<PAGE>
The Acorn Family of Funds
Annual Report
------------------------------
December 31, 1996
Managed by Wanger Asset Management, L.P.
<PAGE>
<TABLE>
<CAPTION>
Acorn Family of Funds Annual Report 1996
<S> <C>
.Table of Contents
Squirrel Chatter
.Excerpt from A Zebra
in Lion Country 1
Acorn USA
.In a Nutshell 2
.Performance at a Glance 3
.Statement of Investments 10
Acorn Fund
.In a Nutshell 2
.Performance at a Glance 5
.Major Portfolio Changes 12
.Statement of Investments 14
.Foreign Portfolio
Diversification 20
Acorn International
.In a Nutshell 6
.Performance at a Glance 7
.Major Portfolio Changes 21
.Statement of Investments 23
.Portfolio Diversification 30
Acorn Family of Funds
.Tax News 3
.The Scarlet A Awards 8
.Reflections on the Year 9
.Report of Independent
Auditors 31
.Financial Highlights 32
.Statements of Assets 34
and Liabilities
.Statements of Operations 35
.Statements of Changes in 36
Net Assets
.Notes to Financial 37
Statements
</TABLE>
Press Recognition
.On February 3, 1997, BusinessWeek ran a cover story entitled, "The
Best Mutual Funds". A prominent financial planner recommended Acorn
International for his model portfolio.
In the same issue, Acorn Fund was one of three small-cap growth funds
featured in a comparison of five-year risk-adjusted returns.
.A few days later, on February 10, 1997, Forbes printed a remarkably
similar story entitled, "How to Build a Mutual Fund Portfolio." Acorn
Fund was one of the four recommended "good buys" among small-company
funds.
<PAGE>
.Squirrel Chatter
People ought to invest at least a minimum in Acorn Fund if only to get hold of
Acorn's quarterly reports and read the president's tale.....
- --Mutual Funds Magazine, July 1996
A Zebra in Lion Country, by Ralph Wanger, is due out in bookstores in April.
Published by Simon & Schuster, this book is a witty survival guide to investing.
It also features some of Ralph Wanger's letters to shareholders which investors
have enjoyed reading over the years. An excerpt from his new book follows:
Every bad idea starts from a good idea. We all know this from our own
experience. We go to a party and have a glass of champagne. Good idea. We feel
better, more relaxed. The party is now more interesting, the toasts more lively,
the girls prettier, the dancing more fun. So we have a second glass of
champagne. Another good idea. The jokes now have gone from humorous to
hilarious, the people you're meeting are the most interesting and glamorous
you've ever known, and the dancing is wild and you've never been better at it.
But after the third glass, and the fourth... well, what started as a good idea
turns into a very bad idea, with your head already beginning to pound from a
headache you know will terminate in a humdinger of a hangover.
It happens all the time in the stock market. Technology stocks have been the
rage for a long time, albeit with some periods of "consolidation." The boom
started with a very good idea. American technology leads the world. Personal
computers and the software to run them, and other electronic and communications
devices, have become inexpensive and relatively easy to use, and we all buy
them. Companies like Microsoft, Motorola, Intel are well-run - indeed fabulous -
companies. All this is correct, a great investment idea. The people who were in
early have made a lot of money.
But as the party lengthens, the stocks get taken over by people who don't
particularly understand what's happening; they are just playing a trend. New
companies are invented to meet their demands. The securities industry, you know,
is not a service industry. It is a manufacturing industry. If you want a stock,
Wall Street will make it for you. Any business, any kind you want. Recently, the
Internet being the rage, the investment bankers have worked overtime creating a
stream of IPOs to meet the demand. And people love them, to judge by their P/Es,
some of which have soared into the triple-digit stratosphere.
Remember back in the early '80's when the hard disk drive for computers was
invented? It was an important, crucial invention, and investors were eager to be
part of this technology. More than 70 disk drive companies were formed and their
stocks were sold to the public. Each company had to get 20 percent of the market
share to survive. For some reason, they didn't all do it.
Anything can get overdone. In the financial world, things get taken to
extremes all the time, like the tulip scandal of 1637. That started with a good
idea. The tulip was a terrific invention. The flower had not previously been
seen in Europe, and it was a great hit, and new varieties and colors increased
its popularity. There was nothing wrong with the idea. But after a few years
people started selling tulip bulbs for hundreds of thousands of dollars apiece,
if they were of a rare variety, and a good idea went to speculative madness.
The tulip was a good idea, disk drives were a good idea, the Internet is a
good idea. They have to be good ideas or they would not become widely popular.
Come up with a concept that's patently silly or harmful and people won't want
it. So, only a good idea can become so popular that it becomes a bad idea.
1
<PAGE>
Acorn USA
.In a Nutshell
Acorn USA's first baby step was a grown-up leap. From launch date (September 4,
1996) through year-end, your Fund rocketed 16.5%, nearly double the return of
the small-cap Russell 2000 index. Nobody (including us) can maintain that pace,
but we're certainly off to a great start.
Acorn USA's stellar performance was not the result of any single stock or
sector concentration. Rather, our top stocks were a multi-industrial group,
exhibiting the virtue of portfolio diversification.
Our best performing energy stock was NGC Corp., a natural gas broker
benefiting from buoyant gas prices and utility deregulation. Technology was
represented by ACT Manufacturing, an electronics assembler with a bulging
backlog of new customers. Health care winner was Steris, a sterilization
equipment company recovering from acquisition indigestion. Best banker was Coast
Savings, caught in the California S&L merger wave. Our growth utility (no
oxymoron) CalEnergy benefited from a strong jolt caused by its recent
acquisition of a UK electric company.
We even cashed in on some Internet hysteria. Our top tech stock was American
Business Information (ABII), a collector and vendor of financial data on small
businesses. The stock crashed mid-year on overblown fears that free Internet
data sources would send ABII's business the way of the buggy whip. Funny
thing... the over-hyped Internet stocks got the whipping, while our Internet
'victim' soared 60%.
Be 1997 bull or bear or somewhere in between, we're sticking to the same
stock-by-stock fundamentals- based investment style that has so far proved very
valuable getting Acorn USA off to a good start.
/s/ Robert A. Mohn
Robert A. Mohn
Portfolio Manager
Fund Assets as of 12/31/96: $53.1 million
.Acorn USA Top 10 Holdings
<TABLE>
<CAPTION>
<S> <C>
CalEnergy 8.2%
Power Plants
NGC 6.1%
Gas Processing/Marketing
Coast Savings 4.8%
California Savings & Loan
GeoScience 4.7%
Offshore Seismic Equipment
Wackenhut 4.5%
Prison Management
Respironics 4.2%
Sleep Apnea Products
Lincare Holdings 3.7%
Home Health Care Services
World Color Press 3.6%
Printing
Data Transmission 3.6%
Data Services for Farmers
Seagull Energy 3.6%
Oil/Gas Producer
</TABLE>
The Fund's top 10 holdings and portfolio diversification vary with changes
in portfolio investments. See the Statement of Investments for a complete list
of the Fund's holdings.
Fund
- -----------------------------------
facts
Our e-mail address has changed!
The new address is [email protected]
Find out what's new at Acorn. Visit our interactive web site at www.wanger.com
2
<PAGE>
.Performance at a Glance
Acorn USA Portfolio Diversification
.as a % of net assets, as of 12/31/96
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
Information 18.3%
Health Care 12.6%
Consumer Goods/Services 6.0%
Finance 9.0%
Industrial Goods/Services 17.9%
Energy/Minerals 27.1%
Cash 9.1%
------
100.0%
</TABLE>
Acorn Family of Funds
.Tax News
Residents of Florida and Pennsylvania may be required to pay an intangibles tax
or a personal property tax on a portion of the year-end value of any of the
Acorn funds. The taxable NAVs for each Acorn fund are listed below:
<TABLE>
<CAPTION>
Taxable NAVs
----------------------------------------
<S> <C> <C> <C>
Acorn
Acorn Fund International Acorn USA
FL Intangibles Tax $14.99 $19.61 $11.65
PA Personal Property Tax $11.94 $17.99 $ 7.27
</TABLE>
<TABLE>
<CAPTION>
Relative Performance
- -----------------------------------------------------------------
<S> <C> <C>
4th quarter since inception
1996 (9/4/96)
Acorn USA 8.7% 16.5%
Russell 2000 5.2% 9.0%
S&P MidCap 400 6.1% 10.7%
S&P 500 8.3% 13.8%
Dow-Jones 10.2% 15.7%
</TABLE>
The Russell 2000 is formed by taking 3,000 companies and then eliminating the
largest 1,000 leaving a good small company index. The S&P MidCap 400 is a market
value-weighted index of 400 stocks that are in the next tier down from the S&P
500. The S&P 500 is a broad market-weighted average, still blue-chip dominated.
The Dow Jones Industrial Average includes 30 large companies. The beginning
value used to compute the Dow Jones "since inception" return in the chart above
is as of 8/31/96. All indexes are unmanaged and returns include reinvested
dividends.
Net Asset Value Per Share 12/31/96: $11.65
A
I
U
IRA
- ---------------------------------------------------
Reminder
Remember, you have until April 15, 1997 to make
your 1996 IRA contribution. For an IRA booklet,
please call 1-800-9-ACORN-9
(1-800-922-6769).
3
<PAGE>
Acorn Fund
.In a Nutshell
Acorn Fund went up 4.2% in the fourth quarter. That makes eight consecutive up
quarters. 1996 was a good year for us. Our gain of 22.6% is a fine absolute
result, and ahead of the small-cap market averages (S&P MidCap 400, Russell
2000, Lipper Small Company Growth Funds Index) in the relative performance table
on page 5. Our foreign stocks matched our strong domestic results. Our results
are analyzed in detail on page 9.
Our best stocks in the fourth quarter included some long-term holdings and
some new names. We first purchased Expeditors International way back in 1987 for
$3.00. The airfreight forwarder flew high for us, soaring 30 percent and
boosting the Fund $6 million.
ACT Manufacturing gave us a wonderful 46.5%+ performance in the quarter.
This contract assembler serves the burgeoning telecommunications industry, and
it built a $4.8 million gain.
We got a tingle from American Power Conversion, which gained 86% in the
quarter. APC makes back-up power supplies for computers. Our summer purchase
sparked a fast $4 million fourth quarter gain.
U.S. blue chip companies have had an awesome run over the last two years.
Small capitalization stocks are up, but not nearly as much. Over the long-run,
small company stocks have done better than large-cap stocks in the past. We
can't predict the future, but we think the reasons for that superior long-term
performance are still true. We're patient, long-term investors, and we're still
finding fine companies that have stocks selling at prices we think are fair.
/s/ Charles P. McQuaid /s/ Terence M. Hogan
Charles P. McQuaid Terence M. Hogan
Co-Portfolio Manager Co-Portfolio Manager
<TABLE>
<CAPTION>
Fund Assets as of 12/31/96: $2,842.1 million
.Acorn Fund Top 10 Holdings
<S> <C>
ADVANTA 1.9%
Credit Cards
Harley Davidson 1.8%
Recreational Vehicles Manufacturer
Carnival 1.6%
Cruise Ship Line
Liberty Media 1.6%
CATVProgramming
AES Corporation 1.6%
Global Power Producer
Lincare Holdings 1.4%
Home Health Care Services
Thermo Electron 1.4%
Energy Systems/Processing Equipment
First USA 1.3%
Credit Cards
Seagull Energy 1.2%
Oil/Gas Producer
Borders 1.2%
Bookstores
</TABLE>
The Fund's top 10 holdings and portfolio diversification vary with changes
in portfolio investments. See the Statement of Investments for a complete list
of the Fund's holdings, including those described under "In a Nutshell."
<TABLE>
<CAPTION>
Fund
- ----------------------------------------------------------------
facts
Full Year Distributions
----------------------------------------
<S> <C> <C> <C>
Acorn Fund Acorn Int'l Acorn USA
Ordinary Income $0.11 $0.12 --
Short-Term Capital Gain $0.13 - --
Long-Term Capital Gain $1.34 $0.28 --
Total Per Share in 1996: $1.58 $0.40 --
</TABLE>
4
<PAGE>
.Performance at a Glance
The Value of a $10,000 Investment in Acorn Fund
.June 10, 1970 through December 31, 1996
[GRAPH APPEARS HERE]
Average Annual Total Return
- ---------------------------------------------------
1 Year 5 Years 10 Years Life of Fund
22.6% 17.6% 16.1% 16.7%
<TABLE>
<CAPTION>
Acorn Fund Mountain Chart Plot Points
<S> <C> <C>
Date Acorn Fund ($) S & P ($)
- ---- -------------- ---------
1970 10,000 10,000
1971 17,828 14,490
1972 19,368 17,242
1973 14,765 14,709
1974 10,691 10,816
1975 13,945 14,842
1976 23,045 18,394
1977 27,168 17,077
1978 31,777 18,200
1979 47,790 21,586
1980 62,594 28,602
1981 58,005 27,195
1982 68,208 33,054
1983 85,389 40,510
1984 89,045 43,051
1985 117,142 56,710
1986 136,843 67,295
1987 142,923 70,828
1988 178,370 82,591
1989 222,681 108,761
1990 183,674 105,386
1991 270,641 137,492
1992 336,210 147,928
1993 444,889 162,882
1994 411,750 165,032
1995 497,407 227,047
9/30/96 584,766 257,697
12/31/96 609,569 279,177
Acorn Fund S&P 500
- ---- -------------- ---------
$609,569 $279,177
</TABLE>
This graph compares the results of $10,000 invested in Acorn Fund on June 10,
1970 (the date Fund shares were first offered to the public), with all dividends
and capital gains reinvested, with the Standard & Poor's 500 Stock Index with
dividends reinvested (source: Salomon Brothers Inc Stock Facts and Shaw Data
Services, Inc.). Past performance does not guarantee future results. The
investment return and principal value of an investment in the Fund will
fluctuate so that Fund shares, when redeemed, may be worth more or less than
their original cost.
Acorn Fund Portfolio Diversification
.as a % of net assets, as of 12/31/96
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
Information 17.9%
Health Care 9.1%
Consumer Goods/Services 9.1%
Finance 15.8%
Industrial Goods/Services 10.6%
Energy/Minerals 10.4%
Real Estate 2.8%
Foreign 22.3%
Cash 2.0%
------
100.0%
</TABLE>
<TABLE>
<CAPTION>
Relative Performance
- ---------------------------------------------------
4th quarter Last 12 mos.
1996
<S> <C> <C>
Acorn Fund 4.2% 22.6%
Dow-Jones 10.2% 28.9%
S&P 500 8.3% 23.0%
S&P MidCap 400 6.1% 19.2%
Russell 2000 5.2% 16.5%
Lipper Small Company
Growth Funds Index -0.9% 14.5%
</TABLE>
The Dow Jones Industrial Average includes 30 large companies. The S&P 500 is a
broad market-weighted average, still blue-chip dominated. The S&P MidCap 400 is
a market value-weighted index of 400 stocks that are in the next tier down from
the S&P 500. The Russell 2000 is formed by taking 3,000 companies and then
eliminating the largest 1,000 leaving a good small company index. The Lipper
Small Company Growth Funds Index is composed of the 30 largest small company
growth funds tracked by Lipper Analytical Services. All indexes are unmanaged
and returns include reinvested dividends.
Net Asset Value Per Share 12/31/96: $15.04
- ------------------------------------------
5
<PAGE>
Acorn International
.In a Nutshell
Markets stayed on trend in the fourth quarter. The Goldilocks theory of a U.S.
economy neither "too hot nor too cold" powered a strong rally here. Overseas,
Europe continued to outperform and Asia to underperform. The Fund made the most
money in Sweden, Finland and the U.K., and lost the most in Japan. Acorn
International rose 4.1% over the three-month period, 1.3% ahead of our small-cap
peers, as reported by Lipper Analytical Services.
We finished 1996 with an excellent gain of 20.7%. We take special pride in
returning 7.4% more than the average international small-cap fund and 8.9% more
than the average international large-cap fund, as reported by Lipper.
Our investment philosophy is to find good companies and hold them long-term.
This works. WM Data is a shining example. It was the biggest dollar winner in
the portfolio for the second year in a row, earning our shareholders $32.4
million in 1996 on top of a $24.7 million gain in 1995. It also helped us define
an outsourcing theme which we used to guide us to other names. Of our top five
winners in 1996, three were European computer service companies.
The U.S. economy has been the strongest major economy in the world in recent
years, and many foreign economies have been in recession. They will catch up. As
the world economy improves, the earnings of companies in our portfolio (who have
stayed profitable when times were tough) should flourish. Happy New Year!
/s/ Leah Joy Zell
Leah Joy Zell
Co-Portfolio Manager
<TABLE>
<CAPTION>
<S> <C> <C>
Fund Assets as of 12/31/96: $1,772.5 million
.Acorn International Top 10 Holdings
WM Data Sweden 3.4%
Computer Services/Consulting
T T Tieto Finland 2.4%
Computer Services/Consulting
Rhoen Klinikum Germany 1.5%
Hospital Management
Fresenius Germany 1.4%
Dialysis Equipment/Solutions
Getronics Netherlands 1.4%
Computer Consulting
Korea Mobile Telecom Korea 1.2%
Mobile Communications
Serco Group United Kingdom 1.2%
Facilities Management
Hennes & Mauritz Sweden 1.2%
Apparel Stores
Capita Group United Kingdom 0.9%
Outsourcing Government Services
Oriflame International United Kingdom 0.9%
Natural Cosmetics Sold Door-to-Door
</TABLE>
The Fund's top 10 holdings and portfolio diversification vary with changes
in portfolio investments. See the Statement of Investments for a complete list
of the Fund's holdings, including those described under "In a Nutshell."
Fund
- ----------------------------------------
facts
Tax Forms 1099-DIV and 1099-B were mailed to shareholders in January with an
informative Tax Guide. The Tax Guide contains important information about
claiming a foreign tax credit/deduction (which is new for Acorn International
shareholders this year), the income attributable to U.S. Government
Obligations, and cost basis. If you did not receive your 1099(s), please call
1-800-962-1585 for a duplicate copy.
6
<PAGE>
.Performance at a Glance
The Value of a $10,000 Investment in Acorn International
.September 23, 1992 through December 31, 1996
[GRAPH APPEARS HERE]
Average Annual Total Return
- ----------------------------------
1 Year 3 Years Life of Fund
20.7% 8.1% 17.8%
<TABLE>
<CAPTION>
Acorn Fund Mountain Chart Plot Points
<S> <C> <C>
Date Acorn Int'l ($) EAFE ($)
- ---- --------------- --------
09/23/92 10,000 10,000
09/30/92 10,010 10,000
12/31/92 10,690 9,614
03/31/93 12,000 10,767
06/30/93 12,920 11,849
09/30/93 13,910 12,635
12/31/93 15,940 12,745
03/31/94 15,850 13,190
06/30/94 15,550 13,864
09/30/94 16,491 13,877
12/31/94 15,334 13,736
03/31/95 14,811 13,992
06/30/95 15,727 14,093
09/30/95 16,824 14,681
12/31/95 16,703 15,275
03/31/96 18,203 15,717
06/30/96 19,593 15,965
09/30/96 19,362 15,945
12/31/96 20,133 16,199
Acorn Fund EAFE
International
- ---- -------------- ---------
$20,133 $16,199
</TABLE>
This graph compares the results of $10,000 invested in Acorn International on
September 23, 1992 (the date the Fund began operations), with all dividends and
capital gains reinvested, with Morgan Stanley's Europe, Australia and Far East
Index (EAFE). The beginning value of EAFE is as of 9/30/92. Past performance
does not guarantee future results. The investment return and principal value of
an investment in the Fund will fluctuate so that Fund shares, when redeemed, may
be worth more or less than their original cost.
Acorn International Portfolio Diversification
.as a % of net assets, as of 12/31/96
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
Information 24.5%
Health Care 7.4%
Consumer Goods/Services 24.2%
Finance 17.8%
Industrial Goods/Services 10.1%
Energy/Minerals 5.7%
Real Estate 1.3%
Transportation 0.7%
Cash 8.3%
------
100.0%
</TABLE>
<TABLE>
<CAPTION>
Relative Performance
- ---------------------------------------------------------
4th quarter Last 12 mos.
1996
<S> <C> <C>
Acorn International 4.1% 20.7%
EAFE 1.6% 6.1%
Lipper International Small
Company Funds Average 2.8% 13.3%
Lipper International
Funds Average 3.9% 11.8%
</TABLE>
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 calculated from the performance of a group of small
company international funds, including Acorn International. For the 4th quarter
period above, the group consisted of 28 funds. For the 12-month period above,
the group consisted of 12 funds. The Lipper International Funds Average is an
average of 386 international funds tracked by Lipper Analytical Services. All
indexes are unmanaged and returns include reinvested dividends.
Net Asset Value Per Share 12/31/96: $19.61
- ------------------------------------------
7
<PAGE>
Acorn Family of Funds
.The Scarlet A Awards
Wanger Asset Management has 14 skilled investment professionals constantly
seeking great stocks. Our ideas come from numerous sources. We do a lot of work
to confirm the validity of a stock idea, whether it is initially suggested
internally or brought to us by one of our many friends in the brokerage
industry. The prestigious Scarlet A award goes to the original source of the
idea. The Acorn funds had lots of great stocks in 1996, so only spectacular
performers won this year. Each Scarlet A stock soared over 90% and earned our
shareholders over $9 million. No stock can grow like that forever (or even for
very long), but it's great while it lasts.
Acorn International Co-Portfolio Manager Leah Zell is our Stockholm stock
stalker, checking in at the Swedish capital twice a year. The international boom
in outsourcing continues to be one of our most successful themes, and WM Data
stands out as one of our best stocks. This company, a facilities management and
data processing organization, carried on its 1995 success and made Acorn
International $32 million and Acorn Fund $18.6 million by climbing 91% in 1996.
Mikael Randel of Carnegie Securities in Copenhagen wins a Scarlet A for the
second year in a row. He introduced Leah to the company back in 1993.
Our analysts watch for spinouts, which often outperform the market. Acorn
Fund Co-Portfolio Manager Terry Hogan saw K-Mart distributing its specialty
retail divisions. Borders Group, a bookstore chain, earned Acorn Fund $17.0
million as it rose 94%. The Scarlet A goes to Terry Hogan for finding this great
blue-light special. (If you want to help an Acorn company, buy your copy of A
Zebra in Lion Country at Borders or Walden.)
We often advocate a patient style of investing. Our willingness to wait for
other investors to recognize value paid off with AES Corporation. AES, a global
power producer, flickered modest returns for several years, but then surged 95%
in 1996, generating a $15.8 million profit for Acorn Fund. Terry Hogan first
purchased this stock in 1991 after learning of it from John Hatsopoulos,
President of long-time Acorn holding Thermo Electron. Thermo also invested in
AES. Scarlet A fans may recall that Thermo Electron appeared on last year's
winning list. John Hatsopoulos will receive the coveted Scarlet A this year.
The energy sector warmed our hearts and your wallets in 1996. Jason Selch,
WAM's oil and gas guru, identified United Meridian in 1996. The Houston-based
producer has particular expertise in 3-D seismic and off-shore finds, and has a
terrific acquisition record. UMC made $13.9 million for Acorn Fund as it gushed
199% last year. The Scarlet A goes to Hanifen Imhoff's Greg McMichael, who
delivered a great study of United Meridian to Jason. We also pay tribute to
Ralph Bard, an expert on oil and mining, who helped us over the years. Mr. Bard
passed away in late 1996.
Jason's second great energy stock was Atwood Oceanics, which provided a
$12.1 million profit - a 152% gain. Atwood operates off-shore drilling rigs. The
company benefited from rising day-rates for its rigs, which remain well below
replacement costs. Atwood was an old-time Acorn holding, dating back to 1990.
Mike Breard of Dominick and Dominick presented the idea originally. Mario
Cibelli of Robotti & Eng resold the intrinsic value of Atwood Oceanics to Jason,
who verified Atwood's attractive attributes and doubled our position. Many
thanks to both Mike Breard and Mario Cibelli, two more 1996 Scarlet A winners.
Still more wins in the oil service industry were Digicon, a U.S. company in
3-D seismic services, and Veritas, a Canadian company in the same business.
Digicon and Veritas merged to become Veritas DGC. The Scarlet A goes to Marshall
Adkins, now at Raymond James.
Finland is home to TT Tieto and Raision Tehtaat. TT Tieto is a fast-growing
computer services/consulting company. This year the stock jumped 160% and
brought Acorn International $26 million in profits. Raision Tehtaat is a potato
processing co-operative that also deals in paper and pulp specialty chemicals.
This stock provided an $18 million profit for Acorn International and a 373%
return in 1996. Scarlet A's for both of these great stock ideas go to Leah Zell.
Last but not least, we award our first-ever Scarlet A for astute stock
selling to Acorn USA Portfolio Manager, Robert Mohn. Rob followed Acorn Fund
holding, Mercury Finance. Last year, Mercury's profitable auto loan business
shifted into reverse. Rob didn't trust that the company could continue to meet
its 20% earnings growth pledge. He began selling the stock in 1996 and
completely closed out the position in early
8
<PAGE>
January 1997. Soon after, Mercury Finance's CEO resigned as the company publicly
admitted to fraudulent earnings statements. Mercury's stock plummeted from $15
to $2 overnight, and now the company is fighting to avoid bankruptcy. Rob's
savvy decision saved Acorn shareholders $18 million. Congratulations to all our
Scarlet A winners.
.Reflections on the Year
The "In a Nutshell" section featured in every quarterly shareholder report
provides a detailed analysis of your funds' performance for the preceding 3
months. We encourage you to read these performance summaries written by your Co-
Portfolio Managers. With this report, we have added to these summaries by
reflecting on other factors that contributed to your funds' outstanding
performance for the full year.
Acorn Fund
- --------------------------------------------------------------------------
What contributed to your Fund's performance in 1996? Early in the year, we
recognized the potential in the energy sector so we emphasized this group. The
commitment paid off. Our oil and gas stocks exploded, up 69% for the year.
Perhaps next time you have to pay $1.68 for a gallon of gasoline, you will feel
better knowing that you own some oil wells.
Our 20 largest holdings were up an average of 29%. These positions represent
companies in a number of industries but all share a common factor - they are
leaders in their field. Many of the stocks you will recognize, as we have owned
them for some time - Harley Davidson, Borders Group and Carnival. Our 20 largest
holdings comprised 25% of the total assets in the fund at year-end. Since our
biggest positions had above-average results, the Fund as a whole did well.
Stock-picking made a difference. Acorn Fund's 20 top-performing stocks were
up a whopping 91% on average and made the Fund $249 million. Acorn Fund is
highly diversified across companies and industries. The benefit of
diversification is to minimize the impact of individual underperforming stocks
(although it also limits the total effect of top performers).
With over 350 stocks in the portfolio, there will always be some losers.
This year, our 20 worst-performing stocks were down an average of 35%, costing
the portfolio $90 million. But as you can see from our overall 22.6% return,
superior stock selection and diversification paid off this year.
Acorn International
- -----------------------------------------------------------------------------
There were four key factors that influenced Acorn International's total twelve-
month return - stock selection, country allocation, local market returns and
currency. The following summary explains where we achieved our outstanding
performance in 1996:
<TABLE>
<CAPTION>
<S> <C>
Good stock picking + 9.0%
Weighting markets correctly + 3.2
Gains in local markets +11.9
Currency - 3.4
-------
+20.7%
</TABLE>
Acorn International's 20 top-performing stocks were up an astonishing 118%
on average, and made the Fund $204 million. Big winners included WM Data, TT
Tieto and Getronics. Our top performers represent a number of industries, but
these three companies are European computer consulting firms. By comparison, our
20 worst-performing stocks were down an average of 40%, costing the portfolio
$73 million.
We gained an advantage over EAFE by overweighting strong markets like
Sweden, Finland and the UK, and underweighting weak markets like Japan. This
contributed a full three percentage points to your Fund's total 20.7% return.
Your Fund also benefited from healthy stock markets overseas. Approximately
half of the total return was attributable to country stock market performance.
The last factor that impacted your Fund's total return was currency. We
purchase international stocks so we must consider the value of the U.S. dollar
in relation to other currencies. This past year, the dollar's strength resulted
in a currency loss on the portfolio of 3.4%.
As you can see, investing overseas is complicated but our 20.7% gain in 1996
was well worth the effort.
9
<PAGE>
Acorn USA
>Statement of Investments December 31, 1996
Number of Shares Value (000)
- ---------------------------------------------------------
Common Stocks: 90.9%
- ---------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Information: 18.3%
>Broadcasting/CATV: 1.8%
39,000 C-Tec (b) $ 946
Cable TV/Local Telephone
>Programming for CATV/TV/
Satellites: 6.3%
85,400 Data Transmission Network (b) 1,900
Data Services for Farmers
50,000 Tele-Communications,
Liberty Media Group (b) 1,428
Cable TV Programming
- --------------------------------------------------------
3,328
>Mobile Communications: 0.9%
26,800 COMARCO (b) 489
Wireless Network Testing
>Computer Software/Services: 2.8%
80,000 Simulation Sciences (b) 1,190
Process Control Software
10,300 CACI International (b) 216
Computer Software Systems
9,200 Computer Language Research 99
Commercial Tax Software
- --------------------------------------------------------
1,505
>Consumer Software:0.7%
80,000 The 3DO Company (b) 385
Entertainment Software
>Business Information: 0.7%
17,000 American Business Information (b) 378
Provides Data on Small Businesses
>Distribution: 0.3%
13,700 Richey Electronics (b) 159
Distributes Electronic Components
>Computer Systems: 2.1%
41,700 ACT Manufacturing (b) 1,100
Contract Manufacturing
>Components/Peripherals: 2.7%
44,000 Kronos (b) 1,408
Time Accounting Software & Clocks
-----
Information: Total 9,698
</TABLE>
<TABLE>
<CAPTION>
Health Care: 12.6%
>Medical Equipment: 8.1%
<S> <C>
128,000 Respironics (b) $ 2,224
Sleep Apnea Products
30,000 Invacare 825
Wheelchairs, Patient Aids & Beds
16,000 Steris (b) 696
Sterilization Equipment
44,000 Kinetic Concepts 539
Hospital Beds
- --------------------------------------------------------
4,284
>Services: 4.5%
48,000 Lincare Holdings (b) 1,968
Home Health Care Services
30,000 United Payors & Providers (b) 412
Medical Claims Repricing
- --------------------------------------------------------
2,380
-----
Health Care: Total 6,664
- --------------------------------------------------------
Consumer Goods/Services: 6.0%
>Retail: 2.3%
108,100 Host Marriott Services (b) 986
Runs Airport Restaurants
7,000 Borders Group (b) 251
Bookstores
- --------------------------------------------------------
1,237
>Entertainment/Leisure: 2.5%
30,000 Fairfield Communities (b) 743
Vacation Timeshares
33,000 Showboat 569
Casinos
- --------------------------------------------------------
1,312
>Manufacturers: 1.2%
65,200 Rawlings (b) 652
Baseball Equipment
-----
Consumer Goods/Services: Total 3,201
- --------------------------------------------------------
Finance: 9.0%
>Savings & Loans: 5.4%
69,000 Coast Savings (b) 2,527
California Savings & Loan
11,000 Peoples Bank Bridgeport 318
Consumer Finance
- --------------------------------------------------------
2,845
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Value (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
.Insurance: 3.0%
51,000 Penn Treaty American (b) $ 1,326
Nursing Home Insurance
11,000 Leucadia National 294
Insurance Holding Company
- -------------------------------------------------------------------------------
1,620
.Other: 0.6%
28,000 Jayhawk (b) 315
Finances Used Autos
--------
Finance: Total 4,780
- -------------------------------------------------------------------------------
Industrial Goods/Services: 17.9%
.Steel: 5.6%
48,500 Steel Dynamics (b) 928
Steel Mini-Mill
50,000 Atchison Casting (b) 900
Steel Foundries
32,000 Schnitzer Steel 820
Scrap Steel
12,000 Gibraltar Steel (b) 315
Steel Processing
- -------------------------------------------------------------------------------
2,963
.Machinery: 1.0%
30,500 Farr (b) 507
Filters
.Industrial Suppliers: 3.2%
33,000 Bearings 920
Distributes Industrial Components
28,000 Lilly Industries, Cl. A 511
Industrial Coatings
18,000 Aftermarket Technology (b) 311
Auto Transmission Remanufacturer
- -------------------------------------------------------------------------------
1,742
.Services: 8.1%
155,200 Wackenhut, Cl. B 2,367
Prison Management
100,000 World Color Press (b) 1,925
Printing
- -------------------------------------------------------------------------------
4,292
--------
Industrial Goods/Services: Total 9,504
</TABLE>
<TABLE>
<CAPTION>
Principal Amount or
Number of Shares Value (000)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<S> <C> <C>
Energy/Minerals: 27.1%
.Independent Power: 8.1%
128,000 CalEnergy (b) $ 4,304
Power Plants
.Oil/Gas Producers: 7.0%
86,000 Seagull Energy (b) 1,892
Oil & Gas Producer
129,000 Tesoro Petroleum (b) 1,806
Oil Refinery/Gas Reserves
- -------------------------------------------------------------------------------
3,698
.Distribution/Marketing/Refining: 6.5%
139,000 NGC 3,232
Gas Processing/Marketing
9,100 United Cities Natural Gas (b) 205
Natural Gas Distributor
- -------------------------------------------------------------------------------
3,437
.Oil Services: 5.5%
191,000 GeoScience (b) 2,483
Offshore Seismic Equipment Company
4,000 Atwood Oceanics (b) 254
Offshore Drilling Company
10,000 J Ray McDermott (b) 220
Offshore Construction Company
- -------------------------------------------------------------------------------
2,957
--------
Energy/Minerals: Total 14,396
--------
Total Common Stocks: 90.9% 48,243
(Cost: $44,075)
Short-Term Obligations:10.5%
$2,577 Prudential Funding 1/2/97 6.25% 2,577
$2,576 Capital Services 1/2/97 6.50% 2,576
$400 State Street Bank Repurchase
Agreement 1/02/97 2.00%;
12/31/96 Agreement Collateralized
by U.S. Treasury Notes 400
- -------------------------------------------------------------------------------
(Amortized Cost: $5,553) 5,553
--------
Total Investments: 101.4% 53,796
(Cost: $49,628)
--------
Cash and Other Assets Less Liabilities: (1.4%) (711)
--------
Total Net Assets: 100% $53,085
===============================================================================
</TABLE>
- -------------------------------------------------------------------------------
.Notes to Statement of Investments
(a) At December 31, 1996, for federal income tax purposes cost of investments
was $49,628,000 and net unrealized appreciation was $4,168,000, consisting
of gross unrealized appreciation of $5,070,000 and gross unrealized
depreciation of $902,000.
(b) Non-income producing security.
11
<PAGE>
Acorn Fund
.Major Portfolio Changes in the Fourth Quarter
<TABLE>
<CAPTION>
Number of Shares
------------------------
9/30/96 12/31/96
Additions
- -------------------------------------------------------------------------------
<S> <C> <C>
Information
Axime Ex Segin 20,000 50,000
BDM International 104,000 140,000
C-Tec 200,000 300,000
Computer Language Research 183,000 310,000
Gaylord Entertainment 0 300,000
IFR Systems 228,000 300,000
Informix 0 330,000
Kronos 423,000 550,000
Metrika Systems 0 65,000
NTT Data 115 246
Simulation Sciences 0 70,000
Sterling Commerce 0 160,000
TCI Satellite Entertainment 0 130,000
(spinoff from Telecom Inc., Cl. A)
Thermo Instrument Systems 535,000 685,000
- -------------------------------------------------------------------------------
Health Care
Gedeon Richter 0 20,000
Medeva 2,700,000 3,100,000
Getinge Industrier 0 650,000
Respironics 582,000 1,162,000
HealthCare Compare 0 573,000
MDL Information Systems 185,000 275,000
- -------------------------------------------------------------------------------
Consumer Goods/Services
Airtours 0 200,000
Hellenic Bottling 200,000 260,000
Designer Holdings 0 290,000
Esselte 180,000 260,000
Kimberly Clark de Mexico 400,000 500,000
Escada 20,000 30,000
Host Marriott Services 332,000 663,000
- -------------------------------------------------------------------------------
Finance
Foremost 197,000 247,000
Baker Fentress 784,000 865,000
Invesco Funding 0 340,000
Cetelem 26,000 70,000
(includes effect of 100% stock dividend)
World Acceptance 700,000 1,190,000
Coast Savings 418,000 528,000
</TABLE>
<TABLE>
<CAPTION>
Number of Shares
------------------------
9/30/96 12/31/96
- -------------------------------------------------------------------------------
Industrial Goods/Services
<S> <C> <C>
Aftermarket Tech 0 108,000
Schnitzer Steel 220,000 300,000
Hunter Douglas 50,000 110,000
Steel Dynamics 0 225,000
Wackenhut, Cl. B 660,000 851,000
World Color Press 760,000 1,185,000
- -------------------------------------------------------------------------------
Energy/Minerals
Cemig 190,000,000 235,000,000
Costilla Energy 0 400,000
United Cities Natural Gas 0 80,000
RAO Gazprom 0 62,500
Seagull Energy 600,000 1,600,000
(includes effect of merger with
Global Natural Resources)
J Ray McDermott 200,000 400,000
Saipem 0 1,000,000
- -------------------------------------------------------------------------------
Real Estate
First Washington Realty Trust 80,000 150,000
Homestead Village 0 88,000
Macerich 0 400,000
- -------------------------------------------------------------------------------
Transportation
Flughafen Wien 120,000 180,000
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
---------------------
9/30/96 12/31/96
Sales
- -------------------------------------------------------------------------------
<S> <C> <C>
Information
ACT Manufacturing 505,000 350,000
Bell Microproducts 201,000 0
CACI International 618,000 461,000
Century Communications, Cl. A 500,000 0
Cognos 150,000 100,000
Daktronics 50,000 0
Datum 85,000 0
Jones Intercable, Cl. A 440,000 325,000
Jones Intercable 22,500 0
Learning Company 350,000 0
Oak Industries 500,000 350,000
Providence Journal 400,000 0
Shaw Communications, Cl. B 800,000 580,000
Tele-Communications,
Series A TCI Group 1,500,000 1,000,000
Triad Systems 700,000 0
WM Data Nordic 460,000 400,000
- -------------------------------------------------------------------------------
Health Care
Pharmaceutical Marketing Services 235,000 0
Renal Treatment Centers 462,000 0
Space Labs Medical 345,000 0
Steris 684,000 0
Thermedics 552,000 268,000
- -------------------------------------------------------------------------------
Consumer Goods/Services
Alliance Entertainment 445,000 0
Aucnet 90,000 55,000
(includes effect of 10% stock dividend)
Grupo Herdez 4,200,000 0
International Cosmetics 56,100 0
Mayora Indah 1,884,000 0
Mr Max 209,000 134,900
Newell 1,650,000 825,000
Royal 120,000 0
Thai President Foods 200,000 0
Toy Biz 251,000 0
- -------------------------------------------------------------------------------
Finance
Cash America 620,000 0
Credicorp 300,000 0
First American 105,000 70,000
Mercury Finance 898,000 818,000
Promise 60,000 20,000
Seoul International Trust 80,000 0
T. Rowe Price 174,000 145,000
Thailand Fund 70,000 30,000
Washington Federal 756,000 645,000
- -------------------------------------------------------------------------------
Industrial Goods/Services
Douglas & Lomason 255,000 0
Expeditors International 600,000 1,000,000
(includes effect of 2 for 1 stock split)
HA.LO Industries 384,000 353,000
(includes effect of 5 for 4 stock split)
Sealed Air 240,000 0
Thermo Electron 1,125,000 975,000
- -------------------------------------------------------------------------------
Energy/Minerals
Abraxas Petroleum 360,000 0
AES Corporation 1,000,000 955,000
Devon Energy 500,000 300,000
Louis Dreyfus Natural Gas 440,000 350,000
Pittencrieff Resources 700,000 0
United Meridian 300,000 200,000
Veritas Energy Services 180,000 115,000
- -------------------------------------------------------------------------------
Real Estate
Fondo Opcion, Series B 600,000 0
</TABLE>
13
<PAGE>
Acorn Fund
.Statement of Investments December 31, 1996
<TABLE>
<CAPTION>
Number of Shares Value (000)
- -----------------------------------------------------------------------------
Common Stocks and Other
Equity-Like Securities: 98.0%
- -----------------------------------------------------------------------------
<S> <C>
Information: 17.9%
.Broadcasting/CATV: 1.7%
1,000,000 Tele-Communications,
Series A TCI Group (b) $ 13,062
47,000 Tele-Communications, Cum. Pfd. 3,125
300,000 TCA Cable TV 9,037
300,000 C-Tec (b) 7,275
170,000 Argyle Television (b) 4,165
325,000 Jones Intercable, Cl. A (b) 3,372
300,000 Granite Broadcasting (b) 3,187
80,000 Cablevision Systems (b) 2,450
130,000 TCI Satellite Entertainment (b) 1,284
- -----------------------------------------------------------------------------
46,957
.Programming for CATV/TV/
Satellites: 3.7%
1,600,000 Tele-Communications,
Liberty Media Group (b) 45,700
750,000 Data Transmission Network (b) (c) 16,687
700,000 International Family
Entertainment (b) 10,850
567,000 United Video Satellite (b) 9,922
300,000 BET Holdings, Cl. A (b) 8,625
300,000 HSN (formerly known as Silver King
Communications) (b) 7,125
300,000 Gaylord Entertainment 6,862
- -----------------------------------------------------------------------------
105,771
.Mobile Communications: 2.1%
500,000 Telephone and Data Systems 18,125
450,000 Cellular Communications of
Puerto Rico (b) 8,887
465,000 Vanguard Cellular Systems (b) 7,324
800,000 Mobile Telecommunication
Technologies (b) 6,800
355,000 COMARCO (b) (c) 6,479
450,000 PriCellular (b) 5,175
350,000 Palmer Wireless (b) 3,675
300,000 Centennial Cellular (b) 3,637
- -----------------------------------------------------------------------------
60,102
.Computer Software/Services: 3.0%
259,000 BRC Holdings (b) 11,590
360,000 Analysts International 10,170
461,000 CACI International (b) 9,681
480,000 Systems & Computer Technology (b) 7,680
153,000 Compuware (b) 7,669
Principal Amount or
Number of Shares Value (000)
- -----------------------------------------------------------------------------
140,000 BDM International (b) 7,595
330,000 Informix (b) 6,724
210,000 Keane (b) 6,667
160,000 Sterling Commerce (b) 5,640
200,000 American Management Systems (b) 4,900
310,000 Computer Language Research 3,332
208,333 Source Informatics Cv. Pfd. (b) 2,360
70,000 Simulation Sciences (b) 1,041
170,000 Kurzweil Applied Intelligence (b) 510
- -----------------------------------------------------------------------------
85,559
.Gaming Equipment: 1.1%
1,800,000 International Game Technology 32,850
.Consumer Software: 0.2%
280,000 Activision (b) 3,605
350,000 Spectrum HoloByte (b) 2,625
180,000 The 3DO Company (b) 866
- -----------------------------------------------------------------------------
7,096
.Business Information: 0.7%
700,000 American Business Information (b) 15,575
885,714 GIGA Cv. Pfd. (b) (c) 3,100
- -----------------------------------------------------------------------------
18,675
.Computer Systems: 1.7%
600,000 Solectron (b) 32,025
350,000 ACT Manufacturing (b) 9,231
287,000 Altron (b) 6,027
- -----------------------------------------------------------------------------
47,283
.Instrumentation: 1.3%
685,000 Thermo Instrument Systems (b) 22,691
5,000,000 Thermo Optek, 5% Note Due 10/15/00 5,150
300,000 IFR Systems (b) (c) 4,725
1,500,000 Thermoquest, 5% Note Due 8/15/00 1,545
20,000 Thermoquest (b) 257
100,000 Thermo Bio Analysis (b) 1,350
65,000 Metrika Systems (b) 488
- -----------------------------------------------------------------------------
36,206
.Distribution: 0.9%
1,000,000 Pioneer-Standard Electronics 13,125
300,000 Kent Electronics (b) 7,725
400,000 Richey Electronics (b) 4,650
- -----------------------------------------------------------------------------
25,500
.Components/Peripherals: 1.5%
550,000 Kronos (b) (c) 17,600
</TABLE>
See accompanying notes to financial statements
14
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Value (000)
- -----------------------------------------------------------------
<C> <S> <C>
325,000 American Power Conversion (b) $ 8,856
350,000 Oak Industries (b) 8,050
325,000 Planar Systems (b) 3,819
250,000 Exide Electronics Group (b) 3,687
- -----------------------------------------------------------------
42,012
Information: Total 508,011
- -----------------------------------------------------------------
Health Care: 9.1%
.Biotechnology/Drug Delivery: 2.1%
450,000 Watson Pharmaceuticals (b) 20,222
260,000 RP Scherer (b) 13,065
228,000 Biogen (b) 8,835
450,000 Inhale Therapeutic Systems (b) 6,806
800,000 Corvas International (b) 4,500
800,000 Corvas International Warrants (b) 1,600
200,000 Genome Therapeutics (b) 2,150
280,000 CIMA Labs (b) 1,715
- -----------------------------------------------------------------
58,893
.Medical Equipment: 2.4%
750,000 Invacare 20,625
1,162,000 Respironics (b) (c) 20,190
1,000,000 Kinetic Concepts 12,250
350,000 Affymetrix (b) 6,217
268,000 Thermedics (b) 4,857
267,000 Innovasive Devices (b) 2,069
125,000 Trex Medical (b) 1,625
- -----------------------------------------------------------------
67,833
.Hospital/Laboratory Supplies: 0.7%
322,000 Sybron International (b) 10,626
273,000 Hillenbrand Industries 9,896
- -----------------------------------------------------------------
20,522
.Services: 3.9%
1,000,000 Lincare Holdings (b) 41,000
498,000 HBO & Company 29,569
573,000 HealthCare Compare (b) 24,281
505,000 United Payors and Providers (b) 6,944
275,000 MDL Information Systems (b) 5,122
100,000 ThermoTrex (b) 2,738
300,000 Walsh International (b) 2,521
- -----------------------------------------------------------------
112,175
---------
Health Care: Total 259,423
- -----------------------------------------------------------------
Principal Amount or
Number of Shares Value (000)
- -----------------------------------------------------------------
Consumer Goods/Services: 9.1%
.Retail: 2.0%
980,000 Borders Group (b) 35,157
295,000 Quality Food Centers (b) 9,956
663,000 Host Marriott Services (b) 6,050
200,000 Duckwall Alco Stores (b) 2,850
84,000 Mac Frugal's (b) 2,194
- -----------------------------------------------------------------
56,207
.Recreational Vehicles: 2.1%
1,100,000 Harley-Davidson 51,700
320,000 Thor Industries 8,080
- -----------------------------------------------------------------
59,780
.Food: 0.4%
725,000 Shoney's (b) 5,075
634,000 Au Bon Pain (b) (c) 4,121
125,000 Morton's Restaurant Group (b) 2,109
60,000 Dave & Buster's (b) 1,207
- -----------------------------------------------------------------
12,512
.Entertainment/Leisure: 2.8%
1,400,000 Carnival 46,200
215,000 GC Companies (b) 7,444
276,000 Carmike Cinemas (b) 7,003
472,000 Hollywood Park, Cv. Pfd. 6,254
265,000 Royal Caribbean Cruises 6,194
180,000 Rio Hotel & Casino (b) 2,632
100,000 Showboat 1,725
535,000 Monarch Casino & Resort (b) (c) 1,070
$6,250,000 Grand Palais Casino 14%
Note Due 2/25/98 (b) 313
- -----------------------------------------------------------------
78,835
.Manufacturers: 1.8%
825,000 Newell 25,987
565,000 Wolverine World Wide 16,385
290,000 Designer Holdings (b) 4,676
232,000 Norwood Promotional (b) 4,234
- -----------------------------------------------------------------
51,282
--------
Consumer Goods/Services: Total 258,616
- -----------------------------------------------------------------
Finance: 15.8%
.Banks: 1.1%
380,000 Texas Regional Bancshares 12,920
285,000 Union Planters 11,115
</TABLE>
15
<PAGE>
Acorn Fund
.Statement of Investments
<TABLE>
<CAPTION>
Number of Shares Value (000)
- ------------------------------------------------------------------
<C> <S> <C>
70,000 First American $ 4,034
104,000 Riverside National Bank 1,807
- ------------------------------------------------------------------
29,876
.Savings & Loans: 3.7%
845,000 Peoples Bank Bridgeport 24,399
528,000 Coast Savings (b) 19,338
645,000 Washington Federal 17,092
390,000 Washington Mutual 16,892
260,000 TCF 11,310
538,000 Commonwealth Bancorp 8,070
280,000 Imperial Thrift & Loan (b) 4,200
156,000 Indiana Federal 3,491
- ------------------------------------------------------------------
104,792
.Insurance: 2.2%
836,000 Baldwin & Lyons, Cl. B 15,362
247,000 Foremost 14,820
351,000 United Fire & Casualty 12,373
350,000 PXRE Corporation 8,663
216,000 Leucadia National 5,778
318,000 ALLIED Life (c) 5,565
- ------------------------------------------------------------------
62,561
.Money Management: 2.7%
880,000 United Asset Management 23,430
865,000 Baker Fentress 14,597
618,000 SEI 13,751
1,621,000 Phoenix Duff and Phelps 11,550
231,000 BISYS (b) 8,561
145,000 T. Rowe Price 6,308
- ------------------------------------------------------------------
78,197
.Credit Cards: 4.4%
1,088,000 First USA 37,672
767,000 ADVANTA, Cl. A 32,789
520,000 ADVANTA, Cl. B 21,255
575,000 National Data 25,013
275,000 Concord EFS (b) 7,769
- ------------------------------------------------------------------
124,498
.Other: 1.7%
1,049,000 Americredit (b) 21,505
818,000 Mercury Finance 10,021
1,190,000 World Acceptance (b) (c) 8,181
496,000 Jayhawk (b) 5,580
310,000 DVI Health Services (b) 4,030
- ------------------------------------------------------------------
49,317
-------
Finance: Total 449,241
- ------------------------------------------------------------------
Industrial Goods/Services: 10.6%
.Steel: 2.0%
1,110,000 Worthington Industries 20,119
440,000 Gibraltar Steel (b) 11,550
300,000 Schnitzer Steel 7,688
374,000 Atchison Casting (b) (c) 6,732
300,000 A M Castle 5,775
225,000 Steel Dynamics (b) 4,303
- ------------------------------------------------------------------
56,167
.Machinery: 3.1%
975,000 Thermo Electron (b) 40,219
800,000 Baldor Electric 19,700
150,000 Nordson 9,563
675,000 Thermo Fibertek (b) 6,286
135,000 Valmont Industries 5,569
110,000 Applied Power 4,359
189,000 Hein-Werner (b) (c) 1,252
500,000 Stevens International, Cl. A (b) (c) 750
34,000 Stevens International, Cl. B (b) (c) 91
- ------------------------------------------------------------------
87,789
.Industrial Suppliers: 1.9%
600,000 Unifi 19,275
750,000 Lilly Industries, Cl. A 13,688
320,000 Bearings 8,920
96,000 Mine Safety Appliances 5,112
244,000 U. S. Can (b) 4,118
108,000 Aftermarket Technology (b) 1,863
35,000 Zoltek (b) 1,273
- ------------------------------------------------------------------
54,249
.Services: 3.6%
1,000,000 Expeditors International
of Washington 23,000
1,185,000 World Color Press (b) 22,811
851,000 Wackenhut, Cl. B 12,978
45,000 Wackenhut, Cl. A 776
430,000 Hub Group (b) 11,503
</TABLE>
See accompanying notes to financial statements
16
<PAGE>
<TABLE>
<CAPTION>
Principal Amount or
Number of Shares Value (000)
- -----------------------------------------------------------------
<C> <S> <C>
353,000 HA.LO Industries (b) $ 9,708
450,000 Material Sciences (b) 8,100
530,000 Thermo TerraTech (b) 5,234
374,000 Thomas Group (b) (c) 3,366
$2,900,000 Western Water, 9% Cv.
Note Due 9/25/05 2,900
119,000 AG Services of America (b) 1,978
- -----------------------------------------------------------------
102,354
--------
Industrial Goods/Services: Total 300,559
- -----------------------------------------------------------------
Energy/Minerals: 10.4%
.Independent Power: 3.0%
955,000 AES Corporation (b) 44,408
1,852 AES Corporation Warrants (b) 38
868,000 CalEnergy (b) 29,187
585,000 Thermo Ecotek (b) 8,921
285,000 Thermo Power (b) 2,262
85,000 Thermo Optek (b) 967
- -----------------------------------------------------------------
85,783
.Oil/Gas Producers: 3.6%
1,600,000 Seagull Energy (b) 35,200
900,000 Tesoro Petroleum (b) 12,600
700,000 Forest Oil (b) 12,338
300,000 Devon Energy 10,425
200,000 United Meridian (b) 10,350
350,000 Louis Dreyfus Natural Gas (b) 5,994
400,000 Costilla Energy (b) 5,450
200,000 St. Mary Land & Exploration 4,975
800,000 Tipperary (b) (c) 3,700
110,000 Abraxas Petroleum CVR Units (b) 1,133
- -----------------------------------------------------------------
102,165
.Distribution/Marketing/Refining: 1.6%
750,000 NGC 17,438
630,000 Southern Union (b) 13,860
303,000 Atmos Energy 7,234
150,000 KN Energy 5,888
80,000 United Cities Natural Gas 1,800
- -----------------------------------------------------------------
46,220
.Oil Services: 1.9%
320,000 Atwood Oceanics (b) 20,320
350,000 Energy Ventures (b) 17,806
400,000 J Ray McDermott (b) 8,800
400,000 Veritas DGC (b) 7,400
- -----------------------------------------------------------------
54,326
.Mining: 0.3%
300,000 Zeigler Coal Holding 6,413
--------
Energy/Minerals: Total 294,907
- -----------------------------------------------------------------
Real Estate: 2.8%
829,000 The Rouse Company (b) 26,321
400,000 Macerich 10,450
155,000 Forest City Enterprises, Cl. B 9,378
123,000 Forest City Enterprises, Cl. A 7,442
210,000 Equity Residential Properties Trust 8,663
165,000 Weingarten Realty Investors 6,703
150,000 First Washington Realty Trust 3,525
120,000 First Washington Realty Trust, Cv. Pfd. 3,270
243,000 Sunstone Hotel Investors 3,189
88,000 Homestead Village (b) 1,584
1,000 Homestead Village Warrants (b) 8
--------
Real Estate: Total 80,533
- -----------------------------------------------------------------
Foreign Securities: 22.3%
.Canada: 0.9%
800,000 Ranger Oil 7,900
200,000 Shaw Industries, Cl. A 4,042
125,000 BCE Mobile Communications (b) 3,702
580,000 Shaw Communications, Cl. B 3,216
100,000 Cognos (b) 2,813
115,000 Veritas Energy Services
(exchangeable into Veritas DGC) (b) 2,181
200,000 Cogeco Cable 1,284
- -----------------------------------------------------------------
25,138
.United Kingdom: 4.0%
1,200,000 Serco Group 13,841
3,100,000 Medeva 13,554
400,000 International CableTel (b) 10,100
2,000,000 Securicor Group, Cl. A 9,566
650,000 Comcast UK Cable Partners (b) 8,856
1,130,000 N. Brown Group 8,673
1,700,000 Invesco 7,549
68,000 Invesco ADS 3,018
340,000 Invesco Funding (b) 1,510
13,600 Invesco Funding LLC (b) 602
</TABLE>
17
<PAGE>
Acorn Fund
.Statement of Investments
<TABLE>
<CAPTION>
Number of Shares Value (000)
- -----------------------------------------------------------------
<C> <S> <C>
700,000 Powerscreen International $ 6,768
393,000 Getty Communications, Cl. A (b) 5,895
600,000 Edinburgh Fund Managers 5,791
580,000 Oriflame 5,310
1,200,000 Body Shop International 4,159
200,000 Airtours 2,781
1,000,000 Capital 2,738
350,000 Ethical Holdings (b) 2,034
4,500,000 Electronics Boutique (b) 1,579
- -----------------------------------------------------------------
114,324
.Germany/Austria: 0.8%
180,000 Flughafen Wien (Austria) 9,166
425,000 United International Holdings
(Austria) (b) 5,206
30,000 Escada 4,847
8,000 Binding-Brauerei 2,544
- -----------------------------------------------------------------
21,763
.Nordic Countries: 3.3%
400,000 WM Data Nordic (Sweden) 34,564
100,000 Hennes & Mauritz, Cl. B (Sweden) 13,825
650,000 Getinge Industrier (Sweden) 12,804
240,000 Autoliv (Sweden) 10,510
725,000 SensoNor (Norway) (b) 6,699
260,000 Esselte, Series A (Sweden) 5,902
220,000 Pricer, Cl. B (Sweden) (b) 5,413
50,000 Sentra, Cl. A (Finland) 1,654
90,000 Benefon (Finland) 1,560
130,000 Sysdeco Group (Norway) (b) 521
- -----------------------------------------------------------------
93,452
.Netherlands: 0.7%
110,000 Hunter Douglas 7,408
270,000 Getronics 7,320
180,000 Telegraaf Holdings 3,788
- -----------------------------------------------------------------
18,516
.Switzerland: 0.8%
6,000 Societe Generale de Surveillance 14,701
14,000 Liechtenstein Global Trust 7,152
- -----------------------------------------------------------------
21,853
.France: 1.2%
45,000 Guilbert 8,786
65,000 Sligos 8,502
70,000 Cetelem 8,079
50,000 Axime Ex Segin (b) 5,771
17,000 Canal Plus 3,747
- -----------------------------------------------------------------
34,885
.Spain/Portugal: 0.4%
375,000 Filmes Lusomundo (Portugal) (b) 4,314
185,000 Vallehermoso 4,004
70,000 Cortefiel 2,099
- -----------------------------------------------------------------
10,417
.Italy/Greece: 1.4%
4,300,000 Banca Fideuram 9,423
300,000 Cellular Communications
International (b) 8,700
260,000 Hellenic Bottling (Greece) 8,331
1,000,000 Saipem 4,616
170,000 Industrie Natuzzi 3,910
1,100,000 Tecnost 2,952
1,200,000 Costa Crociere 2,904
- -----------------------------------------------------------------
40,836
.Israel: 0.1%
200,000 Pec Israel Economic (b) 3,350
.Eastern Europe - 0.1%
20,000 Gedeon Richter (Hungary) 1,169
62,500 RAO Gazprom (Russia) (b) 1,103
- -----------------------------------------------------------------
2,272
.India: 0.2%
300,000 IS Himalaya Fund (b) 3,870
39,393 Housing Development Finance 2,429
- -----------------------------------------------------------------
6,299
.Hong Kong: 0.5%
4,500,000 Varitronix International 8,145
7,318,000 JCG Holdings 7,143
- -----------------------------------------------------------------
15,288
.China: 0.4%
810,000 AES China Generating (b) (c) 10,328
200,000 The Investment Company of China (b) 1,366
- -----------------------------------------------------------------
11,694
.Singapore: 0.4%
5,100,000 Genting International 12,240
</TABLE>
See accompanying notes to financial statements
18
<PAGE>
<TABLE>
<CAPTION>
Principal Amount or
Number of Shares Value (000)
- --------------------------------------------------------------
<C> <S> <C>
.Malaysia: 0.6%
1,450,000 Resorts World (b) $ 6,603
1,125,000 Kian Joo Can Factory (b) 6,236
440,000 O.Y.L. Industries 4,660
- --------------------------------------------------------------
17,499
.Thailand: 0.1%
30,000 The Thailand Fund (b) 1,838
3,300,000 Sinpinyo Fund V (b) 1,448
- --------------------------------------------------------------
3,286
.Korea/Taiwan: 1.4%
120,000 Formosa Fund (Taiwan) (b) 11,340
460,000 President Enterprises (Taiwan) (b) 8,280
5,300 Korea Mobile Telecom 5,431
283,250 Korea Mobile Telecom GDS (b) 3,647
275,000 Kookmin Bank 4,376
110,956 Shinsegae 4,068
7,843 Shinsegae (New) 288
300,000 Korea-Europe Fund 1,530
- --------------------------------------------------------------
38,960
.Indonesia/Philippines: 0.4%
7,000,000 PILTEL (Philippines) (b) 5,922
195,501 Unilever Indonesia 3,351
1,728,000 Tigaraksa Satria 2,414
- --------------------------------------------------------------
11,687
.Japan: 1.7%
120,000 Nintendo 8,571
246 NTT Data 7,185
145,000 Noritsu Koki 6,808
100,000 Paramount Bed 6,375
75,000 Secom 4,530
40,000 Nichiei 2,946
90,000 Sankyo 2,629
720,000 Tokyu Land (b) 2,506
130,000 Heiwa 2,038
134,900 Mr. Max 1,790
55,000 Aucnet 1,777
20,000 Promise 982
- --------------------------------------------------------------
48,137
.Australia / New Zealand: 0.8%
1,700,000 Sky City (New Zealand) 9,261
1,600,000 Village Roadshow 6,265
750,000 Village Roadshow Pfd. 2,037
2,500,000 Burswood Property Trust 3,197
600,000 Petroleum Securities Australia (b) 2,635
- --------------------------------------------------------------
23,395
.Mexico: 0.7%
500,000 Kimberly Clark de Mexico 9,877
2,000,000 Nadro, Series L 5,971
600,000 Grupo Radio Centro (b) 4,125
170,000 Cofar, Series B 238
- --------------------------------------------------------------
20,211
.Brazil: 0.5%
235,000,000 Cemig 8,006
12,000,000 Itau Banco PN 5,197
- --------------------------------------------------------------
13,203
.Other Latin America: 0.9%
4,000,000 Siderca (Argentina) 7,301
130,000 Banco Latinoamericano
de Export (Panama) 6,598
160,000 IRSA (Argentina) 5,100
100,000 Panamerican Beverages (Panama) 4,688
160,000 Siderar (Argentina) (b) 461
- --------------------------------------------------------------
24,148
---------
Foreign: Total 632,853
43,200 Miscellaneous Securities: 0.0% 22
Total Common Stocks and Other ---------
Equity-Like Securities: 98.0% 2,784,165
(Cost: $1,651,100)
Short-Term Obligations: 2.4%
Yield 4.82% -- 6.09% Due 1/02 -- 2/20/97
$19,879 American General Finance 19,861
$18,434 General Motors Acceptance 18,429
$10,568 Hertz 10,555
$10,000 Travelers Insurance 9,989
$10,000 US Treasury Bill 9,933
- --------------------------------------------------------------
(Amortized Cost: $68,767) 68,767
---------
Total Investments: 100.4% 2,852,932
(Cost: $1,719,867)
---------
Cash and Other Assets Less Liabilities: (0.4%) (10,880)
---------
Total Net Assets: 100% $2,842,052
- --------------------------------------------------------------
</TABLE>
19
<PAGE>
Acorn Fund
.Notes to Statements of Investments
(a) At December 31, 1996, for federal income tax purposes cost of investments
was $1,727,925,000 and net unrealized appreciation was $1,125,008,000,
consisting of gross unrealized appreciation of $1,216,175,000 and gross
unrealized depreciation of $91,167,000.
(b) Non-income producing security.
(c) On December 31, 1996, the Fund held the following percentages of the
outstanding voting shares of the affiliated companies (ownership of at
least 5%) listed below:
<TABLE>
<CAPTION>
<S> <C>
COMARCO................................................................ 7.40%
ALLIED Life............................................................ 7.08%
Hein-Werner............................................................ 6.86%
Data Transmission Network.............................................. 6.81%
Atchison Casting....................................................... 6.76%
Kronos................................................................. 6.76%
Thomas Group........................................................... 6.37%
Au Bon Pain............................................................ 6.30%
World Acceptance....................................................... 6.30%
Tipperary.............................................................. 6.13%
Respironics............................................................ 5.90%
Monarch Casino & Resort................................................ 5.65%
Stevens International.................................................. 5.65%
IFR Systems............................................................ 5.59%
Giga................................................................... 5.30%
AES China Generating................................................... 5.13%
</TABLE>
The aggregate cost and value of investments in these companies at December 31,
1996, was $98,155,000 and $113,937,000, respectively. The market value of these
securities represents 4.01% of the total net assets at December 31, 1996. During
the year ended December 31, 1996, the cost of purchases and proceeds from sales
in affiliated companies were $41,214,000 and $31,560,000, respectively.
Dividends received from these companies amounted to $126,780 and the net
realized gain on sales of investments in such companies amounted to $12,839,000.
.Foreign Portfolio Diversification
At December 31, 1996, Acorn Fund's foreign portfolio of investments as a percent
of net assets was diversified as follows:
<TABLE>
<CAPTION>
Value (000) Percent
- --------------------------------------------------------------------------------
<S> <C> <C>
.Information
Computer Systems $ 57,214 2.0%
Mobile Communications 38,528 1.4
Broadcasting/CATV 36,534 1.3
Software/Services 32,073 1.1
Distribution 12,090 0.4
- --------------------------------------------------------------------------------
176,439 6.2
.Health Care
Biotechnology/Drug Delivery 27,280 1.0
Equipment 12,804 0.4
Hospital/Laboratory Supplies 6,375 0.2
- --------------------------------------------------------------------------------
46,459 1.6
.Consumer Goods/Services
Retail 59,615 2.1
Manufacturers 57,590 2.0
Entertainment/Leisure 41,762 1.5
Food 25,497 0.9
- --------------------------------------------------------------------------------
184,464 6.5
.Finance
Money Management 49,285 1.7
Banks 30,466 1.1
Other 28,277 1.0
- --------------------------------------------------------------------------------
108,028 3.8
.Industrial Goods/Services
Services 35,737 1.3
Machinery Processing 16,419 0.6
Steel 461 0.0
- --------------------------------------------------------------------------------
52,617 1.9
.Energy/Minerals
Independent Power 18,334 0.7
Oil/Gas Producers 13,819 0.5
Oil Services 11,917 0.4
- --------------------------------------------------------------------------------
44,070 1.6
.Real Estate 11,610 0.4
.Transportation 9,166 0.3
-------- ----
Total Foreign Portfolio $632,853 22.3%
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
20
<PAGE>
Acorn International
.Major Portfolio Changes in the Fourth Quarter
<TABLE>
<CAPTION>
Number of Shares
-------------------
9/30/96 12/31/96
<S> <C> <C>
Additions
- ------------------------------------------------------------------
Europe
.Germany/Austria
Flughafen Wien 120,000 190,000
Rhoen Klinikum 90,000 100,000
Rhoen Klinikum Pfd. 135,000 165,000
.Denmark
Falck 0 16,000
.Sweden
Bure Investment 0 300,000
Scala International 0 35,000
Hexagon 0 160,000
Esselte, Series A 225,000 315,000
Getinge Industrier 650,000 800,000
.France
Canal Plus 15,000 20,000
Cetelem 42,000 94,000
(includes effect of 100% stock dividend)
Groupe Partouche 0 15,000
.United Kingdom
Expro International Group 0 500,000
Peek 2,214,000 3,000,000
Planning Sciences 0 150,000
Premier Oil 10,000,000 12,000,000
St James Place 0 3,500,000
.Italy/Greece
Attica Enterprises 200,000 400,000
Hellenic Bottling 170,000 275,000
Mediolanum 250,000 400,000
.Netherlands
Hunter Douglas 50,000 110,000
.Hungary
Gedeon Richter 0 20,000
.Russia
RAO Gazprom 0 62,500
- ------------------------------------------------------------------
Asia
.Hong Kong
Television Broadcast 0 65,000
Vanda Systems 0 1,500,000
.Japan
Aderans 0 50,000
Amway Japan 0 70,000
Arrk 0 130,000
Belluna 0 80,000
Chuo Trust & Banking 382,000 570,000
Meitec 275,000 325,000
Mirai Industry 140,000 200,000
NTT Data 215 300
NuSkin Asia Pacific 0 120,000
Orix 0 25,000
Shinki 0 50,000
Tiemco 3,000 50,000
.Korea
S1 Corporation 0 10,260
S1 Corporation (New) 0 4,740
.Philippines
Mondragon International 0 3,700,000
.Singapore
Datacraft Asia 0 430,000
- ------------------------------------------------------------------
Latin America
.Brazil
Elevadores Atlas 0 150,000
.Argentina
IRSA 280,000 320,000
Perez Companc 0 230,000
.Chile
Embotelladora Andina 0 70,000
- ------------------------------------------------------------------
Other Countries
.Australia
Siddons Ramset 0 272,000
Skilled Engineering 1,200,000 1,900,000
.Canada
Cinar Films 150,000 215,000
.Israel
ZAG Industries 0 75,000
</TABLE>
21
<PAGE>
Acorn International
.Major Portfolio Changes in the Fourth Quarter
<TABLE>
<CAPTION>
Number of Shares
-------------------
9/30/96 12/31/96
<S> <C> <C>
Sales
- -----------------------------------------------------------------
Europe
.Germany/Austria
Biotest 80,000 0
BWT 16,500 0
Fresenius Pfd. 14,000 5,000
.Finland
Raision Tehtaat, Series V 70,000 0
.Norway
Aker Maritime (formerly known
as Maritime Group) 300,000 500,000
(includes effect of merger with
Maritime Group)
Elkjoep Norge 300,000 200,000
Sysdeco 1,000,000 660,000
.Sweden
Allgon, Series B 200,000 0
Frontec, Series B 400,000 300,000
WM Data Nordic 800,000 700,000
.United Kingdom
Pittencrieff Resources 1,750,000 0
.Switzerland
Bobst 2,250 0
.Greece
Ergo Bank 120,000 100,000
.Netherlands
Toolex Alpha 145,000 0
- -----------------------------------------------------------------
Asia
.India
Industrial Credit & Investment
Corporation of India 987,800 2,200
.Japan
Aucnet 165,000 110,000
(includes effect of 10% stock dividend)
Daimon 90,000 0
IX Corporation 60,000 0
Japan Information Processing 27,000 0
King 100,000 0
Mr. Max 198,000 120,000
Promise 150,000 70,000
Royal 150,000 0
.Indonesia
Mayora Indah 5,416,000 0
Suba Indah 702,000 0
.Thailand
International Cosmetics 173,100 0
Srithai Superware 97,200 0
Thai President Foods 300,000 0
- -----------------------------------------------------------------
Latin America
.Brazil
Banco Itau Pfd. 26,000,000 23,000,000
.Peru
Credicorp 370,000 0
- -----------------------------------------------------------------
Other Countries
.Australia
Command Petroleum Holdings 12,000,000 0
Petroleum Securities Australia 1,700,000 1,400,000
Village Roadshow Pfd. 750,000 0
.Canada
Shaw Communications 1,000,000 710,000
Veritas Energy Services
(exchangeable into
Veritas DGC) 460,000 395,000
.Israel
Alliance Tire 397,810 0
.South Africa
Kersaf Investments 460,000 0
</TABLE>
22
<PAGE>
Acorn International
.Statement of Investments December 31, 1996
<TABLE>
<CAPTION>
Number of Shares Value (000)
- ------------------------------------------------------------------
Common Stocks and Other
Equity-Like Securities: 91.7%
- ------------------------------------------------------------------
<C> <S> <C>
Europe: 50.3%
.Germany/Austria: 5.3%
120,000 Fresenius $ 24,139
5,000 Fresenius Pfd. 1,032
Dialysis Equipment & Solutions
165,000 Rhoen Klinikum Pfd. 16,381
100,000 Rhoen Klinikum 10,447
Hospital Management
190,000 Flughafen Wien 9,676
Vienna Airport Authority (Austria)
50,000 Marschollek Lautenschlager 7,787
Financial Planning
40,000 Escada 6,463
Fancy Dresses
400,000 United International Holdings (b) 4,900
Cable Television for Austria &
Other Countries (Austria)
15,000 Binding-Brauerei 4,769
Brewer
21,000 Cewe Color Holding 4,769
Photographic Developing & Printing
15,000 Pfleiderer 4,127
Construction Materials
5,000 KTM-Motorradholding (b) 279
Off-Road Motorcycles
- ------------------------------------------------------------------
94,769
.Denmark: 0.6%
16,000 Falck 4,774
Emergency Services
31,000 Kompan International (c) 4,362
Playground Equipment
20,000 Carli Gry (b) 956
Casual Clothing
- ------------------------------------------------------------------
10,092
.Finland: 3.6%
500,000 TT Tieto, Cl. B (c) 42,189
Computer Services/Consulting
100,000 Vaisala, Cl. A 6,509
Meteorological Instruments
370,000 Benefon (c) 6,414
Mobile Telephones
80,000 Fiskars, Series A 5,988
Scissors & Gardening Tools
105,000 Sentra, Cl. A (c) 3,474
Food Retailer
- ------------------------------------------------------------------
64,574
.Norway: 1.4%
1,000,000 SensoNor (b) 9,240
Electronic Sensors for Airbags
500,000 Aker Maritime (formerly
known as Maritime Group) 6,812
Oil Field Equipment & Services
200,000 Elkjoeb Norge 5,857
Consumer Electronics Retailer
660,000 Sysdeco (b) 2,646
Software "Toolsets" & Systems
- ------------------------------------------------------------------
24,555
.Sweden: 8.2%
700,000 WM Data Nordic 60,486
Computer Services/Consulting
150,000 Hennes & Mauritz, Cl. B 20,738
Apparel Stores
800,000 Getinge Industrier 15,759
Sterilization & Disinfection Equipment
320,000 Autoliv 14,013
Seatbelts & Airbags
450,000 Pricer, Cl. B (b) 11,072
Electronic Shelf Labels for Supermarkets
315,000 Esselte, Series A 7,151
Office Supplies & Related Equipment
300,000 Frontec, Series B (b) 5,185
Electronic Commerce Software & Services
160,000 Hexagon 4,171
Industrial Conglomerate
300,000 Bure Investment 3,559
Health Care Services & Investments
35,000 Scala International (b) 3,178
Accounting Software
- ------------------------------------------------------------------
145,312
.France: 4.4%
100,000 Sligos 13,080
Computer Services/Credit Card Processing
94,000 Cetelem 10,849
Credit Cards
80,000 Axime Ex Segin (b) 9,233
Computer Services
45,000 Guilbert 8,786
Office Supplies Distributor
62,000 NRJ 7,847
Radio Network
70,000 Spir Communications 6,650
Regional Newspapers
42,000 Virbac 4,985
Drugs for Animals
50,000 Technip 4,684
Engineering & Construction
</TABLE>
See accompanying notes to financial statements
23
<PAGE>
Acorn International
.Statement of Investments
<TABLE>
<CAPTION>
Number of Shares Value (000)
- -------------------------------------------------------------------
<C> <S> <C>
20,000 Canal Plus 4,409
Pay TV
40,000 Fininfo 4,232
Financial Data Feeds
30,000 CEP Communications 2,115
Trade Magazines & Book Publisher
15,000 Groupe Partouche 1,226
Casinos
30,000 Groupe AB (b) 431
Television Programming
- -------------------------------------------------------------------
78,527
.United Kingdom: 12.7%
1,800,000 Serco Group 20,761
Facilities Management
2,000,000 Capita Group 16,651
Outsourcing Government Services
1,800,000 Oriflame International 16,480
Natural Cosmetics Sold Door-to-Door
1,550,000 Powerscreen International 14,987
Mobile Crushing & Screening Equipment
3,000,000 Medeva 13,117
Drugs for Hyperactive Children
1,610,000 N. Brown Group 12,357
Mail Order Clothing in Large Sizes
467,000 International CableTel (b) 11,792
Cable TV & Telephone System
3,700,000 City Centre Restaurants 8,738
Fast Food Restaurants
1,700,000 Securicor Group, Cl. A 8,131
Mobile Communications
1,700,000 Rotork 7,491
Valve Actuators for Oil & Water Pipelines
12,000,000 Premier Oil (b) 7,290
Oil & Gas Producer
710,000 Edinburgh Fund Managers 6,853
Investment Management
2,500,000 Capital 6,845
Classy Casinos
500,000 Comcast UK Cable Partners (b) 6,813
Cable TV & Telephone System
1,800,000 Body Shop International 6,238
Natural Cosmetics & Toiletries
410,000 Vosper Thornycroft Holdings 6,097
Naval Shipbuilding
3,500,000 St. James Place 5,900
Life Insurance
1,330,000 Ivory & Sime 5,679
Investment Management
720,000 Seton Healthcare Group 5,600
Pharmaceuticals
700,000 Dorling Kindersley 4,929
Reference Books & CD-ROMs
3,000,000 Peek 4,826
Traffic Control Systems
13,000,000 Electronics Boutique (b) 4,561
Videogame/Computer Software Stores
1,400,000 HALMA 4,540
Fire Detection Devices & Burglar Alarms
900,000 Tunstall 4,135
"I've fallen and I can't get up" Monitors
500,000 Expro International Group 4,043
Oil Field Services
670,000 Ethical Holdings (b) (c) 3,894
Drug Delivery
1,100,000 Bluebird Toys 3,699
"Polly Pocket" Toy Manufacturer
150,000 Planning Sciences (b) 1,800
Database & Business Intelligence Software
5,000 Hozelock Group 39
Manufacturer of Garden Hoses
- -------------------------------------------------------------------
224,286
.Switzerland: 3.0%
6,500 Societe Generale de Surveillance 15,926
Inspection/Testing of Trade Goods
25,000 Phoenix Mecano 13,070
Electrical Components Manufacturer
13,000 Liechtenstein Global Trust 6,641
Banking & Investment Management
7,000 Suedelektra Holding (b) 6,386
Diversified Pool of Commodity-Related Projects
12,000 Societe Generale d'Affichage 5,362
Billboard Advertising
1,500 Disetronic Holding (b) 3,307
Medical Equipment
10,000 Prodega (c) 2,871
Cash-and-Carry Retailer
- -------------------------------------------------------------------
53,563
.Italy/Greece: 5.4%
7,100,000 Banca Fideuram 15,559
Life Insurance & Mutual Funds
2,400,000 Saipem SPA 11,077
Pipeline Construction & Drilling Contractor
550,000 Banca Popolare Di Bergamo 9,043
Regional Bank
275,000 Hellenic Bottling 8,811
Coca-Cola Bottler (Greece)
600,000 Gewiss 7,892
Electrical Plugs & Switches
3,100,000 Costa Crociere 7,503
Mediterranean Cruise Line
</TABLE>
See accompanying notes to financial statements
24
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Value (000)
- -----------------------------------------------------------------------
<C> <S> <C>
2,000,000 Editoriale L'Espresso (b) $ 5,524
Newspapers & Magazines
100,000 Ergo Bank 5,069
Bank (Greece)
200,000 Industrie Natuzzi 4,600
Leather Couches
1,100,000 Banca Di Legnano 4,401
Regional Bank
1,600,000 Tecnost 4,293
ATM, Lotto, Toll Collection Equipment Manufacturer
400,000 Mediolanum (b) 3,775
Life Insurance & Mutual Funds
150,000 Intracom (b) 3,374
Telecommunications Equipment (Greece)
400,000 Attica Enterprises 2,756
Ferry Line (Greece)
80,000 Cellular Communications
International (b) 2,320
Mobile Communications
- -----------------------------------------------------------------------
95,997
.Turkey: 0.0%
48,974,000 Sabah Yayincilik 628
Newspapers, Magazines
.Spain/Portugal: 1.8%
100,000 Mapfre Vida 6,919
Life Insurance & Mutual Funds
110,000 Campofrio Alimentacion (formerly
known as Conservera Campofrio) 5,209
Sausage Maker
160,000 Cortefiel 4,797
Apparel Retailer
200,000 Vallehermoso 4,328
Residential Property Developer & Landlord
250,000 Estoril Sol (b) 2,979
Casino Resort (Portugal)
170,000 Lusotur (b) 2,628
Real Estate/Resort Developer (Portugal)
16,000 Zardoya Otis 1,857
Elevator Maintenance
150,000 Filmes Lusomundo (b) 1,726
Newspapers, Radio, Video, Film
Distribution (Portugal)
350,000 Televisao Independente (b) 1,037
Television Station (Portugal)
7,000 Oscar Mayer S.A. 28
Sausage Maker
- -----------------------------------------------------------------------
31,508
.Netherlands: 3.4%
920,000 Getronics 24,944
Computer Consulting
620,000 Kempen (c) 12,186
Stock Brokerage/Investment Management
110,000 Hunter Douglas 7,408
Blinds
280,000 Telegraaf Holdings 5,892
Newspaper Publisher
300,000 Fugro McClelland 5,324
Engineering, Consulting & Surveying
40,000 Wegener 3,704
Newspaper Publisher
- -----------------------------------------------------------------------
59,458
.Hungary: 0.3%
125,000 Cofinec (b) 3,781
Consumer Goods Packaging
20,000 Gedeon Richter 1,169
Generic Drugs
- -----------------------------------------------------------------------
4,950
.Eastern Europe: 0.2%
200,000 Bank Komunalny 1,888
Bank (Poland)
62,500 RAO Gazprom 1,103
Gas Pipelines & Production (Russia)
- -----------------------------------------------------------------------
2,991
--------
Europe: Total 891,210
- -----------------------------------------------------------------------
Asia: 25.8%
.China: 0.3%
390,000 AES China Generating (b) 4,973
Independent Power
.Hong Kong: 2.8%
11,000,000 JCG Holdings 10,737
Consumer Finance
5,500,000 Varitronix International 9,955
LCD Manufacturer
10,000,000 Li and Fung 8,856
Sourcing of Consumer Goods
20,000,000 Golden Harvest Entertainment 6,723
Movie Distribution & Exhibition
15,000,000 Vitasoy International Holdings 6,545
Soya Milk Manufacturer
12,000,000 Manhattan Card 6,089
Chase's Local Credit Card
1,000,000 Chen Hsong Holdings 608
Plastic Injection Moulding Machines
1,500,000 Vanda Systems 393
Computer Services
65,000 Television Broadcast 260
Television Broadcasting
- -----------------------------------------------------------------------
50,166
</TABLE>
25
<PAGE>
Acorn International
.Statement of Investments
<TABLE>
<CAPTION>
Principal Amount or
Number of Shares Value (000)
- ---------------------------------------------------------------------
<C> <S> <C>
.India/Pakistan: 1.0%
82,702 Housing Development Finance $ 5,100
Mortgage Lender
300,000 IS Himalaya Fund (b) 3,870
Closed-End Fund
1,047,800 Zee Telefilms (c) 2,581
Hindi Television Programming & Broadcasting
299,450 Max India 1,834
Rs 50,000 Max India Zero Coupon 306
50,000 Max India New Shares 306
Penicillin & Mobile Phones
810,000 Tube Investment GDR 1,418
Bicycle Manufacturer
219,035 Pakistan State Oil 1,404
Oil Distribution (Pakistan)
342,100 Kotak Mahindra Finance 700
Consumer Finance
2,000,000 Centurion Quantum Growth (b) 223
Closed-End Fund
- ---------------------------------------------------------------------
17,742
.Japan: 9.9%
225,000 Noritsu Koki 10,565
Photo Processing Lab Manufacturer
230,000 Hokuto 10,086
Mushroom Grower
163,000 Secom 9,844
Security Alarm Systems
130,000 Nichiei 9,576
Lender to Small & Medium Size Businesses
300 NTT Data 8,762
Data Communications
120,000 Nintendo 8,571
Video Games
220,000 Konami 7,487
Entertainment Software/Hardware
110,000 Sanyo Shinpan 6,871
Consumer Finance
100,000 Paramount Bed 6,375
Hospital Bed Manufacturer
325,000 Meitec 6,188
Engineering Outsourcing
195,000 Sankyo 5,695
Pachinko Machine Manufacturer
200,000 Mirai Industry 5,428
Manufacturer of Plastic Housing Components
110,000 HIS 5,307
Travel Agent
570,000 Chuo Trust & Banking 4,857
Banking
1,330,000 Tokyu Land (b) 4,629
Real Estate
200,000 Central Uni 4,566
Health Care/Medical Equipment
165,000 Lasertec 4,492
Manufacturer of LCD & Photomask Defect Detectors
150,000 Itariyard 4,045
Designer/Wholesaler of Women's Apparel
135,000 Xebio 4,013
Sporting Goods Retailer
255,000 Heiwa 3,998
Pachinko Machine Manufacturer
113,720 Nihon Jumbo 3,958
Photo Processing Lab
120,000 NuSkin Asia Pacific (b) 3,705
Personal Care Products
50,000 Ryohin Keikaku 3,705
Muji Brand Designer & Specialty Retailer
142,000 Mars Engineering 3,609
Gaming Systems & Machinery
110,000 Aucnet 3,554
Used Auto Auctions Via Satellite
70,000 Promise 3,438
Consumer Finance
50,000 Tiemco (b) 3,196
Fishing Equipment
130,000 Arrk 3,002
Industrial Modeling
430,000 Nanto Bank 2,845
Banking
70,000 Amway Japan 2,243
Network Sales
60,000 People 1,809
Sports Clubs
120,000 Mr. Max 1,592
Household Goods & Appliance Retailer
150,000 Cats 1,422
Pest Control
165,000 Sochiko 1,422
Film, Television & Kabuki Producer
50,000 Aderans 1,219
Hairpieces & Wigs
80,000 Belluna 1,199
Catalog Sales
50,000 Shinki 1,154
Corporate & Consumer Lending
25,000 Orix 1,038
Leasing Company
- ---------------------------------------------------------------------
175,465
.Korea/Taiwan: 4.3%
20,500 Korea Mobile Telecom 21,007
Mobile Communications
</TABLE>
See accompanying notes to financial statements
26
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Value (000)
- -----------------------------------------------------------------------
<S> <C> <C>
480,000 President Enterprises (b) $ 8,640
Food Manufacturer & Distributor (Taiwan)
80,000 Formosa Fund (b) 7,560
Closed-End Fund (Taiwan)
460,000 Kookmin Bank 7,320
Retail Bank
215,000 Dongbu Fire & Marine Insurance (b) 7,176
Non-Life Insurance
95,000 Daehan City Gas 6,854
Gas Utility
70,000 Taipei Fund (b) 6,405
Closed-End Fund (Taiwan)
230,000 Formosa Growth Fund (b) 3,594
Closed-End Fund (Taiwan)
74,161 Shinsegae 2,719
5,039 Shinsegae (New) (b) 185
Department Stores
10,260 S1 Corporation (b) 1,881
4,740 S1 Corporation (New) (b) 779
Systems Security
150,000 Baring Taiwan Fund (b) 1,575
Closed-End Fund (Taiwan)
- ----------------------------------------------------------------------
75,695
.Malaysia: 2.2%
2,350,000 Malaysian Assurance Alliance 11,445
Insurance
1,900,000 Malaysian Oxygen 9,780
Industrial Gases
1,615,000 Arab Malaysian Finance 9,017
Consumer Finance
770,000 O.Y.L. Industries 8,156
Air Conditioners
- ----------------------------------------------------------------------
38,398
.Indonesia: 1.4%
3,000,000 Bank Niaga 7,111
Banking
1,500,000 Modern Photo Film 4,762
Fuji Film Distributor
2,939,900 Tigaraksa Satria (b) (c) 4,107
Distributor of Consumer Goods
3,000,000 Mustika Ratu 4,063
Traditional Cosmetics
230,000 Unilever 3,943
Consumer Goods
- ----------------------------------------------------------------------
23,986
.Philippines: 1.6%
25,000,000 Int'l Container Terminal Services (b) 13,070
Container Handling Terminals &
Port Management
3,000,000 Philippine Savings Bank (b) 7,186
Banking
8,000,000 PILTEL (b) 6,768
Mobile Communications
3,700,000 Mondragon International (b) 1,653
Casinos/Resort
- ----------------------------------------------------------------------
28,677
.Singapore: 1.4%
5,400,000 Genting International 12,960
Cruise Line
2,999,600 Venture Manufacturing 7,463
2,457,000 Venture Manufacturing Warrants
7/26/99 (b) 3,952
Contract Electronics Manufacturer
430,000 Datacraft Asia 718
Network Services
- ----------------------------------------------------------------------
25,093
.Thailand: 0.9%
5,000,000 Shinawatra Satellite 5,655
Satellite Leasing
200,000 Serm Suk 5,343
Pepsi Bottler
320,000 Bangkok Insurance 4,543
Finance/Insurance
2,600,000 Sinpinyo Fund V (b) 1,141
Closed-End Fund
- ----------------------------------------------------------------------
16,682
--------
Asia: Total 456,877
- ----------------------------------------------------------------------
Latin America: 8.1%
.Mexico: 2.7%
600,000 Kimberly Clark de Mexico 11,852
Paper Products
450,000 Bufete Industrial (b) 9,563
Engineering & Construction
3,000,000 Nadro, Series L 8,956
Pharmaceutical Distributor
1,200,000 Grupo Industrial Bimbo 7,165
Bread, Baked Goods & Snacks
700,000 Grupo Radio Centro (b) 4,813
Radio Stations & Networks
2,100,000 Fondo Opcion, Series B (b) 1,814
Real Estate Investment Fund
5,500,000 Grupo Herdez, Series B 1,502
Sauces & Condiments
353,375 GBM Atlantico (b) 972
Bank & Brokerage
107,000 Cofar 150
Drug Stores
- ----------------------------------------------------------------------
46,787
</TABLE>
27
<PAGE>
Acorn International
.Statement of Investments
<TABLE>
<CAPTION>
Number of Shares Value (000)
- ------------------------------------------------------------------------
<S> <C>
.Brazil: 1.8%
23,000,000 Banco Itau Pfd. $ 9,961
Bank
215,000,000 Cemig Pfd. 7,325
Electric Utility
35,000,000 Telemig 4,378
35,000,000 Telemig Pfd. 4,328
Telecommunications
3,000,000 White Martins 4,331
Industrial Gases
150,000 Elevadores Atlas 1,472
Elevator Services
1,000,000 Brazilian Smaller Companies Warrants 475
Closed-End Fund
- ------------------------------------------------------------------------
32,270
.Argentina: 1.5%
6,000,000 Siderca 10,952
Steel Pipe Producer
320,000 IRSA 10,200
Real Estate Management & Development
1,400,000 Cresud (b) 2,478
Agriculture
230,000 Perez Companc (b) 1,617
Oil & Gas Producer
240,000 Siderar (b) 691
Flat Rolled Steel
229,500 Cerveceria Biekert (b) 390
Brewer
- ------------------------------------------------------------------------
26,328
.Chile: 1.0%
280,000 Santa Isabel 6,335
Grocery Stores
150,000 Genesis Chile Fund 5,513
Closed-End Fund
260,000 Banco BHIF (b) 4,257
Financial Services
70,000 Embotelladora Andina 2,135
Coca-Cola Bottler
- ------------------------------------------------------------------------
18,240
.Peru: 0.1%
2,527,334 Enrique Ferreyros 2,433
Heavy Machinery Dealer
.Other Latin America: 1.0%
150,000 Banco Latinoamericano
de Exportaciones 7,613
Trade Financing (Panama)
100,000 Ceteco Holdings 5,752
Appliances Retailer (Central America)
100,000 Panamerican Beverages 4,688
Coca-Cola Bottler (Panama)
450,000 Global Casinos Cv. Pfd. (b) 340
22,500 Global Casinos (b) 96
Casino Operator (Aruba)
- ------------------------------------------------------------------------
18,489
-------
Latin America: Total 144,547
- ------------------------------------------------------------------------
Other Countries: 7.2%
.Australia/New Zealand: 4.1%
4,000,000 Village Roadshow Pfd. Cl. A 10,866
Film Distribution, Exhibition & Production
2,000,000 Publishing & Broadcasting 9,722
Media & TV Broadcasting
1,750,000 Sky City 9,534
Casino & Hotel (New Zealand)
1,900,000 Skilled Engineering 6,414
Temporary Skilled Labor
4,000,000 Austereo 6,354
Radio Stations
1,400,000 Petroleum Securities Australia (b) 6,149
Oil & Gas Producer
3,600,000 Tyndall Australia 6,148
Money Management & Insurance
4,600,000 Sonic Healthcare 5,481
Pathology Labs
3,700,000 Burswood Property Trust 4,732
Perth Casino & Resort
600,000 PDL Holdings 3,243
Electrical Equipment Manufacturer &
Distributor (New Zealand)
175,000 Hudson Conway (b) 2,224
Casino Managers
272,000 Siddons Ramset 1,448
Manufacturer & Distributor of
Construction Materials
-------
72,315
.Canada: 2.6%
1,000,000 Ranger Oil 9,875
Oil & Gas Producer
435,000 Shaw Industries, Cl.A 8,791
Oil Field Services
395,000 Veritas Energy Services
(exchangeable into Veritas DGC) (b) 7,493
Geophysical Contractor
215,000 Cinar Films, Cl. B (b) 5,590
Children's Television Programming
1,400,000 Pan East Petroleum (b) 5,005
Oil & Gas Producer
710,000 Shaw Communications 3,937
Cable TV
500,000 Cogeco (b) 2,626
Cable TV
</TABLE>
See accompanying notes to financial statements
28
<PAGE>
<TABLE>
<S> <C> <C>
Number of Shares Value (000)
- -------------------------------------------------------------------------------
300,000 Cogeco Cable $ 1,926
Cable TV
250,000 Fundy Cable (b) 1,386
Cable TV
- -------------------------------------------------------------------------------
46,629
>Israel: 0.5%
325,000 Blue Square Israel (b) 4,631
Supermarkets & Department Stores
200,000 Pec Israel Economic (b) 3,350
Industrial Holdings
75,000 ZAG Industries (b) 1,238
Plastic Hardwares
- -------------------------------------------------------------------------------
9,219
---------
Other: Total 128,163
- -------------------------------------------------------------------------------
Foreign Corporations, Operations in the U.S.: 0.3%
161,000 Carnival 5,313
Cruise Ship Line (Panama)
---------
Foreign Corporations, Operations in the U.S.: Total 5,313
4,744 Miscellaneous Securities: 0.0% 12
</TABLE>
<TABLE>
<CAPTION>
Principal Amount or
Number of Shares Value (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Total Common Stocks and Other ---------
Equity-Like Securities: 91.7% $1,626,122
(Cost: $1,212,620)
Short-Term Obligations: 8.6%
Yield 5.40% -- 5.80% Due January 1997
$28,628 Whirlpool Finance 28,596
$23,440 Commercial Credit 23,414
$18,694 Cargill 18,649
$18,315 Sears Acceptance 18,293
$17,765 Prudential Funding 17,740
$14,533 General Motors Acceptance 14,522
$12,834 Hertz 12,822
$12,346 Travelers Insurance 12,321
$6,220 American Brands 6,205
- -------------------------------------------------------------------------------
(Amortized Cost: $152,562) 152,562
---------
Total Investments: 100.3% 1,778,684
(Cost: $1,365,182)
---------
Cash and Other Assets Less Liabilities: (0.3)% (6,141)
---------
Total Net Assets: 100% $1,772,543
===============================================================================
</TABLE>
.Notes to Statement of Investments
(a) At December 31, 1996, for federal income tax purposes cost of investments
was $1,375,809,000 and net unrealized appreciation was $402,875,000 consisting
of gross unrealized appreciation of $515,699,000 and gross unrealized
depreciation of $112,824,000.
(b) Non-income producing security.
(c) On December 31, 1996, the Fund held the following percentages of the
outstanding voting shares of the affiliated companies (ownership of at least 5%)
listed below:
Prodega (Switzerland)..............................................10.00%
Estoril Sol (Portugal)............................................. 9.71%
Sentra (Finland)................................................... 9.24%
Benefon (Finland).................................................. 8.91%
Tigaraksa Satria (Indonesia)....................................... 7.26%
Kompan International (Denmark)..................................... 6.58%
Kempen (Netherlands)............................................... 6.31%
Fondo Opcion....................................................... 6.28%
TT Tieto (Finland)................................................. 5.69%
Zee Telefilms (India).............................................. 5.61%
Ethical Holdings (UK).............................................. 5.14%
The aggregate cost and value of investments in these companies at December 31,
1996, was $60,279,000 and $86,872,000 respectively. The market value of these
securities represents 4.90% of the total net assets at December 31, 1996. During
the year ended December 31, 1996, the cost of purchases and proceeds from sales
in affiliated companies were $10,221,000 and $25,879,000, respectively. Net
dividends received from these companies amounted to $1,495,000 and net realized
gain on sale of investments in such companies amounted to $1,948,000.
29
<PAGE>
Acorn International
+Portfolio Diversification
At December 31, 1996, 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
Computer Systems $ 115,669 6.5%
Software/Services 94,040 5.3
Broadcasting/CATV 77,846 4.4
Distribution 67,860 3.8
Mobile Communications 40,440 2.3
Consumer Electronics 28,882 1.6
Instrumentation 6,517 0.4
Equipment 3,374 0.2
- ---------------------------------------------------------------------------
434,628 24.5
+Health Care
Biotechnology/Drug Delivery 40,205 2.3
Hospital/Laboratory Supplies 37,027 2.1
Services 30,387 1.7
Equipment 23,632 1.3
- ---------------------------------------------------------------------------
131,251 7.4
+Consumer Goods/Services
Retail 173,969 9.8
Manufacturers 108,279 6.1
Entertainment/Leisure 75,210 4.3
Food 69,982 3.9
Recreational Vehicles 1,697 0.1
- ---------------------------------------------------------------------------
429,137 24.2
+Finance
Money Management 100,276 5.7
Banks 74,911 4.2
Insurance 26,425 1.5
Other 112,394 6.4
- ---------------------------------------------------------------------------
314,006 17.8
</TABLE>
<TABLE>
<CAPTION>
Value (000) Percent
- ---------------------------------------------------------------------------
+Industrial Goods/Services
<S> <C> <C>
Services $ 110,650 6.2%
Machinery Processing 57,752 3.3
Steel 6,788 0.4
Forest Products/Construction 4,127 0.2
- ---------------------------------------------------------------------------
179,317 10.1
+Energy/Minerals
Oil/Gas Producers 42,163 2.4
Oil Services 32,884 1.8
Independent Power 19,152 1.1
Mining 6,149 0.3
Refining/Marketing 1,404 0.1
- ---------------------------------------------------------------------------
101,752 5.7
+Real Estate 23,599 1.3
+Transportation 12,432 0.7
Total Short Term Obligations 152,562 8.6
-----------------------
Total Investments: $1,778,684 100.3%
===========================================================================
</TABLE>
See accompanying notes to financial statements
30
<PAGE>
Acorn Family of Funds
.Report of Independent Auditors
To the Board of Trustees and Shareholders of
Acorn Investment Trust:
We have audited the accompanying statements of assets and liabilities, including
the schedule of investments of Acorn Fund, Acorn International and Acorn USA as
of December 31, 1996, and the related statements of operations and changes in
net assets for the periods indicated thereon, and the financial highlights for
the periods indicated thereon. These financial statements and financial
highlights are the responsibility of the Funds' 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, 1996, 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, Acorn International and Acorn USA, as of December 31, 1996, the
results of their operations and the changes in their net assets for the periods
indicated thereon, and the financial highlights for the periods indicated
thereon, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 31, 1997
31
<PAGE>
<TABLE>
<CAPTION>
Acorn Family of Funds
.Financial Highlights
Acorn Fund Years ended 12/31,
- ------------------------------------------------------------------------------------------------------------------------
For a share outstanding throughout each year 1996 1995
<S> <C> <C>
Net Asset Value, beginning of year $13.60 $12.24
Income From Investment Operations
Net investment income .09 .11
Net realized and unrealized gain (loss) on investments, foreign currency and futures 2.93 2.42
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.02 2.53
Less Distributions
Dividends from net investment income (.11) (.09)
Distributions from net realized and unrealized gains reportable for federal income taxes (1.47) (1.08)
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (1.58) (1.17)
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of year $15.04 $13.60
========================================================================================================================
Total Return 22.6% 20.8%
Ratios/Supplemental Data
Ratio of expenses to average net assets .57% .57%
Ratio of net investment income to average net assets .53% .89%
Portfolio turnover rate 33% 29%
Net assets at end of year (in millions) $2,842 $2,399
Acorn International Years ended 12/31,
- ------------------------------------------------------------------------------------------------------------------------
For a share outstanding throughout each period 1996 1995
Net Asset Value, beginning of period $16.59 $15.24
Income From Investment Operations
Net investment income (loss) .13 .16
Net realized and unrealized gain (loss) on investments and foreign currency 3.29 1.20
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.42 1.36
Less Distributions
Dividends from net investment income (loss) (.12) -
Distributions from net realized and unrealized gains reportable for federal income taxes (.28) (.01)
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (.40) (.01)
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $19.61 $16.59
========================================================================================================================
Total Return 20.7% 8.9%
Ratios/Supplemental Data
Ratio of expenses to average net assets 1.17% 1.22%
Ratio of net investment income (loss) to average net assets .51% .90%
Portfolio turnover rate 34% 26%
Net assets at end of period (in millions) $1,773 $1,276
</TABLE>
<TABLE>
<CAPTION>
Acorn USA Inception 9/4 through 12/31,
- ---------------------------------------------------------------------------------------------------------------
For a share outstanding throughout period 1996
<S> <C>
Net Asset Value, beginning of period $10.00
Income From Investment Operations
Net investment loss (.02)
Net realized and unrealized gain (loss) on investments 1.67
- ---------------------------------------------------------------------------------------------------------------
Total from investment operations 1.65
- ---------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $11.65
===============================================================================================================
Total Return 16.5%
Ratios/Supplemental Data
Ratio of expenses to average net assets (d) 1.85%*
Ratio of net investment loss to average net assets (.99%)*
Portfolio turnover rate 20%*
Net assets at end of period (in millions) $53
</TABLE>
See accompanying notes to financial statements
32
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C>
$13.95 $11.06 $9.32 $6.51 $8.58 $7.27 $6.48 $7.45
.06 .04 .07 .11 .12 .13 .12 .14
(1.10) 3.50 2.16 2.95 (1.62) 1.65 1.47 .12
- ------------------------------------------------------------------------------------
(1.04) 3.54 2.23 3.06 (1.50) 1.78 1.59 .26
(.11) (.06) (.08) (.10) (.13) (.11) (.16) (.15)
(.56) (.59) (.41) (.15) (.44) (.36) (.64) (1.08)
- ------------------------------------------------------------------------------------
(.67) (.65) (.49) (.25) (.57) (.47) (.80) (1.23)
- ------------------------------------------------------------------------------------
$12.24 $13.95 $11.06 $9.32 $6.51 $8.58 $7.27 $6.48
====================================================================================
(7.4%) 32.3% 24.2% 47.3% (17.5%) 24.8% 24.8% 4.4%
.62% .65% .67% .72% .82% .73% .80% .82%
.55% .30% .72% 1.30% 1.60% 1.59% 1.52% 1.85%
18% 20% 25% 25% 36% 26% 36% 52%
$1,983 $2,035 $1,449 $1,150 $767 $855 $563 $418
Inception 9/23
through 12/31,
- -----------------------------------------
1994 1993 1992
$15.94 $10.69 $10.00
.07 .00 (.03)
(.67) 5.25 .72
- ----------------------------------------
(.60) 5.25 .69
- - -
(.10) - -
- ----------------------------------------
(.10) - -
- ----------------------------------------
$15.24 $15.94 $10.69
- ----------------------------------------
(3.8%) 49.1% 6.9%
1.24% 1.21% 2.35%*
.48% .06% (1.37%)*
20% 19% 20%*
$1,363 $907 $30
</TABLE>
(a) Average commission rate paid per share on Acorn Fund stock transactions for
the year ended December 31, 1996 was $.0194.
(b) Average commission rate paid per share on Acorn International stock
transactions for the year ended December 31, 1996 was $.0008.
(c) Average commission rate paid per share on Acorn USA stock transactions for
the period ended December 31, 1996 was $.0567.
(d) In accordance with a requirement by the Securities and Exchange Commission,
the Acorn USA ratio reflects gross custodian fees.
This ratio net of custodian fees paid indirectly would have been 1.79%.
* Annualized
33
<PAGE>
Acorn Family of Funds
.Statements of Assets and Liabilities
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Acorn
(in thousands) Acorn Fund International Acorn USA
- -------------------------------------------------------------------------------------------------------------------------
12/31/96
Assets
Investments, at value (cost: Acorn Fund $1,719,867;
Acorn International $1,365,182; Acorn USA $49,628) $2,852,932 $1,778,684 $53,796
Cash - 1,657 28
Organization costs - 11 100
Receivable for:
Securities sold 6,715 6,107 144
Fund shares sold 3,612 1,872 552
Dividends and interest 1,378 1,557 13
Other assets 26 15 -
- ------------------------------------------------------------------------------------------------------------------------
Total assets 2,864,663 1,789,903 54,633
Liabilities and Net Assets
Net unrealized depreciation on foreign forward currency contracts - 365 -
Payable for:
Securities purchased 6,620 15,290 1,391
Fund shares redeemed 14,673 725 1
Organization costs - 9 101
Other 1,318 971 55
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities 22,611 17,360 1,548
Net assets applicable to Fund shares outstanding $2,842,052 $1,772,543 $53,085
=========================================================================================================================
Fund shares outstanding 188,918 90,383 4,556
=========================================================================================================================
Pricing of Shares
Net asset value, offering price and redemption price per share $15.04 $19.61 $11.65
=========================================================================================================================
Analysis of Net Assets
Paid-in capital $1,681,710 $1,355,220 $48,898
Accumulated net realized gain on sales of investments, futures
and foreign currency transactions 32,756 12,674 19
Net unrealized appreciation of investments and other assets (net of unrealized
PFIC gains of $8,057 for Acorn Fund and $10,627 for Acorn International) 1,125,008 402,505 4,168
Undistributed net investment income (loss) 2,578 2,144 -
- -------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Fund shares outstanding $2,842,052 $1,772,543 $53,085
=========================================================================================================================
</TABLE>
See accompanying notes to financial statements
34
<PAGE>
<TABLE>
<CAPTION>
Acorn Family of Funds
.Statements of Operations
Acorn
Acorn Fund International Acorn USA
(in thousands) Years ended 12/31 Years ended 12/31 Inception
- ------------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995 9/4-12/31 1996
<S> <C> <C> <C> <C> <C>
Investment Income:
Dividends $ 23,043 $ 23,864 $ 24,877 $ 26,345 $ 35
Interest 7,662 9,264 4,023 3,969 48
- ------------------------------------------------------------------------------------------------------------------------
30,705 33,128 28,900 30,314 83
Foreign taxes withheld (845) (916) (2,681) (2,816) -
- ------------------------------------------------------------------------------------------------------------------------
Total investment income 29,860 32,212 26,219 27,498 83
Expenses:
Investment advisory 12,437 10,429 13,255 11,667 101
Custodian 1,079 737 2,235 1,804 6
Transfer and dividend disbursing agent 1,030 733 1,558 1,360 27
Reports to shareholders 466 331 706 431 7
Legal and audit 152 118 142 119 27
Registration and blue sky 174 26 108 92 14
Trustees' and other 216 239 209 383 8
- ------------------------------------------------------------------------------------------------------------------------
Total expenses 15,554 12,613 18,213 15,856 190
Less custodian fees paid indirectly - - - - (6)
- ------------------------------------------------------------------------------------------------------------------------
Net expenses 15,554 12,613 18,213 15,856 184
- ------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 14,306 19,599 8,006 11,642 (101)
Net Realized and Unrealized Gain (Loss) on Investments,
Futures and Foreign Currency Transactions:
Net realized gain (loss) on sales of investments 298,665 198,606 48,566 (1,937) 120
Net realized gain (loss) on foreign currency
transactions - (118) 1,291 (16,959) -
Net realized loss on futures (22,053) (12,798) - - -
Change in net unrealized appreciation on
investments and foreign currency transactions 250,750 211,069 221,576 114,583 4,168
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments,
futures and foreign currency transactions 527,362 396,759 271,433 95,687 4,288
- ------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $541,668 $416,358 $279,439 $107,329 $ 4,187
========================================================================================================================
</TABLE>
See accompanying notes to financial statements
35
<PAGE>
Acorn Family of Funds
.Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Acorn
Acorn Fund International Acorn USA
(in thousands) Years ended 12/31 Years ended 12/31 Inception
- --------------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995 9/4-12/31 1996
<S> <C> <C> <C> <C> <C>
From Operations:
Net investment income (loss) $ 14,306 $ 19,599 $ 8,006 $ 11,642 $ (101)
Net realized gain (loss) on sales of investments,
futures and foreign currency transactions 276,612 185,690 49,857 (18,896) 120
Change in net unrealized appreciation of
investments and foreign currency transactions 250,750 211,069 221,576 114,583 4,168
- --------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 541,668 416,358 279,439 107,329 4,187
Distributions to Shareholders From:
Net investment income (a) (19,687) (14,810) (10,368) - -
Net realized gain (261,454) (177,941) (24,680) (1,050) -
- --------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (281,141) (192,751) (35,048) (1,050) -
From Fund Share Transactions:
Reinvestment of dividends and capital
gain distributions 257,125 173,543 33,033 1,001 -
Proceeds from other shares sold 358,315 292,683 386,765 147,138 49,912
- --------------------------------------------------------------------------------------------------------------------------
615,440 466,226 419,798 148,139 49,912
Payments for shares redeemed (432,510) (274,314) (167,890) (340,704) (1,014)
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
Fund share transactions 182,930 191,912 251,908 (192,565) 48,898
- --------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 443,457 415,519 496,299 (86,286) 53,085
Net Assets:
Beginning of period 2,398,595 1,983,076 1,276,244 1,362,530 -
End of period (b) $2,842,052 $2,398,595 $1,772,543 $1,276,244 $ 53,085
==========================================================================================================================
</TABLE>
(a) Includes distributions of unrealized PFIC gains of $2,671 in 1996 and $592
in 1995 for Acorn Fund and $3,813 in 1996 for Acorn International.
(b) Includes undistributed net investment income (loss) of $2,578 in 1996 and
$5,288 in 1995 for Acorn Fund; $2,144 in 1996 and $693 in 1995 for Acorn
International; and $0 in 1996 for Acorn USA.
See accompanying notes to financial statements
36
<PAGE>
Acorn Family of Funds
.Notes to Financial Statements
1. Nature of Operations
Acorn Fund, Acorn International and Acorn USA (the "Funds") are series of Acorn
Investment Trust (the "Trust"), an open-end management investment company
organized as a Massachusetts business trust. The investment objective of each
Fund is to seek long-term growth of capital.
2. Significant Accounting Policies
.Security valuation
Investments are stated at current value. Securities traded on securities
exchanges or in over-the-counter markets in which transaction prices are
reported are valued at the last sales price at the time of valuation. Securities
for which there are no reported sales on the valuation date are valued at the
mean of the latest bid and ask quotation or, if there is no ask quotation, at
the most recent bid quotation. Money market instruments having a maturity of 60
days or less from the valuation date are valued on an amortized cost basis.
Securities for which quotations are not available and any other assets are
valued at a fair value as determined in good faith by the Board of Trustees.
.Foreign currency translations
Values of investments denominated in foreign currencies are converted into U.S.
dollars using the spot market rate of exchange at the time of valuation.
Purchases and sales of investments and dividend and interest income are
translated into U.S. dollars using the spot market rate of exchange prevailing
on the respective dates of such transactions. The gain or loss resulting from
changes in foreign exchange rates is included with net realized and unrealized
gain or loss from investments, as appropriate.
.Security transactions and investment income
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend date,
except that certain dividends from foreign securities are recorded as soon as
the information is available to the Funds. Interest income is recorded on the
accrual basis and includes amortization of discounts on money market instruments
and long term debt instruments when required for federal income tax purposes.
Realized gains and losses from security transactions are reported on an
identified cost basis. For Acorn Fund, net realized gains include distributions
of realized gains from other investment companies of $1,395,520 in 1996 and
$877,200 in 1995. For Acorn USA, net realized gains include distributions of
realized gains from other investment companies of $21,360 in 1996.
.Financial instruments
Each Fund may purchase or sell exchange-traded financial futures contracts,
which are contracts that obligate that Fund to make or take delivery of a
financial instrument or the cash value of a securities index at a specified
future date at a specified price. The Funds enter into such contracts to hedge a
portion of their portfolio. Gains and losses are reflected as "Net Realized Gain
(Loss) on Futures" in the Statements of Operations. Additionally, each Fund may
engage in portfolio hedging with respect to changes in currency exchange rates
by entering into forward foreign currency contracts to purchase or sell foreign
currencies. The Statements of Operations reflect gains and losses as realized
for closed forward foreign currency contracts and unrealized for open contracts.
A Fund bears the market risk that arises from changes in the value of financial
instruments and securities indices (futures contracts) or from changes in
foreign currency rates (forward foreign currency contracts) and the credit risk
should a counterparty fail to perform under such contracts.
There were no futures contracts or forward foreign currency contracts open
at December 31, 1996 in Acorn Fund. There were no futures contracts open at
December 31, 1996 in Acorn International. Acorn International entered into
forward contracts to sell foreign currency, settling March 20 through June 19,
1997, as described below:
<TABLE>
<CAPTION>
U.S. Dollar Unrealized Gain
Foreign Amount Currency Proceeds (000) (Loss) (000)
- -----------------------------------------------------------------------
<C> <S> <C> <C>
54,000,000 Swiss Franc $40,617 $149
91,000,000 German Mark $58,820 ($506)
200,000,000 Hong Kong Dollar $25,834 ($8)
-----
($365)
</TABLE>
37
<PAGE>
Acorn Family of Funds
.Notes to Financial Statements
Acorn USA did not enter into any futures or forward foreign currency contracts
during the period ended December 31, 1996.
.Fund share valuation
Fund shares are sold and redeemed on a continuing basis at net asset value. Net
asset value per share is determined daily as of the close of trading on the New
York Stock Exchange on each day the Exchange is open for trading by dividing the
total value of each Fund's investments and other assets, less liabilities, by
the respective number of Fund shares outstanding.
.Federal income taxes, dividends and distributions to shareholders
Acorn Fund and Acorn International have complied with the special provisions of
the Internal Revenue Code available to investment companies for the years ended
December 31, 1996 and December 31, 1995. In accordance with the distribution
requirements imposed on investment companies, Acorn Fund and Acorn International
paid long-term capital gain distributions in 1996 of $241,989,000 and
$24,680,000, respectively, which was sufficient to allow each fund not to incur
any income tax. Acorn USA also complied with these provisions for the period
ended December 31, 1996 and was not required to pay a distribution.
Dividends payable to shareholders are recorded by the Funds on the ex-
dividend date.
Acorn Fund and Acorn International have elected to mark-to-market their
investments in Passive Foreign Investment Companies ("PFICs") for federal income
tax purposes. In accordance with this election, Acorn Fund recognized unrealized
appreciation on PFICs of $2,671,000 in 1996. Cumulative net unrealized
appreciation recognized in prior years on PFICs sold in 1996 amounted to
$7,124,000. Distributions to shareholders from net investment income relating to
PFICs were $2,671,000 in 1996.
In accordance with its PFIC election, for the year ended December 31, 1996,
Acorn International recognized unrealized appreciation on PFICs of $3,813,000.
The cumulative net unrealized appreciation recognized in prior years on PFICs
sold in 1996 amounted to $5,306,000. Distributions to shareholders from net
investment income relating to PFICs were $3,813,000. Prior to 1996, the Fund
recognized unrealized PFIC gains of $11,427,000, which were offset by
accumulated net realized losses on foreign currency transactions and therefore
were not required to be distributed.
Distributions relating to PFICs are treated as ordinary income for Federal
income tax purposes.
Reclassifications have been made in 1996 for Acorn USA in the accompanying
analysis of net assets from undistributed net investment loss to accumulated net
realized gain on sales of investments of $101,000 to reflect differences between
financial reporting and income tax bases.
3. Transactions With Affiliates
The Funds' investment advisor, Wanger Asset Management, L.P. ("WAM") furnishes
continuing investment supervision to the Funds and is responsible for the
overall management of the Funds' business affairs.
Under the Funds' investment management agreements with WAM, each fund pays
the advisor an annual management fee, payable monthly, at the rates set forth
below, which are determined at the beginning of each calendar quarter:
Acorn Fund
- ------------------------------------------
Net asset value:
For the first $100 million .75%
Next $1.4 billion .50%
Net assets in excess of $1.5 billion .40%
Acorn International
- ------------------------------------------
Net asset value:
For the first $100 million 1.25%
Next $400 million 1.00%
Net assets in excess of $500 million .80%
Acorn USA
- ------------------------------------------
Net asset value:
For the first $200 million 1.00%
Net assets in excess of $200 million .95%
38
<PAGE>
Certain officers and trustees of the Trust are also principals of WAM. The
Trust makes no direct payments to its officers and trustees who are affiliated
with WAM. Acorn Fund paid trustees' fees and expenses of $115,700 in 1996 and
$134,000 in 1995; Acorn International paid $99,700 in 1996 and $89,000 in 1995
and Acorn USA paid $600 in 1996 to trustees not affiliated with WAM. Included in
these fees are amounts paid to the Chairman of the Board of $43,200 and $49,000
by Acorn Fund and $37,600 and $32,000 by Acorn International for 1996 and 1995,
respectively, and $200 by Acorn USA for 1996.
WAM advanced Acorn International $71,000 in connection with the
organization and initial registration of the Fund. These costs are being
amortized and reimbursed to WAM over the period January, 1993 though September,
1997. WAM advanced Acorn USA $107,000 in connection with the organization and
initial registration of the Fund. These costs are being amortized and reimbursed
to WAM over the period September, 1996 though August, 2001.
WAM Brokerage Services, L.L.C., a wholly-owned subsidiary of WAM, is the
distributor of the Funds' shares and receives no compensation for its services.
4. Fund Share Transactions
Proceeds and payments on Fund shares as shown in the Statements of Changes in
Net Assets are in respect of the following numbers of shares:
<TABLE>
<CAPTION>
Acorn Fund
- ----------------------------------------------------------
(in thousands) 1996 1995
<S> <C> <C>
Shares sold 23,744 21,831
Shares issued in reinvestment of
dividend and capital gain distributions 17,382 12,817
--------------
41,126 34,648
Less shares redeemed 28,523 20,322
--------------
Net increase in shares outstanding 12,603 14,326
==========================================================
Acorn International
- ----------------------------------------------------------
(in thousands) 1996 1995
Shares sold 20,757 9,482
Shares issued in reinvestment of
dividend and capital gain distributions 1,708 62
--------------
22,465 9,544
Less shares redeemed 8,994 22,013
Net increase (decrease) in --------------
shares outstanding 13,471 (12,469)
==========================================================
Acorn USA
- ---------------------------------------------------
(in thousands) 1996
Shares sold 4,647
Less shares redeemed 91
-----
Net increase in shares outstanding 4,556
===================================================
5. Investment transactions
Acorn Fund
- -------------------------------------------------------------
(in thousands) 1996 1995
Investment securities (excluding
money market instruments):
Purchases $862,321 $636,015
Proceeds from sales 924,259 584,550
Acorn International
- -------------------------------------------------------------
(in thousands) 1996 1995
Investment securities (excluding
money market instruments):
Purchases $612,766 $318,862
Proceeds from sales 498,234 416,451
Acorn USA
- ---------------------------------------------------
(in thousands) 1996
Investment securities (excluding
money market instruments):
Purchases $ 45,708
Proceeds from sales 1,733
===================================================
</TABLE>
39
<PAGE>
The Acorn
- ----------------------------
Family of Funds
.Trustees
Irving B. Harris
Chairman
James H. Lorie
Vice Chairman
Leo A. Guthart
Jerome Kahn, Jr.
David C. Kleinman
Charles P. McQuaid
Roger S. Meier
Adolph Meyer, Jr.
Malcolm N. Smith
Ralph Wanger
.Officers
Ralph Wanger
President
Charles P. McQuaid
Senior Vice President
Terence M. Hogan
Vice President
Leah J. Zell
Vice President
Merrillyn J. Kosier
Vice President and Secretary
Bruce H. Lauer
Vice President and Treasurer
Kenneth A. Kalina
Assistant Treasurer
.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]
web site: www.wanger.com
.Distributor
WAM Brokerage Services, L.L.C.
P.O. Box 8502
Boston, Massachusetts 02266-8502
.Transfer Agent, Dividend Disbursing Agent
and Custodian
State Street Bank and Trust Company
Attention: Acorn Family of Funds
P.O. Box 8502
Boston, Massachusetts 02266-8502
1-800-962-1585
.Legal Counsel
Bell, Boyd & Lloyd
Chicago, Illinois
.Independent Auditors
Ernst & Young LLP
Chicago, Illinois
This report, including the audited schedules of investments and financial
statements, is submitted for the general information of the shareholders of
Acorn Investment Trust. This report is not authorized for distribution unless
preceded or accompanied by a prospectus.
40
<PAGE>
A Zebra In
Lion Country
<PAGE>
A Zebra in Lion Country: Ralph Wanger's Investment Survival Guide, will hit
bookstores in April. Mr. Wanger wants to meet fellow Acorn shareholders! If you
live in or around one of the following cities, drop by, introduce yourself, and
let him personally sign your copy of the book.
>April 8
Barnes & Noble
160 E. 54th Street, New York, NY
>April 15
Schwartz Books
219 N. Milwaukee Street, Milwaukee, WI
>April 17
Baxter Books
608 2nd Avenue, Minneapolis, MN
>April 22
Borders Books & Music
North Michigan Avenue, Chicago, IL
<PAGE>
[PICTURE OF ACORN]
The Acorn
- ------------------------
Family of Funds
WAM Brokerage Services, L.L.C.
P.O. Box 8502
Boston, MA 02266-8502
FIRST CLASS
U.S. POSTAGE
PAID
CHICAGO,IL
PERMIT NO. 1200
