in which transaction prices are reported are valued at the last sales price at the time of valuation, or lacking any reported sales on that day, at the midpoint of the most recent bid and offer. 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 readily available and any other assets are valued at a fair value as determined in good faith by the Board of Trustees. Foreign currency translations Values of investments denominated in foreign currencies are converted into U.S. dollars using the spot market rate of exchange at the time of valuation. Purchases and sales of investments and dividend and interest income are translated into U.S. dollars using the spot market rate of exchange prevailing on the respective dates of such transactions. The gain or loss resulting from changes in foreign exchange rates is included with net realized and unrealized gain or loss from investments and dividends, 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 Fund. Interest income is recorded on the accrual basis and includes amortization of discounts on money market instruments and long term debt instruments when required for federal income tax purposes. Realized gains and losses from security transactions are reported on an identified cost basis. Net realized gains include distributions of realized gains from other investment companies of $877,200 in 1995 and $989,000 in 1994. 14 ACORN FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1995 Financial instruments The Fund may purchase or sell exchange-traded financial futures contracts, which are contracts that obligate the 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 Fund enters into such contracts to hedge a portion of its portfolio. Gains and losses are reflected as "Net Realized Gain (Loss) on Futures Transactions" in the Statements of Operations. Additionally, the Fund may engage in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell foreign currencies. The Statements of Operations reflect gains and losses as realized for closed forward foreign currency contracts and unrealized for open contracts. The Fund bears the market risk that arises from changes in the value of financial instruments and securities indices (futures contracts) or from changes in foreign currency rates (forward foreign currency contracts) and the credit risk should a counterparty fail to perform under such contracts. There were no futures or forward foreign currency contracts open at December 31, 1995. Fund share valuation Fund shares are sold and redeemed on a continuing basis at net asset value (less a redemption charge, currently waived, of 2% for shares held less than 60 days). Net asset value per share is determined daily as of the close of trading on the New York Stock Exchange on each day the Exchange is open for trading by dividing the total value of the Fund's investments and other assets, less liabilities, by the number of Fund shares outstanding. Federal income taxes, dividends and distributions to shareholders It is the Fund's policy to comply with the special provisions of the Internal Revenue Code available to regulated investment companies and, in the manner provided therein, to distribute all of its taxable income, as well as any net realized gain on sales of investments reportable for federal income tax purposes. Such provisions were complied with for the years ended December 31, 1995 and December 31, 1994 and no federal income taxes have been accrued. Dividends and distributions payable to its shareholders are recorded by the Fund on the ex-dividend date. The Fund has elected to mark-to-market its investment in Passive Foreign Investment Companies ("PFICs") for income tax purposes. In accordance with this election, the Fund recognized unrealized appreciation on PFICs of $592,000 in 1995 and $673,000 in 1994. In addition, the Fund recorded net realized losses of $295,000 in 1995 and realized gains of $2,465,000 in 1994 on sales of PFICs. Cumulative net unrealized appreciation recognized in prior years on PFICs sold in 1995 and 1994 amounted to $2,498,000 and $2,285,000, respectively. Distributions to shareholders from net realized gains include $592,000 in 1995 and $853,000 in 1994 relating to PFICs which are treated as ordinary income dividends for Federal income tax purposes. Reclassifications have been made in 1995 in the accompanying analysis of net assets from undistributed net investment income and undistributed net realized gain on sales of investments of $8,197,000 and $8,343,000, respectively, into paid-in capital to reflect differences between financial reporting and income tax bases. Equalization accounting Prior to 1995, a portion of proceeds from sales and cost of redemptions of Fund shares was credited or charged to undistributed net investment income so that income per share available for distribution was not affected by sales or redemptions of shares. Effective January 1, 1995, the Fund no longer utilizes equalization accounting. Other Certain amounts have been reclassified for 1994 to conform with the 1995 presentation. 3. TRANSACTIONS WITH AFFILIATES The Fund's investment advisor, Wanger Asset Management, L.P. ("WAM"), furnishes continuing investment supervision to the Fund and is responsible for the overall management of the Fund's business affairs. The Fund pays a monthly advisory fee at the following annual rates: 3/4 of 1% of the net asset value of the Fund up to $100 million, 1/2 of 1% of the net asset value in excess of $100 million and up to $1.5 billion, and 2/5 of 1% of the net asset value in excess of $1.5 billion, determined at the beginning of each calendar quarter. Certain officers and trustees of the Trust are also principals of WAM. The Trust makes no direct payments to its officers and trustees who are affiliated with WAM. The Fund paid trustees' fees and expenses of $134,000 in 1995 and $120,000 in 1994 to trustees not affiliated with WAM, including $49,000 in 1995 and $47,000 in 1994 to the Chairman of the Board. 4. FUND SHARE TRANSACTIONS Proceeds and payments on Fund shares as shown in the Statements of Changes in Net Assets are in respect of the following numbers of shares:
(in thousands) 1995 1994 - --------------------------------------------------------------- Shares sold 21,831 21,442 Shares issued in reinvestment of dividend and capital gain distributions 12,817 7,423 - --------------------------------------------------------------- 34,648 28,865 Less shares redeemed 20,322 12,671 - --------------------------------------------------------------- Net increase in shares outstanding 14,326 16,194 =============================================================== 5. INVESTMENT TRANSACTIONS (in thousands) 1995 1994 - --------------------------------------------------------------- Investment securities (excluding money market instruments): Purchases $636,015 $391,391 Proceeds from sales 584,550 347,733 ===============================================================
6. FOREIGN PORTFOLIO BY INDUSTRY GROUP At December 31, 1995, the Fund's foreign portfolio of investments as a percentage of net assets was in the following sectors: Consumer Goods and Services 7.6% Information Technology 5.1 Finance 3.1 Industrial Goods and Services 1.5 Health Care 0.9 Energy and Minerals 0.6 Real Estate 0.2 Transportation 0.2 - -------------------------------------- Total Foreign Portfolio 19.2% ======================================
15 Acorn Fund Annual Report December 31, 1995 Trustees - ----------------------------------------------------- Leo A. Guthart Charles P. McQuaid Irving B. Harris Roger S. Meier Jerome Kahn, Jr. Adolph Meyer, Jr. David C. Kleinman Malcolm N. Smith James H. Lorie Ralph Wanger Officers - ----------------------------------------------------- Irving B. Harris, Chairman of the Board James H. Lorie, Vice Chairman of the Board Ralph Wanger, President Charles P. McQuaid, Senior Vice President Terence M. Hogan, Vice President Leah J. Zell, Vice President Merrillyn J. Kosier, Vice President and Secretary Bruce H. Lauer, Vice President and Treasurer Kenneth A. Kalina, Assistant Treasurer Transfer Agent, Dividend Disbursing Agent and Custodian - ----------------------------------------------------- State Street Bank and Trust Company Attention: Acorn Fund P.O. Box 8502 Boston, Massachusetts 02266-8502 1-800-962-1585 Investment Advisor - ----------------------------------------------------- Wanger Asset Management, L.P. 227 West Monroe Street, Suite 3000 Chicago, Illinois 60606 1-800-9-ACORN-9 (1-800-922-6769) e-mail: wanger@mcs.com Legal Counsel - ----------------------------------------------------- Bell, Boyd & Lloyd Chicago, Illinois Auditors - ----------------------------------------------------- Ernst & Young LLP Chicago, Illinois This report, including the audited schedule of investments and financial statements, is submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution unless preceded or accompanied by a prospectus. [LOGO of Acorn Fund] Acorn Fund A No-Load Fund Annual Report December 31, 1995 Managed by Wanger Asset Management, L.P. Acorn International Annual Report 1995 In a Nutshell Acorn International was down less than 1% for the fourth quarter of 1995. Small- cap international funds came under pressure toward year-end, as cautious investors in overseas markets stayed with blue chip stocks and away from second liners and emerging markets. For 1995 as a whole, we finished up 8.9%, about the same as EAFE and over 3% ahead of our peer group of funds, as defined by the Lipper International Small Company Funds Average. Our performance for the year is analyzed in detail in the next section of the report. We are pleased to have done well in our fund category, but we know that U.S. funds did much better than foreign investments in 1995. Every year one market has to do better than the others, and 1995 was the year for the U.S.A. In December 1995 and January 1996, foreign stocks have outperformed the U.S. market. We look forward to 1996. Finally, we want our shareholders to know that Acorn International is now open to new investors. We have substantially increased our staff and improved our systems to manage additional investments effectively. Results to December 31, 1995 - ------------------------------------------------------------------ 4th quarter Last 12 mos. ----------------------------- Acorn International - 0.7% 8.9% EAFE 3.6% 9.4% Lipper International Small Company Funds Average - 0.3% 5.8% EAFE is Morgan Stanley's Europe, Australia and Far East Index, an unmanaged index of companies throughout the world in proportion to world stock market capitalization, excluding the U.S. and Canada. The Lipper International Small Company Funds Average is a group comprised of twelve small company international funds. 1995 DISTRIBUTIONS Ex-Dividend Reinvestment Distribution Per Share Date Price - -------------------------------------------------------------------- Long-Term Capital Gain $0.01 7/18/95 $16.23 No year-end distributions were paid by Acorn International. The Fund did not invest in U.S. Government Interest Obligations. The Taxable N.A.V. for the Florida Intangible Tax and Pennsylvania Personal Property Tax is $16.59. Corporate shareholders do not qualify for a Dividend Received Deduction, since all dividends in this fund are foreign. No foreign taxes were passed through to shareholders, since the Fund did not distribute an income dividend in 1995. The Value of a $10,000 Investment in Acorn International September 23, 1992 through December 31, 1995 Average Annual Total Return 1 Year Life of Fund 8.9% 17.0% [CHART APPEARS HERE] DATE ACORN INT'L ($) EAFE ($) ---- --------------- -------- 09/23/92 10,000 10,000 09/30/92 10,010 10,000 12/31/92 10,690 9,568 03/31/93 12,000 10,667 06/30/93 12,920 11,693 09/30/93 13,910 12,423 12/31/93 15,940 12,485 03/31/94 15,834 12,876 06/30/94 15,534 13,487 09/30/94 16,491 13,452 12/31/94 15,334 13,262 03/31/95 14,811 13,457 06/30/95 15,727 13,498 09/30/95 16,824 14,005 12/31/95 16,703 14,514 This graph compares the results of $10,000 invested in Acorn International on 9-23-92 (the date the Fund began operations) with Morgan Stanley's Europe, Australia and Far East Index ("EAFE"). Past performance does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Acorn International Total Return Percentage for Each Quarter Net Asset Value Per Share 12/31/95: $16.59 Squirrel Chatter Snow Job This winter's record blizzard on the East Coast certainly focused attention on the weather. A few days before the paralyzing storm, there was a story in The New York Times confirming that 1995 had been the warmest year on record. There may be an important connection between the two. Back in October, Swiss Re, one of the world's largest reinsurance companies, took an ad in The Financial Times of London: "Stop and think: giant storms are triggered by global warming; this is caused by the greenhouse effect; which is, in turn, accelerated by man."/1/ The first industry forced to notice the new climate may have been the insurance industry. Hurricane Andrew alone cost insurers $16.5 billion. The next might be agriculture; farmers have tuned their crop-raising practices to local conditions, and any change in climate is highly likely to hurt yields in the short run. Feeding the World In a new book by an old-time environmentalist,/2/ Lester Brown argues that China will be increasing its imports of grain very substantially over the next twenty years. Demand will increase as people upgrade their diets from rice to meat, requiring lots of livestock and poultry feed. A Chinese feed mill operator agrees, saying "When people have more money, the first thing they'll spend it on is food. Meat has status; it's a symbol of prosperity."/3/ Brown projects that grain consumption will increase from 360 million tons in 1995 to 460 million in 2010. At the same time that demand is increasing, the amount of prime agricultural land in China will shrink, and double-cropping will drop. This has happened under very similar conditions in Japan, Korea, and Taiwan. Farmland will turn into housing, shopping centers, roads, dams, parking lots, factories, and golf courses as China becomes prosperous. In the three countries cited, the conversion of farms to commercial real estate has outweighed improvements in yield per acre, requiring Japan, Korea, and Taiwan to import large quantities of grains and foodstuffs. World production of grain is about 1,800 million tons per year, of which 200 million tons are exported. An increase in demand of another 100 million tons would alter the supply-demand balance and greatly increase export tonnage. At the same time demand in China is rising, food demand will be increasing in most other countries as well. India and Indonesia are going through the same demand growth cycle as China. Can the world increase grain production enough to satisfy this demand increase? Brown thinks not, predicting a big rise in food prices. Julian Simon, an economist at the University of Maryland, disagrees; he has bet many environmental activists that commodity prices won't rise, and he has won all the bets so far. Supply may increase too: Who knows how much wheat a free Ukraine can grow? On balance, I think that the American farmer will see more favorable economics in the next decade than in the last as the volume of grain exported from the U.S. rises. We will be looking at investment opportunities in companies that will profit from this trend. Analysis of Investment Performance 1995 was a big story for the stock market in the United States, with the unmanaged S&P 500 stock index soaring 34.1% (excluding dividends). No foreign market did that well as measured in its own local currency. Two markets did beat the U.S.A. in dollar terms; Switzerland (+43%) and Sweden (+35%). The U.S. dollar was weak against the Swiss franc and Swedish krona over the year, so those returns are higher measured in U.S. dollars than in francs or kronor. "Emerging Markets" were all the rage in 1993. Markets in strange places sailed upwards as money moved offshore. Market manias are fine for a while, but eventually prove to be a trap. American investors sent unprecedented billions of dollars to undeveloped markets, where unscrupulous financiers with unpronounceable names sent unsophisticated Yankees home in their underwear. Emerging markets have now had two years of bear markets, and by the end of 1995 have been hammered down to reasonable prices. In Asia in 1995, the Indian market fell 29%, Pakistan 34%, Taiwan 30%, China 23%. Latin America was spooked by a serious financial crisis in Mexico. Mexican stocks went down 27%, Brazil 15%, Peru 17%.
Avg. Weight in Percent Contribution to Market Our Portfolio Gain (Loss) Our Portfolio* - ------------------------------------------------------------------------------- Up Sweden 7.0% 49% 2.8% Germany 4.8 74 2.7 United Kingdom 10.3 25 2.5 Norway 2.8 77 1.6 France 4.8 26 1.1 Down India 1.8 (45) (1.1) Mexico 2.2 (34) (1.0) Brazil 1.9 (34) (0.9) Japan 8.2 (3) (0.4) All Others 56.2 1.6 - ------------------------------------------------------------------------------- 100.0% 8.9%
*The contribution to the portfolio does not equal average country weighting times gain or loss because of foreign currency fluctuation. The Scarlet A Drudgery is as necessary to call out the treasures of the mind as harrowing and planting those of the earth. --Margaret Fuller Foreign markets were mixed in 1995, but we had a bumper crop of great stocks. Every year we recognize skilled investment professionals who helped us harvest big returns. The Scarlet A goes to analysts and others who sowed the ideas that worked out the best over the year. In 1995, that meant that we made a high percentage return and at least $2 million in real money. Many of the best stocks were European computer service companies. The percentage gain winner in 1995 was Sysdeco, a Norwegian company providing software toolsets and systems. The Scarlet A goes to our friend Mogens Vad, who is now at Svenska Handelsbanken. Mogens has been an excellent guide to Nordic stocks. The return on Sysdeco was 263% in 1995, and made us $14 million. We made the most dollars in another Nordic computer service company, WM Data of Sweden. Our position made $25 million in 1995, up 217%. The prize goes to Mikael Randel of Carnegie Securities in Copenhagen. SAP, a German software company, produced a 172% gain and $19 million in profits. More remarkably, it is a repeat winner, having been our best stock in 1994! We are awarding the Scarlet A to Charles Elliott of Goldman Sachs, at work in their London office. The fourth European computer service company to make the winners' circle is Tietotehdas of Finland. Mogens Vad gets his second Scarlet A for the year on this one. Our investment gained 96% in 1995, making us $8 million. Mexico is fighting a major economic crisis, 20% unemployment and 50% interest rates. When the crisis hit, we bought Kimberly Clark (Mexico) at the advice of Luanne Zurlo, now at CS First Boston. We reasoned that in a depression you give up toilet paper last. The stock returned 61% this past year. Our best Asian stock was Malaysian Assurance. We made a 35% gain on the stock. Charlene Wang of Vickers Ballas collects her Scarlet A. Demi Moore wore a Scarlet A in the movies this year, but she was not in our kind of stocks. /s/ Ralph Wanger - ---------------- Ralph Wanger President 1 Quoted in Scientific American, February 1996, p. 27. 2 Brown, Lester R., Who Will Feed China, W. W. Norton, New York, 1995. 3 Liu Youhao, quoted in Forbes, January 1, 1996, p. 54. 4 Computed by taking into account the changes in security price, trading activity and income earned. ======================================================================= Acorn International's Best and Worst Stocks of 1995 $ gain/(loss) % change in 1995 Stock Country in 1995/4/ (in millions) - ----------------------------------------------------------------------- WM Data Nordic Sweden +217% $24.7 Computer Services/Consulting SAP Pfd. Germany +172 19.4 MIS Software Packages Sysdeco Norway +263 14.3 Software Tool Sets & Systems Tietotehdas Finland +96 8.0 Computer Services/Consulting Fresenius Germany +106 8.0 Dialysis Equipment & Solutions Casa Anglo Brasileira Pfd. Brazil -79 (4.4) Department Store Chain International Cosmetics Thailand -49 (3.3) Consumer Goods Distribution Benefon Finland -34 (3.1) Mobile Telephones Grupo Fernandez Editores Mexico -75 (2.6) Textbook Publisher Industrial Credit & Investment Corp. of India India -45 (2.2) Bank/Financial Services 3 MAJOR PORTFOLIO CHANGES IN THE FOURTH QUARTER
Number of Shares Sept. 30, 1995 Dec. 31, 1995 - ------------------------------------------------------------------------------- ADDITIONS - ------------------------------------------------------------------------------- Europe - ------------------------------------------------------------------------------- Germany - ------------------------------------------------------------------------------- Rhoen Klinikum Ord. 5,000 93,000 (includes effect of 10 for 1 stock split) Rhoen Klinikum Pfd. 11,000 135,000 (includes effect of 10 for 1 stock split) Fresenius Pfd. 0 14,000 Italy - ------------------------------------------------------------------------------- Banca Fideuram 6,000,000 7,000,000 Saipem SPA 300,000 1,150,000 Norway - ------------------------------------------------------------------------------- Maritime Group 60,000 150,000 Sweden - ------------------------------------------------------------------------------- Althin Medical AB 160,000 265,000 France - ------------------------------------------------------------------------------- Axime Ex Segin 20,000 65,000 United Kingdom - ------------------------------------------------------------------------------- Edinburgh Fund Managers 0 300,000 Seton Healthcare Group 0 390,000 Rhino Group 7,100,000 13,000,000 Serco Group 1,500,000 1,800,000 Ivory & Sime 0 400,000 Netherlands - ------------------------------------------------------------------------------- Kempen 0 390,000 Asia - ------------------------------------------------------------------------------- India/Pakistan - ------------------------------------------------------------------------------- Max India 0 174,450 Malaysia - ------------------------------------------------------------------------------- Malaysian Assurance Alliance 1,250,000 1,699,500 (includes effect of 12.5% stock bonus) Philippines/Indonesia - ------------------------------------------------------------------------------- Bank Niaga 400,000 1,850,000 (includes effect of 2 for 1 stock split) PILTEL 1,900,000 7,000,000 Int'l Container Terminal Services 8,000,000 11,000,000 Singapore - ------------------------------------------------------------------------------- Genting International 3,800,000 4,600,000 Thailand - ------------------------------------------------------------------------------- International Cosmetics 180,000 360,000 Latin America - ------------------------------------------------------------------------------- Mexico - ------------------------------------------------------------------------------- Bufete Industrial 300,000 370,000 Other South America - ------------------------------------------------------------------------------- Banco De A Edwards 0 150,000 Other Countries - ------------------------------------------------------------------------------- Australia - ------------------------------------------------------------------------------- Publishing & Broadcasting 0 1,400,000 Austereo 0 2,900,000 Petroleum Securities Australia 750,000 1,400,000 Canada - ------------------------------------------------------------------------------- Veritas Energy Services 310,000 600,000 Ranger Oil 300,000 600,000 SALES - ------------------------------------------------------------------------------- Europe - ------------------------------------------------------------------------------- AAF Industries 200,000 0 Aran Energy 5,000,000 0 Banco Portuguese de Investimento 250,000 120,444 Confide 6,000,000 0 Enator Cl. B 750,000 0 Finanza & Futuro 1,200,000 0 Z Groupe Zannier 75,000 0 Milliyet Geazatec 18,750,000 0 OK Holding 220,000 106,000 Polgram 140,000 0 Rautakirja Cl. B 75,000 45,000 Schibsted Gruppen 400,000 0 Sidel 10,000 0 Zehnder Holding 12,000 10,000 Asia - ------------------------------------------------------------------------------- Bharat Petroleum 151,500 0 Cafe de Coral 700,000 0 Genting 900,000 450,000 Gold Peak Batteries 1,400,000 0 Pacific Corp 20,000 0 Philippine Long Distance Telephone 160,000 0 5.75% Cv. Pfd. Reliance Industries 345,961 1,776 Wo Kee Hong 15,300,000 0 Shanghai Yaohua Pilkington Glass 700,000 0 Latin America - ------------------------------------------------------------------------------- Cadenalco 1,700,000 0 Casa Anglo Brasileira Pfd. 25,000,000 20,000,000 Petroleos Ipiranga 300,000,000 0
4 MAJOR PORTFOLIO CHANGES IN THE FOURTH QUARTER
Number of Shares Sept. 30, 1995 Dec. 31, 1995 - -------------------------------------------------------------------------------- Other Countries - -------------------------------------------------------------------------------- Burswood Property Trust 7,000,000 4,500,000 Greenchip Opportunities 600,000 0 International Colin Energy 95,000 0 MEMTEC ADR 228,000 0 Tarragon Oil & Gas 200,000 0 Teva Pharmaceutical Industries 25,000 0 ACORN INTERNATIONAL STATEMENT OF INVESTMENTS DECEMBER 31, 1995 - ------------------------------------------------------------------------------- Number of Shares Value (000) - -------------------------------------------------------------------------------- Common Stocks and Other Equity-Like Securities--97.2% - -------------------------------------------------------------------------------- Europe--52.9% - -------------------------------------------------------------------------------- Germany/Austria--6.6% 120,000 Fresenius $ 13,414 14,000 Fresenius Pfd. 1,330 Dialysis Equipment & Solutions 135,000 Rhoen Klinikum Pfd. 11,790 93,000 Rhoen Klinikum Ord. 9,227 Hospital Management 170,000 Flughafen Wien 11,479 Vienna Airport Authority (Austria) 38,000 Escada (c) 6,903 Designer Fashions 15,000 Binding-Brauerei 6,340 Brewer 400,000 United International Holdings (b) 5,900 Cable Television for Austria & Other Countries 15,000 Pfleiderer 4,559 Construction Materials 45,000 VAE Eisenbahnsysteme 3,798 Railroad Switches (Austria) 25,000 SAP Pfd. 3,790 MIS Software Packages 30,000 BWT 3,083 Water Filtration Systems (Austria) 3,100 Marschollek Lautenschlager 2,252 Financial Planning - -------------------------------------------------------------------------------- 83,865 Denmark--0.8% 47,000 Chr. Hansen's Laboratorium, Cl. B 4,580 Rennet, Food Additives & Allergens 22,000 Kompan International 3,553 Playground Equipment 106,000 OK Holding (b) 1,951 Southeast Asian Trading Company - -------------------------------------------------------------------------------- 10,084 Finland--3.6% 500,000 Tietotehdas, Cl. B (c) 16,236 Computer Services/Consulting 370,000 Benefon (c) 9,203 Mobile Telephones 300,000 Raision Tehtaat, Series V 4,871 Foodstuffs & Specialty Chemicals 180,000 Huhtamaki 4,353 Confectionery & Contraceptives 80,000 Fiskars, Series A 3,906 Scissors & Power Supply Equipment 100,000 Vaisala, Cl. A 3,662 Meteorological Instruments 105,000 Sentra, Cl. A 2,055 Convenience Stores, Restaurants 45,000 Rautakirya, Cl. B 2,031 Bookshops & Kiosks - -------------------------------------------------------------------------------- 46,317 Norway--3.3% 720,000 Sysdeco (b) (c) 19,715 Software Tool Sets & Systems 1,300,000 SensoNor (b) (c) 10,494 Electronic Sensors for Airbags 400,000 Elkjoeb Norge (c) 9,940 Consumer Electronics Retailer 150,000 Maritime Group 2,018 Oil Field Equipment & Services - -------------------------------------------------------------------------------- 42,167 Sweden--7.7% 800,000 WM Data Nordic 36,215 Computer Services/Consulting 250,000 Hennes & Mauritz, Cl. B 13,958 Apparel Stores 250,000 Elekta Instrument, Cl. B 10,035 Equipment for Neurosurgery 215,000 Getinge Industrier 9,814 Sterilization & Disinfection Equipment 150,000 Autoliv 8,782 Seatbelts & Airbags 575,000 Allgon, Series B 7,982 Mobile Telephone Antennae & Systems
ACORN INTERNATIONAL STATEMENT OF INVESTMENTS DECEMBER 31, 1995 - -------------------------------------------------------------------------------
Number of Shares Value (000) - -------------------------------------------------------------------------------- 400,000 Pricer, Cl. B (b) $ 6,760 Electronic Shelf Labels for Supermarkets 265,000 Althin Medical AB (c) 5,398 Dialysis & Other Medical Equipment - -------------------------------------------------------------------------------- 98,944 France--5.0% 42,000 Cetelem 7,892 Consumer Loans 95,000 Sligos 7,848 Computer Services/Credit Card Processing 390,000 Coflexip 7,361 Flexible Pipe for Subsea Oil Wells 60,000 Guilbert 7,055 Office Supplies Distributor 62,000 NRJ 6,263 Radio Network 65,000 Spir Communication 5,968 Newspaper Publisher & Printer 42,000 Virbac 5,153 Veterinary Pharmaceuticals Manufacturer 65,000 Axime Ex Segin (b) 5,011 Computer Services/Consulting 52,000 CEP Communications 4,317 Trade Magazines & Book Publishing 55,000 Technip 3,790 Turnkey Engineering & Construction 65,000 Ecco Travail Temporaire 3,781 Temporary Employment - -------------------------------------------------------------------------------- 64,439 United Kingdom/Ireland--10.8% 3,000,000 Invesco 11,808 Investment Management 467,000 International CableTel (b) 11,442 Cable TV & Telephone System 1,800,000 Oriflame International 11,318 Natural Cosmetics 1,800,000 Serco Group 10,256 Facilities Management 1,550,000 Powerscreen International 9,325 Mobile Crushing & Screening Equipment 2,000,000 Capita Group 8,850 Outsourcing Government Services 2,500,000 Capital Corporation 7,841 Casino 1,700,000 N. Brown Group 7,074 Mail Order Women's Clothing 1,550,000 Medeva 6,450 Pharmaceuticals 670,000 Ethical Holdings (b) 6,030 Drug Delivery 430,000 Securicor Group, Cl. A 5,908 Mobile Communications 450,000 Comcast UK Cable Partners (b) 5,625 Cable TV & Telephone System 3,700,000 City Centre Restaurants 5,400 Fast Food Restaurants 410,000 Vosper Thornycroft Holdings 5,188 Military Shipbuilding 1,700,000 Rotork 4,513 Valve Actuators 1,820,000 Body Shop International 4,295 Natural Cosmetics & Toiletries 500,000 Dorling Kindersley 4,145 Reference Book & CD-ROM Publisher 300,000 Edinburgh Fund Managers 3,065 Investment Management 13,000,000 Rhino Group (b) 2,826 Video Game Stores 390,000 Seton Healthcare Group 2,392 Pharmaceuticals 400,000 Ivory & Sime 1,425 Investment Management 1,750,000 Pittencrieff Resources 1,331 Oil Producer 1,000,000 North American Gas Investors Trust (b) 854 Closed-End Fund - -------------------------------------------------------------------------------- 137,361 Switzerland--4.8% 6,500 Societe Generale de Surveillance 12,879 Inspection/Testing of Trade Goods 23,000 Phoenix Mecano 11,553 Electrical Components Manufacturer 5,000 Bobst 7,821 Packaging Machinery 13,000 Liechtenstein Global Trust 7,682 (formerly BIL GT Gruppe) Banking & Investment Management 21,600 Sece Cortaillod Holdings 7,133 Cables, Cable TV & Electrical Supply Distribution 6,000 Suedelektra Holding (b) 6,466 Diversified Pool of Commodity-Related Projects 10,000 Zehnder Holding 5,040 Specialty Radiators 10,000 Prodega 2,890 Cash-and-Carry Retailer - -------------------------------------------------------------------------------- 61,464 Italy/Greece--4.9% 7,000,000 Banca Fideuram 8,096 Life Insurance & Mutual Funds 550,000 Banca Popolare Di Bergamo 7,605 Regional Bank 3,100,000 Costa Crociere Ord. 7,574 Cruise Ship Line 600,000 Gewiss 7,560 Electrical Components Manufacturer
ACORN INTERNATIONAL STATEMENT OF INVESTMENTS DECEMBER 31, 1995
Number of Shares Value (000) - -------------------------------------------------------------------------------- 130,000 Industrie Natuzzi $ 5,899 Leather Furniture Manufacturer 170,000 Hellenic Bottling Company 5,569 Coca-Cola Bottler (Greece) 120,000 Ergo Bank 4,791 Bank (Greece) 1,100,000 Banca Di Legnano 4,174 Regional Bank 80,000 Cellular Communications International (b) 3,420 Mobile Communications 1,150,000 Saipem SPA 2,653 Pipeline Construction & Drilling Contractor 1,600,000 Tecnost 2,622 ATM, Lotto, Toll Collection Equipment Manufacturer 925,000 Editoriale L'Espresso (b) 1,603 Newspaper & Magazine Publisher 133,130 Teletypos 490 TV Broadcasting (Greece) - -------------------------------------------------------------------------------- 62,056 Turkey--0.5% 4,500,000 Tat Konservcelik Sanayii 2,845 Tomato Paste 92,412,000 Sabah Yayincilik 1,821 Newspapers, Magazines 62,000,000 Medya Holdings 1,069 Newspapers, Magazines, Television 30,000,000 Hurriyet Gazetecilik (b) 911 Newspapers, Magazines - -------------------------------------------------------------------------------- 6,646 Spain/Portugal--2.4% 110,000 Jeronimo Martins 6,112 Supermarket/Hypermarket Chain (Portugal) 300,000 Vallehermoso 5,576 Residential Property Developer & Landlord 160,000 Cortefiel 4,194 Apparel Retailing 170,000 Lusotur (b) 3,528 Real Estate/Resort Developer (Portugal) 100,000 Conservera Campofrio 3,330 Sausage Maker 350,000 Televisao Independente (b) 1,628 Television Station (Portugal) 120,444 Banco Portugues de Investimento (b) 1,442 Bank 378,000 Oscar Mayer S.A. 1,408 Sausage Maker 235,000 Estoril Sol (b) (c) 1,178 Casino Resort (Portugal) 100,000 Filmes Lusomundo 1,037 Newspapers, Radio, Video, Film Distribution (Portugal) 100,000 Marco Iberica Midesa 907 Magazine Distributor - -------------------------------------------------------------------------------- 30,340 Netherlands--2.4% 260,000 Getronics 12,164 Computer Consulting 57,000 Telegraaf Holdings 8,036 Newspaper Publisher 90,000 De Boer Winkelbedrijven 4,435 Supermarkets, Drug Stores, Liquor Stores 390,000 Kempen 3,965 Stock Brokerage/Investment Management 225,000 Fugro McClelland 2,428 Engineering, Consulting & Surveying - -------------------------------------------------------------------------------- 31,028 Eastern Europe--0.1% 147,000 Bank Komunalny 477 Bank (Poland) - -------------------------------------------------------------------------------- 477 ================================================================================ Europe--Total 675,188 Asia--29.3% - -------------------------------------------------------------------------------- China--0.7 % 2,500,000 New World Infrastructure 4,785 (formerly New World China Fund) (b) Infrastructure Investments 390,000 AES China Generating (b) 3,120 Cogeneration 111,275 The China Investment Company (b) 1,029 Closed-End Fund - -------------------------------------------------------------------------------- 8,934 Hong Kong--4.6% 5,000,000 Varitronix International 9,280 LCD Manufacturer 2,300,000 Television Broadcasts 8,195 Television Programming & Broadcasting 9,000,000 Li and Fung 8,032 Sourcing of Consumer Goods 10,000,000 JCG Holdings 7,307 Consumer Finance 14,000,000 Vitasoy International Holdings 5,975 Soya Milk Manufacturer 18,250,000 Golden Harvest Entertainment 4,839 Movie Distribution & Exhibition 11,000,000 Manhattan Card 4,695 Chase's Local Credit Card 2,500,000 Johnson Electric Holdings 4,462 Micromotor Manufacturer
7 ACORN INTERNATIONAL STATEMENT OF INVESTMENTS DECEMBER 31, 1995
Number of Shares Value (000) - -------------------------------------------------------------------------------- 7,500,000 Chen Hsong Holdings $ 3,929 Plastic Injection Machines 12,100,000 ABC Communication Holdings 2,191 Paging Service - -------------------------------------------------------------------------------- 58,905 India/Pakistan--1.4% 82,702 Housing Development Finance 6,358 Mortgage Lender 987,800 Industrial Credit & Investment 2,194 Corporation of India (b) Bank/Financial Services 597,800 Zee Telefilms (c) 2,167 Hindi Television Programming & Broadcasting 221,785 Pakistan State Oil 1,718 Oil Distribution 342,100 Kotak Mahindra Finance 1,162 Consumer Finance Company 174,450 Max India 1,118 Mobile Communications 456,000 Tube Investment GDR 1,083 Bicycle Manufacturer 525,000 Business India TV (b) 860 Satellite Television Broadcasting Network 2,000,000 Centurion Quantum Growth (b) 324 Closed-End Fund 71,800 Mirc Electronic 246 Consumer Electronics 14,900 Adamjee Insurance 44 Insurance (Pakistan) 1,776 Reliance Industries 10 Petrochemicals & Textiles 1,000 Core Healthcare 3 Pharmaceuticals 300 Dabur India 2 Health Care - -------------------------------------------------------------------------------- 17,289 Japan--8.6% 200,000 Secom 13,920 Security Alarm Systems 250,000 Promise 12,044 Consumer Finance 114,000 Sanyo Shinpan 9,393 Consumer Finance 124,000 Nichiei 9,256 Lender to Small & Medium Businesses 195,000 Sankyo 9,073 Pachinko Machine Manufacturer 340,000 Heiwa 8,866 Pachinko Machine Manufacturer 240,000 Tostem 7,980 Window Sash Manufacturer 143,000 Aucnet 6,931 Used Auto Auctions Via Satellite 72,000 Autobacs Seven 5,988 Auto Parts Retailer 84,000 Paramount Bed 5,863 Hospital Bed Manufacturer 104,000 Sony Music Entertainment 5,444 Recorded Music/CDs 140,000 Hokuto 5,089 Mushroom Grower 81,000 Tsutsumi Jewelry 4,059 Jewelry Manufacturer, Retailer & Wholesaler 180,000 Mr. Max 3,472 Household Goods & Appliance Retailer 141,000 Homac Corporation 2,501 Discount Retailer - -------------------------------------------------------------------------------- 109,879 Korea/Taiwan--4.5% 19,000 Korea Mobile Telecom 21,417 Mobile Communications 330,000 Kookmin Bank 6,387 90,000 Kookmin Bank (New) (b) 1,681 Retail Bank 68,000 Shinsegae 5,680 20,666 Shinsegae (New) (b) 1,705 Department Stores 225,000 Daehan Blue Chip Index Trust 4,886 Closed-End Fund 400,000 President Enterprises 4,600 Food Manufacturer & Distributor (Taiwan) 50,000 Formosa Fund (b) 3,800 Closed-End Fund (Taiwan) 155,000 Formosa Growth Fund (b) 2,034 Closed-End Fund (Taiwan) 18,080 Baik Yang 2,447 Underwear Manufacturer 300,000 Baring Taiwan Fund (b) (c) 2,438 Closed-End Fund - -------------------------------------------------------------------------------- 57,075 Malaysia--3.1% 1,200,000 O.Y.L. Industries 9,311 Air Conditioners 1,699,500 Malaysian Assurance Alliance 7,698 Insurance 2,100,000 Sistem Televisyen Malaysia 7,568 Television Franchise 2,000,000 New Straits Times Press 6,696 Newspaper Publisher 1,200,000 Malaysian Oxygen 4,537 Industrial Gases Producer & Distributor 450,000 Genting 3,757 Hotels & Casinos - -------------------------------------------------------------------------------- 39,567
8
======================================================================================================== ACORN INTERNATIONAL STATEMENT OF INVESTMENTS DECEMBER 31, 1995 Number of Shares Value (000) - -------------------------------------------------------------------------------- Indonesia/Philippines--3.7% 7,000,000 PILTEL (b) $ 7,072 Mobile Communications (Philippines) 11,000,000 Int'l Container Terminal Services (b) 5,766 Container Handling Terminals & Port Management (Philippines) 1,633,000 Tigaraksa Satria 5,714 Distributor of Consumer Goods 11,000,000 Universal Robina 5,452 Snack Foods (Philippines) 3,000,000 Mustika Ratu (b) 4,789 Traditional Cosmetics 6,500,000 Mayora Indah 4,691 Baked Goods/Candy 750,000 Modern Photo Film 4,346 Fuji Film Distributor 1,850,000 Bank Niaga (b) 3,540 Banking 230,000 Unilever Indonesia 2,766 Manufacturer & Distributor of Detergents 1,500,000 Philippine Savings Bank (b) 2,631 Banking (Philippines) 1,200,000 Suba Indah (c) 800 Beverage & Food - -------------------------------------------------------------------------------- 47,567 Singapore--1.3% 4,600,000 Genting International 7,498 Cruise Line 1,600,000 Clipsal Industries 3,616 656,000 Clipsal Industries Warrants 8/12/98 (b) 354 Electrical Components 950,000 Venture Manufacturing 3,183 1,109,900 Venture Manufacturing Warrants 7/26/99 (b) 1,765 Contract Manufacturer of Electronic Goods - -------------------------------------------------------------------------------- 16,416 Thailand--1.4% 600,000 Srithai Superware 4,168 Plastic/Melamine Tableware & Containers 200,000 Serm Suk 3,763 Pepsi Bottler 360,000 International Cosmetics 3,287 Consumer Goods Distribution 2,600,000 Sinpinyo Fund V 1,884 Closed-End Fund 300,000 Thai President Foods 1,846 Instant Noodles & Cookies 100,756 Singer Thailand 1,464 Consumer Goods Distributor 1,505,000 Modernform 1,434 Furniture - -------------------------------------------------------------------------------- 17,846 ================================================================================ Asia--Total 373,478 Latin America--7.1% - -------------------------------------------------------------------------------- Mexico--2.1% 500,000 Kimberly Clark de Mexico 7,554 Paper Products 370,000 Bufete Industrial (b) 5,550 Engineering & Construction 1,500,000 Nadro, Series L 5,062 Pharmaceutical Distributor 350,000 Grupo Radio Centro 2,581 Radio Stations & Networks 600,000 GBM Atlantico, Series L (b) 1,950 Bank & Brokerage 1,500,000 Fondo Opcion, Series B (b) (c) 1,518 Real Estate Investment Fund 5,500,000 Grupo Herdez, Series B (b) 1,142 Sauces & Condiments 3,000,000 Grupo Fernandez Editores (b) 837 Textbook Publisher 107,000 Cofar 44 Drug Stores - -------------------------------------------------------------------------------- 26,238 Brazil--1.6% 26,000,000 Banco Itau Pfd. 7,249 Bank 3,500,000,000 White Martins 3,493 Producer/Distributor of Industrial Gases 146,000,000 Cemig Pfd. 3,229 Electric Utility 3,000,000 Multibras Pfd. 2,222 Household Appliances 35,000,000 Telemig Pfd. 1,602 14,000,000 Telemig 720 Telecommunications 20,000,000 Casa Anglo Brasileira Pfd. 844 Department Store Chain 1,000,000 Brazilian Smaller Companies Warrants (b) 700 Closed-End Fund 120,000 Fabricadora de Pecas 593 Auto Parts - -------------------------------------------------------------------------------- 20,652 Other South America--2.5% 260,000 IRSA 6,630 Real Estate Management & Development (Argentina) 130,000 Genesis Chile Fund 5,265 Closed-End Fund 250,000 Credicorp (b) 4,313 Universal Bank (Peru) 105,000 Compania Boliviana de Energia Electrica 3,491 Electric Utility 2,200,000 Banco Wiese 3,390 Bank (Peru) 150,000 Banco De A Edwards (b) 2,944 Bank (Chile)
9
============================================================================================================= ACORN INTERNATIONAL STATEMENT OF INVESTMENTS DECEMBER 31, 1995 Number of Shares or Principal Amount Value (000) - -------------------------------------------------------------------------------- 2,000,000 Enrique Ferreyros $ 2,344 Heavy Machinery Dealer (Peru) 400,000 Banco de Bogota 1,918 Bank (Colombia) $1,252 Tele 2000 9.75% Cv. Note 4/5/97 1,064 Telecommunications & Cable TV (Peru) 450,000 Global Casinos Cv. Pfd. (b) 225 225,000 Global Casinos (b) 63 Worldwide Casino Operator (Aruba) 229,500 Cerveceria Biekert (b) 434 Brewer (Argentina) - -------------------------------------------------------------------------------- 32,081 Central America--0.9% 150,000 Banco Latinoamericano de Exportaciones 6,975 Trade Financing (Panama) 150,000 Panamerican Beverages 4,800 Coca-Cola Bottler (Panama) - -------------------------------------------------------------------------------- 11,775 ================================================================================ Latin America--Total 90,746 Other Countries--7.0% - -------------------------------------------------------------------------------- Australia / New Zealand--4.0% 4,000,000 Village Roadshow Pfd. 12,498 Film Distribution, Exhibition & Production 410,000 Sky City (b) 8,511 Casino & Hotel (New Zealand) 4,500,000 Burswood Property Trust 6,026 Perth Casino & Resort 1,400,000 Publishing & Broadcasting 4,884 Media & TV Broadcasting 3,100,000 Just Jeans Holdings 4,474 Jeans & Fashion Retail Stores 2,900,000 Austereo 4,099 Media--Radio 12,000,000 Command Petroleum Holdings (b) 3,660 Oil & Gas Exploration 1,400,000 Petroleum Securities Australia 3,541 Oil Exploration & Mining 560,000 PDL Holdings 3,112 Electrical Equipment Manufacturer & Distributor (New Zealand) - -------------------------------------------------------------------------------- 50,805 Canada--1.9% 1,000,000 Shaw Communications 6,324 75,000 Shaw Communications Warrants (b) 1 Cable TV 600,000 Ranger Oil 3,750 Oil & Gas Producer 400,000 Enserv (b) 3,446 Oil Field Services 600,000 Veritas Energy Services (b) (c) 3,299 Geophysical Contractor 500,000 Cogeco 2,658 Cable TV 300,000 Cogeco Cable (c) 1,925 Cable TV 340,000 Archer Resources (b) 1,246 Oil & Gas Producer 250,000 Fundy Cable 1,065 Cable TV 330,000 Pan East Petroleum (b) 1,028 Oil & Gas Producer - -------------------------------------------------------------------------------- 24,742 Israel--0.6% 175,000 Pec Israel Economic (b) 4,222 Industrial Holdings 400,000 Ampal American Israel 2,100 Hotels, Real Estate & Industrial Holdings 600,000 Alliance Tire (b) 1,791 Off-the-Road Tires - -------------------------------------------------------------------------------- 8,113 South Africa--0.5% 460,000 Kersaf Investments 5,804 Casino Resorts ================================================================================ Other--Total 89,464 Foreign Corporations, Operations in the U.S.--0.9% - -------------------------------------------------------------------------------- 550,000 ADT (b) 8,250 Alarm Systems & Auto Auctions (Bermuda) 161,000 Carnival 3,924 Cruise Ship Line (Panama) ================================================================================ Foreign Corporations, Operations in the U.S.--Total 12,174 Total Common Stocks and Other Equity-Like Securities--97.2% 1,241,050 - -------------------------------------------------------------------------------- (Cost: $1,049,522) Money Market Instruments--2.2% - -------------------------------------------------------------------------------- Yield 5.60%-5.63% Due January 1996 $14,000 IBM Credit 13,996 $14,165 Travelers Insurance 14,158 - -------------------------------------------------------------------------------- (Cost: $28,154) 28,154 Total Investments--99.4% 1,269,204 - -------------------------------------------------------------------------------- (Cost: $1,077,676) Cash and Other Assets Less Liabilities--0.6% 7,040 - -------------------------------------------------------------------------------- Total Net Assets--100% $1,276,244 ================================================================================
10 ACORN INTERNATIONAL STATEMENT OF INVESTMENTS DECEMBER 31, 1995 (a) At December 31, 1995, for federal income tax purposes cost of investments was $1,089,796,000 and net unrealized appreciation was $179,408,000 consisting of gross unrealized appreciation of $308,310,000 and gross unrealized depreciation of $128,902,000. (b) Non-income producing security. (c) On December 31, 1995, the Fund held the following percentages of the outstanding voting shares of the companies listed below: - ------------------------------------------------------------------------ Estoril Sol (Portugal)........................... 9.12% Fondo Opcion (Mexico)............................ 8.13 Zee Telefilms (India)............................ 8.03 Benefon (Finland)................................ 7.96 Tietotehdas (Finland)............................ 7.91 Veritas Energy Services (Canada)................. 7.05 SensoNor (Norway)................................ 6.79 Elkjoep Norge (Norway)........................... 6.15 Althin Medical (Sweden).......................... 5.80 Sysdeco (Norway)................................. 5.52 Cogeco Cable (Canada)............................ 5.43 Suba Indah (Indonesia).......................... 5.33 Baring Taiwan Fund (Taiwan)...................... 5.27 Escada (Germany)................................. 5.26 The aggregate cost and value of investments in these companies at December 31, 1995, was $63,914,000 and $91,215,000 respectively. The market value of these securities represents 7.15% of the total net assets at December 31, 1995. During the period ended December 31, 1995, dividends received from these companies amounted to $775,000 and the net realized loss on sales of investments in such companies amounted to $8,000. PORTFOLIO DIVERSIFICATION At December 31, 1995, the Fund's portfolio of investments as a percent of net assets was diversified as follows:
Value (000) Percent - --------------------------------------------------------------- Information Group - --------------------------------------------------------------- Broadcasting and CATV $ 80,808 6.3% Distribution 76,200 6.0 Computer Systems 73,465 5.8 Mobile Communications 40,280 3.1 Consumer Electronics 34,989 2.7 Software 31,353 2.5 Instrumentation 3,662 0.3 - --------------------------------------------------------------- 340,757 26.7 Health Care - --------------------------------------------------------------- Biotechnology/Drug Delivery 34,682 2.7 Equipment 25,247 2.0 Hospital/Laboratory Supplies 20,607 1.6 Services 21,017 1.6 - --------------------------------------------------------------- 101,553 7.9 Consumer Goods and Services - --------------------------------------------------------------- Retail 147,669 11.6 Manufacturers 82,293 6.4 Entertainment and Leisure 79,337 6.2 Food 61,862 4.9 Recreational Vehicles 2,874 0.2 - --------------------------------------------------------------- 374,035 29.3 Finance Group - --------------------------------------------------------------- Money Management 64,040 5.0 Banks 63,661 5.0 Insurance 2,296 0.2 Other 87,538 6.8 - --------------------------------------------------------------- 217,535 17.0 Industrial Goods and Services - --------------------------------------------------------------- Machinery Processing 65,561 5.2 Services 41,116 3.2 Forest Products and Construction 10,109 0.8 Steel 5,188 0.4 Furniture and Textiles 1,444 0.1 - --------------------------------------------------------------- 123,418 9.7 Energy and Minerals - --------------------------------------------------------------- Oil and Gas Producers 25,790 2.0 Oil Services 12,032 0.9 Cogeneration 9,840 0.8 Mining 3,541 0.3 Refining/Marketing 1,718 0.1 - --------------------------------------------------------------- 52,921 4.1 Real Estate 19,352 1.5 - --------------------------------------------------------------- Transportation 11,479 1.0 - --------------------------------------------------------------- Total Common Stocks and Other Equity-Like Securities 1,241,050 97.2 Money Market Instruments 28,154 2.2 - --------------------------------------------------------------- Total Investments 1,269,204 99.4 Cash and Other Assets less Liabilities 7,040 0.6 - --------------------------------------------------------------- Net Assets $ 1,276,244 100.0% - ---------------------------------------------------------------
See accompanying notes to financial statements. 11 REPORT OF INDEPENDENT AUDITORS To the Shareholders of Acorn International and the Trustees of Acorn Investment Trust We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Acorn International as of December 31, 1995, the related statements of operations and changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the four fiscal periods then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of investments owned as of December 31, 1995, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Acorn International at December 31, 1995, the results of its operations and changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the four fiscal periods then ended in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Chicago, Illinois January 31, 1996 ACORN INTERNATIONAL STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1995
(in thousands) - -------------------------------------------------------------------------------- Assets Investments, at value (cost: $1,077,676) $1,269,204 Cash 15,339 Organization costs 26 Prepaid expenses 11 Receivable for: Securities sold $ 8,921 Dividends and interest 1,831 Fund shares sold 621 11,373 - -------------------------------------------------------------------------------- Total assets 1,295,953 Liabilities and Net Assets Payable for: Securities purchased 16,735 Fund shares redeemed 2,134 Organization costs 26 Other 814 - -------------------------------------------------------------------------------- Total liabilities 19,709 - -------------------------------------------------------------------------------- Net assets applicable to Fund shares outstanding $1,276,244 ================================================================================ Fund shares outstanding 76,912 ================================================================================ Pricing of Shares Net asset value, offering and redemption price per share $ 16.59 ================================================================================ Analysis of Net Assets Paid-in capital $1,103,312 Accumulated net realized loss on sales of investments and foreign currency transactions (7,197) Net unrealized appreciation of investments and other assets (net of unrealized PFIC gains of $12,120) 179,436 Undistributed net investment income 693 - -------------------------------------------------------------------------------- Net assets applicable to Fund shares outstanding $1,276,244 ================================================================================
See accompanying notes to financial statements. 12
ACORN INTERNATIONAL STATEMENTS OF OPERATIONS DECEMBER 31, 1995 (in thousands) Year ended December 31, 1995 1994 - --------------------------------------------------------------------------------------------------------------------- Investment Income: Dividends $ 23,529 $ 13,914 Interest 3,969 9,465 - --------------------------------------------------------------------------------------------------------------------- Total investment income 27,498 23,379 Expenses: Investment advisory fee 11,667 11,561 Custodian fees and expenses 1,804 2,024 Transfer and dividend disbursing agent fees and expenses 1,360 1,699 Legal and audit fees and expenses 119 241 Reports to shareholders 431 517 Registration and blue sky expenses 92 220 Trustees' fees and other expenses 383 545 - --------------------------------------------------------------------------------------------------------------------- Total expenses 15,856 16,807 - --------------------------------------------------------------------------------------------------------------------- Net investment income 11,642 6,572 Net realized and unrealized gain (loss) on investments and foreign currency: Net realized gain (loss) on sales of investments (1,937) 8,647 Net realized loss on foreign currency transactions (16,959) (13,918) Net realized loss on foreign index contracts - (5,975) Change in net unrealized appreciation 114,583 (67,989) - --------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments and foreign currency 95,687 (79,235) - --------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 107,329 $ (72,663) ===================================================================================================================== ACORN INTERNATIONAL STATEMENTS OF CHANGES IN NET ASSETS DECEMBER 31, 1995 From operations: Net investment income $ 11,642 $ 6,572 Net realized loss on sales of investments, foreign currency transactions and foreign index contracts (18,896) (11,246) Change in net unrealized appreciation 114,583 (67,989) - --------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 107,329 (72,663) Distributions to shareholders from: Net investment income -- (200) Net realized gain (1,050) (8,696) - --------------------------------------------------------------------------------------------------------------------- Total distribution to shareholders (1,050) (8,896) From Fund share transactions: Reinvestment of dividends and capital gain distributions 1,001 8,273 Proceeds from other shares sold 147,138 802,940 - --------------------------------------------------------------------------------------------------------------------- 148,139 811,213 Payments for shares redeemed (340,704) (274,097) - --------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from Fund share transactions (192,565) 537,116 - --------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (86,286) 455,557 Net Assets: Beginning of Period 1,362,530 906,973 - --------------------------------------------------------------------------------------------------------------------- End of Period (including undistributed net investment income of $693 in 1995 and $6,572 in 1994) $1,276,244 $1,362,530 =====================================================================================================================
See accompanying notes to financial statements. 13
ACORN INTERNATIONAL FINANCIAL HIGHLIGHTS DECEMBER 31, 1995 For a share outstanding throughout each period. Inception Sept. 23, 1992 Years ended December 31, through Dec. 31, 1995 1994 1993 1992 - -------------------------------------------------------------------------------------------------------------------------- Net Asset Value, beginning of period $15.24 $15.94 $10.69 $10.00 Income From Investment Operations Net investment income .16 .07 .00 (.03) Net realized and unrealized gain (loss) on investments and foreign currency 1.20 (.67) 5.25 .72 - -------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.36 (.60) 5.25 .69 Less Distributions Dividends from net investment income -- -- -- -- Distributions from net realized gain (.01) (.10) -- -- - -------------------------------------------------------------------------------------------------------------------------- Total distributions (.01) (.10) -- -- - -------------------------------------------------------------------------------------------------------------------------- Net Asset Value, end of period $16.59 $15.24 $15.94 $10.69 ========================================================================================================================== Total Return 8.9% - 3.8% 49.1% 6.9% Ratios/Supplemental Data Ratio of expenses to average net assets 1.2% 1.2% 1.2% 2.4%* Ratio of net investment income to average net assets .9% .5% .1% (1.4%)* Portfolio turnover rate 26% 20% 19% 20%* Net assets at end of period (in millions) $1,276 $1,363 $ 907 $ 30 *Annualized
ACORN INTERNATIONAL NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 1. NATURE OF OPERATIONS Acorn International (the "Fund") is a series of Acorn Investment Trust (the "Trust"), an open-end management investment company organized as a Massachusetts business trust. The investment objective of the Fund is to seek long-term growth of capital. 2. SIGNIFICANT ACCOUNTING POLICIES Security valuation Investments are stated at current value. Securities traded on securities exchanges or in over-the-counter markets in which transaction prices are reported are valued at the last sales price at the time of valuation, or lacking any reported sales on that day, at the midpoint of the most recent bid and offer. 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 readily available and any other assets are valued at a fair value as determined in good faith by the Board of Trustees. Foreign currency translations Values of investments denominated in foreign currencies are converted into U.S. dollars using the spot market rate of exchange at the time of valuation. Purchases and sales of investments and dividend and interest income are translated into U.S. dollars using the spot market rate of exchange prevailing on the respective dates of such transactions. The gain or loss resulting from changes in foreign exchange rates is included with net realized and unrealized gain or loss from investments, as appropriate. Security transactions and investment income Security transactions are accounted for on the trade date (date the order to buy or sell is executed) and dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as soon as the information is available to the Fund. Interest income is recorded on the accrual basis and includes amortization of discounts on money market instruments and on 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. Financial instruments The Fund may purchase or sell exchange-traded financial futures contracts, which are contracts that obligate the 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 Fund enters into such contracts to hedge a portion of its portfolio. Gains and losses are reflected as "Net Realized Gain (Loss) on Foreign Index Contracts" in the Statements of Operations. Additionally, the Fund may engage in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell foreign currencies. The Statements of Operations reflect gains and losses as realized for closed forward foreign currency contracts and unrealized for open con- 14 ACORN INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1995 tracts. The Fund bears the market risk that arises from changes in the value of financial instruments and securities indices (futures contracts) or from changes in foreign currency rates (forward foreign currency contracts) and the credit risk should a counterparty fail to perform under such contracts. There were no futures or forward foreign currency contracts open at December 31, 1995. Fund share valuation Fund shares are sold and redeemed on a continuing basis at net asset value (less a redemption charge, currently waived, of 2% for shares held less than 60 days). Net asset value per share is determined daily as of the close of trading on the New York Stock Exchange on each day the Exchange is open for trading by dividing the total value of the Fund's investments and other assets, less liabilities, by the number of Fund shares outstanding. Federal income taxes, dividends and distributions to shareholders It is the Fund's policy to comply with the special provisions of the Internal Revenue Code available to regulated investment companies and, in the manner provided therein, to distribute all of its taxable income, as well as any net realized gain on sales of investments and foreign currency transactions reportable for federal income tax purposes. Such provisions were complied with for the years ended December 31, 1995 and December 31, 1994 and no federal income taxes have been accrued. The Fund has elected to mark-to-market its investments in Passive Foreign Investment Companies ("PFIC's") for Federal income tax purposes. In accordance with this election, the Fund has recognized cumulative net unrealized PFIC gains of $11,427,000 which will not be distributed since they have been offset by accumulated net realized losses on foreign currency transactions. In addition, for Federal income tax purposes, undistributed net investment income at December 31, 1995 of $17,521,000, will not require distribution due to the application of a portion of the accumulated net realized loss on sales of investments and foreign currency transactions. Accordingly, unrealized PFIC gains of $11,427,000 and undistributed net investment income of $17,521,000 have been reflected as reductions to the accumulated net realized loss on sales of investments and foreign currency transactions in the accompanying analysis of net assets. The remaining accumulated net realized loss on sales of investments and foreign currency transactions of approximately $7,197,000 is available to offset future taxable capital gains. If not applied, the capital loss carryover will expire in 2003. Dividends and distributions payable to its shareholders are recorded by the Fund on the ex-dividend date. Other Certain amounts have been reclassified for 1994 to conform with the 1995 presentation. 3. TRANSACTIONS WITH AFFILIATES The Fund's investment advisor, Wanger Asset Management, L.P., ("WAM") furnishes continuing investment supervision to the Fund and is responsible for overall management of the Fund's business affairs. For its services WAM receives a fee paid monthly at the annual rate of 1.25% of the net asset value of the Fund up to $100 million, 1% of the net asset value in excess of $100 million and up to $500 million and .80% of the net asset value in excess of $500 million, determined at the beginning of each calendar quarter. Certain officers and trustees of the Trust are also principals of WAM. The Trust makes no direct payments to its officers and trustees who are affiliated with WAM. The Fund paid trustees' fees and expenses of $89,000 in 1995 and $80,000 in 1994 to trustees not affiliated with WAM, including $32,000 in 1995 and $31,000 in 1994 paid to the Chairman of the Board. WAM advanced $71,000 in connection with the organization and initial registration of the Fund. These costs are being amortized and reimbursed to WAM over the period January, 1993 through September, 1997. 4. FUND SHARE TRANSACTIONS Proceeds and payments on Fund shares as shown in the Statements of Changes in Net Assets are in respect of the following numbers of shares:
(in thousands) 1995 1994 - ------------------------------------------------------------------- Shares sold 9,482 49,198 Shares issued in reinvestment of dividends and capital gain distributions 62 512 - ------------------------------------------------------------------- 9,544 49,710 Less shares redeemed 22,013 17,234 - ------------------------------------------------------------------- Net increase (decrease) in shares outstanding (12,469) 32,476 ===================================================================
5. INVESTMENT TRANSACTIONS
(in thousands) 1995 1994 - ------------------------------------------------------------------- Investment securities (excluding money market instruments): Purchases $318,862 $703,866 Proceeds from sales 416,451 235,930 ===================================================================
15 Acorn International Annual Report 1995 Acorn International December 31, 1995 A No-Load Fund Trustees - ------------------------------------------------- Annual Report Leo A. Guthart Charles P. McQuaid December 31, 1995 Irving B. Harris Roger S. Meier Jerome Kahn, Jr. Adolph Meyer, Jr. David C. Kleinman Malcolm N. Smith James H. Lorie Ralph Wanger Officers - ------------------------------------------------- Irving B. Harris, Chairman of the Board James H. Lorie, Vice Chairman of the Board Ralph Wanger, President Charles P. McQuaid, Senior Vice President Terence M. Hogan, Vice President Leah J. Zell, Vice President Merrillyn J. Kosier, Vice President and Secretary Bruce H. Lauer, Vice President and Treasurer Kenneth A. Kalina, Assistant Treasurer Transfer Agent, Dividend Disbursing Agent and Custodian - ------------------------------------------------- State Street Bank and Trust Company Attention: Acorn International P.O. Box 8502 Boston, Massachusetts 02266-8502 1-800-962-1585 Managed by Investment Advisor Wanger Asset Management, L.P. - ------------------------------------------------- Wanger Asset Management, L.P. 227 West Monroe Street, Suite 3000 Chicago, Illinois 60606 1-800-9-ACORN-9 (1-800-922-6769) e-mail: wanger@mcs.com Legal Counsel - ------------------------------------------------- Bell, Boyd & Lloyd Chicago, Illinois Auditors - ------------------------------------------------- Ernst & Young LLP Chicago, Illinois This report, including the audited schedule of investments and financial statements, is submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution unless preceded or accompanied by a prospectus. [LOGO OF ACORN INTERNATIONAL] annual report 1995 -----END PRIVACY-ENHANCED MESSAGE-----