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