-----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, Mrt4ogdFJRc6HaoQ3SQf2/L+DwWJIJCfD4qnqoXhIJRPXnHsSx+APtCTvn0GvO72 iPtH2DADXHoY56mlF9wTUw== 0000950131-97-005186.txt : 19970822 0000950131-97-005186.hdr.sgml : 19970822 ACCESSION NUMBER: 0000950131-97-005186 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970821 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: 97667202 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 - ACORN INVESTMENT TRUST Acorn The Acorn Family of Funds Semi-Annual Report ------------------------------ June 30, 1997 Managed by Wanger Asset Management, L.P. Acorn Family of Funds Semi-Annual Report 1997 .Table of Contents
Squirrel Chatter .Excerpt from A Zebra in Lion Country by Ralph Wanger 1 .Stock Talk with Chuck McQuaid 3 Acorn Fund .In a Nutshell 6 .Performance at a Glance 7 .Major Portfolio Changes 13 .Statement of Investments 15 .Foreign Portfolio Diversification 21 Acorn International .In a Nutshell 8 .Performance at a Glance 9 .Major Portfolio Changes 22 .Statement of Investments 25 .Portfolio Diversification 32 Acorn USA .In a Nutshell 4 .Performance at a Glance 5 .Major Portfolio Changes 10 .Statement of Investments 11 Acorn Family of Funds .Statements of Assets and Liabilities 33 .Statements of Operations 34 .Statements of Changes in Net Assets 35 .Financial Highlights 36 .Notes to Financial Statements 38
.Squirrel Chatter [PHOTO OF RALPH WANGER APPEARS HERE] The Information Revolution is a theme that Ralph Wanger identified over 27 years ago. In fact, he has practically made a career out of that one idea. In his book, A Zebra in Lion Country, Mr. Wanger devotes an entire chapter to this theme, as it has been the most profitable investment concept for Acorn shareholders. Today, a significant portion of the Acorn Family of Funds' portfolios are directly related to the Information theme. It is very difficult to make money by investing in companies that create technology. Rather, Acorn's research analysts prefer to look downstream from technology for their information-related stock ideas. This means investing in businesses that will benefit from new technology rather than in the technology companies themselves. We thought our shareholders would appreciate learning more about this important idea. It's a theme that never seems to give out. Many years ago, when my daughter Debra was nine years old, I read her the old, comfortable children's book, Mary Poppins. It's filled with fantastic adventures, but the strangest part of it to me was what the author accepted as plain matter of fact. The book opens by describing the Banks family as rather ordinary middle class: "Number Seventeen...is the smallest house in the lane...rather dilapidated and in need of a coat of paint. But Mr. Banks, who owns it, said to Mrs. Banks that she could have either a nice, clean, comfortable house or four children. But not both, for he couldn't afford it. In this semi-slum, we find the family faced with a crisis: the nursemaid has quit, and the family is being forced to get by short-handed, with only a cook, a maid, and a houseboy. Luckily, Mary Poppins shows up and allows Mrs. Banks to avoid having to touch her own children. The time when it took four servants to run an ordinary household seems very far away. Now we have machines instead of houseboys and housegirls. A revolution in energy use has transformed household productivity, transportation, industry, and just about everything else. It would be no exaggeration to say there would have been no Industrial Revolution without the harnessing of cheap carbon, found in coal, oil, and gas. Many of the companies supplying the ever-growing energy needs of our world have proved marvelous investments over most of this century. But in the last quarter of this century a different theme has emerged. Twenty years ago I wrote that carbon's dominance was being challenged by a second chemical element, silicon. Our ability to place thousands of circuit elements on tiny silicon chips was creating extraordinary information-gathering and -sorting systems. Information processing was becoming cheaper and cheaper, while energy was rising in price. It was clear, even in the mid-seventies, that "the world will substitute information for energy." Even in 1976 I thought it was kind of old news, but I have continued to invest in that trend ever since. At Wanger Asset Management, we have rarely owned semiconductor companies, but we have made a lot of money for Acorn shareholders in cellular phone companies--LIN Broadcasting, Mobile Communications, and Telephone & Data Systems--that use semiconductor chips. We have never invested in VCR makers, but have owned companies like Electronic Arts and Sierra On-Line, which make video games. Acorn shareholders have benefited from investments in credit card companies, too. "Plastic" has revolutionized consumer behavior in the last couple of 1 The slot machine and the ATM are quite similar microcomputers under the skin. If you like, you can think of the ATM as a slot machine with a boring payoff. decades, but could't have existed without the changes in processing technology. Today, people don't have to apply for personal loans at a bank; they just run up their credit card balances. Acorn has owned four companies that issue credit cards: Advanta, First USA, and MBNA, and Peoples's Bank. International Game Technology is the world leader in the manufacturing of slot machines. This company has been in the Acorn portfolio since 1988. Acorn shareholders hit the jackpot with this stock. Why? The slot machine and the ATM are quite similar microcomputers under the skin. If you like, you can think of the ATM as a slot machine with a boring payoff. Alternatively, the slot machine can be considered the ultimate user-friendly computer. (Not so friendly, I admit, once your money runs out.) A growing percentage of casino gamblers prefer the machines to dealing with humans at table games (craps, blackjack, roulette), so casinos have been removing the tables to make room for more slots. The one-armed bandit maker takes a very simple microcomputer, puts a display and coin box on it, and calls it a slot machine. If the company sold it as a computer, it would probably get $800 for it; selling it as a slot machine, it gets $6,000. Oil and gas companies have also benefited from new technologies that allow horizontal drilling, reservoir modeling, subsea completions--all of which have lowered finding costs. Acorn shareholders are benefiting from this innovation by owning Veritas DGC, PetSec Energy, United Meridian and Tesoro Petroleum. Companies that put together invaluable databases, like Data Transmissions Network, benefit from technological advances that help speed up data processing. Recognizing a transforming technology and then investing downstream from it should be a key concept for any direct stock investor. We invite you to learn more about how Acorn is investing in companies downstream from technology by reading Stock Talk with Chuck McQuaid on page three. Winning With Technology New products are dangerous, especially in the computer field, where obsolescence comes fast and technological breakthroughs bring price slashing every year. What I have always looked for instead are the downstream users of new technologies. I've bought the stocks of companies that buy, use, and exploit the computers and electronics to reduce costs, revitalize their businesses, and add functionality to their products. Italicized excerpts are from A ZEBRA IN LION COUNTRY by Ralph Wanger with Everett Mattlin. Copyright (C) 1997 by Ralph Wanger. Published by Simon & Schuster, New York, $25.00. Reprinted by permission. Each of the Acorn funds owns some but not all of the stocks referenced in Squirrel Chatter. See each fund's Statement of Investments for a complete list of fund holdings. Each fund's portfolio varies with changes in portfolio investments. 2 .Stock Talk with Chuck McQuaid As Ralph Wanger explains in Squirrel Chatter, the Acorn funds love to invest in companies that benefit from technology. Supplying programs to fill up all the channels on your CATV system is a great business. Below, Chuck McQuaid, Co- Portfolio Manager of Acorn Fund and Director of Research of Wanger Asset Management, tells shareholders more about the funds' media investments. Chuck, it's been three years since your last interview. What changes have you made to Acorn's media investments? We've beefed up our holdings of video programmers and reduced our positions in cable television. Competition between cable television and satellite broadcasters plus improved technologies boost market penetration and channel capacity. Video programmers appear to be the primary winners as they benefit from increased subscriber fees and advertising revenues. Which stocks have you bought recently? We added 300,000 shares to our HSN Inc. position so far this year. Home Shopping Network is growing rapidly under the able leadership of CEO Barry Diller. The Supreme Court's decision to sustain "must carry" insures that HSN's television stations will be carried by CATV systems, which is especially important as HSN launches new programming. We also bought more BET Holdings, which owns Black Entertainment Network, and United Video Satellite Group, which owns the Prevue Network and distributes superstation WGN. What is your biggest video programming investment? Liberty Media is our largest video programming investment and one of our top five holdings. It has interests in over 70 national and regional channels, including Discovery Communications and regional sports channels. The Discovery Channel's demographics are great for advertisers and its ratings are up. Learning Channel's and Animal Planet's subscriber counts are surging. Regional sports channels are very popular and are being bundled together to provide national advertising. Liberty also has interests in the Encore movie channels and the shopping channel, QVC. Has Acorn Fund profited from media buyouts? Yes, though it may take time to realize value. Our 1994 purchases of International Family Entertainment at $12-17 looked dumb for a while as video programmers were out of favor. But IFEOs core cash flow grew 24% in 1995 and 44% in 1996, so we bought more at $10-14 in 1995 and paid up to $17 for even more in 1996. Our patience is being rewarded as Rupert Murdoch's News Corp is buying out IFE for $35 a share. Our 1996 purchase of Gaylord Entertainment is paying off more quickly. Westinghouse has announced it will buy Gaylord's Country Music Television and The Nashville Network. The deal should close in a few weeks, providing Acorn shareholders with a tidy profit. Media stocks are just a part of Acorn's information group. How does Wanger Asset Management cover the whole group? I focus on media and communications. Another analyst, Laura McKenna, has made large profits on computer software and service companies, along with contract manufacturers. As we mentioned last quarter, Andrew Morley and Todd Narter have joined us and are beginning to research niche components and systems companies here in the USA and overseas. 3 Acorn USA .In a Nutshell [PHOTO OF ROBERT A. MOHN APPEARS HERE] Exuberance reigned on Wall Street last quarter, and Acorn USA joined in the parade. Your fund gained 16.0%, an excellent showing, though not quite up to the large-capped S&P 500's +17.5%, nor the small-fried Russell 2000's +16.2%. Since inception, Acorn USA is up 33%, nearly double the percent return of our Lipper small-cap fund peers. We nearly pitched a perfect game last quarter. Only one of our top 20 holdings (Respironics) fell in price, and merely 1/8 of a point at that. Our top five sluggers were Wackenhut, HealthCare Compare, Data Transmission, C-Tec and Kronos, each up 20-60% over the past three months. What propelled such strong returns? Not any extraordinary news events, not any outsized earnings increases, but simply the buying pressure from investors discovering and paying up for our companies' wonderful franchises. These newly enlightened investors figured out that Wackenhut manages safer, cheaper prisons than do state bureaucrats; HealthCare Compare has a one-of-a- kind national PPO health care network impossible to clone; Data Transmission's subscriber base is growing 20% a year; C-Tec is offering a prix fixe bundled cable, phone and internet service before any other cable guy or baby Bell; and Kronos's time-clock software is a crucial piece of the factory automation puzzle. Even after their recent run, none of these companies are household names, yet. We don't want to own yesterday's celebrity stocks, we want tommorow's. We're stock market talent scouts, not autograph hounds. We will continue to build our portfolio of new and exciting small companies for you. /s/ Robert A. Mohn - ---------------------- Robert A. Mohn Lead Portfolio Manager Fund Assets as of 6/30/97: $113.7 million .Acorn USA Top 10 Holdings CalEnergy 7.5% Power Plants Coast Savings 6.4% California Savings & Loan Data Transmission Network 5.3% Data Services for Farmers HealthCare Compare 4.3% PPO Network Wackenhut 4.1% Prison Management C-Tec 4.0% Cable TV/Local Telephone Royal Caribbean Cruises 3.8% Cruises to Caribbean and Alaska Applied Industrial Technologies 3.4% Distributes Industrial Components GeoScience 2.9% Offshore Seismic Equipment Company Schnitzer Steel 2.9% Scrap Steel Processor The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings. Fund facts As Acorn USA's assets have grown, its total expense ratio has declined. As noted in the financial highlights on page 36, the fund's total expense ratio has dropped from its original 2.00% (the expense limit at inception) to 1.41%. 4 .Performance at a Glance Acorn USA Portfolio Diversification .as a % of net assets, as of 6/30/97 [PIE CHART APPEARS HERE] Information 22.9% Health Care 10.1% Consumer Goods/Services 7.1% Finance/Real Estate 14.1% Industrial Goods/Services 19.7% Energy/Minerals 19.7% Cash less liabilities 6.4% ----- 100.0% Acorn Family of Funds .Distributions The following table details the funds' mid-year distributions. The record date was July 22, 1997, the ex-dividend date was July 23, 1997, and the payable date was July 30, 1997.
Acorn Acorn Fund International Acorn USA - --------------------------------------------------------------- Ordinary Income $0.05/share $0.08/share -- Long-Term Capital Gain $0.19/share $0.14/share -- Reinvestment Price $17.05 $21.17 --
Relative Performance - -------------------------------------------------------------------------------- 2nd quarter Last 6 mos. Since inception 1997 (9/4/96) Acorn USA 16.0% 14.3% 33.2% Russell 2000 16.2% 10.2% 20.1% S&P MidCap 400 14.7% 13.0% 25.0% S&P 500 17.5% 20.6% 37.2% Dow-Jones 17.1% 20.1% 38.9% Lipper Small Cap Funds Avg 17.1% 9.0% 17.2%
The Russell 2000 is formed by taking 3,000 companies and then eliminating the largest 1,000 leaving a good small company index. The S&P MidCap 400 is a market value-weighted index of 400 stocks that are in the next tier down from the S&P 500. The S&P 500 is a broad market-weighted index, blue-chip dominated. The Dow Jones Industrial Average includes 30 large companies. The Lipper Small Cap Funds Avg is an average of all U.S. small-cap funds tracked by Lipper, which consisted of 486, 467, and 422 funds for the 2nd qtr., 6-mos., and "since inception" periods above. The beginning value used to compute the Dow Jones and the Lipper Small Cap Funds Avg "since inception" return in the chart above is as of 8/31/96. 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. All indexes are unmanaged and returns include reinvested dividends. Net Asset Value Per Share 6/30/97: $13.32 - --------------------------------------------- Q> Why does the share price drop when a fund pays a distribution? A> The law requires mutual funds to pay a distribution of any net income and realized net capital gains to their shareholders. When a fund pays a distribution, the assets of the fund go down, and the value of each share drops by the amount of the distribution. But the value is not lost. The distribution money is transferred to shareholders. Most shareholders reinvest their distributions, buying more shares at the new lower share price. Shareholders that take their distributions in cash receive a check equal to the distribution per share times the number of shares owned. 5 Acorn Fund .In a Nutshell [PHOTOS OF CHARLES P. MCQUAID AND TERENCE M. HOGAN APPEARS HERE] Acorn Fund gained 13.5% in the second quarter, which is a respectable performance in most years. As shown on page 7, the indices edged Acorn in the quarter. The year-to-date figures reflect the Fund's beating the Russell 2000, but lagging the bigger barometers. Acorn's domestic equities were in-line with the indices for the quarter and ahead for the six-month period. We tuned in to some great media stock shows. We watched Rupert Murdoch buy out International Family for a 69% return, then got great ratings on Liberty Media, Data Transmission, HSN and United Video, each of which produced gains over 20 percent. Technology stocks sizzled into the summer, led by a 106% gain in ACT Manufacturing. Acorn hit the "K" trifecta when Keane, Kent and Kronos wired in returns over 50 percent. Analysts International and Compuware joined the 50+ percent club, while stalwart Solectron lit up the circuit with a 40% surge. Other long-time Acorn holdings helped second quarter performance: Harley- Davidson roared in with a 42% quarterly gain. HBO, the health care software mavens, configured a 45% move and prison administrator Wackenhut locked down a 40% return. We were heartened by the market renaissance in Japan, with several holdings delivering big gains. Facilities manager NTT Data topped that list, serving up a 46% performance. Our losers in the quarter included Informix, Invacare, SensoNor and a smattering of Thermo Electron subsidiaries. Market records fall almost daily, but we will continue to seek consistent returns over up and down cycles through exciting small and mid-cap stocks. /s/ Charles P. McQuaid /s/ Terence M. Hogan Charles P. McQuaid Terence M. Hogan Co-Portfolio Manager Co-Portfolio Manager Fund Assets as of 6/30/97: $3,220.7 million .Acorn Fund Top 10 Holdings AES Corporation 2.4% Global Power Producer Carnival 1.8% Cruise Ship Line Liberty Media 1.8% CATV Programming Banc One 1.7% Bank/Credit Cards (acquired First USA ) HealthCare Compare 1.7% PPO Network Harley Davidson 1.6% Motorcycle Manufacturer Borders 1.5% Bookstores Lincare Holdings 1.3% Home Health Care Services Solectron 1.2% Electronics Contract Manufacturer CalEnergy 1.1% Power Plants The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings. Do You Remember What Year It Was? . 426 mutual funds exist . South Vietnam surrenders to the Communist North . Acorn Fund closes out the year up 30.6% . One Flew Over The Cuckoo's Nest wins an Oscar . Dow ends the year at 852.41 Answer on page 41. 6 >Performance at a Glance The Value of a $10,000 Investment in Acorn Fund >June 10, 1970 through June 30, 1997 [LINE CHART APPEARS HERE] Date Acorn Fund ($) S & P ($) ---- -------------- --------- 1970 10,000 10,000 1971 17,828 14,490 1972 19,368 17,242 1973 14,765 14,709 1974 10,691 10,816 1975 13,945 14,842 1976 23,045 18,394 1977 27,168 17,077 1978 31,777 18,200 1979 47,790 21,586 1980 62,594 28,602 1981 58,005 27,195 1982 68,208 33,054 1983 85,389 40,510 1984 89,045 43,051 1985 117,142 56,710 1986 136,843 67,295 1987 142,923 70,828 1988 178,370 82,591 1989 222,681 108,761 1990 183,674 105,386 1991 270,641 137,492 1992 336,210 147,928 1993 444,889 162,882 1994 411,750 165,032 1995 497,407 227,047 1996 609,569 279,177 06/30/97 674,822 336,708 Average Annual Total Return 1 Year 5 Years 10 Years Life of Fund 17.8% 19.3% 15.1% 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. 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 6/30/97 [PIE CHART APPEARS HERE] Information 20.1% Health Care 8.4% Consumer Goods/Services 8.3% Finance/Real Estate 16.5% Industrial Goods/Services 9.3% Energy/Minerals 10.3% Foreign 17.2% Cash 9.9% 100.0% Relative Performance - -------------------------------------------------------------------------- 2nd quarter Last 6 mos. Last 12 mos. 1997 Acorn Fund 13.5% 10.7% 17.8% Dow-Jones 17.1% 20.1% 38.5% S&P 500 17.5% 20.6% 34.7% S&P MidCap 400 14.7% 13.0% 23.3% Russell 2000 16.2% 10.2% 16.3% The Dow Jones Industrial Average includes 30 large companies. The S&P 500 is a broad market-weighted index, 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 indexes are unmanaged and returns include reinvested dividends. Net Asset Value Per Share 6/30/97: $16.65 - ----------------------------------------- 7 Acorn International >In a Nutshell [PHOTO OF LEAH JOY ZELL APPEARS HERE] Acorn International gained 5.9% in the second quarter. The best market for the quarter was Japan, where our portfolio soared 27% in dollars, contributing nearly half of the total return for the three months. The best stock for the quarter was Kempen, a Dutch brokerage firm, which has made Acorn International shareholders $6.5 million since March 31st. Credit for finding Kempen goes to Marcel Houtzager, a core member of our international team, who has a keen eye for value in his native market. On average, a 6% return over three months would be sufficient to make most investors happy. The second quarter of 1997, however, was anything but average. The large-cap U.S. market indices hit record highs. European blue chips kept up the pace in local currencies. Even the EAFE index, whose Japanese weighting has penalized performance since 1989, gained 13%, its best quarterly showing since the fourth quarter of 1988. Meanwhile, small-cap stocks have not participated to the extent the headlines would suggest. In the UK, the small-cap index actually fell 4% since March 31st in local currencies, against a large-cap market that rose 7%. Similar discrepancies in performance can be demonstrated in Japan, Switzerland, France and elsewhere going back 12 months. Two-tier markets are nothing new. In the early 1970's, fund managers chased after the "Nifty Fifty". While we do not know when investors' love affair with blue chips will wane, our philosophy has always been to own the less well-known companies at reasonable valuations. We are finding plenty of them. Patience and experience have taught us that other investors find them too, when given the chance to pause and look around. /s/ Leah Joy Zell Leah Joy Zell Lead Portfolio Manager
Fund Assets as of 6/30/97: $1,970.0 million >Acorn International Top 10 Holdings WM Data Sweden 2.7% Computer Services/Consulting T T Tieto Finland 2.2% Computer Services/Consulting Rhoen Klinikum Germany 1.7% Hospital Management Axime Ex Segin France 1.2% Computer Services Banca Fideuram Italy 1.2% Life Insurance/Mutual Funds Kempen Netherlands 1.2% Stock Brokerage/ Investment Management Getronics Netherlands 1.1% Computer Services Serco Group United Kingdom 1.1% Facilities Management Genting International Singapore 0.9% Cruise Line Getinge Industrier Sweden 0.9% Sterilization/Disinfection Equipment
The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings. Fund - ------------------------------------------------------------------------------ facts Remember, you can use your touch-tone telephone to obtain your fund account balance(s) 24 hours a day. Simply call 1-800-962-1585 and follow the easy automated instructions. 8 Performance at a Glance The Value of a $10,000 Investment in Acorn International September 23, 1992 through June 30, 1997 [LINE CHART APPEARS HERE] Average Annual Total Return ------------------------------------- 1 Year 3 Years Life of Fund 11.3% 11.9% 17.7%
Date Acorn Int'l ($) EAFE ($) ---- --------------- -------- 09/23/92 10,000 10,000 09/30/92 10,010 10,000 12/31/92 10,690 9,614 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 09/30/96 19,362 15,945 12/31/96 20,133 16,199 03/31/97 20,564 15,945 06/30/97 21,786 18,015
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 6/30/97 [PIE CHART APPEARS HERE] Information 22.9% Health Care 6.9% Consumer Goods/Services 24.7% Finance/Real Estate 20.0% Industrial Goods/Services/Transportation 13.3% Energy/Minerals 5.8% Cash less liabilities 6.4% ------ 100.0% Relative Performance - --------------------------------------------------------------------- 2nd quarter Last 6 mos. Last 12 mos. 1997 Acorn International 5.9% 8.2% 11.3% EAFE 13.0% 11.2% 12.8% Lipper Int'l Small Cap Funds Avg. 7.3% 10.4% 13.5% Lipper Int'l Funds Avg. 11.1% 12.5% 16.5% 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 Int'l Small Cap Funds Avg. is calculated from the performance of a group of small-cap int'l funds, including Acorn Int'l. For the 2nd qtr., 6-mos. and 12-mos. periods above, the group consisted of 31, 28 and 24 funds, respectively. The Lipper Int'l Funds Avg. is an average of all int'l funds tracked by Lipper, excluding the Int'l Small Cap Funds group. This group consisted of 440, 417 and 368 funds for the 2nd qtr., 6-mos. and 12-mos. periods above, respectively. All indexes are unmanaged and returns include reinvested dividends. Net Asset Value Per Share 6/30/97: $21.22 - ----------------------------------------- 9 Acorn USA Major Portfolio Changes in the Second Quarter
Number of Shares ------------------------ 3/31/97 6/30/97 Additions - --------------------------------------------------------------------------- Information BDM International 0 11,800 C-Tec 111,000 131,000 Centennial Cellular 0 15,000 Data Transmission Network 169,800 189,100 Gaylord Entertainment 20,000 62,000 Kronos 69,000 103,000 United Video Satellite Group 63,000 133,000 Wonderware 60,000 230,700 - --------------------------------------------------------------------------- Health Care Cardiac Pathways 0 40,000 - --------------------------------------------------------------------------- Consumer Goods/Services Host Marriott Services 136,200 265,200 - --------------------------------------------------------------------------- Finance Acceptance Insurance 20,000 76,100 SEI Investments 0 15,000 - --------------------------------------------------------------------------- Industrial Goods/Services Wackenhut, Cl. B 198,900 234,900 - --------------------------------------------------------------------------- Energy/Minerals United Meridian 0 6,700 - --------------------------------------------------------------------------- Real Estate Cornerstone Properties 0 45,000 Forest City Enterprises, Cl. A 0 34,700 Number of Shares ------------------------ 3/31/97 6/30/97 Sales - ---------------------------------------------------------------------------- Information ACT Manufacturing 34,500 7,100 Richey Electronics 30,000 0 Simulation Sciences 52,300 0 - --------------------------------------------------------------------------- Consumer Goods/Services Fairfield Communities 30,000 0 Showboat 78,000 15,800 - --------------------------------------------------------------------------- Finance People's Bank Bridgeport 11,000 0 - --------------------------------------------------------------------------- Industrial Goods/Services Aftermarket Technology 18,000 0 - --------------------------------------------------------------------------- Energy/Minerals Atwood Oceanics 2,200 0 Seagull Energy 86,000 50,100
10
Acorn USA .Statement of Investments (unaudited) June 30, 1997 Number of Shares Value (000) - -------------------------------------------------------------------------------- Common Stocks: 93.6% - -------------------------------------------------------------------------------- Information: 22.9% .CATV/TV/Satellites: 14.4% 189,100 Data Transmission Network (b) $ 6,004 Data Services for Farmers 131,000 C-Tec (b) 4,569 Cable TV/Local Telephone 133,000 United Video Satellite (b) 2,793 CATV & Satellite Dish Programming 67,000 Tele-Communications, Liberty Media Group (b) 1,591 CATV & Satellite Dish Programming 62,000 Gaylord Entertainment 1,430 Country & Western Cable Channels - -------------------------------------------------------------------------------- 16,387 .Mobile Communications: 1.3% 62,800 COMARCO (b) 1,209 Wireless Network Testing 15,000 Centennial Cellular (b) 238 Cellular Franchises - -------------------------------------------------------------------------------- 1,447 .Computer Software/Services: 4.4% 230,700 Wonderware (b) 3,259 Industrial Control Software 36,000 American Business Information (b) 783 Provides Data on Small Businesses 74,300 Computer Language Research 724 Commercial Tax Software 11,800 BDM International (b) 271 Software Consulting - -------------------------------------------------------------------------------- 5,037 .Electronics: 2.8% 103,000 Kronos (b) 2,833 Time Accounting Software & Clocks 7,100 ACT Manufacturing (b) 296 Contract Manufacturing - -------------------------------------------------------------------------------- 3,129 ------- Information: Total 26,000 - -------------------------------------------------------------------------------- Health Care: 10.1% .Medical Equipment: 3.4% 128,000 Respironics (b) 2,704 Sleep Apnea Products 44,000 Kinetic Concepts 792 Hospital Beds 40,000 Cardiac Pathways (b) 360 Heart Surgery Devices - -------------------------------------------------------------------------------- 3,856 .Services: 6.7% 94,000 HealthCare Compare (b) 4,923 PPO Network 57,000 Lincare Holdings (b) 2,451 Home Health Care Services 22,400 United Payors & Providers (b) 297 Medical Claims Repricing - -------------------------------------------------------------------------------- 7,671 ------- Health Care: Total 11,527 - -------------------------------------------------------------------------------- Consumer Goods/Services: 7.1% .Retail: 3.0% 265,200 Host Marriott Services (b) 3,116 Fast Food Kiosks in Airports, Rest Stops & Malls 14,000 Borders (b) 338 Bookstores - -------------------------------------------------------------------------------- 3,454 .Entertainment/Leisure: 4.1% 123,700 Royal Caribbean Cruises 4,322 Cruises to Caribbean & Alaska 15,800 Showboat 276 Casinos - -------------------------------------------------------------------------------- 4,598 ------- Consumer Goods/Services: Total 8,052 - -------------------------------------------------------------------------------- Finance: 12.0% .Savings & Loans: 6.3% 159,000 Coast Savings (b) 7,225 California Savings & Loan .Insurance: 5.0% 76,100 Acceptance Insurance (b) 1,731 Crop Insurance 59,500 Amerus Life Holdings 1,659 Annuities/Life Insurance 51,000 Penn Treaty American (b) 1,562 Nursing Home Insurance 23,000 Leucadia National 712 Insurance Holding Company - -------------------------------------------------------------------------------- 5,664 .Money Management: 0.7% 55,000 Phoenix Duff & Phelps 406 Money Management 15,000 SEI Investments 362 Mutual Fund Administration - -------------------------------------------------------------------------------- 768 ------- Finance: Total 13,657
See accompanying notes to financial statements 11
Acorn USA .Statement of Investments (unaudited) Number of Shares Value (000) - -------------------------------------------------------------------------------- Industrial Goods/Services: 19.7% .Steel: 7.0% 111,000 Schnitzer Steel $ 3,302 Scrap Steel Processor 88,300 Steel Dynamics (b) 2,207 Steel Mini-Mill 77,000 Atchison Casting (b) 1,280 Steel Foundries 53,000 Gibraltar Steel (b) 1,219 Steel Processing - -------------------------------------------------------------------------------- 8,008 .Machinery: 4.8% 108,200 Applied Industrial Technologies 3,895 Distributes Industrial Components 100,050 Farr Company (b) 1,563 Filters - -------------------------------------------------------------------------------- 5,458 .Industrial Suppliers: 1.7% 96,000 Lilly Industries, Cl. A 1,932 Industrial Coatings .Services: 6.2% 234,900 Wackenhut, Cl. B 4,683 Prison Management 100,000 World Color Press (b) 2,375 Printing - -------------------------------------------------------------------------------- 7,058 -------- Industrial Goods/Services: Total 22,456 - -------------------------------------------------------------------------------- Energy/Minerals: 19.7% .Independent Power: 7.5% 224,000 CalEnergy (b) 8,512 Power Plants .Oil/Gas Producers: 3.1% 165,700 Tesoro Petroleum (b) 2,454 Oil Refinery/Gas Reserves 50,100 Seagull Energy (b) 877 Oil/Gas Producer 6,700 United Meridian (b) 201 Oil/Gas Producers - -------------------------------------------------------------------------------- 3,532 .Distribution/Marketing/Refining: 4.9% 128,000 United Cities Natural Gas 3,008 Natural Gas Distributor 124,400 NGC 1,920 Gas Processing/Marketing 27,000 Atmos Energy 648 Natural Gas Distributor - -------------------------------------------------------------------------------- 5,576 .Oil Services: 4.2% 252,000 GeoScience (b) 3,307 Offshore Seismic Equipment Company 54,600 J Ray McDermott (b) 1,474 Offshore Construction Company - -------------------------------------------------------------------------------- 4,781 -------- Energy/Minerals: Total 22,401 - -------------------------------------------------------------------------------- Real Estate: 2.1% 34,700 Forest City Enterprises, Cl. A 1,657 Shopping Centers 45,000 Cornerstone Properties 692 Downtown Office Buildings -------- Real Estate: Total 2,349 -------- Total Common Stocks: 93.6% 106,442 (Cost: $90,722) Short-Term Obligations: 7.1% Yield 5.56%-5.75% Due 7/1/97-7/3/97 $5,893 General Motors Acceptance 5,893 $2,192 Ford Motor Credit 2,191 - -------------------------------------------------------------------------------- (Amortized Cost: $8,084) 8,084 -------- Total Investments: 100.7% 114,526 (Cost: $98,806) -------- Cash and Other Assets Less Liabilities: (0.7%) (836) -------- Total Net Assets: 100% $113,690 ================================================================================
- -------------------------------------------------------------------------------- .Notes to Statement of Investments (a) At June 30, 1997, for federal income tax purposes cost of investments was $98,806,000 and net unrealized appreciation was $15,720,000, consisting of gross unrealized appreciation of $16,359,000 and gross unrealized depreciation of $639,000. (b) Non-income producing security. See accompanying notes to financial statements 12
Acorn Fund .Major Portfolio Changes in the Second Quarter Number of Shares ----------------------- 3/31/97 6/30/97 Additions - ----------------------------------------------------------------------------- Information Acres Gaming 80,000 370,000 Activision 280,000 460,000 Altron 287,000 357,000 American Business Information 700,000 830,000 BET Holdings, Cl. A 300,000 400,000 Centennial Cellular 300,000 400,000 Electronic Arts 0 150,000 HSN 327,000 600,000 Itron 0 200,000 Metrika Systems 0 200,000 Micros Systems 125,000 279,000 Premiere Technologies 0 350,000 Spectrum HoloByte 450,000 1,100,000 Thermo Bio Analysis 100,000 200,000 Thermo Instrument Systems 685,000 865,000 United International Holding (Austria) 425,000 552,000 United Video Satellite 700,000 810,000 Wonderware 250,000 650,000 - ----------------------------------------------------------------------------- Health Care HealthCare Compare 1,000,000 1,026,000 Kinetic Concepts 1,000,000 1,115,000 Magellan Health Services 400,000 528,000 - ----------------------------------------------------------------------------- Consumer Goods/Services Airtours (United Kingdom) 270,000 330,000 Cie Fin Richemont (Switzerland) 0 2,500 Kimberly Clark de Mexico (Mexico) 2,500,000 3,000,000 - ----------------------------------------------------------------------------- Finance Acceptance Insurance 0 229,000 Banco Latinoamericano de Export (Panama) 130,000 162,000 Leucadia National 216,000 396,000 Orient (Japan) 0 350,000 Pioneer Group 0 181,000 Shohkoh Fund (Japan) 0 9,000 Stad Rotterdam (Netherlands) 0 25,000 Industrial Goods/Services AirNet Systems 0 174,000 National Patent Development 0 310,000 Pameco 0 65,000 Worthington Industries 1,110,000 1,210,000 - ----------------------------------------------------------------------------- Energy/Minerals J Ray McDermott 385,000 505,000 Pride International 370,000 550,000 Tesoro Petroleum 1,200,000 1,300,000 United Meridian 300,000 400,000 Zeigler Coal Holding 300,000 400,000 - ----------------------------------------------------------------------------- Real Estate Cornerstone Properties 0 350,000 Equity Residential Properties Trust 210,000 260,000
13 Acorn Fund .Major Portfolio Changes in the Second Quarter
Number of Shares ----------------------- 3/31/97 6/30/97 Sales - ----------------------------------------------------------------------------- Information ACT Manufacturing 500,000 325,000 American Management Systems 400,000 294,000 Argyle Television 44,000 0 Broderbund Software 300,000 200,000 CoreComm 450,000 0 Getronics (Netherlands) 250,000 207,000 Grupo Radio Centro (Mexico) 496,000 225,000 Informix 600,000 0 Keane 210,000 165,000 Palmer Wireless 350,000 0 Planar Systems 375,000 0 SK Telecom ADR (Korea) 283,250 0 SK Telecom (Korea) 4,000 0 Systems & Computer Techology 605,000 505,000 Tele-Communications, Cum. Pfd. 44,000 0 WM Data Nordic (Sweden) 350,000 1,500,000 (includes effect of 400% stock bonus) - ----------------------------------------------------------------------------- Health Care Biogen 228,000 0 CIMA Labs 253,000 0 Genome Therapeutics 130,000 0 Invacare 740,000 0 Thermedics 63,000 0 Trex Medical 125,000 29,000 Watson Pharmaceuticals 450,000 0 - ----------------------------------------------------------------------------- Consumer Goods/Services Aucnet (Japan) 30,000 0 Burswood Property Trust (Australia) 450,000 0 Costa Crociere (Italy) 1,200,000 0 Dave & Buster's 135,000 0 Duckwall Alco Stores 48,000 0 Escada (Germany) 16,000 0 Hellenic Bottling (Greece) 260,000 234,000 Hennes & Mauritz, Cl. B (Sweden) 50,000 50,000 (includes effect of 5 for 1 stock split) Mr. Max (Japan) 34,000 0 Newell 700,000 600,000 Norwood Promotional 232,000 0 O.Y.L. Industries (Malaysia) 255,000 0 Pricer, Cl. B (Sweden) 220,000 180,000 Resorts World (Malaysia) 1,350,000 800,000 Royal Caribbean Cruises 310,000 235,000 Wolverine World Wide 565,000 450,000 (includes effect of 3 for 2 stock split) - ----------------------------------------------------------------------------- Finance ADVANTA, Cl. A 531,000 0 ADVANTA, Cl. B 247,000 93,000 ALLIED Life Financial 318,000 0 Amvescap (United Kingdom) 1,920,000 1,270,000 Banc One 1,013,000 1,151,909 (includes the effect of the acquisition of First USA) PXRE 350,000 145,000 T. Rowe Price 100,000 64,000 Washington Mutual 323,000 297,000 - ----------------------------------------------------------------------------- Industrial Goods/Services Material Sciences 450,000 0 Nordson 148,000 75,000 Thermo Electron 975,000 900,000 Thermo Fibertek 675,000 0 Thermo TerraTech 434,000 0 Thomas Group 300,000 0 - ----------------------------------------------------------------------------- Energy/Minerals Seagull Energy 1,900,000 1,500,000 Southern Union 630,000 530,000 Thermo Ecotek 585,000 0
14 Acorn Fund Statement of Investments (unaudited) June 30, 1997
Number of Shares Value (000) - ----------------------------------------------------------------------- Common Stocks and Other Equity-Like Securities: 90.1% - ----------------------------------------------------------------------- Information: 20.1% Broadcasting/CATV: 1.6% 560,000 C-Tec (b) $ 19,530 1,000,000 Tele-Communications, Series A TCI Group 14,875 300,000 TCA Cable TV 11,288 80,000 Cablevision Systems (b) 4,280 300,000 Granite Broadcasting (b) 3,075 - ----------------------------------------------------------------------- 53,048 Programming for CATV/ TV/Satellites: 5.2% 2,400,000 Tele-Communications, Liberty Media Group (b) 57,000 819,000 Data Transmission Network (b) (c) 26,003 700,000 International Family Entertainment 24,063 600,000 HSN (b) 18,750 810,000 United Video Satellite (b) 17,010 400,000 BET Holdings, Cl. A (b) 13,100 300,000 Gaylord Entertainment 6,919 280,000 Macrovision (b) 3,815 - ----------------------------------------------------------------------- 166,660 Mobile Communications: 1.7% 500,000 Telephone and Data Systems 18,969 900,000 Mobile Telecommunication Technologies (b) 12,881 355,000 COMARCO (b) (c) 6,834 400,000 Centennial Cellular (b) 6,350 465,000 Vanguard Cellular Systems (b) 6,336 450,000 PriCellular (b) 4,050 - ----------------------------------------------------------------------- 55,420 Computer Software/Services: 3.3% 505,000 Systems & Computer Technology (b) 13,509 360,000 Analysts International 12,060 240,000 Compuware (b) 11,460 254,000 BRC Holdings (b) 9,652 650,000 Wonderware (b) 9,181 350,000 Premiere Technologies (b) 9,100 375,000 BDM International (b) 8,625 165,000 Keane (b) 8,580 294,000 American Management Systems (b) 7,864 353,000 CACI International (b) 5,383 160,000 Sterling Commerce (b) 5,260 400,000 Computer Language Research 3,900 Principal Amount or Number of Shares Value (000) - ----------------------------------------------------------------------- 208,333 Source Informatics Cv. Pfd. (b) 2,360 - ----------------------------------------------------------------------- 106,934 Gaming Equipment: 1.1% 1,800,000 International Game Technology 31,950 370,000 Acres Gaming (b) 3,238 - ----------------------------------------------------------------------- 35,188 Consumer Software: 0.7% 460,000 Activision (b) 6,612 1,100,000 Spectrum HoloByte (b) 5,363 150,000 Electronic Arts (b) 5,044 200,000 Broderbund Software (b) 4,938 - ----------------------------------------------------------------------- 21,957 Business Information: 0.6% 830,000 American Business Information (b) 18,052 885,714 GIGA Cv. Pfd. (b) (c) 3,100 - ----------------------------------------------------------------------- 21,152 Contract Manufacturing: 1.8% 545,000 Solectron (b) 38,184 325,000 ACT Manufacturing (b) 13,569 357,000 Altron (b) 5,355 - ----------------------------------------------------------------------- 57,108 Instrumentation: 1.8% 865,000 Thermo Instrument Systems (b) 26,383 300,000 IFR Systems (b) (c) 5,625 200,000 Itron (b) 5,175 $5,000,000 Thermo Optek, 5% Note Due 10/15/00 4,951 165,000 Thermo Optek (b) 1,836 293,000 Thermoquest (b) 4,468 265,000 Metrika Systems (b) 4,064 200,000 Thermo Bio Analysis (b) 3,038 $1,500,000 Thermoquest, 5% Note Due 8/15/00 1,607 - ----------------------------------------------------------------------- 57,147 Distribution: 0.9% 1,090,000 Pioneer-Standard Electronics 14,715 300,000 Kent Electronics (b) 11,006 450,000 Richey Electronics (b) 3,769 - ----------------------------------------------------------------------- 29,490 Computer Systems: 0.9% 600,000 Kronos (b) (c) 16,500 279,000 Micros Systems (b) 11,718 - ----------------------------------------------------------------------- 28,218
15 Acorn Fund Statement of Investments (unaudited)
Number of Shares Value (000) - ------------------------------------------------------------------ Components/Peripherals: 0.5% 425,000 American Power Conversion (b) $ 8,075 250,000 Oak Industries (b) 7,188 - ---------------------------------------------------------------- 15,263 -------- Information: Total 647,585 - ---------------------------------------------------------------- Health Care: 8.4% Biotechnology/Drug Delivery: 1.0% 260,000 RP Scherer (b) 13,443 450,000 Inhale Therapeutic Systems (b) 11,138 800,000 Corvas International (b) 5,200 800,000 Corvas International Warrants (b) 1,600 - ---------------------------------------------------------------- 31,381 Medical Equipment: 1.8% 1,162,000 Respironics (b) (c) 24,547 1,115,000 Kinetic Concepts 20,070 300,000 Affymetrix (b) 9,591 275,000 Innovasive Devices (b) 3,231 29,000 Trex Medical (b) 363 - ---------------------------------------------------------------- 57,802 Hospital/Laboratory Supplies: 0.8% 273,000 Hillenbrand Industries 12,968 322,000 Sybron International (b) 12,840 - ---------------------------------------------------------------- 25,808 Services: 4.8% 1,026,000 HealthCare Compare (b) 53,737 1,000,000 Lincare Holdings (b) 43,000 498,000 HBO & Company 34,300 528,000 Magellan Health Services (b) 15,576 505,000 United Payors and Providers (b) 6,691 300,000 Walsh International (b) 2,513 - ---------------------------------------------------------------- 155,817 -------- Health Care: Total 270,808 - ---------------------------------------------------------------- Consumer Goods/Services: 8.3% Retail: 2.1% 1,960,000 Borders (b) 47,285 313,000 Quality Food Centers (b) 11,894 731,000 Host Marriott Services (b) 8,589 - ---------------------------------------------------------------- 67,768 Recreational Vehicles: 1.9% 1,100,000 Harley-Davidson 52,731 Principal Amount or Number of Shares Value (000) - ---------------------------------------------------------------- 320,000 Thor Industries 7,960 - ---------------------------------------------------------------- 60,691 Food: 0.1% 634,000 Au Bon Pain (b) (c) 4,279 Entertainment/Leisure: 3.0% 1,400,000 Carnival 57,750 215,000 GC Companies (b) 9,836 276,000 Carmike Cinemas (b) 9,039 235,000 Royal Caribbean Cruises 8,210 472,000 Hollywood Park, Cv. Pfd. 6,313 180,000 Rio Hotel & Casino (b) 2,711 535,000 Monarch Casino & Resort (b) (c) 2,140 112,000 Showboat 1,953 $6,250,000 Grand Palais Casino 14% Note Due 2/25/98 (b) 313 - ---------------------------------------------------------------- 98,265 Manufacturers: 1.2% 600,000 Newell 23,775 450,000 Wolverine World Wide 13,669 - ---------------------------------------------------------------- 37,444 -------- Consumer Goods/Services: Total 268,447 - ---------------------------------------------------------------- Finance: 13.4% Banks: 3.1% 1,151,909 Banc One (Acquired First USA) 55,796 380,000 Texas Regional Bancshares 15,960 285,000 Union Planters 14,784 260,000 TCF 12,838 - ---------------------------------------------------------------- 99,378 Savings & Loans: 3.4% 1,267,000 Peoples Bank Bridgeport 32,784 528,000 Coast Savings (b) 23,991 297,000 Washington Mutual 17,746 671,000 Washington Federal 17,236 538,000 Commonwealth Bancorp 8,810 280,000 Imperial Thrift & Loan (b) 4,550 156,000 Indiana Federal 4,407 - ---------------------------------------------------------------- 109,524 Insurance: 2.1% 836,000 Baldwin & Lyons, Cl. B 18,915 247,000 Foremost 14,789 351,000 United Fire & Casualty 13,163
16
Number of Shares Value (000) - -------------------------------------------------------------------------- 396,000 Leucadia National 12,251 229,000 Acceptance Insurance (b) 5,210 145,000 PXRE 4,459 - -------------------------------------------------------------------------- 68,787 .Money Management: 2.7% 880,000 United Asset Management 24,915 865,000 Baker Fentress 17,084 618,000 SEI 14,909 1,723,000 Phoenix Duff & Phelps 12,707 231,000 BISYS (b) 9,644 181,000 Pioneer Group 4,163 64,000 T. Rowe Price 3,304 - -------------------------------------------------------------------------- 86,726 .Credit Cards: 1.1% 575,000 National Data 24,905 275,000 Concord EFS (b) 7,116 93,000 ADVANTA, Cl. B 3,319 - -------------------------------------------------------------------------- 35,340 .Other: 1.0% 935,000 Americredit (b) 19,635 1,390,000 World Acceptance (b) (c) 8,861 310,000 DVI Health Services (b) 4,495 - -------------------------------------------------------------------------- 32,991 -------- Finance: Total 432,746 - -------------------------------------------------------------------------- Industrial Goods/Services: 9.3% .Steel: 2.1% 1,210,000 Worthington Industries 22,158 520,000 Gibraltar Steel (b) 11,960 350,000 Schnitzer Steel 10,413 340,000 Steel Dynamics (b) 8,500 405,000 Atchison Casting (b) (c) 6,733 295,000 A M Castle 6,527 120,000 Metal Management (b) 1,793 - -------------------------------------------------------------------------- 68,084 .Machinery: 2.7% 900,000 Thermo Electron (b) 30,938 800,000 Baldor Electric 23,650 355,000 Applied Industrial Technologies 12,780 110,000 Applied Power 5,679 270,000 Valmont Industries 5,130 75,000 Nordson 4,819 189,000 Hein-Werner (b) (c) 1,512
Principal Amount or Number of Shares Value (000) - -------------------------------------------------------------------------- 500,000 Stevens International, Cl. A (b) (c) 500 34,000 Stevens International, Cl. B (b) (c) 94 - -------------------------------------------------------------------------- 85,102 .Industrial Suppliers: 1.5% 625,000 Unifi 23,359 774,000 Lilly Industries, Cl. A 15,577 96,000 Mine Safety Appliances 5,808 244,000 U.S. Can (b) 3,477 65,000 Pameco (b) 1,154 - -------------------------------------------------------------------------- 49,375 .Services: 3.0% 1,185,000 World Color Press (b) 28,144 800,000 Expeditors International of Washington 22,700 901,000 Wackenhut, Cl. B 17,964 45,000 Wackenhut, Cl. A 1,080 430,000 Hub Group (b) 12,954 210,000 HA(Yen)LO Industries (b) 4,961 $2,900,000 Western Water, 9% Cv. Note Due 9/25/05 2,900 174,000 Airnet Systems (b) 2,849 310,000 National Patent Development (b) 2,422 - -------------------------------------------------------------------------- 95,974 -------- Industrial Goods/Services: Total 298,535 - -------------------------------------------------------------------------- Energy/Minerals: 10.3% .Independent Power: 3.6% 1,115,000 AES Corporation (b) 78,886 1,852 AES Corporation Warrants (b) 84 950,000 CalEnergy (b) 36,100 - -------------------------------------------------------------------------- 115,070 .Oil/Gas Producers: 2.5% 1,500,000 Seagull Energy (b) 26,250 1,300,000 Tesoro Petroleum (b) 19,256 400,000 United Meridian (b) 12,000 475,000 Forest Oil (b) 6,977 320,000 KCS Energy 6,520 350,000 Costilla Energy (b) 4,506 960,000 Tipperary (b) (c) 3,840 - -------------------------------------------------------------------------- 79,349 .Distribution/Marketing/Refining: 1.3% 819,000 NGC 12,643 530,000 Southern Union (b) 12,124
17 Acorn Fund .Statement of Investments (unaudited)
Number of Shares Value (000) - -------------------------------------------------------------------------- 303,000 Atmos Energy 7,272 150,000 KN Energy 6,319 150,000 United Cities Natural Gas 3,525 - -------------------------------------------------------------------------- 41,883 .Oil Services: 2.6% 700,000 EVI (b) 29,400 288,000 Atwood Oceanics (b) 19,296 505,000 J Ray McDermott (b) 13,635 550,000 Pride International (b) 13,200 400,000 Veritas DGC (b) 9,000 - -------------------------------------------------------------------------- 84,531 .Mining: 0.3% 400,000 Zeigler Coal Holding 9,350 --------- Energy/Minerals: Total 330,183 - -------------------------------------------------------------------------- Real Estate: 3.1% 829,000 The Rouse Company (b) 24,456 260,000 Equity Residential Properties Trust 12,350 400,000 Macerich 11,100 619,000 Homestead Village (b) 11,065 125,000 Homestead Village Warrants (b) 1,063 233,000 Forest City Enterprises, Cl. B 11,009 185,000 Forest City Enterprises, Cl. A 8,834 165,000 Weingarten Realty Investors 6,971 350,000 Cornerstone Properties 5,381 150,000 First Washington Realty Trust 3,788 120,000 First Washington Realty Trust, Cv. Pfd. 3,660 --------- Real Estate: Total 99,677 - -------------------------------------------------------------------------- Foreign Securities: 17.2% .Canada: 0.9% 800,000 Ranger Oil 7,450 200,000 Shaw Industries, Cl. A 5,081 150,000 Cognos (b) 4,669 125,000 BCE Mobile Communications (b) 3,887 500,000 Shaw Communications, Cl. B 3,679 115,000 Veritas Energy Services (b) 2,667 200,000 Cogeco Cable 1,631 - -------------------------------------------------------------------------- 29,064 .United Kingdom: 3.4% 1,200,000 Serco Group 14,060 3,270,000 Medeva 13,959 400,000 NTL (b) 9,950 1,700,000 Securicor Group, Cl. A 8,064 650,000 Comcast UK Cable Partners (b) 7,800 700,000 Powerscreen International 7,625 1,270,000 Amvescap 7,408 81,000 Amvescap ADR 4,718 1,100,000 N. Brown Group 6,984 330,000 Airtours 6,365 350,000 Getty Communications, Cl. A (b) 5,163 600,000 Edinburgh Fund Managers 4,708 580,000 Oriflame 4,682 1,200,000 Body Shop International 3,026 899,900 Capital 2,816 530,000 Ethical Holdings (b) 2,352 - -------------------------------------------------------------------------- 109,680 .Germany/Austria: 0.5% 180,000 Flughafen Wien (Austria) 7,605 552,000 United International Holdings (Austria) (b) 5,727 8,000 Binding-Brauerei 2,204 - -------------------------------------------------------------------------- 15,536 .Nordic Countries: 2.0% 1,500,000 WM Data Nordic (Sweden) 26,384 650,000 Getinge Industrier (Sweden) 11,517 240,000 Autoliv (Sweden) 9,390 180,000 Pricer, Cl. B (Sweden) (b) 6,192 260,000 Esselte, Series A (Sweden) 5,952 702,700 SensoNor (Norway) (b) 3,791 50,000 Hennes & Mauritz, Cl. B (Sweden) 1,759 - -------------------------------------------------------------------------- 64,985 .Netherlands: 0.6% 135,000 Hunter Douglas 11,507 207,000 Getronics 6,698 25,000 Stad Rotterdam 1,145 - -------------------------------------------------------------------------- 19,350 .Switzerland: 0.8% 6,050 Societe Generale de Surveillance 12,947 14,000 Liechtenstein Global Trust 8,595 2,500 Cie Fin Richemont (b) 3,618 - -------------------------------------------------------------------------- 25,160 .France: 1.0% 128,000 Axime Ex Segin (b) 15,152 70,000 Cetelem 8,811
18
Number of Shares Value (000) - ------------------------------------------------------------------------ 20,000 Canal Plus $ 3,897 24,000 Guilbert 3,401 - ------------------------------------------------------------------------ 31,261 .Spain/Portugal: 0.3% 185,000 Vallehermoso 5,000 375,000 Filmes Lusomundo (Portugal) (b) 3,392 - ------------------------------------------------------------------------ 8,392 .Italy/Greece: 1.3% 4,000,000 Banca Fideuram 13,059 300,000 Cellular Communications International (b) 10,050 234,000 Hellenic Bottling (Greece) 8,658 1,000,000 Saipem 5,113 170,000 Industrie Natuzzi 4,356 - ------------------------------------------------------------------------ 41,236 .Israel: 0.1% 200,000 Pec Israel Economic (b) 4,800 .Eastern Europe: 0.0% 20,000 Gedeon Richter (Hungary) 1,843 .India: 0.3% 300,000 IS Himalaya Fund (b) 4,530 39,383 Housing Development Finance 4,491 - ------------------------------------------------------------------------ 9,021 .Hong Kong: 0.4% 4,500,000 Varitronix International 7,638 7,318,000 JCG Holdings 5,904 - ------------------------------------------------------------------------ 13,542 .China: 0.0% 200,000 The Investment Company of China (b) 970 .Singapore/Malaysia: 0.5% 5,100,000 Genting International 15,045 800,000 Resorts World (Malaysia) 2,409 - ------------------------------------------------------------------------ 17,454 .Thailand: 0.0% 3,300,000 Sinpinyo Fund V (b) 1,019 .Korea/Taiwan: 0.9% 115,000 Formosa Fund (Taiwan) (b) 14,778 460,000 President Enterprises (Taiwan) (b) 9,545 170,707 Kookmin Bank 3,186 300,000 Korea-Europe Fund 1,635 - ------------------------------------------------------------------------ 29,144 .Indonesia: 0.2% 195,501 Unilever Indonesia $ 3,457 1,700,000 Tigaraksa Satria 2,089 - ------------------------------------------------------------------------ 5,546 .Japan: 1.7% 266 NTT Data 10,298 110,000 Nintendo 9,228 174,000 Noritsu Koki 8,591 110,000 Paramount Bed 5,527 75,000 Secom 5,512 33,000 Nichiei 3,836 720,000 Tokyu Land (b) 2,989 9,000 Shohkoh Fund 2,729 90,000 Sankyo 2,706 130,000 Heiwa 2,556 350,000 Orient 1,428 - ------------------------------------------------------------------------ 55,400 .Australia/New Zealand: 0.5% 1,700,000 Sky City (New Zealand) 8,630 800,000 Village Roadshow 2,889 550,000 Village Roadshow Pfd. 1,380 600,000 PetSec Energy (b) 2,720 - ------------------------------------------------------------------------ 15,619 .Mexico: 0.7% 3,000,000 Kimberly Clark de Mexico 12,068 2,000,000 Nadro, Series L 6,801 225,000 Grupo Radio Centro 2,644 170,000 Cofar, Series B 252 - ------------------------------------------------------------------------ 21,765 .Brazil: 0.4% 115,000,000 Cemig 5,928 10,000,000 Itau Banco PN 5,601 - ------------------------------------------------------------------------ 11,529 .Other Latin America: 0.7% 3,000,000 Siderca (Argentina) 7,771 160,000 IRSA (Argentina) 7,000 162,000 Banco Latinoamericano de Export (Panama) 6,986 - ------------------------------------------------------------------------ 21,757 -------- Foreign: Total 554,073 153,200 Miscellaneous Securities: 0.0% 22
19 Acorn Fund .Statement of Investments (unaudited)
Principal Amount Value (000) - --------------------------------------------------------- Total Common Stocks and Other ---------- Equity-Like Securities: 90.1% $2,902,076 (Cost: $1,604,148) Short-Term Obligations: 9.9% Yield 4.56% - 5.68% Due 7/1/97 - 8/14/97 $50,902 Baxter International 50,685 $38,053 General Motors Acceptance 38,020 $33,303 Aetna Services 33,270 $29,243 Heller Financial 29,108 $25,130 Ford Motor Credit 25,065 $24,476 Aon 24,393 $19,274 American General 19,203 $16,000 Temple Inland 15,957 $14,178 Coca Cola 14,147 $13,705 GE Capital 13,673 $12,678 Sears Roebuck Acceptance 12,625 $11,892 Commercial Credit 11,861 $10,000 US Treasury Bill 9,980 $ 9,862 Prudential Funding 9,853 $ 6,862 Xerox 6,854 $ 3,000 Nynex 2,996 - --------------------------------------------------------- (Amortized Cost: $317,690) 317,690 ---------- Total Investments: 100% 3,219,766 (Cost: $1,921,838) ---------- Cash and Other Assets Less Liabilities: (0.0%) 983 ---------- Total Net Assets: 100% $3,220,749
- -------------------------------------------------------------------------------- .Notes to Statement of Investments (a) At June 30, 1997, for federal income tax purposes cost of investments was $1,929,895,000 and net unrealized appreciation was $1,289,871,000, consisting of gross unrealized appreciation of $1,352,874,000 and gross unrealized depreciation of $63,003,000. (b) Non-income producing security. (c) On June 30, 1997, the Fund held the following percentages of the outstanding voting shares of the affiliated companies (ownership of at least 5%) listed below: Data Transmission Network.......................7.43% COMARCO.........................................7.40% Kronos..........................................7.38% Tipperary.......................................7.36% World Acceptance................................7.35% Atchison Casting................................7.32% Hein-Werner.....................................6.86% Au Bon Pain.....................................6.30% Respironics.....................................5.90% Monarch Casino & Resort.........................5.65% Stevens International...........................5.65% IFR Systems.....................................5.59% Giga............................................5.30% The aggregate cost and value of investments in these companies at June 30, 1997, was $86,433,000 and $110,569,000, respectively. The market value of these securities represents 3.43% of the total net assets at June 30, 1997. During the six months ended June 30, 1997, cost of purchases in affiliated companies was $5,745,000. There were no sales or dividends received from these companies during the six months ended June 30, 1997. See accompanying notes to financial statements 20 Acorn Fund .Foreign Portfolio Diversification At June 30, 1997, Acorn Fund's foreign portfolio of investments as a percent of net assets was diversified as follows:
Value (000) Percent - -------------------------------------------------------------------- .Information Computer Systems $ 51,018 1.6% Broadcasting/CATV 35,328 1.1 Software/Services 34,212 1.1 Mobile Communications 22,001 0.7 Distribution 4,269 0.1 - -------------------------------------------------------------------- 146,828 4.6 .Health Care Biotechnology/Drug Delivery 28,599 0.9 Equipment 11,517 0.3 Hospital/Laboratory Supplies 5,527 0.2 - -------------------------------------------------------------------- 45,643 1.4 .Consumer Goods/Services Manufacturers 61,842 1.9 Entertainment/Leisure 37,821 1.2 Retail 21,941 0.7 Food 20,407 0.6 - -------------------------------------------------------------------- 142,011 4.4 .Finance Money Management $ 52,825 1.6% Banks 33,001 1.0 Other 33,771 1.1 - -------------------------------------------------------------------- 119,597 3.7 .Industrial Goods/Services Services 34,335 1.1 Machinery Processing 11,416 0.3 - -------------------------------------------------------------------- 45,751 1.4 .Energy/Minerals Oil Services 12,884 0.4 Oil/Gas Producers 12,837 0.4 Independent Power 5,928 0.2 - -------------------------------------------------------------------- 31,649 1.0 .Real Estate 14,989 0.5 .Transportation 7,605 0.2 ------------------------- Total Foreign Portfolio $554,073 17.2% ====================================================================
21 Acorn International .Major Portfolio Changes in the Second Quarter
Number of Shares ----------------------- 3/31/97 6/30/97 Additions - ---------------------------------------------------------------------- Europe .Germany Berzelius Umwelt 0 160,000 IVG Holdings 200,000 290,000 .Finland Talentum 80,000 550,000 .Sweden Bure Investment 315,000 665,000 Micronic Laser Systems 0 225,000 .France Assystem 0 30,000 Fininfo 40,000 60,000 Groupe AB 110,000 350,000 Groupe Partouche 30,000 50,000 Spir Communications 70,000 85,000 .United Kingdom City Centre Restaurants 3,700,000 4,500,000 Dorling Kindersley 900,000 1,300,000 Edinburgh Fund Managers 710,000 950,000 Eurotherm 0 400,000 Expro International Group 500,000 700,000 Hozelock Group 238,000 600,000 Premier Oil 6,000,000 12,000,000 Seton Healthcare Group 720,000 1,444,000 Spirax Sarco 0 100,000 Vosper Thornycroft Holdings 410,000 730,000 .Switzerland Hero 0 11,000 Cie Fin Richemont 0 6,000 Publicitas Holding 0 30,000 Selecta Group 0 40,000 .Italy Banca Pop Commercia 100,000 400,000 Banca Pop Di Bergamo 550,000 700,000 Fila Holdings 60,000 100,000 Pininfarina 0 30,000 Principal Amount or Number of Shares ----------------------- 3/31/97 6/30/97 .Netherlands DOC Data 0 250,000 Stad Rotterdam 0 75,000 Wegener 50,000 310,000 (includes effect of 5 for 1 stock split) .Poland Best Company Series D 85,000 200,000 - ---------------------------------------------------------------------- Asia .Hong Kong China HK Photo Products 7,000,000 19,696,000 Innovative International Holdings 5,500,000 12,000,000 Li and Fung 10,000,000 13,000,000 Regent Pacific 0 8,910,000 TVB 1,300,000 2,300,000 Vanda Systems 7,200,000 9,600,000 Varitronix International 6,000,000 7,500,000 .Japan Aderans 150,000 330,000 Amway Japan 110,000 300,000 Chuo Trust & Banking 650,000 900,000 Fuji Software ABC 130,000 190,000 NuSkin Asia Pacific 120,000 160,000 Orient Corporation 0 1,600,000 Shohkoh Fund 30,000 35,000 Softbank Corporation 78,000 95,000 .Korea Dongbu Fire & Marine Insurance 178,970 233,330 .Malaysia AMFB 0 3,230,000 .Indonesia Tunas Ridean 0 2,700,000 .Philippines Int'l Container Terminal Services, Cv. 1.75% 3/13/04 0 $3,000,000
22
Number of Shares ------------------------- 3/31/97 6/30/97 .Singapore Genting International 5,500,000 6,124,600 Omni Industries 0 910,000 Venture Manufacturing 3,050,000 3,500,000 .Thailand BEC World Public 0 450,000 - --------------------------------------------------------------------- Latin America .Mexico Kimberly Clark de Mexico 3,000,000 3,600,000 Tubos de Acero de Mexico 250,000 400,000 .Brazil Bompreco 0 100,000 White Martins 3,500,000 2,250,000 (includes effect of 1 to 2 reverse stock split) .Argentina Perez Companc 600,000 1,000,000 (includes effect of 11.5% stock dividend) .Peru Enrique Ferreyros 2,527,334 4,200,000 .Panama Banco Latinoamericano de Exportaciones 150,000 184,000 Other Countries .Australia Anaconda Nickel 2,000,000 2,500,000 Siddons Ramset 600,000 1,000,000 .Canada Pangea Goldfields 0 650,000 Shaw Industries 450,000 520,000 .Israel ZAG Industries 200,000 300,000 .South Africa Energy Africa 405,000 780,000
23 Acorn International .Major Portfolio Changes in the Second Quarter
Number of Shares ----------------------- 3/31/97 6/30/97 Sales - ---------------------------------------------------------------------- Europe .Germany Escada 26,000 0 Fresenius 90,000 60,000 Marschollek Lautenschlager 40,000 0 .Denmark Carli Gry 20,000 0 .Finland Benefon 370,000 200,000 .Norway Aker Maritime 200,000 0 Elkjoep Norge 80,000 0 .Sweden Frontec, Series B 150,000 0 Hennes & Mauritz, Cl. B 150,000 440,000 (includes effect of 5 for 1 stock split) Pricer, Cl. B 450,000 350,000 WM Data Nordic 650,000 3,000,000 (includes effect of 400% stock bonus) .France Guilbert 40,000 30,000 .United Kingdom Capita Group 1,400,000 3,000,000 (includes effect of 200% stock bonus) .Switzerland Disetronic Holding 2,600 0 .Italy/Greece Costa Crociere 3,100,000 0 Hellenic Bottling 275,000 247,000 Intracom 150,000 0 .Spain Campofrio Alimentacion 110,000 0 .Netherlands Getronics 850,000 700,000 - ---------------------------------------------------------------------- Asia .Hong Kong Manhattan Card 12,000,000 0 Vitasoy International 8,900,000 0 .Japan Aucnet 65,000 0 Cats 86,000 0 Itariyard 90,000 0 Koei 50,000 0 Mr Max 26,000 0 Nichiei 130,000 112,600 Promise 70,000 0 Sanyo Shinpan 33,000 0 .Korea Daehan City Gas 70,000 0 SK Telecom 15,000 0 .Malaysia Arab Malaysian Finance 3,300,000 0 Malaysian Assurance Alliance 2,350,000 1,210,000 (includes effect of 10% stock bonus) O.Y.L. Industries 450,000 0 .Singapore Datacraft Asia 750,000 0 - ---------------------------------------------------------------------- Latin America .Mexico Grupo Herdez, Series B 4,900,000 0 Grupo Radio Centro 579,000 263,000 .Brazil Cemig Pfd. 185,000,000 165,000,000 .Argentina Cerveceria Biekert 220,470 0 - ---------------------------------------------------------------------- Other Countries .Australia Austereo 4,000,000 0 Burswood Property Trust 670,000 0
24 Acorn International .Statement of Investments (unaudited) June 30, 1997
Number of Shares Value (000) - --------------------------------------------------------------------- Common Stocks and Other Equity-Like Securities: 93.6% - --------------------------------------------------------------------- Europe: 49.3% .Germany/Austria: 4.8% 165,000 Rhoen Klinikum Pfd. $21,115 100,000 Rhoen Klinikum 13,199 Hospital Management 60,000 Fresenius 12,395 Dialysis Equipment & Solutions 290,000 IVG Holdings 9,985 Real Estate 190,000 Flughafen Wien 8,027 Vienna Airport Authority (Austria) 15,000 Pfleiderer 7,704 Construction Materials 21,000 Cewe Color Holding 5,483 Photographic Developing & Printing 473,000 United International Holdings (b) 4,907 Cable Television for Austria & Other Countries (Austria) 15,000 Binding-Brauerei 4,132 Brewer 160,000 Berzelius Umwelt 2,442 Industrial Waste Recycling 70,000 Boewe Systec 2,294 Envelope Stuffing Machines 29,000 KTM-Motorradholding (b) 1,987 Off-Road Motorcycles (Austria) - --------------------------------------------------------------------- 93,670 .Denmark: 0.5% 125,000 Falck 6,598 Ambulance, Firefighting & Security Services 31,000 Kompan International (c) 3,740 Playground Equipment - --------------------------------------------------------------------- 10,338 .Finland: 3.8% 500,000 TT Tieto, Cl. B (c) 43,318 Computer Services/Consulting 100,000 Vaisala, Cl. A 7,605 Meteorological Instruments 80,000 Fiskars, Series A 6,777 Scissors & Gardening Tools 105,000 Sentra, Cl. A (c) 6,630 Grocery Wholesaling & Retailing 550,000 Talentum (c) 6,247 Trade Journals 200,000 Benefon 3,465 Mobile Telephones - --------------------------------------------------------------------- 74,042 .Norway: 0.3% 969,400 SensoNor (b) 5,230 Electronic Sensors for Airbags 500,000 Atex Media Solutions 956 Print Media Software - --------------------------------------------------------------------- 6,186 .Sweden: 7.2% 3,000,000 WM Data Nordic 52,768 Computer Services/Consulting 1,000,000 Getinge Industrier 17,719 Sterilization & Disinfection Equipment 440,000 Hennes & Mauritz, Cl. B 15,479 Apparel Stores 320,000 Autoliv 12,520 Seatbelts & Airbags 350,000 Pricer, Cl. B (b) 12,041 Electronic Shelf Labels for Supermarkets 665,000 Bure Investment 8,386 Health Care Services & Investments 315,000 Esselte, Series A 7,211 Office Supplies & Related Equipment 400,000 Atle 5,380 Investment Company 175,000 Hexagon 4,753 Industrial Conglomerate 50,700 Scala International (b) 2,885 Accounting Software 225,000 Micronic Laser Systems (b) 1,106 Laser Equipment 96,000 Oresa Ventures (b) 894 Eastern European Venture Capital - --------------------------------------------------------------------- 141,142 France: 4.4% 200,000 Axime Ex Segin (b) 23,676 Computer Services 94,000 Cetelem 11,832 Credit Cards 62,000 NRJ 8,448 Radio Network 60,000 Fininfo 7,052 Data Feeds for French Banks & Brokers 85,000 Spir Communications 6,537 Regional Newspapers 50,000 Technip 5,808 Engineering & Construction 55,000 Virbac 5,480 Drugs for Animals 27,000 Canal Plus 5,261 Pay TV 30,000 Guilbert 4,251 Office Supplies Distribution
See Accompanying notes to financial statements 25 Acorn International .Statement of Investments (unaudited)
Number of Shares Value (000) - ------------------------------------------------------------------------ 50,000 Groupe Partouche $ 3,407 Casinos 350,000 Groupe AB (b) 2,975 Television Programming 30,000 Assystem 1,717 Consultants on Nuclear Power Plants - ------------------------------------------------------------------------ 86,444 .United Kingdom: 12.0% 1,800,000 Serco Group 21,090 Facilities Management 1,600,000 Powerscreen International 17,429 Mobile Crushing & Screening Equipment 1,950,000 Oriflame International 15,740 Natural Cosmetics Sold Door-to-Door 3,170,000 Medeva 13,533 Drugs for Hyperactive Children 3,000,000 Capita Group 11,758 Outsourcing Government Services 467,000 NTL (b) 11,617 Cable TV & Telephone System 1,444,000 Seton Healthcare Group 10,370 Pharmaceuticals 1,500,000 N. Brown Group 9,524 Mail Order Clothing in Large Sizes 4,500,000 City Centre Restaurants 9,474 Fast Food Restaurants 730,000 Vosper Thornycroft Holdings 9,264 Naval Shipbuilding 12,000,000 Premier Oil 9,237 Oil & Gas Producer 4,000,000 St. James Place 8,721 Life Insurance 1,700,000 Securicor Group, Cl. A 8,064 Mobile Communications 950,000 Edinburgh Fund Managers 7,455 Investment Management 1,700,000 Rotork 7,370 Valve Actuators for Oil & Water Pipelines 13,000,000 Electronics Boutique (b) 7,248 Videogame/Computer Software Stores 2,200,000 Capital 6,884 Classy Casinos 500,000 Comcast UK Cable Partners (b) 6,000 Cable TV & Telephone System 2,200,000 HALMA 5,987 Fire Detection Devices & Burglar Alarms 1,300,000 Dorling Kindersley 5,550 Reference Books & CD-ROMs 700,000 Expro International Group 5,330 Oil Field Services 1,800,000 Body Shop International 4,539 Natural Cosmetics & Toiletries 1,200,000 Ivory & Sime 4,334 Investment Management 600,000 Hozelock Group 4,234 Garden Hoses 2,100,000 Aberdeen Trust 3,198 Money Management 670,000 Ethical Holdings (b) (c) 2,973 Drug Delivery 4,000,000 Peek 2,530 Traffic Control Systems 400,000 Eurotherm 2,413 Instruments & Measuring Devices 900,000 Tunstall 1,962 "I've fallen and I can't get up" Monitors 250,000 Planning Sciences (b) 1,438 Database & Business Intelligence Software 100,000 Spirax Sarco 1,144 Steam Traps 125,000 Shanks & McEwan 307 Landfills & Waste Incinerators - ------------------------------------------------------------------------ 236,717 .Switzerland: 4.1% 6,550 Societe Generale de Surveillance 14,017 Inspection/Testing of Trade Goods 25,000 Phoenix Mecano 13,032 Electrical Components Manufacturer 6,000 Cie Fin Richemont 8,684 Luxury Goods & Tobacco 13,000 Liechtenstein Global Trust 7,981 Banking & Investment Management 18,000 Societe Generale d'Affichage 6,926 Billboard Advertising 8,000 Suedelektra Holding 6,859 Natural Resources 11,000 Hero 6,149 Packaged Foods 40,000 Selecta Group (b) 6,091 Vending Machines 30,000 Publicitas Holding 5,721 Print Media 10,000 Prodega (c) 4,527 Cash-and-Carry Retailer - ------------------------------------------------------------------------ 79,987 .Italy/Greece: 5.7% 7,100,000 Banca Fideuram 23,180 Life Insurance & Mutual Funds 2,500,000 Saipem SPA 12,783 Pipeline Construction & Drilling Contractor
26
Number of Shares Value (000) - ----------------------------------------------------------------------- 700,000 Banca Popolare Di Bergamo $ 10,347 Regional Bank 600,000 Gewiss 10,314 Electrical Plugs & Switches 247,000 Hellenic Bottling 9,139 Coca-Cola Bottler (Greece) 650,000 Mediolanum 7,323 Life Insurance & Mutual Funds 2,000,000 Editoriale L'Espresso 6,653 Newspapers & Magazines 200,000 Industrie Natuzzi 5,125 Leather Couches 400,000 Banco Pop Commercia e Industria 4,831 Regional Bank 400,000 Attica Enterprises 3,855 80,000 Attica Enterprises New 771 Ferry Line (Greece) 1,100,000 Banca Di Legnano 3,540 Regional Bank 100,000 Fila Holdings 3,344 Athletic Shoes 1,000,000 Unipol 2,803 Life & Auto Insurance 80,000 Cellular Communications International (b) 2,680 Mobile Communications 1,500,000 Autogrill Finanziaria (b) 2,508 Tollway Restaurants 125,000 Saes Getters 1,984 Getters used in TV's/PC's 175,000 Danieli 1,155 Steel-making Machinery 30,000 Pininfarina 498 Car Design 228 Ergo Bank 14 Bank (Greece) - ----------------------------------------------------------------------- 112,847 .Spain/Portugal: 1.5% 160,000 Cortefiel 6,995 Apparel Retailer 100,000 Mapfre Vida 6,494 Life Insurance & Mutual Funds 200,000 Vallehermoso 5,406 Residential Property Developer & Landlord 200,000 Lusotur (b) 3,211 Real Estate/Resort Developer (Portugal) 250,000 Estoril Sol (c) 3,129 Casino Resort (Portugal) 16,000 Zardoya Otis 2,109 Elevator Maintenance 150,000 Filmes Lusomundo 1,357 Newspapers, Radio, Video, Film Distribution (Portugal) 24,800 Investec (b) 846 Sports Newspaper (Portugal) 350,000 Televisao Independente 657 Television Station (Portugal) - ----------------------------------------------------------------------- 30,204 .Netherlands: 4.3% 630,000 Kempen (c) 23,055 Stock Brokerage/Investment Management 700,000 Getronics 22,651 Computer Services 135,000 Hunter Douglas 11,507 Blinds 300,000 Fugro McClelland 7,732 300,000 Fugro McClelland Dividend Coupon 245 Engineering, Consulting & Surveying 310,000 Wegener 7,199 Newspaper Publisher 300,000 Telegraaf Holdings 6,492 Newspaper Publisher 75,000 Stad Rotterdam 3,434 Auto Insurance 250,000 DOC Data (b) 3,254 Audio CD & CD Rom Replication - ----------------------------------------------------------------------- 85,569 .Hungary: 0.3% 145,000 Cofinec (b) 4,006 Consumer Goods Packaging 20,000 Gedeon Richter 1,843 Generic Drugs - ----------------------------------------------------------------------- 5,849 .Poland: 0.4% 2,550,000 Bank Inicjatyw 3,065 Warsaw Bank 210,000 Amica Wronki 1,757 Appliance Manufacturer 200,000 Bank Komunalny 955 Gdansk-Area Bank 200,000 Best Company Series D 2,434 Electronics Retailer - ----------------------------------------------------------------------- 8,211 ------- Europe: Total 971,206
27 Acorn International .Statement of Investments (unaudited)
Number of Shares Value (000) - -------------------------------------------------------------------------------------- Asia: 26.8% .Hong Kong: 3.6% 13,000,000 Li and Fung $14,599 Sourcing of Consumer Goods 7,500,000 Varitronix International 12,731 LCD Manufacturer 2,300,000 TVB 10,332 Television Broadcasting 11,000,000 JCG Holdings 8,874 Consumer Finance 12,000,000 Innovative International Holdings 6,273 Auto Accessories 19,696,000 China HK Photo Products 5,720 Fuji Film Distributor 20,000,000 Golden Harvest Entertainment 4,957 Movie Distribution & Exhibition 9,600,000 Vanda Systems 4,461 Systems Integrator 8,910,000 Regent Pacific (b) 2,502 Money Management 2,000,000 Pacific Ports 400 Container Terminal Operation & Port Management - -------------------------------------------------------------------------------------- 70,849 .India/Pakistan: 1.1% 82,702 Housing Development Finance 9,432 Mortgage Lender 300,000 IS Himalaya Fund (b) 4,530 Closed-End Fund 1,047,200 Zee Telefilms (c) 3,627 Hindi Television Programming & Broadcasting 349,450 Max India 1,846 50,000 Max India New Shares 264 Penicillin & Mobile Phones 810,000 Tube Investment GDR 1,150 Bicycle Manufacturer 59,035 Pakistan State Oil 475 Oil Distribution (Pakistan) 342,100 Kotak Mahindra Finance 392 Consumer Finance 2,000,000 Centurion Quantum Growth 307 Closed-End Fund - -------------------------------------------------------------------------------------- 22,023 .Japan: 12.7% 350 NTT Data 13,550 Computer Services/Consulting 270,000 Noritsu Koki 13,331 Photo Processing Lab Manufacturer 112,600 Nichiei 13,087 Lender to Small & Medium Size Businesses 163,000 Secom 11,980 Security Alarm Systems 35,000 Shohkoh Fund 10,613 Short-Term Loans for Small Business 299,000 Hokuto 10,582 Mushroom Grower 140,000 Orix Corporation 10,387 Leasing Company 300,000 Amway Japan 10,172 Network Sales 325,000 Meitec 9,685 Engineering Outsourcing 330,000 Aderans 9,401 Hairpieces & Wigs 110,000 Nintendo 9,228 Video Games 235,000 Konami 8,790 Entertainment Software/Hardware 190,000 Fuji Software ABC 8,302 Computer Services/Consulting 1,600,000 Orient Corporation 6,530 Credit Cards 80,000 Ryohin Keikaku 6,320 Designer & Retailer of Muji Brand Specialty Consumer Goods 275,000 Mirai Industry 6,296 Manufacturer of Plastic Housing Components 95,000 Softbank Corporation 6,085 Publisher/Software Distributor 115,000 HIS 6,080 Travel Agent 900,000 Chuo Trust & Banking 5,977 Banking 240,000 Shinki 5,957 Corporate & Consumer Lending 120,000 Nidec 5,873 Manufacturer of Motors for Hard Disk Drives 195,000 Sankyo 5,862 Pachinko Machine Manufacturer 165,000 Lasertec 5,624 Manufacturer of LCD & Photomask Defect Detectors 110,000 Paramount Bed 5,527 Hospital Bed Manufacturer 1,330,000 Tokyu Land 5,521 Real Estate 255,000 Heiwa 5,014 Pachinko Machine Manufacturer 130,000 People 4,431 Sports Clubs 160,000 NuSkin Asia Pacific (b) 4,240 Network Sales
See accompanying notes to financial statements 28 Number of Shares Value (000) - ------------------------------------------------------------------------- 160,000 Arrk Corporation $ 3,426 Industrial Modeling 135,000 Xebio 3,327 Sporting Goods Retailer 249,700 Belluna 3,273 Catalog Sales 142,000 Mars Engineering 3,251 Gaming Systems & Machinery 240,000 Central Uni 3,146 Health Care/Medical Equipment 126,020 Nihon Jumbo 3,062 Photo Processing Lab 415,000 Nanto Bank 2,582 Banking 55,000 Tiemco 2,451 Fishing Equipment 165,000 Shochiku 1,557 Film, Television & Kabuki Producer - ------------------------------------------------------------------------- 250,520 >Korea/Taiwan: 2.8% 80,000 Formosa Fund (b) 10,280 Closed-End Fund (Taiwan) 480,000 President Enterprises (b) 9,960 Food Manufacturer & Distributor (Taiwan) 70,000 Taipei Fund 8,785 Closed-End Fund (Taiwan) 233,330 Dongbu Fire & Marine Insurance (b) 6,779 Non-Life Insurance 319,387 Kookmin Bank 5,961 Retail Bank 26,265 S1 Corporation 5,265 Systems Security 230,000 Formosa Growth Fund (b) 5,247 Closed-End Fund (Taiwan) 150,000 Baring Taiwan Fund (b) 2,231 Closed-End Fund (Taiwan) - ------------------------------------------------------------------------- 54,508 >Malaysia: 0.9% 2,000,000 Malaysian Oxygen 10,143 Industrial Gases 1,210,000 Malaysian Assurance Alliance 7,047 Insurance 3,230,000 AMFB 1,049 Consumer Finance - ------------------------------------------------------------------------- 18,239 >Indonesia: 1.5% 3,000,000 Bank Niaga 8,513 Banking 1,600,000 Modern Photo Film 5,659 Fuji Film Distributor Principal Amount or Number of Shares Value(000) - ------------------------------------------------------------------------- 230,000 Unilever $ 4,067 Consumer Goods 2,900,900 Tigaraksa Satria (c) 3,564 Distributor of Consumer Goods 2,700,000 Tunas Ridean 3,553 Auto Retailing 3,000,000 Mustika Ratu 3,208 Traditional Cosmetics 220,000 Medco Energi 405 Oil & Gas Drilling & Production - ------------------------------------------------------------------------- 28,969 >Philippines: 1.4% 27,000,000 Int'l Container Terminal Services (b) 13,819 $3,000,000 Int'l Container Terminal Services Cv. 1.75% 3/13/04 3,000 Container Handling Terminals & Port Management 3,500,000 Philippine Savings Bank 5,308 Banking 14,100,000 Mondragon International (b) 4,972 Casinos/Resort - ------------------------------------------------------------------------- 27,099 >Singapore: 1.8% 6,124,600 Genting International 18,068 Cruise Line 3,500,000 Venture Manufacturing 11,407 2,500,000 Venture Manufacturing Wts. 7/26/99 (b) 5,945 Contract Electronics Manufacturer 910,000 Omni Industries (b) 468 Contract Electronics Manufacturer - ------------------------------------------------------------------------- 35,888 >Thailand: 1.0% 4,470,100 Shinawatra Satellite 5,392 Satellite Leasing 320,000 Bangkok Insurance 5,065 Finance/Insurance 200,000 Serm Suk 4,324 Pepsi Bottler 450,000 BEC World Public 3,856 Television/Radio Broadcasting 2,600,000 Sinpinyo Fund V 803 Closed-End Fund - ------------------------------------------------------------------------- 19,440 ------- Asia: Total 527,535 - ------------------------------------------------------------------------- Latin America: 9.0% >Mexico: 3.0% 3,600,000 Kimberly Clark de Mexico 14,481 Paper Products 29 Acorn International >Statement of Investments (unaudited) Number of Shares Value (000) - ------------------------------------------------------------------ 1,510,000 Grupo Industrial Bimbo 10,801 Bread, Baked Goods & Snacks 3,000,000 Nadro, Series L 10,201 Pharmaceutical Distributor 450,000 Bufete Industrial (b) 9,619 Engineering & Construction 400,000 Tubos de Acero de Mexico 7,375 Seamless Pipe for Oil Wells 263,000 Grupo Radio Centro 3,090 Radio Stations & Networks 2,100,000 Grupe Accion (formerly known as Fondo Opcion) (c) 3,089 Real Estate Investment Fund 100,000 Corp Interamericana de Entretenimiento (b) 424 Management of Live Entertainment 107,000 Cofar 159 Drug Stores - ------------------------------------------------------------------ 59,239 >Brazil: 2.3% 20,000,000 Banco Itau Pfd. 11,202 Bank 165,000,000 Cemig Pfd. 8,506 Electric Utility 2,250,000 White Martins 6,583 Industrial Gases 35,000,000 Telemig 5,982 30,000,000 Telemig Pfd. 5,308 Telecommunications 370,000 Elevadores Atlas 4,820 Elevator Services 100,000 Bompreco 2,775 Supermarket Chain 1,000,000 Brazilian Smaller Companies Warrants 745 Closed-End Fund - ------------------------------------------------------------------ 45,921 >Argentina: 1.8% 320,000 IRSA 14,000 Real Estate Management & Development 4,000,000 Siderca 10,361 Steel Pipe Producer 1,000,000 Perez Companc 8,031 Oil & Gas Producer 1,400,000 Cresud (b) 3,122 Grain & Cattle Farms - ------------------------------------------------------------------ 35,514 >Chile: 1.3% 150,000 Genesis Chile Fund 7,538 Closed-End Fund Number of Shares Value (000) - ------------------------------------------------------------------ 220,000 Santa Isabel 7,095 Grocery Stores 260,000 Banco BHIF 5,493 Financial Services 120,000 Embotelladora Andina, Series A 2,573 120,000 Embotelladora Andina, Series B 2,505 Coca-Cola Bottler - ------------------------------------------------------------------ 25,204 >Peru: 0.2% 4,200,000 Enrique Ferreyros 4,829 Heavy Machinery Dealer >Panama: 0.4% 184,000 Banco Latinoamericano de Exportaciones 7,935 Trade Financing ------- Latin America: Total 178,642 - ------------------------------------------------------------------ Other Countries: 7.8% >Australia/New Zealand: 3.7% 2,200,000 Publishing & Broadcasting 12,576 Media & TV Broadcasting 1,750,000 Sky City 8,884 Casino & Hotel (New Zealand) 4,500,000 Tyndall Australia 7,586 Money Management & Insurance 3,000,000 Village Roadshow Pfd. Cl. A 7,529 Film Distribution, Exhibition & Production 5,200,000 Sonic Healthcare 7,207 Pathology Labs 2,500,000 Anaconda Nickel (b) 7,024 Nickel Mining 1,400,000 PetSec Energy (b) 6,346 Oil & Gas Producers 1,000,000 Siddons Ramset 5,469 Manufacturer & Distributor of Construction Materials 420,000 Hudson Conway (b) 4,201 Casino Managers 1,800,000 Skilled Engineering 3,277 Temporary Skilled Labor 600,000 PDL Holdings 3,152 Electrical Equipment Manufacturer & Distributor (New Zealand) - ------------------------------------------------------------------ 73,251 >Canada: 3.2% 520,000 Shaw Industries 13,211 Oil Field Services 1,000,000 Ranger Oil 9,313 Oil & Gas Producer 30
Number of Shares Value (000) - ---------------------------------------------------------------------------------- 395,000 Veritas Energy Services (b) $ 9,162 Geophysical Contractor 250,000 Cinar Films (b) 8,125 Children's Television Programming 1,700,000 Pan East Petroleum (b) 4,436 Oil & Gas Producer 600,000 Shaw Communications 4,414 Cable TV 500,000 Cogeco 3,226 Cable TV 1,100,000 Bracknell (b) 3,149 Specialty Contractor 300,000 Shermag (b) 2,696 Manufacturer of Solid Wood Furniture 300,000 Cogeco Cable 2,446 Cable TV 650,000 Pangea Goldfields (b) 1,885 Gold Mining Exploration 250,000 Fundy Cable (b) 1,105 Cable TV - ---------------------------------------------------------------------------------- 63,168 >Israel: 0.7% 325,000 Blue Square Israel (b) 5,606 Supermarkets & Department Stores 200,000 Pec Israel Economic (b) 4,800 Industrial Holdings 300,000 ZAG Industries (b) 3,075 Plastic Hardwares - ---------------------------------------------------------------------------------- 13,481 >South Africa: 0.2% 780,000 Energy Africa 4,041 Oil & Gas Producer - ---------------------------------------------------------------------------------- Other: Total 153,941
Principal Amount or Number of Shares Value (000) - ---------------------------------------------------------------------------------- Foreign Corporations, Operations in the U.S.: 0.7% 101,500 AES Corporation (b) $ 7,181 Electric Generating Plants 161,000 Carnival 6,641 Cruise Ship Line (Panama) Foreign Corporations, Operations --------- in the U.S.: Total 13,822 4,744 Miscellaneous Securities: 0.0% 17 Total Common Stocks and Other ---------- Equity-Like Securities: 93.6% 1,845,163 (Cost: $1,373,900) Short-Term Obligations: 6.5% Yield 5.49%--5.62% Due 7/1/97--7/18/97 $32,872 General Motors Acceptance 32,829 $22,020 Baxter International 21,987 $17,791 General Electric Capital 17,779 $12,410 Prudential Funding 12,391 $12,296 Sears Roebuck Acceptance 12,271 $10,288 Commercial Credit 10,277 $10,187 Heller Financial 10,162 $9,643 GTE 9,630 - ---------------------------------------------------------------------------------- (Amortized Cost: $127,326) 127,326 --------- Total Investments: 100.1% 1,972,489 (Cost: $1,501,226) --------- Cash and Other Assets Less Liabilities: (0.1%) (2,452) --------- Total Net Assets: 100% $ 1,970,037 ==================================================================================
- -------------------------------------------------------------------------------- >Notes to Statement of Investments (a) At June 30, 1997, for federal income tax purposes cost of investments was $1,511,853,000 and net unrealized appreciation was $460,636,000 consisting of gross unrealized appreciation of $579,531,000 and gross unrealized depreciation of $118,895,000. (b) Non-income producing security. (c) On June 30, 1997, the Fund held the following percentages of the outstanding voting shares of the affiliated companies (ownership of at least 5%) listed below: Prodega (Switzerland).........................................10.00% Estoril Sol (Portugal)........................................ 9.71% Sentra (Finland).............................................. 9.24% Tigaraksa Satria (Indonesia).................................. 7.16% Talentum (Finland)............................................ 6.89% Kompan International (Denmark)................................ 6.58% Kempen (Netherlands).......................................... 6.42% Grupe Accion (Mexico)......................................... 6.28% TT Tieto (Finland)............................................ 5.69% Zee Telefilms (India)......................................... 5.61% Ethical Holdings (UK)......................................... 5.14% The aggregate cost and value of investments in these companies at June 30, 1997, was $58,504,000 and $103,899,000 respectively. The market value of these securities represents 5.27% of the total net assets at June 30, 1997. During the six months ended June 30, 1997, the cost of purchases and proceeds from sales in affiliated companies were $6,058,000 and $245,000, respectively. Net dividends received from these companies amounted to $1,329,000 and net realized gains on the sale of investments in such companies amounted to $70,000. 31 Acorn International >Portfolio Diversification At June 30, 1997, Acorn International's portfolio of investments as a percent of net assets was diversified as follows:
Value(000) Percent - ----------------------------------------------------- >Information Software/Services $129,322 6.5% Computer Systems 103,725 5.3 Broadcasting/CATV 101,150 5.1 Distribution 39,960 2.0 Mobile Communications 33,001 1.7 Consumer Electronics 31,451 1.6 Instrumentation 12,002 0.6 Equipment 1,106 0.1 - ----------------------------------------------------- 451,717 22.9 >Health Care Biotechnology/Drug Delivery 45,916 2.3 Services 42,700 2.2 Hospital/Laboratory Supplies 25,129 1.3 Equipment 20,865 1.1 - ----------------------------------------------------- 134,610 6.9 >Consumer Goods/Services Retail 184,802 9.4 Manufacturers 142,351 7.2 Entertainment/Leisure 81,717 4.1 Food 75,269 3.8 Recreational Vehicles 3,137 0.2 - ----------------------------------------------------- 487,276 24.7 >Finance Money Management $ 144,875 7.4% Banks 88,824 4.5 Insurance 31,622 1.6 Credit Cards 6,530 0.3 Other 81,475 4.1 - ----------------------------------------------------- 353,326 17.9 >Industrial Goods/Services Services 156,656 8.0 Machinery Processing 68,711 3.5 Steel 16,639 0.8 Forest Products/Construction 7,704 0.4 - ----------------------------------------------------- 249,710 12.7 >Energy/Minerals Oil/Gas Producers 61,114 3.1 Oil Services 28,474 1.4 Independent Power 15,687 0.8 Mining 8,909 0.5 Refining/Marketing 475 0.0 - ----------------------------------------------------- 114,659 5.8 >Real Estate 41,212 2.1 >Transportation 12,653 0.6 >Total Common Stocks and --------------------- Other Equity-Like Securities 1,845,163 93.6 >Short-Term Obligations 127,326 6.5 --------------------- Total Investments $1,972,489 100.1% =====================================================
See accompanying notes to financial statements 32 Acorn Family of Funds .Statements of Assets and Liabilities (unaudited)
Acorn (in thousands) Acorn Fund International Acorn USA - -------------------------------------------------------------------------------------------------------------------- 6/30/97 Assets Investments, at value (cost: Acorn Fund $1,921,838; Acorn International $1,501,226; Acorn USA $98,806) $3,219,766 $1,972,489 $114,526 Cash - 9,140 1 Net unrealized appreciation on foreign forward currency contracts - 2,454 - Organization costs - 4 90 Receivable for: Securities sold 7,361 4,599 488 Fund shares sold 3,745 2,218 311 Dividends and interest 2,825 4,740 23 Other assets 9 6 - - -------------------------------------------------------------------------------------------------------------------- Total assets 3,233,706 1,995,650 115,439 Liabilities and Net Assets Payable for: Securities purchased 9,394 22,013 1,516 Fund shares redeemed 2,862 2,649 65 Organization costs - 2 90 Other 701 949 78 - -------------------------------------------------------------------------------------------------------------------- Total liabilities 12,957 25,613 1,749 Net assets applicable to Fund shares outstanding $3,220,749 $1,970,037 $113,690 ==================================================================================================================== Fund shares outstanding 193,496 92,838 8,538 ==================================================================================================================== Pricing of Shares Net asset value, offering price and redemption price per share $16.65 $21.22 $13.32 ==================================================================================================================== Analysis of Net Assets Paid-in capital $1,754,464 $1,403,353 $ 97,185 Accumulated net realized gain on sales of investments, futures and foreign currency transactions 163,748 91,299 980 Net unrealized appreciation of investments and other assets (net of unrealized PFIC gains of $8,057 for Acorn Fund and $10,627 for Acorn International) 1,289,506 463,034 15,720 Undistributed net investment income (loss) 13,031 12,351 (195) - -------------------------------------------------------------------------------------------------------------------- Net assets applicable to Fund shares outstanding $3,220,749 $1,970,037 $113,690 ====================================================================================================================
See accompanying notes to financial statements 33 Acorn Family of Funds >Statements of Operations (unaudited)
Acorn Acorn Fund International Acorn USA 6 months Year 6 months Year 6 months Inception 9/4 (in thousands) ended 6/30, ended 12/31, ended 6/30, ended 12/31, ended 6/30, through 12/31, - ----------------------------------------------------------------------------------------------------------------------------------- 1997 1996 1997 1996 1997 1996 Investment Income: Dividends $ 13,726 $ 23,043 $ 19,006 $ 24,877 $ 238 $ 35 Interest 5,672 7,662 4,111 4,023 169 48 - ----------------------------------------------------------------------------------------------------------------------------------- 19,398 30,705 23,117 28,900 407 83 Foreign taxes withheld (586) (845) (2,234) (2,681) - - - ----------------------------------------------------------------------------------------------------------------------------------- Total investment income 18,812 29,860 20,883 26,219 407 83 Expenses: Investment advisory 6,520 12,437 7,918 13,255 427 101 Custodian 543 1,079 1,238 2,235 13 6 Transfer and dividend disbursing agent 665 1,030 944 1,558 68 27 Reports to shareholders 260 466 345 706 28 7 Legal and audit 136 152 78 142 17 27 Registration and blue sky 112 174 67 108 36 14 Trustees' and other 123 216 86 209 14 8 - ----------------------------------------------------------------------------------------------------------------------------------- Total expenses 8,359 15,554 10,676 18,213 603 190 Less custodian fees paid indirectly - - - - (1) (6) - ----------------------------------------------------------------------------------------------------------------------------------- Net expenses 8,359 15,554 10,676 18,213 602 184 - ----------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 10,453 14,306 10,207 8,006 (195) (101) Net Realized and Unrealized Gain (Loss) on Investments, Futures and Foreign Currency Transactions: Net realized gain on sales of investments 137,771 298,665 71,391 48,566 961 120 Net realized gain on foreign currency transactions - 7,234 1,291 - - Net realized loss on futures (6,779) (22,053) - - - - Change in net unrealized appreciation of investments and foreign currency transactions 164,498 250,750 60,529 221,576 11,552 4,168 - ----------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain on investments, futures and foreign currency transactions 295,490 527,362 139,154 271,433 12,513 4,288 - ----------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations $305,943 $541,668 $149,361 $279,439 $12,318 $4,187 ===================================================================================================================================
See accompanying notes to financial statements 34 Acorn Family of Funds >Statements of Changes in Net Assets (unaudited)
Acorn Acorn Fund International Acorn USA 6 months Year 6 months Year 6 months Inception 9/4 (in thousands) ended 6/30, ended 12/31, ended 6/30, ended 12/31, ended 6/30, through 12/31, - -------------------------------------------------------------------------------------------------------------------------------- 1997 1996 1997 1996 1997 1996 From Operations: Net investment income (loss) $ 10,453 $ 14,306 $ 10,207 $ 8,006 $ (195) $ (101) Net realized gain on sales of investments, futures and foreign currency transactions 130,992 276,612 78,625 49,857 961 120 Change in net unrealized appreciation of investments and foreign currency transactions 164,498 250,750 60,529 221,576 11,552 4,168 - ----------------------------------------------------------------------------------------------------- ------------------------- Net increase in net assets resulting from operations 305,943 541,668 149,361 279,439 12,318 4,187 Distributions to Shareholders From: Net investment income (a) - (19,687) - (10,368) - - Net realized gain - (261,454) - (24,680) - - - ------------------------------------------------------------------------------------------------------------------------------- Total distributions to shareholders - (281,141) - (35,048) - - From Fund Share Transactions: Reinvestment of dividends and capital gain distributions - 257,125 - 33,033 - - Proceeds from other shares sold 321,603 358,315 227,585 386,765 57,800 49,912 - ------------------------------------------------------------------------------------------------------------------------------- 321,603 615,440 227,585 419,798 57,800 49,912 Payments for shares redeemed (248,849) (432,510) (179,452) (167,890) (9,513) (1,014) - ------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets from Fund share transactions 72,754 182,930 48,133 251,908 48,287 48,898 - ------------------------------------------------------------------------------------------------------------------------------- Total increase in net assets 378,697 443,457 197,494 496,299 60,605 53,085 Net Assets: Beginning of period 2,842,052 2,398,595 1,772,543 1,276,244 53,085 - End of period (b) $3,220,749 $2,842,052 $1,970,037 $1,772,543 $113,690 $53,085 ================================================================================================================================
(a) Includes distributions of unrealized PFIC gains of $2,671 for Acorn Fund and $3,813 for Acorn International in 1996. (b) Includes undistributed net investment income (loss) of $13,031 at June 30, 1997 and $2,578 at December 31, 1996 for Acorn Fund, $12,351 at June 30, 1997 and $2,144 at December 31, 1996 for Acorn International and $(195) at June 30, 1997 and $0 at December 31, 1996 for Acorn USA. See accompanying notes to financial statements 35 Acorn Family of Funds >Financial Highlights (unaudited)
6 months Years Acorn Fund ended 6/30, ended 12/31, - ---------------------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period 1997 1996 Net Asset Value, beginning of period $15.04 $13.60 Income From Investment Operations Net investment income .05 .09 Net realized and unrealized gain (loss) on investments, foreign currency and futures 1.56 2.93 - ---------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.61 3.02 Less Distributions Dividends from net investment income -- (.11) Distributions from net realized and unrealized gains reportable for federal income taxes -- (1.47) - ---------------------------------------------------------------------------------------------------------------------------- Total distributions -- (1.58) - ---------------------------------------------------------------------------------------------------------------------------- Net Asset Value, end of period $16.65 $15.04 ============================================================================================================================ Total Return 10.7% 22.6% Ratios/Supplemental Data Ratio of expenses to average net assets .57%* .57% Ratio of net investment income to average net assets .72%* .53% Portfolio turnover rate 22%* 33% Net assets at end of period (in millions) $3,221 $2,842
6 months Years Acorn USA ended 6/30, ended 12/31, - ----------------------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period 1997 1996 Net Asset Value, beginning of period $19.61 $16.59 Income From Investment Operations Net investment income (loss) .11 .13 Net realized and unrealized gain (loss) on investments and foreign currency 1.50 3.29 - ----------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.61 3.42 Less Distributions Dividends from net investment income -- (.12) Distributions from net realized and unrealized gains reportable for federal income taxes -- (.28) - ----------------------------------------------------------------------------------------------------------------------------- Total distributions -- (.40) - ----------------------------------------------------------------------------------------------------------------------------- Net Asset Value, end of period $21.22 $19.61 ============================================================================================================================= Total Return 8.2% 20.7% Ratios/Supplemental Data Ratio of expenses to average net assets 1.14%* 1.17% Ratio of net investment income (loss) to average net assets 1.09%* .51% Portfolio turnover rate 33%* 34% Net assets at end of period (in millions) $1,970 $1,773
6 months Inception 9/4 Acorn International ended 6/30, through 12/31, - ------------------------------------------------------------------------------------------------------------------------------ For a share outstanding throughout each period 1997 1996 Net Asset Value, beginning of period $11.65 $10.00 Income From Investment Operations Net investment loss (e) (.03) (.02) Net realized and unrealized gain on investments 1.70 1.67 - ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 1.67 1.65 - ------------------------------------------------------------------------------------------------------------------------------ Net Asset Value, end of period $13.32 $11.65 ============================================================================================================================== Total Return 14.3% 16.5% Ratios/Supplemental Data Ratio of expenses to average net assets (d) 1.41%* 1.85%* Ratio of net investment loss to average net assets (.46%)* (.99%)* Portfolio turnover rate 31%* 20%* Net assets at end of period (in millions) $114 $53
36
- ------------------------------------------------------------------------------------------------------- 1995 1994 1993 1992 1991 1990 1989 1988 $12.24 $13.95 $11.06 $ 9.32 $ 6.51 $ 8.58 $7.27 $6.48 .11 .06 .04 .07 .11 .12 .13 .12 2.42 (1.10) 3.50 2.16 2.95 (1.62) 1.65 1.47 - ------------------------------------------------------------------------------------------------------- 2.53 (1.04) 3.54 2.23 3.06 (1.50) 1.78 1.59 (.09) (.11) (.06) (.08) (.10) (.13) (.11) (.16) (1.08) (.56) (.59) (.41) (.15) (.44) (.36) (.64) - ------------------------------------------------------------------------------------------------------- (1.17) (.67) (.65) (.49) (.25) (.57) (.47) (.80) - ------------------------------------------------------------------------------------------------------- $13.60 $12.24 $13.95 $11.06 $ 9.32 $ 6.51 $8.58 $7.27 ======================================================================================================= 20.8% (7.4%) 32.3% 24.2% 47.3% (17.5% ) 24.8% 24.8% .57% .62% .65% .67% .72% .82% .73% .80% .89% .55% .30% .72% 1.30% 1.60% 1.59% 1.52% 29% 18% 20% 25% 25% 36% 26% 36% $2,399 $1,983 $2,035 $1,449 $1,150 $ 767 $ 855 $ 563 Inception 9/23 through 12/31, - ------------------------------------------------ 1995 1994 1993 1992 $15.24 $15.94 $10.69 $10.00 .16 .07 .00 (.03) 1.20 (.67) 5.25 .72 - ------------------------------------------------ 1.36 (.60) 5.25 .69 -- -- -- -- (.01) (.10) -- -- - ------------------------------------------------ (.01) (.10) -- -- - ------------------------------------------------ $16.59 $15.24 $15.94 $10.69 ================================================ 8.9% (3.8%) 49.1% 6.9% 1.22% 1.24% 1.21% 2.35%* .90% .48% .06% (1.37%)* 26% 20% 19% 20%* $1,276 $1,363 $ 907 $ 30
(a) Average commission rate paid per share on Acorn Fund stock transactions for the six months ended June 30, 1997 and for the year ended December 31, 1996 was $.0086 and $.0194, respectively. (b) Average commission rate paid per share on Acorn International stock transactions for six months ended June 30, 1997 and for the year ended December 31, 1996 was $.0087 and $.0008, respectively. (c) Average commission rate paid per share on Acorn USA stock transactions for the six months ended June 30, 1997 and for the period ended December 31, 1996 was $.0584 and $.0567, respectively. (d) In accordance with a requirement by the Securities and Exchange Commission, the Acorn USA ratio reflects gross custodian fees. This ratio net of custodian fees paid indirectly would have been 1.40% for the six months ended June 30, 1997 and 1.79% for the period ended December 31, 1996. (e) Net investment loss per share was based upon the average shares outstanding during each period. * Annualized See accompanying notes to financial statements 37 Acorn Family of Funds >Notes to Financial Statements (unaudited) 1. Nature of Operations Acorn Fund, Acorn International and Acorn USA (the "Funds") are series of Acorn Investment Trust (the "Trust"), an open-end management investment company organized as a Massachusetts business trust. The investment objective of each Fund is to seek long-term growth of capital. 2. Significant Accounting Policies >Security valuation Investments are stated at current value. Securities traded on securities exchanges or in over-the-counter markets in which transaction prices are reported are valued at the last sales price at the time of valuation. Securities for which there are no reported sales on the valuation date are valued at the mean of the latest bid and ask quotation or, if there is no ask quotation, at the most recent bid quotation. Money market instruments having a maturity of 60 days or less from the valuation date are valued on an amortized cost basis. Securities for which quotations are not available and any other assets are valued at a fair value as determined in good faith by the Board of Trustees. >Foreign currency translations Values of investments denominated in foreign currencies are converted into U.S. dollars using the spot market rate of exchange at the time of valuation. Purchases and sales of investments and dividend and interest income are translated into U.S. dollars using the spot market rate of exchange prevailing on the respective dates of such transactions. The gain or loss resulting from changes in foreign exchange rates is included with net realized and unrealized gain or loss from investments, as appropriate. >Security transactions and investment income Security transactions are accounted for on the trade date (date the order to buy or sell is executed) and dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as soon as the information is available to the Funds. Interest income is recorded on the accrual basis and includes amortization of discounts on money market instruments and long term debt instruments when required for federal income tax purposes. Realized gains and losses from security transactions are reported on an identified cost basis. For Acorn Fund and for Acorn USA, net realized gains include distributions of realized gains from other investment companies of $1,395,520 and $21,360 in 1996, respectively. >Financial instruments Each Fund may purchase or sell exchange-traded financial futures contracts, which are contracts that obligate that Fund to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Funds enter into such contracts to hedge a portion of their portfolio. Gains and losses are reflected as "Net Realized Gain (Loss) on Futures" in the Statements of Operations. Additionally, each Fund may engage in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell foreign currencies. The Statements of Operations reflect gains and losses as realized for closed forward foreign currency contracts and unrealized for open contracts. A Fund bears the market risk that arises from changes in the value of financial instruments and securities indices (futures contracts) or from changes in foreign currency rates (forward foreign currency contracts) and the credit risk should a counterparty fail to perform under such contracts. There were no forward foreign currency contracts open at June 30, 1997 in Acorn Fund. Acorn Fund had the following open futures contracts at June 30, 1997:
Number of Contract Expiration Unrealized Contracts Value (000) Date Loss (000) - --------------------------------------------------------------------------------------------- S & P 500 Stock Index Futures (Short) 120 $53,415 9/97 $353
38 Acorn Family of Funds .Notes to Financial Statements There were no futures contracts open at June 30, 1997 in Acorn International. Acorn International entered into forward contracts to sell foreign currency, settling July 21 through September 26, 1997, as described below:
U.S.Dollar Unrealized Foreign Amount Currency Proceeds (000) Gain (000) - ------------------------------------------------------------------- 69,000,000 Swiss Franc $48,499 $ 665 60,000,000 German Mark $35,010 353 200,000,000 French Franc $34,581 313 200,000,000 Hong Kong Dollar $25,817 8 47,405,280,000 Italian Lira $28,077 287 9,135,000,000 Japanese Yen $81,457 590 452,000,000 Swedish Krone $58,904 238 ------ $2,454
Acorn USA did not enter into any futures or forward foreign currency contracts during the period ended June 30, 1997. .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. Dividends payable to shareholders are recorded by the Funds on the ex- dividend date. Acorn Fund and Acorn International have elected to mark-to-market their investments in Passive Foreign Investment Companies ("PFICs") for Federal income tax purposes. In accordance with this election, Acorn Fund recognized unrealized appreciation on PFICs of $2,671,000 in 1996. Cumulative net unrealized appreciation recognized in prior years on PFICs sold amounted to $7,124,000 and distributions to shareholders from net realized gains relating to PFICs include $2,671,000 in 1996. In accordance with its PFIC election, for the year ended December 31, 1996, Acorn International recognized unrealized appreciation on PFICs of $3,813,000. The cumulative net unrealized appreciation recognized in prior years on PFICs sold in 1996 amounted to $5,306,000. Distributions to shareholders from net investment income relating to PFICs were $3,813,000 in 1996. Prior to 1996, the Fund recognized unrealized PFIC gains of $11,427,000, which were offset by accumulated net realized losses on foreign currency transactions and therefore were not required to be distributed. Distributions relating to PFICs are treated as ordinary income for Federal income tax purposes. 3. Transactions With Affiliates The Funds' investment advisor, Wanger Asset Management, L.P. ("WAM") furnishes continuing investment supervision to the Funds and is responsible for the overall management of the Funds' business affairs. Under the Funds' investment management agreements with WAM, each fund pays the Advisor an annual management fee, payable monthly, at the rates set forth below. The fees for Acorn Fund and Acorn International are determined at the beginning of each calendar quarter and the fees for Acorn USA are determined and accrued daily:
Acorn Fund - ------------------------------------------------------------------- Net asset value: For the first $100 million .75% Next $1.4 billion .50% Net assets in excess of $1.5 billion .40% Acorn International - ------------------------------------------------------------------- Net asset value: For the first $100 million 1.25% Next $400 million 1.00% Net assets in excess of $500 million .80% Acorn USA - ------------------------------------------------------------------- Net asset value: For the first $200 million 1.00% Net assets in excess of $200 million .95%
39 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 $85,845 in 1997 and $115,700 in 1996; Acorn International paid $56,745 in 1997 and $99,700 in 1996 and Acorn USA paid $2,910 in 1997 and $600 in 1996 to trustees not affiliated with WAM. Included in these fees are amounts paid to the Chairman of the Board of $25,075 and $43,200 by Acorn Fund and $16,575 and $37,600 by Acorn International for the six months ended June 30, 1997 and the year ended December 31, 1996, respectively, and $850 and $200 by Acorn USA for the six months ended June 30, 1997 and the period ended December 31, 1996, 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 though September, 1997. WAM advanced Acorn USA $107,000 in connection with the organization and initial registration of the Fund. These costs are being amortized and reimbursed to WAM over the period September, 1996 though August, 2001. WAM Brokerage Services, L.L.C., a wholly-owned subsidiary of WAM, is the distributor of the Funds' shares and receives no compensation for its services. 4. Fund Share Transactions Proceeds and payments on Fund shares as shown in the Statements of Changes in Net Assets are in respect of the following number of shares:
6 months Acorn Fund ended 6/30, - ------------------------------------------------------------------------------ (in thousands) 1997 1996 Shares sold 20,790 23,744 Shares issued in reinvestment of dividend and capital gain distributions -- 17,382 ------------------ 20,790 41,126 Less shares redeemed 16,212 28,523 ------------------ Net increase in shares outstanding 4,578 12,603 ==============================================================================
6 months Acorn International ended 6/30, - ------------------------------------------------------------------------------ (in thousands) 1997 1996 Shares sold 11,286 20,757 Shares issued in reinvestment of dividend and capital gain distributions -- 1,708 ------------------ 11,286 22,465 Less shares redeemed 8,831 8,994 ------------------ Net increase in shares outstanding 2,455 13,471 ==============================================================================
6 months Acorn USA ended 6/30, - ------------------------------------------------------------------------------ (in thousands) 1997 1996 Shares sold 4,781 4,647 Less shares redeemed 799 91 ------------------ Net increase in shares outstanding 3,982 4,556 ==============================================================================
5. Investment Transactions
6 months Acorn Fund ended 6/30, - ----------------------------------------------------------------------------- (in thousands) 1997 1996 Investment securities (excluding money market instruments): Purchases $300,690 $862,321 Proceeds from sales 484,459 924,259
6 months Acorn International ended 6/30, - ------------------------------------------------------------------------------ (in thousands) 1997 1996 Investment securities (excluding money market instruments): Purchases $385,436 $612,766 Proceeds from sales 295,545 498,234
6 months Acorn USA ended 6/30, - ------------------------------------------------------------------------------ (in thousands) 1997 1996 Investment securities (excluding money market instruments): Purchases $ 57,960 $ 45,708 Proceeds from sales 12,274 1,733 ==============================================================================
40 The Acorn - ----------------------- Family of Funds .Trustees Irving B. Harris Chairman James H. Lorie Vice Chairman Leo A. Guthart Jerome Kahn, Jr. David C. Kleinman Charles P. McQuaid Roger S. Meier Adolph Meyer, Jr. Ralph Wanger .Officers Ralph Wanger President Charles P. McQuaid Senior Vice President Terence M. Hogan Vice President Leah J. Zell Vice President Robert A. Mohn Vice President Marcel P. Houtzager Vice President Merrillyn J. Kosier Vice President and Secretary Bruce H. Lauer Vice President and Treasurer Kenneth A. Kalina Assistant Treasurer .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: acorn@wanger.com web site: www.wanger.com .Distributor WAM Brokerage Services, L.L.C. P.O. Box 8502 Boston, Massachusetts 02266-8502 .Transfer Agent, Dividend Disbursing Agent and Custodian State Street Bank and Trust Company Attention: Acorn Family of Funds P.O. Box 8502 Boston, Massachusetts 02266-8502 1-800-962-1585 .Legal Counsel Bell, Boyd & Lloyd Chicago, Illinois This report, including the unaudited schedules of investments 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. Answer to Do You Remember What Year It Was?: 1975 41 The Acorn - ----------------------- Family of Funds WAM Brokerage Services, L.L.C. P.O. Box 8502 Boston, MA 02266-8502 -----END PRIVACY-ENHANCED MESSAGE-----