-----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, VYmOtfu0gKLzxW5MuUckCP9ESJtjTj8urBjZTDQ7xNi++ijLxwC9LxA170oDhEto VGYVbbB3P2qCp9KH3R32ZA== 0000950131-96-004080.txt : 19960928 0000950131-96-004080.hdr.sgml : 19960928 ACCESSION NUMBER: 0000950131-96-004080 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960821 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-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-01829 FILM NUMBER: 96618531 BUSINESS ADDRESS: STREET 1: 227 W MONROE STE 3000 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3126349200 MAIL ADDRESS: STREET 1: 227 W MONROE ST STE 3000 STREET 2: ATTN: BRUCE LAUER CITY: CHICAGO STATE: IL ZIP: 60606 FORMER COMPANY: FORMER CONFORMED NAME: ACORN FUND INC DATE OF NAME CHANGE: 19920703 N-30D 1 SEMI-ANNUAL REPORT [PHOTO APPEARS HERE] Acorn Fund / Acorn International Semi-Annual Report --------------------------------- June 30, 1996 Managed by Wanger Asset Management, L.P. Acorn Fund and Acorn International Semi-Annual Report 1996 .Table of Contents Squirrel Chatter .Letter from Ralph Wanger 1 More Squirrel Chatter .Meet Leah Zell 3 Acorn Fund .In a Nutshell 4 .Performance at a Glance 5 .Major Portfolio Changes 8 .Statement of Investments 10 .Portfolio Diversification 17 Acorn International .In a Nutshell 6 .Performance at a Glance 7 .Major Portfolio Changes 18 .Statement of Investments 20 .Portfolio Diversification 27 Acorn Fund and Acorn International .Financial Highlights 28 .Statements of Assets and Liabilities 30 .Statements of Operations 31 .Statements of Changes in Net Assets 32 .Notes to Financial Statements 33 .ACORN USA Acorn Investment Trust recently filed a registration statement with the SEC relating to shares of Acorn USA, a new, no-load U.S. small-cap fund to be advised by Wanger Asset Management. Acorn expects to begin selling Acorn USA shares in early September, after that registration statement becomes effective. WAM Brokerage Services, L.L.C., distributor, will mail an Acorn USA prospectus to all Acorn shareholders in early September. If you are not currently an Acorn shareholder, you may obtain an Acorn USA prospectus when it is available by calling 1-800-9-ACORN-9 (1-800-922-6769) or by writing to WAM Brokerage Services, L.L.C., at 227 West Monroe Street, Suite 3000, Chicago, IL, 60606. Securities of Acorn USA may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This communication does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. .Squirrel Chatter: Investing the Acorn Way In a globalized world, investors must think globally, and so investment values will be discovered wherever they may lie. In this issue, we are highlighting Acorn International and our investment philosophy. We hope that you gain a better understanding of small cap international investing. International funds are doing very well in 1996. The foreign markets were hot in 1993, but then went into a consolidation period in 1994 and 1995, a normal market reaction after a big upmove. Now the markets, refreshed, are on the move. The press has discovered this new strength, and written some enthusiastic articles./1/ .It's a Small World After All Small cap stocks have become more popular in recent years, but still receive far less attention from Wall Street than large cap stocks like Coca-Cola or McDonald's. This is why we do our own homework. Our analysts never unpack their suitcases. Every few weeks they must head to the airport to search the world over for small company stocks to buy. We look for companies that exhibit three distinct qualities: growth potential, financial strength and fundamental value. We find growth in an expanding marketplace for a company's product, a good design, efficient manufacturing and sound marketing. Financial strength refers to a company with low debt, adequate working capital and conservative accounting principles. These attributes provide management the stability and flexibility it needs to reach strategic objectives. Fundamental value means low price. A good company is not the same as a good stock. The stock price must be fair relative to the company's current and expected dividends, earnings, growth rate, book value and economic replacement value of assets. We refer to our investment approach as growth at a reasonable price. Historically, small cap stocks have outperformed large caps, so our hard work and focus has been rewarded. Most of you already know about the Acorn funds' low turnover rates and long-term time horizon. Small cap stocks are very costly to trade, especially in foreign markets. In order to save transaction costs, we have to hold stocks for the long-term, so we must have a long-term reason to own them. There are "themes" that will put companies on a growth path. Outsourcing is a major theme of investing. We also like European companies that have proprietary technology, can cut costs, and are friendly to shareholders. Following is an example of our "Healthy Living" theme. .No Small Potato In 1994, we bought a small Finnish company, called Raision Tehtaat, for Acorn International. Raision Tehtaat is a potato farmers cooperative that also deals in paper and pulp specialty chemicals (the starch from potatoes gives paper a shiny look). Co-Portfolio Manager Leah Zell discovered the company when it was selling at 7x trailing earnings and 80% of book value. She bought stock for Acorn International over an eight month period as the stock price declined from FMK 120 to FMK 80. At the beginning of this year, the stock was selling at FMK 62 and looked like a loser. Then, suddenly, the price began to cook. It has since gone up 500%. The reason behind the sharp rise is an obscure margarine named Benecol. It turns out that Raision discovered a novel edible oil that, taken daily, lowers cholesterol (Finnish men have unusually high levels of cholesterol) and incorporated it into a margarine. Scientific studies substantiating the health benefits were published in the New England Journal of Medicine in November 1995. The next month, Raision rolled out Benecol and the product has been flying off grocers' shelves ever since. You will notice the company was one of Acorn International's top ten holdings at quarter end (we have taken some profits since). Of course, not every stock reacts this way, and we could not have foreseen Benecol's success. But a few big winners can make up for the fizzlers, keeping our long-term performance strong. - -------------------- 1 See Fortune, "Now's The Time To Go Global," February, 1996 Your Money, "Hot International Mutual Funds: Undervalued And Ready To Fly," April/May, 1996. The Wall Street Journal, "Global Investing," June 27, 1996. 1 ...investing outside the U.S. is an easy yet powerful way to lower your volatility and potentially increase your return at the same time. .Diversifying Your Investments Many of you know that diversification helps reduce risk. Acorn International owns nearly 300 stocks, in over 40 countries worldwide. Therefore, fund performance is not dependent upon the price of any one stock, or the economic progress of any one region of the world. There have been many studies on the value of international diversification. One study by Morgan Stanley Capital International shows that adding international stocks to a U.S. portfolio improves return without increasing risk. Risk/Reward Characteristics of Global Equity Investing .10 years ended 12/31/95 [GRAPH APPEARS HERE] The S&P 500, representing the U.S. stock market, and the EAFE index representing the markets of Europe, Australia and the Far East, were used as measures for U.S. and non-U.S. stock market performance. The S&P 500 and EAFE are unmanaged, broad, market-weighted indexes. Portfolios of the indices were combined in varying proportions to determine various volatility/return relationships. This showed that the least volatile portfolio would have been composed of 70% U.S. equities and 30% foreign equities. The results reflect the importance of balancing a portfolio between U.S. and foreign securities. (source: Morgan Stanley Capital International) Point 1 represents an entirely U.S. stock portfolio. Point 11 is a pure foreign portfolio. In between is a mixture: point 2 is 90% domestic and 10% foreign, point 3 is an 80-20% mix, and so on. If U.S. and foreign markets were perfectly correlated, the mixed portfolios would fall on a straight line between point 1 and point 11. Because the U.S. and foreign markets are only partially correlated, the straight line becomes a parabola. The payoff shows up when we compare point 1 (100% U.S.) with point 4 (70% U.S., 30% foreign). Point 4 has a higher return than point 1 (17.0% vs. 16.4%) but lower volatility. Clearly, the Morgan Stanley study shows that investing outside the U.S. can be an easy yet powerful way to reduce your volatility and potentially increase your return at the same time. Half of the total assets managed by Wanger Asset Management are invested outside the United States. We have made a major commitment to international investing and are finding interesting small companies abroad to buy for you. .Knowledge is Power We strive to provide our shareholders with information that is useful in making personal investment decisions. Each quarterly report provides commentary on fund performance, compares fund returns with appropriate relative indexes, shows the value of compounding via mountain charts, breaks out industry diversification in easy-reference pie charts, and lists fund holdings, including the ten largest holdings for each fund and major portfolio changes within the quarter. Our annual Acorn Investment Trust Informational Shareholder Meeting has proved a popular way for our investors to learn more about the Acorn investment philosophy, hear from the funds' portfolio managers, and ask questions of the investment team. We encourage you to join us in Chicago on September 10, and learn more about your investments in the Acorn funds. Come and meet our team! Happy Investing! /s/ Ralph Wanger Ralph Wanger President 2 .More Squirrel Chatter [PHOTO OF LEAH ZELL APPEARS HERE] Leah Zell is Co-Portfolio Manager of Acorn International. Ms. Zell has worked with Acorn since 1984. She has a BA from Radcliffe, a Ph.D from Harvard and is a C.F.A. Q. You have a Ph.D in History. Isn't that an unusual background for an investment professional? A. It is unusual but not inappropriate. History is about explaining the past and making investments is about anticipating the future. Security analysis is really history turned inside out. Both rely on a common set of research and analytic skills. A history background teaches you (1) to think dynamically about change; and (2) to be comfortable with a long-term time horizon. Having gone from history to security analysis, I moved from thinking about centuries to thinking about decades. Q. How did you get into the investment business? A. I started out a plain-vanilla European historian, then I met a professor at Harvard named David Landes who taught me about industrialization. By the time I got my degree, I had one advisor in the economics department, one at the business school, and a job on Wall Street. Q. The other members of your team also seem to have eclectic backgrounds. Do you recruit for diversity? A. Absolutely. We have six full-time international analysts, all of whom are foreign nationals or have spent significant periods of their lives overseas. Our varied backgrounds give us a wealth of expertise on which to draw for investment decisions. But what we all have in common is something you might call "dual vision." Q. What do you mean by "dual vision?" A. "Dual vision" is the ability to view a stock both as an Anglo-Saxon security analyst and as a local investor. We want to combine the best of the U.S. market's discipline with the sensitivity of the cultural insider. Q. What do you believe distinguishes your team's investment approach from other international funds? A. Remember that we are an international small cap fund. Stockpicking will always be more important to us than country allocation. Our challenge is finding good stocks before they become household names. The solution we have adopted is to do our own research. All of us travel extensively, talk to company managements, and follow up with industry checks. Running Acorn International is very labor-intensive but worth the effort, because our shareholders cannot replicate our portfolio for themselves. Finally, we hold good ideas for years. Q. Why do you hold stocks for such a long time? A. Have you ever tried to ski down a slalom course? The temptation is to look at the next gate, but it slows your pace. Experienced skiers learn to look downhill two or three gates to pick the best "line". At Acorn International, we focus three to six quarters ahead, to get a better perspective on a company's fair value. Besides, trading is expensive. Q. What can Acorn shareholders learn from this approach as it relates to their own personal investment goals? A. There are a lot of stories in the press about the hottest funds and markets, whereas investing is a game of patience and focus. I am often asked what is the right amount of international equity exposure for individuals. International stocks are 66% of the investment world, so an American investor could allocate 10-30% overseas. But to me, the percentage allocation you choose is less important than staying the course. Q. Acorn International is up 17.3% year to date. Can this performance be sustained? A. Markets are unpredictable and equity returns are uneven. Although a 17% return in six months is unlikely to be repeated often, I am bullish on international small cap stocks. They are like U.S. small caps twenty years ago-- underresearched and underowned. To the extent that the U.S. leads global trends, I often feel I am able to understand businesses abroad because I know where they lie along the development curve. The best recommendation I can make for Acorn International is that I buy it for my own children. 3 Acorn Fund .In a Nutshell Acorn Fund finished the second quarter up 7.0%, beating all of the indexes listed on page 5. Year-to-date, the Fund also bettered the market measures, posting a 15.2% return. Our energy stocks, fueled by their first quarter success, provided lots of second quarter winners. United Meridian was pumped up when it announced an oil discovery off Equatorial Guinea, Tesoro Petroleum topped Tenneco in a key court case, and Atwood Oceanics rose due to higher deep-sea drilling rig rates. Other big energy gainers included Digicon, J. Ray McDermott and Global Natural Resources. In a sickly market for healthcare stocks, HBO & Co. and Lincare Holdings came out of the second quarter hale and hearty. HBO dominates its market for healthcare information systems, with CEO Charlie McCall and his team exceeding even our optimistic expectations. Lincare, a leader in oxygen therapy, gained altitude as concerns over Medicare cuts declined. Some of our larger long-time holdings notched nice gains. Kronos proved a timely pick; the Massachusetts manufacturer of shopclocks has replaced mechanical parts with microprocessors and is developing new software applications. Lilly Industries' core business improved and was helped by the acquisition of Guardsman Products, which greatly expands Lilly's share of industrial coatings. Acorn's foreign portfolio generated a 7.9% return in the quarter, with a year-to-date return of 16.5%. Overseas performance was led by Italy's Banca Fideuram, whose mutual fund sales rose rapidly. Stronger housing demand helped Spanish property developer Vallehermoso, while computer services stalwart WM Data Nordic continued to soar. After three years in hiding, normal volatility has returned to the U.S. market. We at the Acorn Fund welcome the fluctuations, since it affords us the opportunity to do what we do best--invest in outstanding businesses at reasonable prices. /s/ Charles P. McQuaid /s/ Terence M. Hogan - ---------------------- -------------------- Charles P. McQuaid Terence M. Hogan Co-Portfolio Manager Co-Portfolio Manager
Fund Net Assets as of 6/30/96: $2,805.4 million .Acorn Fund Top 10 Holdings ADVANTA 2.2% Credit Cards Newell 1.8% Consumer Goods Thermo Electron 1.7% Energy Systems & Processing Equipment Harley Davidson 1.6% Recreational Vehicles Manufacturer TCI Liberty Media Group 1.5% CATV Programming Carnival 1.4% Cruise Ship Line Lincare Holdings 1.4% Home Health Care Services Solectron 1.3% Electronics Contract Manufacturer Tele Communications 1.3% Cable TV HBO&Company 1.2% Health Care Services
The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments.
Acorn Fund Semiannual Distribution - ------------------------------------------------------------------------- Ex-Dividend Reinvestment Per Share Date Price Long-Term Capital Gains $0.14 7/23/96 $14.48 Income Dividend $0.07 7/23/96 $14.48
Fund facts Q. Why does share price drop when the Fund pays a dividend? A. As the Fund accumulates net income from investments and realizes capital gains, the amounts become part of the Fund's assets and are included in the NAV. When the Fund pays those amounts to shareholders as dividends and capital gains, the assets of the Fund are reduced and the value of each Fund share falls by the amount of the distribution. But that value isn't lost. If you reinvest your distribution, you get more shares (at the lower price). If you elect to receive cash, the amount of your check will be equal to the drop in share price multiplied by the number of Fund shares you own. 4 .Performance at a Glance The Value of a $10,000 Investment in Acorn Fund .June 10, 1970 through June 30, 1996 [GRAPH APPEARS HERE]
Date Acorn Fund S&P 500 - ---- ---------- ------- 1970 10,000 10,000 1971 17,828 14,756 1972 19,368 17,558 1973 14,765 14,978 1974 10,691 11,015 1975 13,945 15,115 1976 23,045 18,732 1977 27,168 17,391 1978 31,777 18,533 1979 47,790 21,982 1980 62,594 29,127 1981 58,005 27,694 1982 68,208 33,660 1983 85,389 41,253 1984 89,045 43,841 1985 117,142 57,751 1986 136,843 68,529 1987 142,923 72,128 1988 178,370 84,107 1989 222,681 110,757 1990 183,674 107,319 1991 270,641 140,015 1992 336,210 150,642 1993 444,889 165,870 1994 411,750 168,060 1995 497,407 231,213 6/30/96 572,749 254,556
Average Annual Total Return --------------------------------------- 1 Year 5 Years 10 Years Life of Fund 24.8% 20.3% 15.0% 16.8% 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. Acorn Fund Portfolio Diversification .as a % of net assets, as of 6/30/96 [PIE CHART APPEARS HERE] Information 18.9% Health Care 10.5% Consumer Goods/Services 9.9% Finance 14.8% Industrial Goods/Services 9.7% Energy/Minerals 8.0% Real Estate 1.9% Foreign 21.2% Cash less liabilities 5.1% ----- 100.0%
Relative Performance - --------------------------------------------------------------------- 2nd quarter Last 6 mos. Last 12 mos. Acorn Fund 7.0% 15.2% 24.8% Dow-Jones 1.8% 11.8% 27.1% Standard & Poor's 500 4.5% 10.1% 26.0% Standard & Poor's MidCap 400 2.9% 9.2% 21.6% Russell 2000 5.0% 10.4% 23.9%
The Dow Jones Industrial Average includes 30 large 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. Net Asset Value Per Share 6/30/96: $15.66 - ----------------------------------------- 5 Acorn International .In a Nutshell Acorn International had another fine quarter, returning 7.6%. This is a particularly strong result in comparison to EAFE, which rose 1.6% over the same timeframe. Owning good companies once again made the difference. The single biggest winner for the second quarter, in percentage terms, was Raision Tehtaat in Finland, which jumped 90% after doubling in the first quarter. The European outsourcing theme made us the most money in dollar terms, with 40%+ gains in WM Data and TT Tieto, and 20%+ gains in Getronics and Capita. Outside Europe, Noritsu Koki and Hokuto in Japan both picked up 40%+, as did Nadro in Mexico. Southeast Asian markets were quiet this quarter, but Taiwan broke ranks with a 28% rise, matched by our holdings there. Good portfolios, like fine wines, mature over time. Our returns in 1996 reflect decisions made going back to 1993. As we get to know our companies better, our level of confidence grows. This enables us to make informed decisions when emotions grip the markets, whether up or down. Good teams also mature over time. We have doubled the number of international analysts since the Fund began. Our hires have been successfully trained and we are doing a better job of covering the world. It is gratifying to see the Fund's returns exceed its benchmarks. The Acorn investment process and philosophy is working for you. Cash flows have been modestly positive so far this year, adding about 1% to the size of the Fund per month. Our team of regional and industry specialists are working hard to find new ideas for you. /s/ Leah Joy Zell Leah Joy Zell Co-Portfolio Manager Fund Net Assets as of 6/30/96: $1,624.8 million .Acorn International Top 10 Holdings WM Data Nordic Sweden 3.1% Computer Services/Consulting Rhoen Klinikum Germany 1.7% Hospital Management Fresenius Germany 1.5% Dialysis Equipment & Solutions Korea Mobile Telecom Korea 1.5% Mobile Communications T T Tieto Finland 1.5% Computer Services/Consulting Getronics Netherlands 1.4% Computer Consulting Raision Tehtaat Finland 1.2% Foodstuffs & Specialty Chemicals Village Roadshow Australia 1.1% Film Distribution/Exhibition/Production Banca Fideuram Italy 1.1% Life Insurance & Mutual Funds Hennes & Mauritz Sweden 1.1% Apparel Stores The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. Acorn International Semiannual Distribution - -------------------------------------------------------------------------------- Per Share Ex-Dividend Reinvestment Date Price Long-Term Capital Gains $0.00 -- -- Income Dividend $0.05 7/23/96 $18.97 Fund facts The No-Load Advantage: The Acorn funds are 100% no-load, which means that all of your money goes to work for you immediately. There are no sales charges, and no 12b-1 fees or back- end load fees, so all of your dollars are invested at net asset value. 6 .Performance at a Glance The Value of a $10,000 Investment in Acorn International .September 23, 1992 through June 30, 1996 [GRAPH APPEARS HERE] Date Acorn International EAFE ---- ------------------- ---- 09/23/92 10,000 10,000 09/30/92 10,010 10,000 12/31/92 10,690 9,614 03/31/93 12,000 10,767 06/30/93 12,920 11,849 09/30/93 13,910 12,635 12/31/93 15,940 12,745 03/31/94 15,850 13,190 06/30/94 15,550 13,864 09/30/94 16,491 13,877 12/31/94 15,334 13,736 03/31/95 14,811 13,992 06/30/95 15,727 14,093 09/30/95 16,824 14,681 12/31/95 16,703 15,275 03/31/96 18,203 15,717 06/30/96 19,593 15,965 Average Annual Total Return 1 Year Life of Fund 24.6% 19.5% This graph compares the results of $10,000 invested in Acorn International on September 23, 1992 (the date the Fund began operations), with all dividends and capital gains reinvested, with Morgan Stanley's Europe, Australia and Far East Index (EAFE). The beginning value of EAFE is as of 9/30/92. Past performance does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Acorn International Portfolio Diversification .as a % of net assets, as of 6/30/96
[PIE CHART APPEARS HERE] Information 24.9% Health Care 7.7% Consumer Goods/Services 28.5% Finance 20.2% Industrial Goods/Services 9.4% Energy/Minerals 5.7% Real Estate 1.6% Cash less liabilities 2.0% ------- 100.0%
Relative Performance - -------------------------------------------------------------------------- 2nd quarter Last 6 mos. Last 12 mos. Acorn International 7.6% 17.3% 24.6% EAFE 1.6% 4.5% 13.3% Lipper International Small Company Funds Average 7.1% 13.5% 20.0% Lipper International Fund Index 3.9% 8.5% 16.4%
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, including Acorn International. The Lipper International Fund Index is an equal-weighted index of the 30 largest international funds. All indices are unmanaged and returns include reinvested dividends. Net Asset Value Per Share 6/30/96: $19.46 - ----------------------------------------- 7 Acorn Fund .Major Portfolio Changes in the Second Quarter
Number of Shares ----------------------- 3/31/96 6/30/96 Additions - -------------------------------------------------------------------------------- Information ACT Manufacturing 275,000 470,000 Actvision 0 180,000 American Business Information 400,000 500,000 Analysts International 0 130,000 CACI International 436,000 600,000 Cellular Communications International 150,000 300,000 Comcast UK Cable Partners 600,000 730,000 Compuware 0 153,000 Data Transmission Network 0 250,000 In Focus Systems 210,000 256,000 Keane 0 105,000 Korea Mobile Telecom GDS 0 260,000 (includes elect of 3 for 1 stock conversion) Nintendo 0 120,000 NTT Data 0 100 Palmer Wireless 200,000 350,000 Providence Journal 0 360,000 Sanmina 70,000 180,000 Softkey International 0 300,000 Solectron 900,000 950,000 Source Informatics Cv. Pfd. 0 208,333 (spin-of from Walsh International) Sysdeco 100,000 175,000 TCI Liberty Media Group 1,500,000 1,600,000 United Video Satellite 465,000 550,000 Varitronix International 3,500,000 4,300,000 Village Roadshow Pfd. 0 750,000 - -------------------------------------------------------------------------------- Health Care Andrx 0 43,000 CIMA Labs 0 280,000 Genome Therapeutics 0 200,000 Innovasive Devices 0 267,000 Invacare 580,000 650,000 Lincare Holdings 967,000 1,000,000 Medeva 2,230,000 2,695,000 Paramount Bed 56,100 100,000 Trex Medical 50,000 125,000 Watson Pharmaceuticals 280,000 320,000 - -------------------------------------------------------------------------------- Consumer Goods/Services Esselte, Series A 10,000 180,000 Toy Biz 0 251,000 - -------------------------------------------------------------------------------- Finance Americredit 879,000 1,049,000 Foremost 127,000 162,000 Imperial Thrift & Loan 0 280,000 Jayhawk 0 375,000 SEI 434,000 618,000 Texas Regional Bancshares 309,000 380,000 - -------------------------------------------------------------------------------- Industrial Goods/Services Atchison Casting 264,000 354,000 Bearings 180,000 250,000 Gibraltar Steel 300,000 440,000 Hunter Douglas 0 40,000 Material Sciences 0 225,000 Sensonor 600,000 725,000 Siderca 0 2,000,000 Wackenhut, Cl. B 444,000 562,000 World Color Press 0 100,000 - -------------------------------------------------------------------------------- Energy/Minerals Barrett Resources 0 103,000 CalEnergy 475,000 850,000 Carbo Ceramics 0 56,000 Devon Energy 300,000 350,000 Forest Oil 400,000 500,000 NGC 510,000 679,000 Seagull Energy 0 300,000 Tesoro Petroleum 600,000 800,000 Thermo Optek 0 85,000 Tipperary 0 770,000 - -------------------------------------------------------------------------------- Real Estate Tokyu Land 0 720,000
8
Number of Shares --------------------------- 3/31/96 6/30/96 Sales - --------------------------------------------------------------------------- Information Blonder Tongue Labs 205,000 0 Cellular Communications Cv. Pfd. 180,000 0 Continuum 94,000 0 DMX 270,000 0 InterTAN 150,000 0 International Game Technology 2,040,000 1,830,000 Pittencrief Communications 400,000 0 Sierra On-Line 300,000 0 Systems & Computer Technology 775,000 480,000 Thermo Instrument Systems 635,000 535,000 Tripos 100,000 0 Universal Electronics 110,000 0 - --------------------------------------------------------------------------- Health Care Anesta 63,800 0 Apria Healthcare Group 366,000 316,000 Chr. Hansen Holding, Cl. B 29,000 0 Fresenius USA 48,000 0 North American Biologicals 562,000 0 Renal Treatment Centers 582,000 462,000 Sepracor 280,000 150,000 Steris 340,000 684,000 (includes effect of merger with Amsco International) Thermotrex 150,000 100,000 Vertex Pharmaceuticals 100,000 0 - --------------------------------------------------------------------------- Consumer Goods/Services American Media 1,235,000 0 Anchor Gaming 200,000 0 Cato 440,000 191,000 First Brands 475,000 300,000 Flughafen Wien 50,000 30,000 Kian Joo Can Warrants 5/22/99 168,000 0 Lands' End 215,000 0 Mikasa 275,000 0 Morton Restaurant Group 325,000 125,000 (formerly known as Quantum Restaurant Group) O'Sullivan Industries 700,000 0 Playboy Enterprises, Cl. B 200,000 0 Players International 250,000 0 Resorts World 1,950,000 1,450,000 Sony Music Entertainment 33,000 0 Station Casinos 188,000 0 St. John Knits 147,000 60,000 (includes effect of 2 for 1 split) Tostem 110,000 0 Tsutsumi Jewelry 46,000 0 - --------------------------------------------------------------------------- Finance Aames Financial 237,000 295,000 (includes effect of 3 for 2 split) Arab Malaysian Finance 220,000 0 ADVANTA, Cl. A 842,000 767,000 BayBanks 96,000 46,000 Bell Bancorp 162,000 0 Cash America 1,220,000 620,000 First Commerce 206,000 73,000 First USA Paymentech 15,000 0 Mercury Finance 1,393,000 898,000 North American Gas Investors Trust 995,000 0 Thailand Fund 100,000 78,000 - --------------------------------------------------------------------------- Industrial Goods/Services Ecco 14,000 0 Ecco Travail Temporaire 70,000 0 Loral 215,000 0 Myers Industries 180,000 0 Sealed Air 540,000 240,000 Superior Services 70,000 0 Teleflex 120,000 0 Thermo Electron 800,000 1,125,000 (includes effect of 3 for 2 split) Thermo Fibertek 600,000 675,000 (includes effect of 3 for 2 split) Thermo Sentron 34,000 0 Zoltek 110,000 0 - --------------------------------------------------------------------------- Energy/Minerals Basin Exploration 100,000 0 Digicon 809,000 400,000 Landmark Graphics 335,000 0 Seacor Holdings 20,000 0 Thermo Ecotek 500,000 390,000
9 Acorn Fund .Statement of Investments (unaudited) June 30, 1996
Principal Amount or Number of Shares Value (000) - -------------------------------------------------------------------------------- Common Stocks and Other Equity-Like Securities: 94.9% - -------------------------------------------------------------------------------- Information: 18.9% .Broadcasting/CATV: 3.0% 1,800,000 Tele-Communications, Series A TCI Group (b) $32,625 50,000 Tele-Communications, Cum. Pfd. 3,087 300,000 TCA Cable TV 9,075 300,000 Silver King Communications (b) 9,000 277,000 Argyle Television (b) 6,925 440,000 Jones Intercable, Cl. A (b) 5,885 22,500 Jones Intercable (b) 323 360,000 Providence Journal (b) 5,535 500,000 Century Communications, Cl. A (b) 4,250 80,000 Cablevision Systems (b) 3,700 300,000 Granite Broadcasting (b) 3,881 - -------------------------------------------------------------------------------- 84,286 .Programming for CATV/TV: 3.2% 1,600,000 TCI Liberty Media Group (b) 42,400 250,000 Data Transmission Network (b) 15,200 700,000 International Family Entertainment (b) 12,950 550,000 United Video Satellite (b) 11,550 300,000 BET Holdings (b) 7,913 - -------------------------------------------------------------------------------- 90,013 .Mobile Communications: 3.1% 500,000 Telephone and Data Systems 22,500 450,000 Cellular Communications of Puerto Rico (b) 14,625 800,000 Mobile Telecommunication Technologies (b) 11,700 500,000 Vanguard Cellular Systems (b) 10,875 350,000 Palmer Wireless (b) 7,000 355,000 COMARCO (b) (c) 6,523 468,000 PriCellular (b) 5,675 300,000 Centennial Cellular (b) 5,063 246,000 Shared Technologies (b) 1,783 - -------------------------------------------------------------------------------- 85,744 .Computer Software/Services: 1.9% 266,000 BRC Holdings (b) 9,576 600,000 CACI International (b) (c) 9,450 480,000 Systems & Computer Technology (b) 6,960 153,000 Compuware (b) 6,043 130,000 Analysts International 5,460 104,000 BDM International (b) 4,836 105,000 Keane 3,872 125,000 American Management Systems (b) 3,656 208,333 Source Informatics Cv. Pfd. (b) 2,360 118,000 Computer Language Research 1,475 170,000 Kurzweil Applied Intelligence (b) 510 - -------------------------------------------------------------------------------- 54,198 .Gaming Equipment: 1.1% 1,830,000 International Game Technology 30,881 .Computer Game Software: 0.4% 300,000 Softkey International (b) 5,681 180,000 Activision (b) 2,340 350,000 Spectrum HoloByte (b) 2,012 - -------------------------------------------------------------------------------- 10,033 .Business Information: 0.4% 500,000 American Business Information (b) 9,125 600,000 GIGA Cv. Pfd. (b) 2,100 - -------------------------------------------------------------------------------- 11,225 .Computer Systems: 2.1% 950,000 Solectron (b) 35,981 470,000 ACT Manufacturing (b) (c) 6,874 332,000 Altron (b) 6,723 180,000 Sanmina (b) 4,860 700,000 Triad Systems (b) 4,463 - -------------------------------------------------------------------------------- 58,901 .Instrumentation: 1.0% 535,000 Thermo Instrument Systems (b) 17,254 $5,000 Thermo Optek, 5% Note Due 10/15/00 5,350 85,000 Thermo Optek (b) 1,105 228,000 IFR Systems (b) 2,793 $1,500 Thermoquest, 5% Note Due 8/15/00 1,620 20,000 Thermoquest (b) 278 85,000 Datum (b) 903 - -------------------------------------------------------------------------------- 29,303 .Distribution: 1.1% 1,000,000 Pioneer-Standard Electronics 13,250 334,000 Kent Electronics (b) 10,437 470,000 Bell Microproducts (b) (c) 3,584 300,000 Richey Electronics (b) 3,525 - -------------------------------------------------------------------------------- 30,796 .Components/Peripherals: 1.6% 457,000 Kronos (b) (c) 16,223 500,000 Oak Industries (b) 14,813
10
Number of Shares Value (000) - -------------------------------------------------------------------------------- 256,000 In Focus Systems (b) $ 6,208 325,000 Planar Systems (b) 4,631 350,000 Exide Electronics Group (b) 3,325 80,000 Daktronics (b) 360 - -------------------------------------------------------------------------------- 45,560 ----------- Information: Total 530,940 - -------------------------------------------------------------------------------- Health Care: 10.5% .Biotechnology/Drug Delivery: 2.3% 320,000 Watson Pharmaceuticals (b) 12,120 260,000 RP Scherer (b) 11,797 450,000 Inhale Therapeutic Systems (b) 8,325 120,000 Human Genome Sciences (b) 4,410 800,000 Corvas International (b) (c) 3,900 800,000 Corvas International Warrants (b) 800 70,000 Biogen (b) 3,841 155,000 Protein Design Labs (b) 3,488 163,000 TheraTech (b) 3,138 133,000 CellPro (b) 2,394 60,000 Incyte Pharmaceutical (b) 2,314 150,000 Sepracor (b) 2,250 145,000 Cygnus Therapeutic Systems (b) 2,211 280,000 CIMA Labs (b) 2,100 200,000 Genome Therapeutics (b) 1,800 43,000 Andrx (b) 650 - -------------------------------------------------------------------------------- 65,538 .Medical Equipment: 3.5% 684,000 Steris (b) 21,888 650,000 Invacare 15,275 930,000 Kinetic Concepts 14,415 552,000 Thermedics (b) 13,800 582,000 Respironics (b) 10,767 345,000 SpaceLabs Medical (b) 8,021 350,000 Affymetrix (b) 4,514 89,000 Boston Scientific (b) 4,005 267,000 Innovasive Devices (b) 2,670 125,000 Trex Medical (b) 2,359 - -------------------------------------------------------------------------------- 97,714 .Hospital/Laboratory Supplies: 0.7% 273,000 Hillenbrand Industries 10,169 322,000 Sybron International (b) 8,050 - -------------------------------------------------------------------------------- 18,219 - -------------------------------------------------------------------------------- .Services: 4.0% 1,000,000 Lincare Holdings (b) 39,250 498,000 HBO & Company 33,739 462,000 Renal Treatment Centers (b) 13,283 316,000 Apria Healthcare Group (b) 9,915 185,000 MDL Information Systems (b) 5,504 100,000 ThermoTrex (b) 4,925 450,000 Pharmaceutical Marketing Services (b) 4,387 300,000 Walsh International (b) 2,525 - -------------------------------------------------------------------------------- 113,528 ----------- Health Care: Total 294,999 - -------------------------------------------------------------------------------- Consumer Goods/Services: 9.9% .Retail: 1.7% 980,000 Borders Group (b) 31,605 295,000 Quality Food Centers (b) 7,596 200,000 Duckwall Alco Stores (b) 2,950 50,000 Nine West (b) 2,556 70,000 Dave & Buster's (b) 1,873 191,000 Cato 1,146 - -------------------------------------------------------------------------------- 47,726 .Recreational Vehicles: 1.8% 1,100,000 Harley-Davidson 45,238 320,000 Thor Industries 6,560 - -------------------------------------------------------------------------------- 51,798 .Food: 0.3% 634,000 Au Bon Pain (b) (c) 4,755 125,000 Morton Restaurant Group (formerly known as Quantum Restaurant Group) (b) 2,188 - -------------------------------------------------------------------------------- 6,943 .Entertainment/Leisure: 3.3% 1,400,000 Carnival 40,425 2,000,000 Alliance Entertainment (b) (c) 13,750 215,000 GC Companies (b) 8,009 265,000 Royal Caribbean Cruises 7,553 276,000 Carmike Cinemas (b) 7,452 251,000 Toy Biz (b) 5,083 472,000 Hollywood Park, Cv. Pfd. 4,720 180,000 Rio Hotel & Casino (b) 2,768
11 Acorn Fund .Statement of Investments (unaudited)
Principal Amount or Number of Shares Value (000) - ------------------------------------------------------------------------------- 535,000 Monarch Casino & Resort (b) (c) $ 2,140 $6,250 Grand Palais Casino 14% Note Due 2/25/98 (b) 313 - ------------------------------------------------------------------------------- 92,213 .Manufacturers: 2.8% 1,650,000 Newell 50,531 375,000 Wolverine World Wide 12,187 300,000 First Brands 8,100 232,000 Norwood Promotional (b) 5,220 60,000 St. John Knits 2,678 - ------------------------------------------------------------------------------- 78,716 ------- Consumer: Total 277,396 - ------------------------------------------------------------------------------- Finance: 14.8% .Banks: 1.1% 380,000 Texas Regional Bancshares (c) 9,500 285,000 Union Planters 8,657 46,000 BayBanks 4,956 105,000 First American 4,423 73,000 First Commerce 2,582 104,000 Riverside National Bank 1,378 - ------------------------------------------------------------------------------- 31,496 .Savings/Loans: 2.6% 700,000 Peoples Bank Bridgeport 15,575 756,000 Washington Federal 15,498 400,000 Coast Savings (b) 13,100 390,000 Washington Mutual 11,651 260,000 TCF 8,645 280,000 Imperial Thrift & Loan (b) 4,130 156,000 Indiana Federal 3,140 - ------------------------------------------------------------------------------- 71,739 .Insurance: 2.0% 836,000 Baldwin & Lyons, Cl. B (c) 17,243 351,000 United Fire & Casualty 10,705 162,000 Foremost 9,193 331,000 Transnational Re 8,151 318,000 ALLIED Life Financial (c) 6,360 216,000 Leucadia National 5,292 - ------------------------------------------------------------------------------- 56,944 .Money Management: 2.8% 880,000 United Asset Management 21,560 784,000 Baker Fentress 14,994 618,000 SEI 13,055 1,621,000 Phoenix Duff and Phelps 12,157 241,000 BISYS (b) 9,098 254,000 T. Rowe Price 7,811 - ------------------------------------------------------------------------------- 78,675 .Credit Cards: 4.4% 767,000 ADVANTA, Cl. A 39,117 520,000 ADVANTA, Cl. B 23,530 600,000 First USA 33,000 575,000 National Data 19,694 220,000 Concord EFS (b) 7,810 - ------------------------------------------------------------------------------- 123,151 .Other: 1.9% 1,049,000 Americredit (b) 16,391 898,000 Mercury Finance 11,450 295,000 Aames Financial 10,583 375,000 Jayhawk (b) 5,109 320,000 DVI Health Services (b) 5,040 620,000 Cash America 4,030 - ------------------------------------------------------------------------------- 52,603 ------- Finance: Total 414,608 - ------------------------------------------------------------------------------- Industrial Goods/Services: 9.7% .Steel: 1.5% 1,110,000 Worthington Industries 23,171 440,000 Gibraltar Steel (b) 8,910 354,000 Atchison Casting (b) (c) 5,575 200,000 Schnitzer Steel 5,350 - ------------------------------------------------------------------------------- 43,006 .Machinery: 4.3% 1,125,000 Thermo Electron 46,828 800,000 Baldor Electric 18,000 675,000 Thermo Fibertek (b) 11,391 150,000 Nordson 8,475 240,000 Sealed Air (b) 8,070 250,000 Bearings 6,750 135,000 Valmont Industries 4,590 300,000 Douglas & Lomason (c) 4,275 96,000 Mine Safety Appliances 3,936 110,000 Applied Power 3,080 174,000 U.S. Can (b) 2,828 180,000 Hein-Werner (b) (c) 1,440 500,000 Stevens International, Cl. A (b) (c) 1,250
12
Principal Amount or Number of Shares Value (000) - ------------------------------------------------------------------------------- 34,000 Stevens International, Cl. B (b) (c) $ 90 - ------------------------------------------------------------------------------- 121,003 .Furniture/Textiles: 1.1% 600,000 Unifi 16,875 750,000 Lilly Industries, Cl. A 12,750 - ------------------------------------------------------------------------------- 29,625 .Services: 2.8% 600,000 Expeditors International of Washington 18,600 562,000 Wackenhut, Cl. B 10,327 58,000 Wackenhut, Cl. A 1,428 384,000 HA.LO Industries (b) (c) 9,984 430,000 Hub Group (b) 8,761 374,000 Thomas Group (b) (c) 6,919 530,000 Thermo Terratech (b) 6,360 154,000 Unitog 4,351 $2,900 Western Water, 9% Cv. Note Due 9/25/05 4,251 225,000 Material Sciences (b) 3,881 100,000 World Color Press (b) 2,538 115,000 AG Services of America (b) 1,466 43,000 Worker's Compensation Medical Centers (b) 22 - ------------------------------------------------------------------------------- 78,888 ------- Industrial: Total 272,522 - ------------------------------------------------------------------------------- Energy/Minerals: 8.0% .Independent Power: 2.3% 995,000 The AES Corporation (b) 28,109 850,000 CalEnergy (b) 21,675 390,000 Thermo Ecotek (b) 9,457 285,000 Thermo Power (b) 3,563 - ------------------------------------------------------------------------------- 62,804 .Oil/Gas Producers: 3.0% 440,000 United Meridian (b) 15,840 770,000 Global Natural Resources (b) 12,609 800,000 Tesoro Petroleum (b) 9,200 350,000 Devon Energy 8,575 300,000 Seagull Energy (b) 7,500 500,000 Forest Oil (b) 6,812 427,000 Louis Dreyfus Natural Gas (b) 6,405 550,000 Coho Resources (b) 3,781 770,000 Tipperary (b) (c) 3,369 200,000 St. Mary Land & Exploration 3,350 103,000 Barrett Resources (b) 3,064 360,000 Abraxas Petroleum (b) (c) 2,453 110,000 Abraxas Petroleum CVRs (b) 1,015 - ------------------------------------------------------------------------------- 83,973 .Distribution/Marketing/Refining: 1.1% 606,000 Southern Union (b) 13,332 679,000 NGC 10,185 143,000 KN Energy 4,790 53,000 Atmos Energy 1,623 - ------------------------------------------------------------------------------- 29,930 .Oil Services: 1.3% 320,000 Atwood Oceanics (b) 14,320 255,000 Energy Ventures (b) 8,287 400,000 Digicon (b) 6,700 201,000 J Ray McDermott (b) 5,025 56,000 Carbo Ceramics 1,232 - ------------------------------------------------------------------------------- 35,564 .Mining: 0.3% 300,000 Zeigler Coal Holding 4,800 250,000 Coeur D'Alene Mines 4,594 - ------------------------------------------------------------------------------- 9,394 ------- Energy: Total 221,665 - ------------------------------------------------------------------------------- Real Estate: 1.9% 829,000 The Rouse Company 21,450 210,000 Equity Residential Properties Trust 6,904 155,000 Forest City Enterprises, Cl. B 6,452 123,000 Forest City Enterprises, Cl. A 5,043 165,000 Weingarten Realty Investors 6,394 120,000 First Washington Realty Trust, Cv. Pfd. 3,030 80,000 First Washington Realty Trust 1,600 243,000 Sunstone Hotel Investors 2,643 ------- Real Estate: Total 53,516 - ------------------------------------------------------------------------------- Foreign Securities: 21.2% .Canada: 0.7% 800,000 Shaw Communications, Cl. B 5,653 125,000 BCE Mobile Communications (b) 4,059 235,000 Veritas Energy Services (b) 3,054 400,000 Ranger Oil 2,950
13 Acorn Fund .Statement of Investments (unaudited)
Number of Shares Value (000) - -------------------------------------------------------------------------------- 200,000 Shaw Industries $ 2,643 200,000 Cogeco Cable 1,208 - -------------------------------------------------------------------------------- 19,567 .United Kingdom/Ireland: 3.5% 400,000 International CableTel (b) 11,800 2,695,000 Medeva 10,511 1,200,000 Serco Group 10,106 730,000 Comcast UK Cable Partners (b) 9,308 450,000 ADT (b) 8,494 2,000,000 Securicor Group, Cl. A 8,142 1,150,000 N. Brown Group 6,236 1,700,000 Invesco 6,102 68,000 Invesco ADS 2,380 700,000 Powerscreen International 4,960 3,800,000 Waterford Wedgwood (Ireland) 4,960 580,000 Oriflame 4,569 1,000,000 Capital 3,574 345,000 Ethical Holdings (b) 3,364 1,200,000 Body Shop International 3,319 4,500,000 Rhino Group (b) 1,119 700,000 Pittencrieff Resources 489 - -------------------------------------------------------------------------------- 99,433 .Germany/Austria: 0.5% 425,000 United International Holdings (Austria) (b) 5,844 20,000 Escada 3,607 8,000 Binding-Brauerei 3,022 30,000 Flughafen Wien (Austria) 2,060 - -------------------------------------------------------------------------------- 14,533 .Nordic Countries: 2.5% 460,000 WM Data Nordic (Sweden) 29,114 110,000 Hennes & Mauritz, Cl. B (Sweden) 10,194 240,000 Autoliv (Sweden) 7,306 725,000 SensoNor (Norway) (b) 6,361 150,000 Huhtamaki (Finland) 5,004 220,571 Pricer, Cl. B (Sweden) (b) 4,620 180,000 Esselte, Series A (Sweden) 3,635 50,000 Sentra, Cl. A (Finland) (b) 1,560 90,000 Benefon (Finland) 1,483 175,000 Sysdeco Group (Norway) (b) 1,212 - -------------------------------------------------------------------------------- 70,489 .Netherlands: 0.5% 300,000 Getronics 6,643 22,000 Telegraaf Holdings 3,692 40,000 Hunter Douglas 2,730 - -------------------------------------------------------------------------------- 13,065 .Switzerland: 1.0% 6,000 Societe Generale de Surveillance 14,356 14,000 Liechtenstein Global Trust 6,823 13,200 Sece Cortaillod Holdings 6,327 - -------------------------------------------------------------------------------- 27,506 .France: 0.7% 50,000 Guilbert 7,284 63,000 Sligos 5,874 26,000 Cetelem 5,843 - -------------------------------------------------------------------------------- 19,001 .Spain/Portugal: 0.4% 300,000 Vallehermoso 5,920 375,000 Filmes Lusomundo (Portugal) (b) 2,324 70,000 Cortefiel 1,597 - -------------------------------------------------------------------------------- 9,841 .Italy/Greece: 1.2% 300,000 Cellular Communications International (b) 10,125 4,500,000 Banca Fideuram 9,787 200,000 Hellenic Bottling (Greece) 6,637 85,000 Industrie Natuzzi 4,356 1,100,000 Tecnost 1,826 1,200,000 Costa Crociere 1,738 - -------------------------------------------------------------------------------- 34,469 .Israel: 0.1% 200,000 Pec Israel Economic (b) 3,625 - -------------------------------------------------------------------------------- 3,625 .India: 0.3% 300,000 IS Himalaya Fund (b) 4,290 39,393 Housing Development Finance 3,285 298,700 Industrial Credit & Investment Corp. of India (b) 763 - -------------------------------------------------------------------------------- 8,338 .Hong Kong: 0.5% 4,300,000 Varitronix International 8,971 7,000,000 JCG Holdings 5,697 - -------------------------------------------------------------------------------- 14,668
14
Number of Shares Value (000) - -------------------------------------------------------------------------------- .China: 0.4% 810,000 AES China Generating (b) (c) $ 8,556 200,000 The Investment Company of China (b) 1,430 111,275 The China Investment Company (b) 821 - -------------------------------------------------------------------------------- 10,807 .Singapore: 0.3% 5,100,000 Genting International 8,925 - -------------------------------------------------------------------------------- 8,925 .Malaysia: 0.7% 1,450,000 Resorts World 8,310 1,125,000 Kian Joo Can Factory 6,177 400,000 O.Y.L. Industries 4,168 40,000 O.Y.L. Industries Rights (b) 176 - -------------------------------------------------------------------------------- 18,831 .Thailand: 0.4% 78,000 The Thailand Fund 7,897 3,300,000 Sinpinyo Fund V 2,355 200,000 Thai President Foods 1,378 59,600 International Cosmetics 476 - -------------------------------------------------------------------------------- 12,106 .Korea/Taiwan: 1.8% 120,000 Formosa Fund (b) 10,440 134,956 Shinsegae 9,150 15,043 Shinsegae (new) 936 320,000 President Enterprises (Taiwan) (b) 6,760 5,000 Korea Mobile Telecom 6,114 260,000 Korea Mobile Telecom GDS 4,452 255,000 Kookmin Bank 5,517 80,000 Seoul International Trust 3,440 300,000 Korea-Europe Fund 2,475 - -------------------------------------------------------------------------------- 49,284 .Indonesia/Philippines: 0.6% 6,000,000 PILTEL (Philippines) (b) 9,160 1,728,000 Tigaraksa Satria 4,455 195,501 Unilever Indonesia 2,889 2,400,000 Mayora Indah 1,340 - -------------------------------------------------------------------------------- 17,844 .Japan: 2.2% 120,000 Nintendo 8,927 175,000 Noritsu Koki 8,839 100,000 Paramount Bed 6,828 75,000 Secom 4,950 132,000 Royal 4,128 90,000 Aucnet 4,020 720,000 Tokyu Land (b) 3,814 209,000 Mr. Max 3,811 160,000 Heiwa 3,690 90,000 Sankyo 3,446 100 NTT Data 2,990 60,000 Promise 2,954 40,000 Nichiei 2,662 - -------------------------------------------------------------------------------- 61,059 .Australia/New Zealand: 0.8% 1,700,000 Sky City (New Zealand) (b) 7,396 1,600,000 Village Roadshow 7,267 750,000 Village Roadshow Pfd. 2,568 2,500,000 Burswood Property Trust 3,404 700,000 Petroleum Securities 2,727 - -------------------------------------------------------------------------------- 23,362 .Mexico: 0.7% 400,000 Kimberly Clark de Mexico 7,309 2,000,000 Nadro, Series L (c) 5,976 300,000 Grupo Radio Centro 2,962 4,200,000 Grupo Herdez, Series B 1,413 600,000 Fondo Opcion, Series B (b) 570 170,000 Cofar, Series B 171 - -------------------------------------------------------------------------------- 18,401 .Brazil: 0.4% 15,000,000 Itau Banco PN 6,095 190,000,000 Cemig 5,052 - -------------------------------------------------------------------------------- 11,147 .Other Latin America: 1.0% 170,000 Panamerican Beverages (Panama) 7,608 130,000 Banco Latinoamericano de Export (Panama) 7,312 300,000 Credicorp (Peru) 5,962 160,000 IRSA (Argentina) 5,400 2,000,000 Siderca (Argentina) 2,724 - -------------------------------------------------------------------------------- 29,006 ------- Foreign: Total 595,307
15 Acorn Fund .Statement of Investments (unaudited)
Principal Amount Value (000) - -------------------------------------------------------------------------------- Total Common Stocks and Other --------- Equity-Like Securities: 94.9% $2,660,953 (Cost: $1,592,256) Money Market Instruments: 5.6% Yield 4.9%-5.4% Due July 1996 $ 12,839 Union Pacific 12,835 3,066 Prudential Funding 3,065 13,463 General Motors Acceptance Corp 13,457 12,737 Travelers Insurance 12,730 17,880 Aetna Property & Casualty 17,864 8,262 IBM Credit 8,251 13,905 American General Finance 13,884 13,731 Aetna Property & Casualty 13,709 11,000 General Motors Acceptance Corp 10,980 10,575 Cargill 10,555 15,905 General Motors Acceptance Corp 15,867 14,660 Prudential Funding 14,623 10,000 U.S. Treasury Bill 9,964 - -------------------------------------------------------------------------------- (Cost: $157,784) 157,784 Total Investments: 100.5% 2,818,737 (Cost: $1,750,040) --------- Cash and Other Assets Less Liabilities: (0.5%) (13,302) ---------- Total Net Assets: 100% $2,805,435 ================================================================================
.Notes to Statement of Investments (a) At June 30, 1996, for federal income tax purposes cost of investments was $1,762,550,000 and net unrealized appreciation was $1,056,187,000, consisting of gross unrealized appreciation of $1,139,002,000 and gross unrealized depreciation of $82,815,000. (b) Non-income producing security. (c) On June 30, 1996, the Fund held the following percentages of the outstanding voting shares of the companies listed below: COMARCO................................................................... 7.63% Douglas & Lomason......................................................... 7.07% ALLIED Life Financial..................................................... 6.87% Tipperary................................................................. 6.87% Hein-Werner............................................................... 6.86% Atchison Casting.......................................................... 6.41% Corvas International...................................................... 6.35% Abraxas Petroleum......................................................... 6.21% HA.LO Industries.......................................................... 6.11% Texas Regional Bancshares................................................. 6.04% Thomas Group.............................................................. 5.95% CACI International........................................................ 5.94% Stevens International Cl. A & B........................................... 5.68% Baldwin & Lyons........................................................... 5.67% Monarch Casino & Resort................................................... 5.61% Bell Microproducts........................................................ 5.58% Au Bon Pain............................................................... 5.45% Kronos.................................................................... 5.45% ACT Manufacturing......................................................... 5.24% Alliance Entertainment.................................................... 5.20% AES China Generating...................................................... 5.13%
The aggregate cost and value of investments in these companies at June 30, 1996, was $110,420,000 and $144,212,000, respectively. The market value of these securities represents 5.14% of the total net assets at June 30, 1996. During the period ended June 30, 1996, dividends received from these companies amounted to $287,400 and the net realized gain on sales of investments in such companies amounted to $401,300. 16 .Portfolio Diversification At June 30, 1996, Acorn Fund's foreign portfolio of investments as a percentage of net assets was diversified as follows: Value (000) Percent - --------------------------------------------------------------------------- .Information Mobile Communications $ 43,535 1.5% Broadcasting/CATV 43,102 1.5 Computer Systems 38,747 1.4 Software/Services 16,013 0.6 Distribution 13,527 0.5 Consumer Electronics 8,971 0.3 - --------------------------------------------------------------------------- 163,895 5.8 .Health Care Biotechnology/Drug Delivery 22,346 0.8 Hospital/Laboratory Supplies 6,828 0.2 - --------------------------------------------------------------------------- 29,174 1.0 .Consumer Goods/Services Retail 74,867 2.7 Manufacturers 48,248 1.7 Entertainment/Leisure 37,037 1.3 Food 33,162 1.2 Transportation 2,060 0.1 - --------------------------------------------------------------------------- 195,374 7.0 .Finance Money Management 51,417 1.8 Banks 32,472 1.2 Other 30,547 1.1 - --------------------------------------------------------------------------- 114,436 4.1 .Industrial Goods/Services Services 38,025 1.3 Machinery Processing 13,147 0.5 - --------------------------------------------------------------------------- 51,172 1.8 .Energy/Minerals Independent Power 13,608 0.5 Oil/Gas Producers 9,220 0.3 Oil Services 2,724 0.1 - --------------------------------------------------------------------------- 25,552 0.9 .Real Estate 15,704 0.6 ---------------------- Total Foreign Portfolio $595,307 21.2% =========================================================================== 17 Acorn International .Major Portfolio Changes in the Second Quarter
Number of Shares --------------------------- 3/31/96 6/30/96 Additions - ------------------------------------------------------------- Europe .Germany Biotest 0 9,000 .Switzerland Societe Generale d'Affichage 0 6,500 .Italy Editoriale L'Espresso 1,000,000 2,000,000 Mediolanum 0 100,000 .Greece Attica Enterprises 0 200,000 .Sweden Esselte 10,000 225,000 Frontec B 0 400,000 (includes effect of 4 for 1 split) .France Technip 0 50,000 .United Kingdom Bluebird Toys 460,000 1,100,000 Comcast UK Cable Partners 450,000 580,000 HALMA 270,000 1,400,000 Medeva 2,034,000 2,790,000 Premier Oil 0 7,100,000 Securicor 0 1,700,000 (received 1,649,050 additional shares in recapitalization) Tunstall 550,000 750,000 .Hungary Cofinec 0 65,000 .Netherlands Hunter Douglas 0 40,000 Kempen 410,000 620,000 Toolex Alpha 0 55,000 Wegener 20,000 30,000 .Spain Zardoya Otis 0 10,000 - ------------------------------------------------------------- Asia .India Zee Telefilms 597,800 847,800 .Malaysia Arab Malaysian Finance 930,000 1,200,000 Malaysian Assurance Alliance 1,799,500 2,200,000 Malaysian Oxygen 1,400,000 1,600,000 .Philippines Int'l Container Terminal Services 14,000,000 16,500,000 PILTEL 7,000,000 8,000,000 .Singapore Want Want Holdings 0 840,000 .Thailand Shinawatra Satellite 0 4,200,000 .Japan Aucnet 143,000 165,000 Cats 0 200,000 Central Uni 117,000 175,000 Chuo Trust & Banking 0 274,000 Daimon 0 70,000 HIS 37,000 84,000 Hokuto 208,000 250,000 Itariyard 0 120,000 Konami 0 79,000 Lasertec 0 165,000 Mars Engineering 13,000 113,000 Meitec 0 45,000 Nanto Bank 0 385,000 Nemic Lambda 0 135,000 Nihon Jumbo 43,720 85,720 Nintendo 0 120,000 Noritsu Koki 200,000 275,000 NTT Data 0 200 Ryohin Keikaku 34,600 49,600 Sari 0 70,000 Tokyu Land 0 1,130,000 .Korea/Taiwan Daehan City 85,000 95,000 Korea Mobile Telecom 19,000 19,970 Dongbu Insurance 0 157,284 - ------------------------------------------------------------- Latin America .Argentina Siderca 0 5,000,000 .Chile Banco BHIF 0 260,000
18
Number of Shares ----------------------- 3/31/96 6/30/96 .Brazil White Martins 0 2,000,000 - -------------------------------------------------------------------------------- Other Countries .Canada Cinar Films 0 100,000 .Australia Burswood Property Trust 2,700,000 3,700,000 Skilled Engineering 0 1,200,000 Sonic Healthcare 0 4,605,000 Tyndall Australia 0 3,000,000 (includes effect of 10% stock bonus) Village Roadshow Pfd. Cl. B 0 750,000 Sales - -------------------------------------------------------------------------------- Europe .Austria Flughafen Wien 145,000 80,000 .Italy Banca Fideuram 8,500,000 8,000,000 .Sweden Allgon, Series B 575,000 500,000 Althin Medical AB 130,000 0 .France Axime Ex Segin 80,000 70,000 Ecco SA 14,000 0 Ecco Travail Temporaire 56,000 0 Guilbert 60,000 50,000 .United Kingdom Edinburgh Fund Managers 850,000 710,000 Invesco 2,000,000 90,000 North American Gas Investors Trust 1,000,000 0 .Netherlands Getronics 260,000 1,000,000 (includes effect of 4 for 1 split) Telegraaf Holdings 43,000 35,000 .Denmark Chr. Hansen Holding, Cl. B 47,000 0 .Switzerland Bobst 5,000 3,900 Zehnder Holding 5,000 0 Principal Amount of Number of Shares ------------------------- 3/31/96 6/30/96 .Spain Marco Iberica Midesa 65,000 0 - -------------------------------------------------------------------------------- Asia .Hong Kong ABC Communication Holdings 4,500,000 0 First Sign International Holdings 24,000,000 5,000,000 .Pakistan Adamjee Insurance 14,900 0 .Japan Homac 141,000 0 Promise 250,000 220,000 Sony Music Entertainment 50,000 0 Tostem 240,000 0 Tsutsumi Jewelry 85,000 0 .Malaysia New Straits Times Press 500,000 0 O.Y.L. Industries 850,000 700,000 .Philippines Universal Robina 12,000,000 0 - -------------------------------------------------------------------------------- Latin America .Peru Tele 2000 9.75% Cv. Note 4/5/97 $1,252 $0 .Argentina Quilmes Industrial Pfd. 150,000 0 Quilmes Industrial 300,000 0 .Bolivia Compania Boliviana de Energia Electrica 105,000 0 - -------------------------------------------------------------------------------- Other Countries .Canada Tesco 300,000 0 .Australia Petroleum Securities Australia 2,500,000 1,700,000 .Israel Ampal American Israel 260,000 0
19 Acorn International .Statement of Investments (unaudited) June 30, 1996
Number of Shares Value (000) - -------------------------------------------------------------------------------- Common Stocks and Other Equity-Like Securities: 98.0% - -------------------------------------------------------------------------------- Europe: 49.6% .Germany/Austria: 6.4% 120,000 Fresenius $ 21,994 14,000 Fresenius Pfd. 2,532 Dialysis Equipment and Solutions 135,000 Rhoen Klinikum Pfd. 15,565 90,000 Rhoen Klinikum 11,825 Hospital Management 21,000 Cewe Color Holding 7,657 Photographic Developing & Printing 40,000 Escada 7,213 Designer Fashions 15,000 Binding-Brauerei 5,666 Brewer 5,000 Marschollek Lautenschlager 5,584 Financial Planning 400,000 United International Holdings (b) 5,500 Cable Television for Austria and Other Countries (Austria) 80,000 Flughafen Wien 5,492 Vienna Airport Authority (Austria) 15,000 Pfleiderer 4,119 Construction Materials 30,000 BWT 3,822 Water Filtration Systems (Austria) 35,000 VAE Eisenbahnsysteme 3,300 Railroad Switches (Austria) 9,000 Biotest 2,868 Immunoglobulins - -------------------------------------------------------------------------------- 103,137 .Denmark: 0.3% 31,000 Kompan International (c) 4,201 Playground Equipment - -------------------------------------------------------------------------------- 4,201 .Finland: 4.2% 500,000 TT Tieto, Cl. B (c) 23,891 Computer Services/Consulting 300,000 Raision Tehtaat, Series V 17,886 300,000 Raision Tehtaat, Rights (b) 2,454 Foodstuffs & Specialty Chemicals 370,000 Benefon (c) 6,096 Mobile Telephones 170,000 Huhtamaki 5,671 Confectionery & Contraceptives 100,000 Vaisala, Cl. A 5,036 Meteorological Instruments 80,000 Fiskars, Series A 4,477 Scissors & Gardening Tools 105,000 Sentra, Cl. A (b) (c) 3,277 Convenience Stores, Restaurants - -------------------------------------------------------------------------------- 68,788 .Norway: 1.7% 1,000,000 SensoNor (b) 8,773 Electronic Sensors for Airbags 250,000 Maritime Group 6,311 Oil Field Equipment & Services 300,000 Elkjoeb Norge 6,187 Consumer Electronics Retailer 840,000 Sysdeco (b) (c) 5,818 Software Tool Sets & Systems - -------------------------------------------------------------------------------- 27,089 .Sweden: 7.2% 800,000 WM Data Nordic (c) 50,633 Computer Services/Consulting 185,000 Hennes & Mauritz, Cl. B 17,145 Apparel Stores 645,000 Getinge Industrier (c) 12,150 Sterilization & Disinfection Equipment 320,000 Autoliv 9,741 Seatbelts & Airbags 457,142 Pricer, Cl. B (b) 9,575 Electronic Shelf Labels for Supermarkets 500,000 Allgon, Series B 8,326 Mobile Telephone Antennae & Systems 400,000 Frontec, Series B (b) 4,913 Computer Software & Services 225,000 Esselte, Series A 4,543 Office Supplies & Related Equipment - -------------------------------------------------------------------------------- 117,026 .France: 4.2% 70,000 Axime Ex Segin (b) 9,790 Computer Services/Consulting 42,000 Cetelem 9,439 Consumer Loans 95,000 Sligos 8,857 Computer Services/Credit Card Processing 62,000 NRJ 8,189 Radio Network 50,000 Guilbert 7,284 Office Supplies Distributor 65,000 Spir Communication 6,401 Newspaper Publisher & Printer 42,000 Virbac 5,898 Veterinary Pharmaceuticals Manufacturer 50,000 Technip 4,603 Construction 52,000 CEP Communications 4,394 Trade Magazines & Book Publishing
20
Number of Shares Value (000) - -------------------------------------------------------------------------------- 39,000 Fininfo $ 4,068 Financial Data Feeds - -------------------------------------------------------------------------------- 68,923 .United Kingdom: 11.2% 1,800,000 Serco Group 15,159 Facilities Management 1,800,000 Oriflame International 14,180 Natural Cosmetics 467,000 International CableTel (b) 13,777 Cable TV & Telephone System 2,000,000 Capita Group 11,685 Outsourcing Government Services 1,600,000 Powerscreen International 11,337 Mobile Crushing & Screening Equipment 2,790,000 Medeva 10,881 Pharmaceuticals 1,650,000 N. Brown Group 8,948 Mail Order Women's Clothing 2,500,000 Capital 8,934 Casinos 710,000 Edinburgh Fund Managers 7,557 Investment Management 580,000 Comcast UK Cable Partners (b) 7,395 Cable TV & Telephone System 3,700,000 City Centre Restaurants 7,014 Fast Food Restaurants 1,700,000 Securicor Group, Cl. A 6,921 Mobile Communications 670,000 Ethical Holdings (b) (c) 6,533 Drug Delivery 1,700,000 Rotork 6,472 Valve Actuators 1,330,000 Ivory & Sime 5,559 Investment Management 410,000 Vosper Thornycroft Holdings 5,224 Military Shipbuilding 1,800,000 Body Shop International 4,978 Natural Cosmetics & Toiletries 640,000 Seton Healthcare Group 4,922 Pharmaceuticals 500,000 Dorling Kindersley 4,646 Reference Book & CD-ROM Publisher 750,000 Tunstall 4,393 Monitoring Equipment 1,100,000 Bluebird Toys 3,982 Toy Manufacturer 1,400,000 HALMA 3,829 Fire Detection Devices & Burglar Alarms 7,100,000 Premier Oil (b) 3,365 Oil & Gas Producer - -------------------------------------------------------------------------------- 13,000,000 Rhino Group (c) 3,232 Video Game Stores 1,750,000 Pittencrieff Resources 1,224 Oil & Gas Producer 90,000 Invesco 323 Investment Management - -------------------------------------------------------------------------------- 182,470 .Switzerland: 3.8% 6,500 Societe Generale de Surveillance 15,553 Inspection/Testing of Trade Goods 25,500 Phoenix Mecano 12,590 Electrical Components Manufacturer 21,600 Sece Cortaillod Holdings 10,354 Cable TV 13,000 Liechtenstein Global Trust 6,335 Banking & Investment Management 3,900 Bobst 5,624 Packaging Machinery 7,000 Suedelektra Holding (b) 5,425 Diversified Pool of Commodity-Related Projects 6,500 Societe Generale d'Affichage 3,324 Billboard Advertising 10,000 Prodega 2,836 Cash-and-Carry Retailer - -------------------------------------------------------------------------------- 62,041 .Italy/Greece: 5.1% 8,000,000 Banca Fideuram 17,399 Life Insurance & Mutual Funds 2,200,000 Saipem SPA 9,242 Pipeline Construction & Drilling Contractor 600,000 Gewiss 9,002 Electrical Components Manufacturer 550,000 Banca Popolare Di Bergamo 8,477 Regional Bank 120,000 Ergo Bank 6,604 Bank (Greece) 170,000 Hellenic Bottling 5,642 Coca-Cola Bottler (Greece) 2,000,000 Editoriale L'Espresso (b) 5,577 Newspaper & Magazine Publisher 100,000 Industrie Natuzzi 5,125 Leather Furniture Manufacturer 3,100,000 Costa Crociere 4,489 Cruise Ship Line 1,100,000 Banca Di Legnano 3,832 Regional Bank 80,000 Cellular Communications International (b) 2,700 Mobile Communications
21 Acorn International .Statement of Investments (unaudited)
Number of Shares Value (000) - -------------------------------------------------------------------------------- 1,600,000 Tecnost $ 2,656 ATM, Lotto, Toll Collection Equipment Manufacturer 200,000 Attica Enterprises (b) 1,337 Ferry Line (Greece) 100,000 Mediolanum 992 Life Insurance & Mutual Funds - -------------------------------------------------------------------------------- 83,074 .Turkey: 0.4% 90,000,000 Sabah Yayincilik 2,503 Newspapers, Magazines 5,999,850 Tat Konservcelik Sanayii 1,412 4,500,000 Tat Konservcelik Sanayii Rights (b) 669 Tomato Paste 62,000,000 Medya Holdings 1,364 Newspapers, Magazines, Television 30,000,000 Hurriyet Gazetecilik 1,302 Newspapers, Magazines - -------------------------------------------------------------------------------- 7,250 .Spain/Portugal: 1.8% 350,000 Vallehermoso 6,906 Residential Property Developer & Landlord 100,000 Mapfre Vida 5,615 Life Insurance & Mutual Funds 110,000 Conservera Campofrio 4,152 Sausage Maker 160,000 Cortefiel 3,650 Apparel Retailing 170,000 Lusotur (b) 2,929 Real Estate/Resort Developer (Portugal) 235,000 Estoril Sol (b) (c) 1,455 Casino Resort (Portugal) 375,000 Oscar Mayer S.A. 1,263 Sausage Maker 350,000 Televisao Independente (b) 1,046 Television Station (Portugal) 10,000 Zardoya Otis 957 10,000 Zardoya Otis Rights (b) 95 Elevator Maintenance 140,200 Filmes Lusomundo (b) 869 Newspapers, Radio, Video, Film Distribution (Portugal) - -------------------------------------------------------------------------------- 28,937 .Netherlands: 3.0% 1,000,000 Getronics 22,144 Computer Consulting 620,000 Kempen (c) 9,407 Stock Brokerage/Investment Management 35,000 Telegraaf Holdings 5,874 Newspaper Publisher 225,000 Fugro McClelland 3,453 Engineering, Consulting & Surveying 30,000 Wegener 3,179 Newspaper Publisher 40,000 Hunter Douglas 2,730 Window Coverings 55,000 Toolex Alpha 1,320 Compact Disc Manufacturing Equipment - -------------------------------------------------------------------------------- 48,107 .Hungary: 0.2% 65,000 Cofinec 3,112 Consumer Goods Packaging - -------------------------------------------------------------------------------- 3,112 .Poland: 0.1% 180,813 Bank Komunalny 964 Bank - -------------------------------------------------------------------------------- 964 ----------- Europe: Total 805,119 - -------------------------------------------------------------------------------- Asia: 31.1% .China: 0.3% 390,000 AES China Generating (b) 4,119 Independent Power 111,275 The China Investment Company (b) 821 Closed-End Fund - -------------------------------------------------------------------------------- 4,940 .Hong Kong: 3.1% 5,000,000 Varitronix International 10,431 LCD Manufacturer 10,000,000 Li and Fung 9,430 Sourcing of Consumer Goods 10,000,000 JCG Holdings 8,138 Consumer Finance 20,000,000 Golden Harvest Entertainment 7,234 Movie Distribution & Exhibition 15,000,000 Vitasoy International Holdings 5,474 Soya Milk Manufacturer 11,000,000 Manhattan Card 5,258 Chase's Local Credit Card 7,500,000 Chen Hsong Holdings 4,021 Plastic Injection Moulding Machines 5,000,000 First Sign International Holdings 1,066 Brand Name Apparel - -------------------------------------------------------------------------------- 51,052
22
Principal Amount or Number of Shares Value (000) - -------------------------------------------------------------------------------- .India/Pakistan: 1.7% 82,702 Housing Development Finance $ 6,897 Mortgage Lender 300,000 IS Himalaya Fund (b) 4,290 Closed-End Fund 847,800 Zee Telefilms 3,525 Hindi Television Programming & Broadcasting 221,785 Pakistan State Oil 2,617 Oil Distribution (Pakistan) 810,000 Tube Investment GDR 2,531 Bicycle Manufacturer 987,800 Industrial Credit & Investment Corporation of India (b) 2,523 Bank/Financial Services 193,850 Max India 1,761 Rs 50,000 Max India Zero Coupon (b) 710 Mobile Communications 342,100 Kotak Mahindra Finance 859 Consumer Finance Company 525,000 Business India TV (b) 858 Satellite Television Broadcasting Network 2,000,000 Centurion Quantum Growth (b) 284 Closed-End Fund 34,800 Mirc Electronic 62 Consumer Electronics - -------------------------------------------------------------------------------- 26,917 .Japan: 11.3% 275,000 Noritsu Koki 13,889 Photo Processing Lab Manufacturer 200,000 Secom 13,201 Security Alarm Systems 250,000 Hokuto 11,988 Mushroom Grower 220,000 Promise 10,831 Consumer Finance 120,000 Nintendo 8,927 Video Games 113,000 Mars Engineering 8,911 Gaming Systems & Machinery 130,000 Nichiei 8,652 Lender to Small & Medium Size Businesses 195,000 Sankyo 7,466 Pachinko Machine Manufacturer 114,000 Sanyo Shinpan 7,285 Consumer Finance 165,000 Aucnet 7,371 Used Auto Auctions Via Satellite 100,000 Paramount Bed 6,828 Hospital Bed Manufacturer 295,000 Heiwa 6,804 Pachinko Machine Manufacturer 1,130,000 Tokyu Land (b) 5,985 Real Estate 200 NTT Data 5,980 Data Communications 120,000 Itariyard 5,743 Women's Apparel 165,000 Royal 5,160 Retail Auto Parts 165,000 Lasertec 5,144 Manufacturer of Defect Detectors 84,000 HIS 5,108 Travel Agent 135,000 Nemic Lambda 5,021 Power Sources 175,000 Central Uni 4,834 Health Care/Medical Equipment 49,600 Ryohin Keikaku 4,468 Specialty Consumer Goods Retailer 198,000 Mr. Max 3,610 Household Goods & Appliance Retailer 70,000 Daimon 3,510 Discount Liquor Retailer 85,720 Nihon Jumbo 3,438 Photo Processing Lab 200,000 Cats 3,282 Pest Control 385,000 Nanto Bank 2,769 Banking 274,000 Chuo Trust & Banking 2,698 Banking 79,000 Konami 2,636 Entertainment Software/Hardware 45,000 Meitec 1,022 Engineering Outsourcing 70,000 Sari 817 Discount Liquor Retailer - -------------------------------------------------------------------------------- 183,378 .Korea/Taiwan: 5.7% 19,970 Korea Mobile Telecom 24,421 Mobile Communications 440,000 Kookmin Bank 9,519 Retail Bank 95,000 Daehan City Gas 8,666 Gas Utility 157,284 Dongbu Fire & Marine Insurance (b) 8,510 Non-Life Insurance 400,000 President Enterprises (b) 8,450 Food Manufacturer & Distributor (Taiwan) 80,000 Formosa Fund (b) 6,960 Closed-End Fund (Taiwan)
23
Acorn International .Statement of Investments (unaudited) Number of Shares Value (000) - ------------------------------------------------------------------------------- 90,161 Shinsegae $ 6,113 9,839 Shinsegae (New) (b) 613 Department Stores 70,000 Taipei Fund (b) 6,020 Closed-End Fund (Taiwan) 225,000 Daehan Blue Chip Index Trust (b) 4,805 Closed-End Fund 230,000 Formosa Growth Fund (b) 3,393 Closed-End Fund (Taiwan) 83,250 Korea Housing Bank Old (b) 1,940 48,740 Korea Housing Bank New (b) 1,272 Bank 150,000 Baring Taiwan Fund (b) 1,444 Closed-End Fund (Taiwan) - ------------------------------------------------------------------------------- 92,126 .Malaysia: 2.0% 2,200,000 Malaysian Assurance Alliance 11,638 Insurance 1,600,000 Malaysian Oxygen 8,656 Industrial Gases 700,000 O.Y.L. Industries 7,294 70,000 O.Y.L. Industries Rights (b) 309 Air Conditioners 1,200,000 Arab Malaysian Finance 5,242 Consumer Finance - ------------------------------------------------------------------------------- 33,139 .Indonesia: 2.1% 2,939,400 Tigaraksa Satria (c) 7,577 Distributor of Consumer Goods 1,470,000 Modern Photo Film 6,316 Fuji Film Distributor 2,500,000 Bank Niaga (b) 6,230 Banking 3,000,000 Mustika Ratu 5,671 Traditional Cosmetics 6,500,000 Mayora Indah 3,631 Baked Goods/Candy 230,000 Unilever 3,399 Consumer Goods 1,200,000 Suba Indah (c) 928 Beverage & Food - ------------------------------------------------------------------------------- 33,752 .Philippines: 1.9% 8,000,000 PILTEL (b) 12,214 Mobile Communications 16,500,000 Int'l Container Terminal Services (b) 11,178 Container Handling Terminals & Port Management 3,000,000 Philippine Savings Bank (b) 7,385 Banking - ------------------------------------------------------------------------------- 30,777 .Singapore: 1.1% 5,400,000 Genting International 9,450 Cruise Line 1,900,000 Venture Manufacturing 3,500 2,401,674 Venture Manufacturing Warrants 7/26/99 (b) 2,467 475,000 Venture Manufacturing Rights (b) 337 Contract Electronics Manufacturer 840,000 Want Want Holdings 2,260 - ------------------------------------------------------------------------------- 18,014 .Thailand: 1.9% 4,200,000 Shinawatra Satellite 7,606 Satellite Leasing 200,000 Serm Suk 6,142 Pepsi Bottler 320,000 Bangkok Insurance 5,997 Finance/Insurance 600,000 Srithai Superware 3,874 Plastic/Melamine Tableware & Containers 300,000 Thai President Foods 2,067 Instant Noodles & Cookies 201,512 Singer Thailand 1,968 Consumer Goods Distributor 2,600,000 Sinpinyo Fund V 1,855 Closed-End Fund 183,800 International Cosmetics 1,469 Consumer Goods Distribution - ------------------------------------------------------------------------------- 30,978 -------- Asia: Total 505,073 - ------------------------------------------------------------------------------- Latin America: 9.1% .Mexico: 2.5% 600,000 Kimberly Clark de Mexico 10,963 Paper Products 3,000,000 Nadro, Series L 8,964 Pharmaceutical Distributor 380,000 Bufete Industrial (b) 6,603 Engineering & Construction 1,000,000 Grupo Industrial Bimbo 4,631 Radio Stations & Networks Bread, Baked Goods & Snacks 400,000 Grupo Radio Centro 3,950 Radio Stations & Networks 5,500,000 Grupo Herdez, Series B 1,850 Sauces & Condiments 24
Principal Amount or Number of Shares Value (000) - -------------------------------------------------------------------------------- 600,000 GBM Atlantico (b) $ 1,425 Bank & Brokerage 1,500,000 Fondo Opcion, Series B (b) (c) 1,425 Real Estate Investment Fund 3,000,000 Grupo Fernandez Editores (b) 1,205 Textbook Publisher 107,000 Cofar 108 Drug Stores - -------------------------------------------------------------------------------- 41,124 .Brazil: 1.6% 28,000,000 Banco Itau Pfd. 11,377 Bank 200,000,000 Cemig Pfd. 5,318 Electric Utility 35,000,000 Telemig Pfd. 3,608 35,000,000 Telemig (b) 2,858 Telecommunications 2,000,000 White Martins 2,809 Industrial Gases 1,000,000 Brazilian Smaller Companies Warrants (b) 665 Closed-End Fund - -------------------------------------------------------------------------------- 26,635 .Argentina: 1.2% 280,000 IRSA 9,450 Real Estate Management & Development 5,000,000 Siderca 6,810 Steel Pipe Producer 1,400,000 Cresud (b) 2,804 Agriculture 229,500 Cerveceria Biekert (b) 294 Brewer - -------------------------------------------------------------------------------- 19,358 .Chile: 1.4% 240,000 Santa Isabel 6,660 Retail 150,000 Genesis Chile Fund 6,225 Closed-End Fund 260,000 Banco BHIF 5,233 Financial Services 200,000 Banco De A Edwards 4,200 Bank - -------------------------------------------------------------------------------- 22,318 .Peru: 0.9% 370,000 Credicorp 7,354 Universal Bank 2,200,000 Banco Wiese 3,964 Bank 2,000,000 Enrique Ferreyros 2,867 Heavy Machinery Dealer - -------------------------------------------------------------------------------- 14,185 .Other Latin America: 1.5% 150,000 Banco Latinoamericano de Exportaciones 8,438 Trade Financing (Panama) 170,000 Panamerican Beverages 7,608 Coca-Cola Bottler (Panama) 100,000 Ceteco Holdings 5,448 White Goods Retail 405,714 Banco de Bogota 2,147 Bank (Colombia) 450,000 Global Casinos Cv. Pfd. (b) 600 225,000 Global Casinos (b) 169 Worldwide Casino Operator (Aruba) - -------------------------------------------------------------------------------- 24,410 ------- Latin America: Total 148,030 - -------------------------------------------------------------------------------- Other Countries: 7.4% .Australia/New Zealand: 4.5% 4,250,000 Village Roadshow Pfd. Cl. A 14,886 750,000 Village Roadshow Pfd. Cl. B 2,568 Film Distribution, Exhibition & Production 2,000,000 Publishing & Broadcasting 8,816 Media & TV Broadcasting 1,750,000 Sky City (b) 7,613 Casino & Hotel (New Zealand) 14,500,000 Command Petroleum Holdings (b) 7,418 Oil & Gas Producer 1,700,000 Petroleum Securities Australia (b) 6,623 Oil & Gas Producer 4,000,000 Austereo 6,423 Media - Radio 3,700,000 Burswood Property Trust 5,038 Perth Casino & Resort 4,605,000 Sonic Healthcare 4,277 Pathology Labs 3,000,000 Tyndall Australia 3,660 Money Management & Insurance 1,200,000 Skilled Engineering 3,353 Temporary Skilled Labor 560,000 PDL Holdings 2,340 Electrical Equipment Manufacturer & Distributor (New Zealand) - -------------------------------------------------------------------------------- 73,015 .Canada: 2.3% 575,000 Veritas Energy Services (b) (c) 7,473 Geophysical Contractor
25 Acorn International .Statement of Investments (unaudited)
Number of Shares Value (000) - ------------------------------------------------------------------------------- 1,000,000 Shaw Communications $ 7,066 Cable TV 800,000 Ranger Oil 5,900 Oil & Gas Producer 435,000 Shaw Industries 5,749 Oil Field Services 500,000 Cogeco 2,398 Cable TV 100,000 Cinar Films 2,175 Children's Television Programming 700,000 Pan East Petroleum Warrants (b) 1,871 700,000 Pan East Petroleum (b) 1,871 Oil & Gas Producer 300,000 Cogeco Cable 1,812 Cable TV 250,000 Fundy Cable 1,098 Cable TV - ------------------------------------------------------------------------------ 37,413 .Israel: 0.3% 200,000 Pec Israel Economic (b) 3,625 Industrial Holdings 447,736 Alliance Tire (b) 1,003 Off-the-Road Tires - ------------------------------------------------------------------------------ 4,628 .South Africa: 0.3% 460,000 Kersaf Investments 4,716 Casino Resorts --------- Other: Total 119,772 Principal Amount or Number of Shares Value (000) - ------------------------------------------------------------------------------ Foreign Corporations, Operations in the U.S.: 0.8% 500,000 ADT (b) $ 9,438 Alarm Systems & Auto Auctions (Bermuda) 161,000 Carnival 4,649 Cruise Ship Line (Panama) Foreign Corporations, --------- Operations in the U.S.: Total 14,087 2,344 Miscellaneous Securities: 0.0% 10 Total Common Stocks and Other --------- Equity-Like Securities: 98.0% 1,592,091 (Cost: $1,205,661) Money Market Instruments: 2.2% Yield 5.36%-5.42% Due July 1996 $10,000 Aetna Property 9,994 7,676 Capital Services 7,673 9,632 Ford Motor Credit 9,629 7,921 Travelers Insurance 7,918 - ------------------------------------------------------------------------------ (Cost: $35,214) 35,214 --------- Total Investments: 100.2% 1,627,305 (Cost: $1,240,875) --------- Cash and Other Assets Less Liabilities: (0.2%) (2,513) Total Net Assets: 100% $1,624,792 - ------------------------------------------------------------------------------
.Notes to Statement of Investments (a) At June 30, 1996, for federal income tax purposes cost of investments was $1,252,995,000 and net unrealized appreciation was $374,310,000, consisting of gross unrealized appreciation of $473,863,000 and gross unrealized depreciation of $99,553,000. (b) Non-income producing security. (c) On June 30, 1996, the Fund held the following percentages of the outstanding voting shares of the companies listed below: Getinge Industrier (Sweden)....................9.31% Sentra "A" (Finland)...........................9.21% Estoril Sol (Portugal).........................9.12% Fondo Opcion (Mexico)..........................8.13% Benefon (Finland)..............................7.96% Tigaraksa Satria (Indonesia)...................7.09% Veritas Energy Services (Canada)...............6.76% Sysdeco Group (Norway).........................5.75% TT Tieto (Finland).............................5.70% Kempen (Netherlands)...........................6.35% WM Data Nordic (Sweden)........................5.42% Suba Indah (Indonesia).........................5.33% Kompan International (Denmark).................5.25% Ethical Holdings PLC (United Kingdom)..........5.14% Rhino Group (United Kingdom)...................5.04% The aggregate cost and value of investments in these companies at June 30, 1996, was $78,031,000 and $144,096,000 respectively. The market value of these securities represents 8.87% of the total net assets at June 30, 1996. During the period ended June 30, 1996, dividends received from these companies amounted to $1,682,000 and the net realized gain on sales of investments in such companies amounted to $109,000. 26 .Portfolio Diversification At June 30, 1996, the Fund's portfolio of investments as a percentage of net assets was diversified as follows:
Value (000) Percent - -------------------------------------------------------------------------------- .Information Computer Systems $ 90,442 5.6% Broadcasting/CATV 84,382 5.2 Distribution 83,794 5.2 Software/Services 59,110 3.6 Mobile Communications 52,800 3.2 Consumer Electronics 29,270 1.8 Instrumentation 5,036 0.3 - -------------------------------------------------------------------------------- 404,834 24.9 .Health Care Biotechnology/Drug Delivery 45,068 2.8 Hospital/Laboratory Supplies 35,631 2.2 Services 27,390 1.7 Equipment 16,984 1.0 - -------------------------------------------------------------------------------- 125,073 7.7 .Consumer Goods/Services Retail 183,003 11.3 Manufacturers 115,329 7.1 Food 84,142 5.2 Entertainment/Leisure 69,948 4.3 Transportation 6,829 0.4 Recreational Vehicles 3,534 0.2 - -------------------------------------------------------------------------------- 462,785 28.5 .Finance Banks 99,453 6.1 Money Management 98,211 6.0 Insurance 25,706 1.7 Other 104,613 6.4 - -------------------------------------------------------------------------------- 327,983 20.2 .Industrial Goods/Services Services 84,543 5.2 Machinery Processing 58,330 3.6 Steel 5,224 0.3 Forest Products/Construction 4,119 0.3 - -------------------------------------------------------------------------------- 152,216 9.4 .Energy/Minerals Oil/Gas Producers 37,778 2.3 Independent Power 23,124 1.4 Oil Services 22,363 1.4 Mining 6,623 0.4 Refining/Marketing 2,617 0.2 - -------------------------------------------------------------------------------- 92,505 5.7 .Real Estate 26,695 1.6 .Money Market Instruments 35,214 2.2 --------------------------------- Total Investments $1,627,305 100.2% ================================================================================
27 Acorn Fund and Acorn International .Financial Highlights (unaudited)
Acorn Fund 6 mos. ended 6/30, Years ended 12/31, - ------------------------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period 1996 1995 Net Asset Value, beginning of period $13.60 $12.24 Income From Investment Operations Net investment income .04 .11 Net realized and unrealized gain (loss) on investments and foreign currency 2.02 2.42 - ------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.06 2.53 Less Distributions Dividends from net investment income .00 (.09) Distributions from net realized and unrealized gains reportable for federal income taxes .00 (1.08) - ------------------------------------------------------------------------------------------------------------------------------- Total distributions .00 (1.17) - ------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, end of period $15.66 $13.60 =============================================================================================================================== Total Return 15.2% 20.8% Ratios/Supplemental Data Ratio of expenses to average net assets .56%* .57% Ratio of net investment income to average net assets .61%* .89% Portfolio turnover rate 39%* 29% Net assets at end of period (in millions) $2,805 $2,399 (a) Average commission rate paid per share on stock transactions for the six months ended June 30, 1996 was $.0226. Acorn International 6 mos. ended 6/30, Years ended 12/31, - ------------------------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period 1996 1995 Net Asset Value, beginning of period $16.59 $15.24 Income From Investment Operations Net investment income .09 .16 Net realized and unrealized gain (loss) on investments and foreign currency 2.78 1.20 - ------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.87 1.36 Less Distributions Dividends from net investment income -- -- Distributions from net realized -- (.01) - ------------------------------------------------------------------------------------------------------------------------------- Total distributions -- (.01) - ------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, end of period $19.46 $16.59 =============================================================================================================================== Total Return 17.3% 8.9% Ratios/Supplemental Data Ratio of expenses to average net assets 1.16%* 1.22% Ratio of net investment income to average net assets 1.03%* .90% Portfolio turnover rate 37%* 26% Net assets at end of period (in millions) $1,625 $1,276 (a) Average commission rate paid per share on stock transactions for the six months ended June 30, 1996 was $.0005.
*Annualized See accompanying notes to financial statements 28
- ----------------------------------------------------------------------------------------------------- 1994 1993 1992 1991 1990 1989 1988 1987 $13.95 $11.06 $ 9.32 $ 6.51 $ 8.58 $ 7.27 $ 6.48 $ 7.45 .06 .04 .07 .11 .12 .13 .12 .14 (1.10) 3.50 2.16 2.95 (1.62) 1.65 1.47 .12 - ----------------------------------------------------------------------------------------------------- (1.04) 3.54 2.23 3.06 (1.50) 1.78 1.59 .26 (.11) (.06) (.08) (.10) (.13) (.11) (.16) (.15) (.56) (.59) (.41) (.15) (.44) (.36) (.64) (1.08) - ----------------------------------------------------------------------------------------------------- (.67) (.65) (.49) (.25) (.57) (.47) (.80) (1.23) - ----------------------------------------------------------------------------------------------------- $12.24 $13.95 $11.06 $ 9.32 $ 6.51 $ 8.58 $ 7.27 $ 6.48 ===================================================================================================== -7.4% 32.3% 24.2% 47.3% -17.5% 24.8% 24.8% 4.4% .62% .65% .67% .72% .82% .73% .80% .82% .55% .30% .72% 1.30% 1.60% 1.59% 1.52% 1.85% 18% 20% 25% 25% 36% 26% 36% 52% $1,983 $2,035 $1,449 $1,150 $ 767 $ 855 $ 563 $ 418 Inception 9/23 through 12/31, - ---------------------------------- 1994 1993 1992 $15.94 $10.69 $10.00 .07 .00 (.03) (.67) 5.25 .72 - ---------------------------------- (.60) 5.25 .69 -- -- -- (.10) -- -- - ---------------------------------- (.10) -- -- - ---------------------------------- $15.24 $15.94 $10.69 ================================== -3.8% 49.1% 6.9% 1.24% 1.21% 2.35% * .48% .06% (1.37%)* 20% 19% 20% * $1,363 $ 907 $ 30
29 Acorn Fund and Acorn International Statements of Assets and Liabilities (unaudited)
(in thousands) Acorn Fund Acorn International - ------------------------------------------------------------------------------------------------------------------------------- 6/30/96 Assets Investments, at value (cost: Acorn Fund $1,750,040; Acorn International $1,240,875) $2,818,737 $1,627,305 Cash 648 2,057 Organization costs -- 19 Receivable for: Securities sold 9,244 5,588 Dividends and Interest 2,319 4,920 Fund shares sold 2,167 4,847 - ------------------------------------------------------------------------------------------------------------------------------- Total assets 2,833,115 1,644,736 Liabilities and Net Assets Unrealized depreciation on foreign forward currency contracts -- 12 Payable for: Securities purchased 18,147 14,781 Fund shares redeemed 9,209 4,583 Organization costs -- 19 Other 324 549 - ------------------------------------------------------------------------------------------------------------------------------- Total liabilities 27,680 19,944 Net assets applicable to Fund shares outstanding $2,805,435 $1,624,792 =============================================================================================================================== Fund shares outstanding 179,120 83,499 =============================================================================================================================== Pricing of Shares Net asset value, offering price and redemption price per share $ 15.66 $ 19.46 =============================================================================================================================== Analysis of Net Assets Paid-in capital $1,540,690 $1,222,333 Undistributed net realized gain on sales of investments and foreign currency transactions 195,219 19,913 Net unrealized appreciation of investments and other assets (net of unrealized PFIC gains of $12,510 for Acorn Fund and $12,120 for Acorn International) 1,056,181 374,301 Undistributed net investment income 13,345 8,245 - ------------------------------------------------------------------------------------------------------------------------------- Net assets applicable to Fund shares outstanding $2,805,435 $1,624,792 ===============================================================================================================================
See accompanying notes to financial statements 30 .Statements of Operations (unaudited)
Acorn Fund Acorn International (in thousands) 6 mos. ended, Year ended, 6 mos. ended, Year ended, - ---------------------------------------------------------------------------------------------------------------------------------- 6/30 1996 12/31 1995 6/30 1996 12/31 1995 Investment Income: Dividends $ 12,710 $ 23,864 $ 16,418 $ 26,345 Interest 3,231 9,264 1,383 3,969 - ---------------------------------------------------------------------------------------------------------------------------------- 15,941 33,128 17,801 30,314 Foreign taxes withheld (531) (916) (1,772) (2,816) - ---------------------------------------------------------------------------------------------------------------------------------- Total investment income 15,410 32,212 16,029 27,498 Expenses: Investment advisory fee 5,805 10,429 6,049 11,667 Custodian fees and expenses 510 737 1,056 1,804 Transfer and dividend disbursing agent fees and expenses 494 733 807 1,360 Reports to shareholders 278 331 371 431 Legal and audit fees and expenses 86 118 81 119 Registration and blue sky expenses 81 26 8 92 Trustees' fees and other 99 239 105 383 - ---------------------------------------------------------------------------------------------------------------------------------- Total expenses 7,353 12,613 8,477 15,856 - ---------------------------------------------------------------------------------------------------------------------------------- Net investment income 8,057 19,599 7,552 11,642 Net realized and unrealized gain (loss) on investments and foreign currency: Net realized gain (loss) on sales of investments 175,308 198,606 27,095 (1,937) Net realized gain (loss) on foreign currency transactions -- (118) 15 (16,959) Net realized loss on futures (4,811) (12,798) -- -- Change in net unrealized appreciation 186,376 211,069 194,865 114,583 - ---------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain on investments and foreign currency 356,873 396,759 221,975 95,687 - ---------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations $ 364,930 $ 416,358 $ 229,527 $ 107,329 ==================================================================================================================================
See accompanying notes to financial statements 31 Acorn Fund and Acorn International .Statements of Changes in Net Assets (unaudited)
Acorn Fund Acorn International (in thousands) 6 mos. ended, Year ended, 6 mos. ended, Year ended, - ------------------------------------------------------------------------------------------------------------------------------------ 6/30 1996 12/31 1995 6/30 1996 12/31 1995 From operations: Net investment income $ 8,057 $ 19,599 $ 7,552 $ 11,642 Net realized gain (loss) on sales of investments, foreign currency transactions and futures 170,497 185,690 27,110 (18,896) Change in net unrealized appreciation 186,376 211,069 194,865 114,583 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets resulting from operations 364,930 416,358 229,527 107,329 Distributions to shareholders from: Net investment income - (14,810) - - Net realized gain (a) - (177,941) - (1,050) - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions to shareholders - (192,751) - (1,050) From Fund share transactions: Reinvestment of dividends and capital gain distributions - 173,543 - 1,001 Proceeds from other shares sold 184,718 292,683 200,029 147,138 - ------------------------------------------------------------------------------------------------------------------------------------ 184,718 466,226 200,029 148,139 Payments for shares redeemed (142,808) (274,314) (81,008) (340,704) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets from Fund share transactions 41,910 191,912 119,021 (192,565) - ------------------------------------------------------------------------------------------------------------------------------------ Total increase (decrease) in net assets 406,840 415,519 348,548 (86,286) Net Assets: Beginning of period 2,398,595 1,983,076 1,276,244 1,362,530 - ------------------------------------------------------------------------------------------------------------------------------------ End of period (b) $2,805,435 $2,398,595 $1,624,792 $1,276,244 ==================================================================================================================================== (a) Includes distribution of unrealized PFIC gains of $592 in 1995 for Acorn Fund. (b) Includes undistributed net investment income of $13,345 in 1996 and $5,288 in 1995 for Acorn Fund and $8,245 in 1996 and $693 in 1995 for Acorn International. See accompanying notes to financial statements
32 .NOTES TO FINANCIAL STATEMENTS 1. Nature of Operations Acorn Fund and Acorn International (the "Funds") are series of Acorn Investment Trust (the "Trust"), an open-end management investment company organized as a Massachusetts business trust. The investment objective of each Fund is to seek long-term growth of capital. 2. Significant Accounting Policies .Security valuation Investments are stated at current value. Securities traded on securities exchanges or in over-the-counter markets in which transaction prices are reported are valued at the last sales price at the time of valuation. Securities for which there are no reported sales on the valuation date are valued at the mean of the latest bid and ask quotation or, if there is no ask quotation, at the most recent bid quotation. Money market instruments having a maturity of 60 days or less from the valuation date are valued on an amortized costs basis. Securities for which quotations are not available and any other assets are valued at a fair value as determined in good faith by the Board of Trustees. .Foreign currency translations Values of investments denominated in foreign currencies are converted into U.S. dollars using the spot market rate of exchange at the time of valuation. Purchases and sales of investments and dividend and interest income are translated into U.S. dollars using the spot market rate of exchange prevailing on the respective dates of such transactions. The gain or loss resulting from changes in foreign exchange rates is included with net realized and unrealized gain or loss from investments, as appropriate. .Security transactions and investment income Security transactions are accounted for on the trade date (date the order to buy or sell is executed) and dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as soon as the information is available to the Funds. Interest income is recorded on the accrual basis and includes amortization of discounts on money market instruments and long-term debt instruments when required for federal income tax purposes. Realized gains and losses from security transactions are reported on an identified cost basis. For Acorn Fund, net realized gains include distributions of realized gains from other investment companies of $877,200 in 1995. .Financial instruments Each Fund may purchase or sell exchange-traded financial futures contracts that obligate that Fund to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Fund enters into such contracts to hedge a portion of its portfolio. Gains and losses are reflected as "Net Realized Gain (Loss) on Futures" in the Statements of Operations. Additionally, each Fund may engage in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell foreign currencies. The Statements of Operations reflect gains and losses as realized for closed forward foreign currency contracts and unrealized for open contracts. A Fund bears the market risk that arises from changes in the value of financial instruments and securities indices (future 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 contracts or forward foreign currency contracts open at June 30, 1996 in Acorn Fund. There were no futures contracts open at June 30, 1996 in Acorn International. Acorn International entered into one forward contract to sell foreign currency, settling December 19, 1996, as described below:
Foreign U.S. Dollar Unrealized Amount Currency Proceeds(000) Loss (000) - ----------------------------------------------------------------------------- 200,000,000 Hong Kong Dollar $25,808 $12
33 ACORN FUND AND ACORN INTERNATIONAL .NOTES TO FINANCIAL STATEMENTS .Fund share Valuation Fund shares are sold and redeemed on a continuing basis at net asset value. Net asset value per share is determined daily as of the close of trading on the New York Stock Exchange on each day the Exchange is open for trading by dividing the total value of each Fund's investments and other assets, less liabilities, by the respective number of Fund shares outstanding. .Federal income taxes, dividends and distributions to shareholders Each Fund intends to comply with the special provisions of the Internal Revenue Code available to investment companies. The Funds have elected to mark-to-market their investments in Passive Foreign Investment Companies (PFICs") for federal income tax purposes. In accordance with this election, for the year ended December 31, 1995, Acorn Fund recognized unrealized appreciation on PFICs of $592,000 and recorded net realized losses of $295,000 on sales of PFICs. Cumulative net unrealized appreciation recognized in prior years on PFICs sold in 1995 amounted to $2,498,000 and distributions to shareholders from net realized gains included $592,000 relating to PFICs, which are treated as ordinary income for federal income tax purposes. For the year ended December 31, 1995, Acorn International recognized cumulative net unrealized PFIC gains of $11,427,000, which were offset by accumulated net realized losses on foreign currency transactions and therefore will not be distributed. In addition, undistributed net investment income of Acorn International at December 31, 1995 of $17,521,000 was offset against a portion of the accumulated not realized loss on sales of investments and foreign currency transactions and therefore will not be distributed. Acorn International had an accumulated net realized loss on sales of investments for federal income tax purposes at December 31, 1995 of $7,197,000. This loss is available to offset future taxable gains and if not applied, will expire in 2003. Dividends payable to shareholders are recorded by the Funds on the ex-dividend date. 3. Transactions with Affiliates The Funds' investment advisor, Wanger Asset Management, L.P. ("WAM") furnishes continuing investment supervision to the Funds and is responsible for the overall management of the Funds' business affairs. Under the Funds' investment management agreement with WAM, each fund pays the Advisor an annual management fee, payable monthly, at the rates set forth below, which are determined at the beginning of each calendar quarter:
Acorn Fund Acorn International - -------------------------------------------------------------------------- Net Asset Value: For the first $100 million .75% For the first $100 million 1.25% Next $1.4 billion .50% Next $400 million 1.00% Net assets in excess of Net assets in excess of $1.5 billion .40% $500 million .80%
Certain officers and trustees of the Trust are also principals of WAM. The Trust makes no direct payments to its officers and trustees who are affiliated with WAM. Acorn Fund paid trustees' fees and expenses of $50,000 in 1996 and $134,000 in 1995 and Acorn International paid $51,000 in 1996 and $89,000 in 1995 to trustees not affiliated with WAM. Included in these fees are amounts paid to the Chairman of the Board of $20,000 and $49,000 by Acorn Fund and $20,000 and $32,000 by Acorn International for 1996 and 1995, respectively. WAM advanced Acorn International $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. WAM Brokerage Services, L.L.C., a wholly-owned subsidiary of WAM, is the distributor of the Funds' shares and receives no compensation for its services. 34 4. Fund Share Transactions Proceeds and payments of Fund shares as shown in Statements of Changes in Net Assets are in respect of the following numbers of shares:
Acorn Fund 6 mos. ended 6/30, - -------------------------------------------------------------------------------- (in thousands) 1996 1995 Shares sold 12,502 21,831 Shares issued in reinvestments of dividends and capital gain distributions -- 12,817 - -------------------------------------------------------------------------------- 12,502 34,648 Less shares redeemed 9,697 20,322 - -------------------------------------------------------------------------------- Net increase in shares outstanding 2,805 14,326 ================================================================================ Acorn International 6 mos. ended 6/30, - -------------------------------------------------------------------------------- (in thousands) 1996 1995 Shares sold 11,080 9,482 Shares issued in reinvestment of dividends and capital gain distributions -- 62 - -------------------------------------------------------------------------------- 11,080 9,544 Less shares redeemed 4,493 22,013 - -------------------------------------------------------------------------------- Net increase (decrease) in shares outstanding 6,587 (12,469) ================================================================================ 5. Investment Transactions Acorn Fund 6 mos. ended 6/30, - -------------------------------------------------------------------------------- (In thousands) 1996 1995 Investment securities (excluding money market instruments): Purchases $494,726 $636,015 Proceeds from sales 493,997 584,550 ================================================================================ Acorn International 6 mos. ended 6/30, - -------------------------------------------------------------------------------- (In thousands) 1996 1995 Investments securities (excluding money market instruments): Purchases $387,415 $318,862 Proceeds from sales 285,486 416,451 ================================================================================
35 Acorn Fund - -------------------------------------------------------------------------------- Acorn International .Trustees Irving B. Harris Chairman James H. Lorie Vice Chairman Leo A. Guthart Jerome Kahn, Jr. David C. Kleinman Charles P. McQuaid Roger S. Meier Adolph Meyer, Jr. Malcolm N. Smith Ralph Wanger .Officers 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 Funds 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 .Distributor WAM Brokerage Services, L.L.C. P.O. Box 8502 Boston, Massachusetts 02266-8502 .Legal Counsel Bell, Boyd & Lloyd Chicago, Illinois This report, including the unaudited schedules of investments and financial statements, is submitted for the general information of the shareholders of Acorn Investment Trust. This report is not authorized for distribution unless preceded or accompanied by a prospectus. 36 Acorn Fund - ----------------------------- Acorn International WAM Brokerage Services, L.L.C. P.O. Box 8502 Boston, MA 02266-8502 -----END PRIVACY-ENHANCED MESSAGE-----