<PAGE>
Acorn
The Acorn Family of Funds
First Quarter Report
--------------------------------
March 31, 1997
Managed by Wanger Asset Management, L.P.
<PAGE>
Acorn Family of Funds First Quarter Report 1997
.Table of Contents
Squirrel Chatter
.Excerpt from
A Zebra in Lion Country by Ralph Wanger 1
Acorn USA
.In a Nutshell 4
.Performance at a Glance 5
.Major Portfolio Changes 10
.Statement of Investments 11
Acorn Fund
.In a Nutshell 6
.Performance at a Glance 7
.Major Portfolio Changes 13
.Statement of Investments 15
.Foreign Portfolio Diversification 21
Acorn International
.In a Nutshell 8
.Performance at a Glance 9
.Major Portfolio Changes 22
.Statement of Investments 25
.Portfolio Diversification 32
A Zebra in Lion Country: Ralph Wanger's Investment Survival Guide (Simon &
Schuster) is now available in bookstores nationwide. All of the investment
philosophies and techniques that have guided Mr. Wanger over the past 25 years
are revealed in this book. As readers of his quarterly shareholder reports have
come to expect, Mr. Wanger has included lively anecdotes, metaphors and stock
stories that make the book fun to read (Absolutely no algebra required.)
How can you get your copy?
1. Purchase a copy at your local bookstore
2. Call 1-800-888-4741 to order your copy directly and receive about 25% off the
suggested retail price.
3. Send a new investment of $5,000 or more for a new or existing Acorn Fund,
Acorn International or Acorn USA account between April 1, 1997 and Flag Day
(June 14, 1997), and Wanger Asset Management will automatically send you a
book for FREE.
Frankly, we like the last option the best.
We hope you share our excitement over this event. Our shareholders are very
important to us, and we look forward to a long and mutually rewarding
relationship with you.
<PAGE>
.Squirrel Chatter
A Zebra in Lion Country by Ralph Wanger is worth a special run to the
bookstore...Not only is it entertaining and well written, but you'll get market-
tested, proven and profitable advice about managing your money in stocks and
mutual funds. --Terry Savage, Chicago Sun-Times, April 13, 1997
Market volatility characterized the first quarter of 1997. We thought you would
appreciate this timely excerpt from Mr. Wanger's new book.
Is There a Pattern?
Why do we fall for such tricks and listen to market forecasters who are no
better than astrologers? Because the human mind is a pattern-seeking mind. We
are all descended from people who are good pattern finders, because at some
point our ancestors were walking around with some fellow hunters and there was a
little rustle in the tall grass a hundred feet ahead. And Og said, "That's the
wind," and Magog said, "I think it's a leopard." And Og marched forward and was
leopard lunch. Your ancestor is Magog, who read that rustle aright. We're all
descended from people who were very good at finding patterns in things.
All of us at some point in our lives lie down on our back on a hillside and
look up at the sky and see objects or creatures in the clouds. At least, I hope
everyone has done that. It's an excellent thing to do. You will see patterns in
the clouds -- horses, whales, faces.
You'll see them because we're genetically trained to be pattern
recognizers. If you ask a computer scientist what people can do very readily
that computers have a tough time doing, the answer will be pattern recognition.
You or I could recognize any of thousands of faces instantly. You won't remember
all their names, but if you've seen a face before, you'll recognize it.
Computers have a very difficult time with pattern recognition. The human brain
is itself a very good computer, programmed to perform functions like that. It
was damned important to know if that rustle ahead was the wind or a leopard, or
if those three men in uniform coming toward you were from your army or theirs.
In the investment world, however, extrapolating patterns from historical
data is unreliable because of the constantly changing nature of that world. We
all accept the cliche that the pace of change has accelerated, but I wonder if
what that really means has sunk in.
The institutionalization of the market, for example, has had a profound
effect on market behavior. Individual investors tend to hold on to their stocks;
institutions have been turning over their portfolios almost 100 percent a year.
They may not be trying to time the market -- many professional managers stay
fully invested -- but they are constantly changing the names in their
portfolios. The incessant stock switching that has taken hold among many
professional managers is like a bride's announcing at the wedding reception that
she is already planning her divorce. Furthermore, individuals make sales at
scattered times, while institutions tend to act in unison. We're back to the
herd of zebras, responding similarly to any given stimuli.
This time, the zebras are in a canyon, with the lion asleep at the head
wall. Every zebra is going to munch grass right up to the lion's nose, then bolt
down the trail just before the lion pounces. Unfortunately, it is a narrow
trail, and in fact, the zebras will pile up in a helpless clot at the first
narrow point and become instant steak tartare. Many large institutions,
responsible for billion-dollar portfolios and dealing in often illiquid markets,
claim that they can make a quick switch from stock to stock or stocks to cash,
and vice versa. No way. The result is the highly volatile market we have today.
It makes very large, very abrupt moves that create impossible situations for
timers. By the time they have figured out what's going on, it's already too
late.
The effect of the globalization of economies and markets--to a degree that
far surpasses that of even ten years ago--has had an enormous impact on what
happens in our own market. The shift from an industrial to a service economy has
also made older data suspect. Wall Street
1
<PAGE>
.Squirrel Chatter
- --------------------------------------------------------------------------------
Beware of False Metaphors
When you stop to think about it, all investing rests on metaphors. Your broker
calls you and says, "This is Murray. I've got a stock here that's going to be
the next Intel." That's a metaphor. Metaphors are ways of finding common
patterns between dissimilar things.
As essential as metaphors are for investors, therefore, they require
critical analysis. In December 1994 the Mexican peso collapsed. The Mexican
economy reeled. The Mexican stock market tanked. ("Collapsed," "reeled," and
"tanked" are all metaphors, if that's of any interest.) Investors then sold
stocks in Argentina, causing a drop in prices and a run on Argentina's peso.
There was no problem with the Argentine economy or banking system. Investors had
simply assumed a metaphor: "They speak Spanish and use pesos as money, so they
are the same." Never mind that Buenos Aires is 4,609 airline miles away from
Mexico. Often those who believe in false metaphors create opportunities for
those who think a bit harder.
Bad metaphors trap investors all the time. How often do we read, "This
market is just like the market in April 1966?" There are similarities, sure, but
not enough to bank on them. Chart reading is a metaphor. Momentum investing is
another. In fact, almost all models that forecast the future have to be viewed
suspiciously. That is why at Acorn we established a powerful and far-reaching
group, the Metaphor Committee, whose ruthless and unsleeping members can pounce
at any time, crushing an overworked simile or dismembering a mixed metaphor.
The most complex area in which the committee operates is criticism of
mathematical models that predict stock price behavior. It has become popular in
recent years to put one's metaphor into a series of equations that can then be
run on a computer, adding the veneer of infallibility provided by neatly typed-
out rows of numbers.
All models have an inherent limitation on their validity, the Cricket
Limit. There is a nearly perfect mathematical fit between air temperature and
the pitch at which crickets chirp. As the temperature drops down to about 50/o/,
crickets chirp more slowly. One might expect the pitch to decline further as the
night cools from 50/o/ to 45/o/. This doesn't happen; under 50/o/, the cricket
packs it in and stops chirping altogether.
No matter how reliable the relationship of two variables has been (such as
interest rates and inflation), there is no reason to think the relationship will
hold for previously unknown levels (as happens when inflation rates soar).
- --------------------------------------------------------------------------------
inventions such as program trading and derivatives have introduced new factors
that have further muddied the picture. Lately, the influx of hundreds of
billions of dollars into mutual funds has tossed in another fresh element.
All those indicators that are supposed to tell you when the bull market is
over can, again, be unreliable extrapolations of past behavior. As a prime
example, in October 1992 the dividend yield of the S&P 500 fell below 3 percent,
and it has been common wisdom that whenever that occurs, the market is ready for
a tumble. It always happens, proclaimed the soothsayers (citing 1987 as another
instance), and it always will. When the bear didn't pounce, the timers blamed
dropping interest rates and rising corporate earnings but declared they were
only stalling the inevitable. But still no great correction came, even though
the yield stayed under 3 percent. By March 31, 1997,
2
<PAGE>
A
I
U
If you ask a computer scientist what people can do very readily that computers
have a tough time doing, the answer will be pattern recognition.
the dividend yield on the S&P 500 hit a record low of 1.9 percent, while the
market was still making new highs.
By that time the pundits had changed their tune. Well, maybe the old signal
isn't valid anymore, after all. Now the argument runs: "Investors currently want
appreciation more than income, so companies are using their earnings to expand
operations or buy back stock, and dividend payouts are going to stay low from
now on." (No one has challenged this reasoning, though stocks are increasingly
owned by tax-exempt holders who are happy to get dividends, and less by
individuals who have to pay taxes on them.) As Wharton professor Jeremy Siegel
wrote in his book Stocks for the Long Run, "Any yardstick for stock valuation,
even one with a sound theoretical basis or one that has worked for more than a
century, can stop working."
Meanwhile, a good number of portfolio managers, observing the low dividend
yield and other negative signs, moved heavily into bonds and cash, and their
performance suffered, in some cases for several years. (One celebrity casualty
of the urge to time: Jeff Vinik, late of the Fidelity Magellan fund, who in late
1995 and early 1996 shifted a good part of his portfolio from stocks into bonds,
expecting the former to correct and the latter to rally. Wrong on both counts,
he was soon no longer employed by Fidelity). Eventually the Cassandras will
prove right -- bear markets have not been repealed -- but it is very doubtful
that the timers will be any better off at the end of the day than if they had
just stayed in the stocks of companies they liked. Even the timers with the best
records concede that they have added no return to a buy-and-hold policy; their
claim is that since they are often in cash, they achieve their returns with
lower volatility.
The stock market, at least in the short run, responds to many factors
besides profits and dividends. Inflation and interest rates, supply of new stock
underwritings, the money supply, investor confidence, governmental actions, and
international events are all factors that interact with one another in subtle,
changing, and unpredictable ways. What we have, really, is a complex system with
lags and multiple feedback loops.
All such systems share certain characteristics that hinder predictive
accuracy. Behavior can be counterintuitive. The long-term response will often be
the opposite of a short-term response. (Price and wage controls bring down the
rate of inflation at first but then create distortions that make the situation
worse.) Trying to predict what will happen to a complex system by looking at
only one part of it leads to inaccurate conclusions. (Trying to predict the
market by watching corporate profits alone is a perfect example.) Setting policy
to optimize one part of the system often produces poor results for the total
system. (Environmental rules to reduce auto exhaust emissions cause large
increases in gasoline consumption, so the effect on the total system may be
negative.)
One might think, for example, that at least the state of the economy would
provide a road map to securities prices, but as Peter Lynch has said, "I spend
about fifteen minutes a year on economic analysis. The way you lose money in the
stock market is to start off with an economic picture." Market levels simply
have little to do with whether the economy is up 3 percent or down 1 percent.
They have a great deal to do with cash flow into and out of markets. Every study
shows that the stock market is a reliable lead indicator of where the economy is
headed, but it's no help trying to look at events the other way round. You
simply have to buy stocks you believe in because you think you've found people
who have an important reason to be in business, and then you have to stick with
them as long as your faith in them remains.
But nothing seems to stop people from trying to call the market's
direction. I sometimes think they are less interested in making money than they
are in proving their brilliance. "The market has a will of its own, does it?
Very well, I'll tame it and show who's boss." It's a silly challenge. When the
market's going down, it's not because you are stupid. And when it's going up,
it's not because you are smart.
- -------------------------------------------------------------------------------
From A ZEBRA IN LION COUNTRY by Ralph Wanger with Everett Mattlin. Copyright (C)
1997 by Ralph Wanger. Published by Simon & Schuster, New York, $25.00. Reprinted
by permission.
3
<PAGE>
U
Acorn USA
.In a Nutshell
Small-cap stocks took a beating last quarter. The small-cap Russell 2000 index
sank over 5%, and Lipper's Small Company Growth Funds Index cratered nearly 10%.
Acorn USA held its ground better than most, falling only 1.5%. Since its launch
date last September, Acorn USA is up 14.8%, just less than the S&P 500's gain,
but more than quadruple the Russell 2000's return.
Our star performer was Applied Industrial Technologies. The stock (formerly
known as Bearings) gained a princely 26% in the quarter. A large acquisition is
expected to ratchet up earnings at this industrial component distributor. Other
winners were Respironics (manufactures pumps that help apnea sufferers breathe
while asleep) and Data Transmission (provides satellite-delivered agricultural
data and analysis to farmers).
Oil stocks took a spill last quarter. Warmer than expected winter weather
sent petrol prices plunging, tripping up Seagull Energy and Tesoro. Both are
savvy operators, with new oilfields coming on stream to stem the ill effects of
today's cruddy crude prices.
Tech stocks went to heck in the first quarter. Worst hit were the fancy-
multiple glamour stocks favored by momentum investors and Internet chatterers.
We avoided most of the tech wreck, being underweight in tech overall and
completely weightless in the sexy tech symbols beloved of the technology
papparazzi. Our favorite tech companies are plain Janes like Kronos and Act
Manufacturing, with their proven niche products, sustainable growth rates and
cheap stock prices.
The stock market has been sloppy so far this year. We look at the stock
market's wriggles like we would a solar eclipse. We may give them a glance, but
we're careful not to stare. Instead, we spend our time calling on managements,
visiting companies and digging through financial statements in search of
thriving well-priced stocks for your Fund.
/s/ Robert A. Mohn
- ----------------------
Robert A. Mohn
Lead Portfolio Manager
Fund Assets as of 3/31/97: $86.9 million
.Acorn USA Top 10 Holdings
CalEnergy 8.4%
Power Plants
Coast Savings 7.3%
California Savings & Loan
Data Transmission 5.1%
Data Services for Farmers
Applied Industrial Technologies 4.4%
Distributes Industrial Components
HealthCare Compare 4.1%
Managed Care Services
Royal Caribbean Cruise 3.9%
Exotic Cruises
C-Tec 3.6%
Cable TV/Local Telephone
United Cities Natural Gas 3.3%
Natural Gas Distributor
Wackenhut 3.3%
Prison Management
Schnitzer Steel 3.3%
Scrap Steel Processor
The Fund's top 10 holdings and portfolio diversification vary with changes in
portfolio investments. See the Statement of Investments for a complete list of
the Fund's holdings.
Fund
--------------------------------------------------------------------------
facts
Remember, you can use your touch-tone telephone to obtain your fund account
balance(s) 24 hours a day. Simply call 1-800-962-1585 and follow the easy
automated instructions.
4
<PAGE>
.Performance at a Glance
U
Acorn USA Portfolio Diversification
.as a % of net assets, as of 3/31/97
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
Information 17.8%
Health Care 11.1%
Consumer Goods/Services 8.2%
Finance 12.2%
Industrial Goods/Services 21.2%
Energy/Minerals 23.2%
Cash 6.3%
-----
100.0%
</TABLE>
<TABLE>
<CAPTION>
Relative Performance
- ------------------------------------------------------------
1st quarter since inception
1997 (9/4/96)
<S> <C> <C>
Acorn USA -1.5% 14.8%
Russell 2000 -5.2% 3.4%
S&P MidCap 400 -1.5% 9.0%
S&P 500 2.7% 16.8%
Dow-Jones 2.6% 18.7%
Lipper Small Company Growth
Funds Index -9.4% -5.1%
</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, 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. 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 3/31/97: $11.48
- -----------------------------------------
Did You U
- --------------------------------------------------------------------------------
Know?
You can now open a new Acorn account by wire. Simply call 1-800-962-1585 to
obtain an account number and wiring instructions.
After your account is open you may easily add to it by:
.wiring money from your bank
.exchanging from one Acorn account to another
.mailing your check with the stub from one of your account statements, with
a slip from your Acorn investment booklet or with a letter of instruction.
Please remember the Acorn funds do not accept third party checks.
5
<PAGE>
A
Acorn Fund
.In a Nutshell
Acorn Fund weathered a stormy first quarter. The fund outperformed the small cap
averages, losing 2.5 percent in the quarter, while the Russell 2000 slid 5.2
percent. The larger capitalization Dow Jones Industrials and S&P 500 each
managed more than a two percent rise.
Our winners were literally all over the map. AES, a global power producer,
and its affiliate AES China Generating, turned on electrifying 20+ percent
performance. Genting International, our Malaysian cruise and gaming investment,
hit the jackpot, paying off with a 23% jump. Nearer to home, Royal Caribbean &
Carnival cruised into port with double-digit gains.
Broadcasters International Family Entertainment & Data Transmission scored
boffo ratings, rising 31 and 18 percent. Acquisitions are back in vogue; we
benefited when BankOne charged in to buy First USA's credit cards and Reed
Elsevier tapped into MDL Information Systems.
On the losing side of the ledger, Thermo Electron, HBO & Co and Harley-
Davidson all hit speedbumps. Financial stocks gave back some of their great
profits, while technology short-circuited. Our underweight position in
technology and focus on downstream technology groups aided our relative
performance. Oil and gas companies also retreated after a winning 1996.
We are proud of our long-term record, built by purchasing great businesses
at attractive prices. Although we hate to see Acorn decline in any quarter, many
of our peers fell over 10 percent in the first period. The Acorn team will not
chase momentum stocks up and down. Instead of whiplash, we will strive to
provide consistent long-run returns.
Lastly, we are pleased to announce that Andrew Morley is joining us to
cover domestic electronics and computers. Andrew has an MBA from Harvard and a
BS in electrical engineering from Yale University. We look forward to his
contribution to the Acorn funds.
/s/Charles P. McQuaid /s/ Terence M. Hogan
Charles P. McQuaid Terence M. Hogan
Co-Portfolio Manager Co-Portfolio Manager
Fund Assets as of 3/31/97: $2,803.4 million
.Acorn Fund Top 10 Holdings
Carnival 1.8%
Cruise Ship Line
AES Corporation 1.8%
Global Power Producer
Liberty Media 1.7%
CATV Programming
First USA 1.5%
Credit Cards
Lincare Holdings 1.5%
Home Health Care Services
HealthCare Compare 1.5%
Managed Care Services
Harley Davidson 1.3%
Motorcycle Manufacturer
Borders 1.3%
Bookstores
Seagull Energy 1.2%
Oil/Gas Producer
CalEnergy 1.2%
Power Plants
The Fund's top 10 holdings and portfolio diversification vary with changes in
portfolio investments. See the Statement of Investments for a complete list of
the Fund's holdings.
New
- --------------------------------------------------------------------------------
Prospectus
This month, the 1997 Acorn Family of Funds prospectus was mailed with the first
quarter report to shareholders. (The funds saved on postage by consolidating the
two mailings.) Look on prospectus pages 24-25 to meet your fund managers, and
pages 38-43 for easy shareholder reference charts.
6
<PAGE>
A
.Performance at a Glance
The Value of a $10,000 Investment in Acorn Fund
.June 10, 1970 through March 31, 1997
[GRAPH APPEARS HERE]
Average Annual Total Return
------------------------------------------
1 Year 5 Years 10 Years Life of Fund
11.0% 15.2% 14.0% 16.5%
<TABLE>
<CAPTION>
Acorn Fund Mountain Chart Plot Points
Date Acorn Fund($) S & P($)
- ---- ------------- --------
<S> <C> <C>
1970 10,000 10,000
1971 17,828 14,490
1972 19,368 17,242
1973 14,765 14,709
1974 10,691 10,816
1975 13,945 14,842
1976 23,045 18,394
1977 27,168 17,077
1978 31,777 18,200
1979 47,790 21,586
1980 62,594 28,602
1981 58,005 27,195
1982 68,208 33,054
1983 85,389 40,510
1984 89,045 43,051
1985 117,142 56,710
1986 136,843 67,295
1987 142,923 70,828
1988 178,370 82,591
1989 222,681 108,761
1990 183,674 105,386
1991 270,641 137,492
1992 336,210 147,928
1993 444,889 162,882
1994 411,750 165,032
1995 497,407 227,047
1996 609,569 279,177
3/31/97 594,573 286,661
</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 3/31/97
[PIE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
Information 17.9%
Health Care 9.6%
Consumer Goods/Services 8.8%
Finance 13.6%
Industrial Goods/Services 9.9%
Energy/Minerals 10.1%
Real Estate 3.1%
Foreign 20.0%
Cash 7.0%
------
100.0%
</TABLE>
<TABLE>
<CAPTION>
Relative Performance
- --------------------------------------------------
1st quarter Last 12 mos.
1997
<S> <C> <C>
Acorn Fund -2.5% 11.0%
Dow-Jones 2.6% 20.5%
S&P 500 2.7% 19.8%
S&P MidCap 400 -1.5% 10.6%
Russell 2000 -5.2% 5.1%
</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. All indexes
are unmanaged and returns include reinvested dividends.
Net Asset Value Per Share 3/31/97: $14.67
- -----------------------------------------
7
<PAGE>
I
Acorn International
.In a Nutshell
In the first quarter of 1997 a strategy of international diversification
rewarded patient investors. While the average U.S. small-cap fund lost nearly 7%
from January to March, the average international small-cap fund rose over 2%.
Acorn International fully participated in the relative outperformance of its
peer group, gaining 2.1% for the period.
As always, good stock picks determined where we made our money. Capita
Group, Rhoen Klinikum, Kempen and Genting International contributed mightily to
overall results. We are amused by how little-known these companies are by large-
cap investors, even in their home markets. It tells us that our investment
philosophy of seeking tomorrow's blue chips is sound. We hope to hold them until
they become household names, reaping the benefits of rising share prices along
the way.
Our losses this quarter were primarily in Japan. The Nikkei average (big
stocks) dropped 7% while the Japanese over-the-counter average plunged 15% in
the quarter in a demoralized market. When sentiment turns, the rebound should be
sharp. While we also took a markdown on the currency translation of some foreign
holdings, we see a stronger dollar as mostly positive for overseas markets. It
helps many non-U.S. companies to compete and boosts their reported earnings,
supporting their economies and their valuations.
We are pleased to announce that Todd Narter is joining us to cover
international technology stocks. Todd has spent the last eight years working in
the semiconductor industry in Japan. He has an M.A. from Stanford in electrical
engineering and a B.A. from the University of Texas. His unique expertise
enhances our analytical capabilities and we look forward to having him on the
team.
/s/ Leah Joy Zell
Leah Joy Zell
Co-Portfolio Manager
<TABLE>
<CAPTION>
<S> <C> <C>
Fund Assets as of 3/31/97: $1,873.9 million
.Acorn International Top 10 Holdings
WM Data Sweden 3.0%
Computer Services/Consulting
T T Tieto Finland 2.2%
Computer Services/Consulting
Rhoen Klinikum Germany 1.7%
Hospital Management
Getronics Netherlands 1.5%
Computer Consulting
Axime Ex Segin France 1.3%
Computer Services
Serco Group United Kingdom 1.1%
Facilities Management
Hennes & Mauritz Sweden 1.1%
Apparel Stores
Fresenius Germany 1.0%
Dialysis Equipment/Solutions
Banca Fideuram Italy 1.0%
Life Insurance/Mutual Funds
Getinge Industrier Sweden 0.9%
Sterilization/Disinfection Equipment
</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
The Acorn funds have a free telephone exchange plan with a family of
money market mutual funds. To find out more, call us at 1-800-9-ACORN-9 (1-800-
922-6769).
8
<PAGE>
I
.Performance at a Glance
The Value of a $10,000 Investment in Acorn International
.September 23, 1992 through March 31, 1997
Average Annual Total Return
1 Year 3 Years Life of Fund
13.1% 9.1% 17.3%
[GRAPH APPEARS HERE]
Acorn International Mountain Chart Plot Points
<TABLE>
<CAPTION>
Date Acorn Int'l ($) EAFE ($)
- ---- --------------- --------
<S> <C> <C>
09/23/92 10,000 10,000
09/30/92 10,010 10,000
12/31/92 10,690 9,614
03/31/93 12,000 10,767
06/30/93 12,920 11,849
09/30/93 13,910 12,635
12/31/93 15,940 12,745
03/31/94 15,850 13,190
06/30/94 15,550 13,864
09/30/94 16,491 13,877
12/31/94 15,334 13,736
03/31/95 14,811 13,992
06/30/95 15,727 14,093
09/30/95 16,824 14,681
12/31/95 16,703 15,275
03/31/96 18,203 15,717
06/30/96 19,593 15,965
09/30/96 19,362 15,945
12/31/96 20,133 16,199
03/31/97 20,564 15,945
</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 3/31/97
[PIE CHART APPEARS]
<TABLE>
<CAPTION>
<S> <C>
Information 22.3%
Health Care 7.2%
Consumer Goods/Services 23.2%
Finance 18.7%
Industrial Goods/Services 11.2%
Energy/Minerals 5.3%
Real Estate 1.8%
Transportation 0.6%
Cash 9.7%
-----
100.0%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Relative Performance
- ----------------------------------------------------------------
1st quarter Last 12 mos.
1997
Acorn International 2.1% 13.1%
EAFE -1.6% 1.5%
Lipper Int'l Small Co. Funds Avg. 2.1% 11.7%
Lipper Int'l Funds Avg. 1.3% 8.7%
Lipper Small Co. Funds Avg. -6.9% 4.7%
</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 Int'l Small Co. Funds
Avg. is calculated from the performance of a group of small company
international funds, including Acorn International. For the 1st quarter and 12-
month periods above, the group consisted of 21 funds and 19 funds, respectively.
The Lipper Int'l Funds Avg. is an average of all international funds tracked by
Lipper Analytical Services. This group consisted of 408 and 354 funds for the
quarter and 12-month periods above, respectively. The Lipper Small Co. Funds
Avg. is calculated from the performance of a group of small company U.S. funds.
For the 1st quarter and 12-month periods above, the group consisted of 465 and
393 funds, respectively. All indexes are unmanaged and returns include
reinvested dividends.
Net Asset Value Per Share 3/31/97: $20.03
9
<PAGE>
U
Acorn USA
>Major Portfolio Changes in the First Quarter
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Shares
-----------------
12/31/96 3/31/97
Additions
- ------------------------------------------------------
Information
C-Tec 39,000 111,000
Data Transmission Network 85,400 169,800
Gaylord Entertainment 0 20,000
Kronos 44,000 69,000
United Video Satellite 0 63,000
Wonderware 0 60,000
- ------------------------------------------------------
Health Care
HealthCare Compare 0 87,000
- ------------------------------------------------------
Consumer Goods/Services
Royal Caribbean Cruises 0 111,000
Showboat 33,000 78,000
- ------------------------------------------------------
Finance
Acceptance Insurance 0 20,000
Amerus Life Holdings 0 59,500
Coast Savings 69,000 159,000
Phoenix Duff & Phelps 0 80,000
- ------------------------------------------------------
Industrial Goods/Services
Applied Industrial Technologies 33,000 108,200
(formerly known as Bearings)
Gibraltar Steel 12,000 53,000
Lilly Industries, Cl. A 28,000 96,000
Schnitzer Steel 32,000 111,000
Steel Dynamics 48,500 88,300
Wackenhut, Cl. B 155,200 198,900
- ------------------------------------------------------
Energy/Minerals
Atmos Energy 0 27,000
CalEnergy 128,000 215,000
GeoScience 191,000 252,000
J Ray McDermott 10,000 54,000
United Cities Natural Gas 9,100 126,000
Sales
- ------------------------------------------------------
Information
The 3DO Company 80,000 0
CACI International 10,300 0
- ------------------------------------------------------
Health Care
Invacare 30,000 0
Steris 16,000 0
- ------------------------------------------------------
Consumer Goods/Services
Rawlings 65,200 0
- ------------------------------------------------------
Finance
Jayhawk 28,000 0
</TABLE>
10
<PAGE>
U
Acorn USA
. Statement of Investments (unaudited) March 31, 1997
<TABLE>
<CAPTION>
Number of Shares Value (000)
- ---------------------------------------------------------------
Common Stocks and Other
Equity-Like Securities: 93.7%
- ---------------------------------------------------------------
<S> <C> <C>
Information: 17.8%
. CATV/TV/Satellites: 12.2%
169,800 Data Transmission Network $ 4,457
Data Services for Farmers
111,000 C-Tec 3,136
Cable TV/Local Telephone
75,000 Tele-Communications,
Liberty Media Group 1,495
Cable TV Programming
63,000 United Video Satellite 1,055
CATV & Satellite Dish Programming
20,000 Gaylord Entertainment 430
Country & Western Cable Channels
- ---------------------------------------------------------------
10,573
. Mobile Communications: 0.7%
34,800 COMARCO 609
Wireless Network Testing
. Computer Software/Services: 2.3%
60,000 Wonderware 585
Industrial Control Software
48,400 Computer Language Research 581
Tax Software
52,300 Simulation Sciences 530
Process Control Software
17,000 American Business Information 331
Provides Data on Small Businesses
- ---------------------------------------------------------------
2,027
. Electronics: 2.6%
69,000 Kronos 1,207
Time Accounting Software & Clocks
34,500 ACT Manufacturing 716
Contract Manufacturing
30,000 Richey Electronics 353
Distributes Electronic Components
- ---------------------------------------------------------------
2,276
------
Information: Total 15,485
- ---------------------------------------------------------------
Health Care: 11.1%
. Medical Equipment: 3.8%
128,000 Respironics 2,720
Sleep Apnea Products
44,000 Kinetic Concepts 627
Hospital Beds
- ---------------------------------------------------------------
3,347
. Services: 7.3%
87,000 HealthCare Compare 3,534
Managed Care Services
57,000 Lincare Holdings 2,351
Home Health Care Services
30,000 United Payors & Providers 428
Medical Claims Repricing
- ---------------------------------------------------------------
6,313
--------
Health Care: Total 9,660
- ---------------------------------------------------------------
Consumer Goods/Services: 8.2%
. Retail: 1.7%
136,200 Host Marriott Services 1,209
Runs Airport Restaurants
14,000 Borders Group 264
Bookstores
- ---------------------------------------------------------------
1,473
. Entertainment/Leisure: 6.5%
111,000 Royal Caribbean Cruises 3,386
Exotic Cruises
78,000 Showboat 1,541
Casinos
300,000 Fairfield Communities 750
Vacation Timeshares
- ---------------------------------------------------------------
5,677
--------
Consumer Goods/Services: Total 7,150
- ---------------------------------------------------------------
Finance: 12.2%
. Savings & Loans: 7.7%
159,000 Coast Savings 6,300
California Savings & Loan
11,000 Peoples Bank Bridgeport 358
Consumer Finance
- ---------------------------------------------------------------
6,658
. Insurance: 3.8%
51,000 Penn Treaty American 1,326
Nursing Home Insurance
59,500 Amerus Life Holdings 1,324
Annuities/Life Insurance
20,000 Acceptance Insurance 372
Crop Insurance
11,000 Leucadia National 302
Insurance Holding Company
- ---------------------------------------------------------------
3,324
</TABLE>
11
<PAGE>
U
Acorn USA
. Statement of Investments (unaudited)
<TABLE>
<CAPTION>
Number of Shares Value (000)
- ----------------------------------------------------------
<S> <C> <C>
. Money Management: 0.7%
80,000 Phoenix Duff & Phelps $ 610
Mutual Funds
--------
Finance: Total 10,592
- ----------------------------------------------------------
Industrial Goods/Services: 21.2%
. Steel: 7.7%
111,000 Schnitzer Steel 2,831
Scrap Steel Processor
88,300 Steel Dynamics 1,545
Steel Mini-Mill
63,900 Atchison Casting 1,230
Steel Foundries
53,000 Gibraltar Steel 1,060
Steel Processing
- ----------------------------------------------------------
6,666
. Machinery: 5.6%
108,200 Applied Industrial Technologies 3,787
Distributes Industrial Components
82,650 Farr 1,064
Filters
- ----------------------------------------------------------
4,851
. Industrial Suppliers: 2.3%
96,000 Lilly Industries, Cl. A 1,740
Industrial Coatings
18,000 Aftermarket Techology 279
Auto Transmission Remanufacturer
- ----------------------------------------------------------
2,019
. Services: 5.6%
198,900 Wackenhut, Cl. B 2,834
Prison Management
100,000 World Color Press 2,038
Printing
- ----------------------------------------------------------
4,872
--------
Industrial Goods/Services: Total 18,408
- ----------------------------------------------------------
Energy/Minerals: 23.2%
. Independent Power: 8.4%
215,000 CalEnergy 7,310
Power Plants
. Oil/Gas Producers: 3.5%
86,000 Seagull Energy 1,548
Oil & Gas Producer
143,000 Tesoro Petroleum 1,502
Oil Refinery/Gas Reserves
- ----------------------------------------------------------
3,050
. Distribution/Marketing/Refining: 6.4%
126,000 United Cities Natural Gas 2,898
Natural Gas Distributor
124,400 NGC 1,959
Gas Processing/Marketing
27,000 Atmos Energy 685
Natural Gas Distributor
- ----------------------------------------------------------
5,542
. Oil Services: 4.9%
252,000 GeoScience 2,772
Offshore Seismic Equipment Company
54,000 J Ray McDermott 1,309
Offshore Construction Company
2,200 Atwood Oceanics 137
Offshore Drilling Company
- ----------------------------------------------------------
4,218
--------
Energy/Minerals: Total 20,120
Total Common Stocks and Other --------
Equity-Like Securities: 93.7% 81,415
--------
Short-Term Obligations: 6.5% 5,659
--------
Total Investments: 100.2% 87,074
--------
Cash and Other Assets Less Liabilities: (0.2%) (200)
--------
Total Net Assets: 100% $ 86,874
- ----------------------------------------------------------
</TABLE>
12
<PAGE>
Acorn Fund
.Major Portfolio Changes in the First Quarter
<TABLE>
<CAPTION>
Number of Shares
----------------------
12/31/96 3/31/97
Additions
- -------------------------------------------------------------
<S> <C> <C>
Information
ACT Manufacturing 350,000 500,000
American Management Systems 200,000 400,000
American Power Conversion 325,000 400,000
BDM International 140,000 340,000
(includes effect of 2 for 1 split)
Broderbund Software 0 300,000
C-Tec 300,000 560,000
Cognos (Canada) 100,000 150,000
Data Transmission Network 750,000 800,000
Informix 330,000 600,000
Kronos 550,000 600,000
Macrovision 0 280,000
Micros Systems 0 125,000
Pioneer-Standard Electronics 1,000,000 1,090,000
Systems & Computer Technology 480,000 605,000
Thermoquest 20,000 229,000
United Video Satellite 567,000 700,000
Wonderware 0 250,000
- -------------------------------------------------------------
Health Care
HealthCare Compare 573,000 1,000,000
Magellan Health Services 0 400,000
- -------------------------------------------------------------
Consumer Goods/Services
Acres Gaming 0 80,000
Airtours (United Kingdom) 200,000 270,000
Dave and Buster's 60,000 135,000
Royal Caribbean Cruises 265,000 310,000
- -------------------------------------------------------------
Finance
World Acceptance 1,190,000 1,390,000
- -------------------------------------------------------------
Industrial Goods/Services
Gibraltar Steel 440,000 520,000
Hunter Douglas 110,000 125,000
Metal Management 0 105,000
Schnitzer Steel 300,000 350,000
Steel Dynamics 225,000 340,000
- -------------------------------------------------------------
Energy/Minerals
CalEnergy 868,000 950,000
KCS Energy 0 160,000
Pride Petroleum 0 370,000
Seagull Energy 1,600,000 1,900,000
Tesoro Petroleum 900,000 1,200,000
United Meridian 200,000 300,000
- -------------------------------------------------------------
Real Estate
Homestead Village 88,000 619,000
</TABLE>
13
<PAGE>
A
<TABLE>
<CAPTION>
Acorn Fund
.Major Portfolio Changes in the First Quarter
Number of Shares
--------------------
12/31/96 3/31/97
Sales
- ----------------------------------------------------------------
<S> <C> <C>
Information
The 3DO Company 180,000 0
Argyle Television 170,000 44,000
Benefon (Finland) 90,000 0
CACI International 461,000 343,000
Compuware 153,000 130,000
Electronics Boutique
(United Kingdom) 4,500,000 0
Exide Electronics Group 250,000 0
Jones Intercable, Cl. A 325,000 0
Kurzweil Applied Intelligence 170,000 0
Oak Industries 350,000 250,000
PILTEL (Philippines) 7,000,000 0
Securicor Group, Cl. A
(United Kingdom) 2,000,000 1,700,000
Simulation Sciences 70,000 0
SK Telecom (Korea) (formerly
known as Korea Mobile Telecom) 5,300 4,000
(includes effect of 3% bonus)
Solectron 600,000 545,000
Sysdeco Group (Norway) 130,000 0
TCI Satellite Entertainment 130,000 0
Telegraaf Holdings (Netherlands) 180,000 0
Village Roadshow (Australia) 1,600,000 800,000
WM Data Nordic (Sweden) 400,000 350,000
- ----------------------------------------------------------------
Health Care
Affymetrix 350,000 300,000
MDL Information Systems 275,000 0
Thermedics 268,000 63,000
ThermoTrex 100,000 0
- ----------------------------------------------------------------
Consumer Goods/Services
Burswood Property (Australia) 2,500,000 450,000
Cortefiel (Spain) 70,000 0
Designer Holdings 290,000 0
Duckwall Alco Stores 200,000 48,000
Escada (Germany) 30,000 16,000
Guilbert (France) 45,000 27,000
Hennes & Mauritz, Cl. B (Sweden) 100,000 50,000
Mac Frugal's 84,000 0
Morton's Restaurant Group 125,000 0
Mr. Max (Japan) 134,900 34,000
Newell 825,000 700,000
O.Y.L. Industries (Malaysia) 440,000 255,000
Panamerican Beverages (Panama) 100,000 0
Sentra, Cl. A (Finland) 50,000 0
Shinsegae (Korea) 110,956 0
Shoney's 725,000 0
- ----------------------------------------------------------------
Finance
ADVANTA, Cl. A 767,000 531,000
ADVANTA, Cl. B 520,000 247,000
Americredit 1,049,000 935,000
First American 70,000 0
First USA 1,088,000 1,013,000
Itau Banco PN (Brazil) 12,000,000 10,000,000
Jayhawk 496,000 0
Kookmin Bank (Korea) 275,000 155,000
Mercury Finance 818,000 0
Promise (Japan) 20,000 0
Riverside National Bank 104,000 0
T Rowe Price 145,000 100,000
The Thailand Fund (Thailand) 30,000 0
Washington Mutual 390,000 323,000
- ----------------------------------------------------------------
Industrial Goods/Services
Aftermarket Technology 108,000 0
AG Services of America 119,000 0
Expeditors International
of Washington 1,000,000 800,000
HA.LO Industries 353,000 210,000
Kian Joo Can Factory (Malaysia) 1,125,000 0
Tecnost (Italy) 1,100,000 0
Zoltek 35,000 0
- ----------------------------------------------------------------
Energy/Minerals
Abraxas Petroleum 110,000 0
AES China Generating (China) 810,000 730,000
AES Corporation 955,000 900,000
Atwood Oceanics 320,000 298,000
Cemig (Brazil) 235,000,000 130,000,000
Devon Energy 300,000 0
Forest Oil 700,000 475,000
Louis Dreyfus Natural Gas 350,000 0
RAO Gazprom (Russia) 62,500 0
Siderar (Argentina) 160,000 0
Siderca (Argentina) 4,000,000 3,000,000
St. Mary Land & Exploration 200,000 0
Thermo Power 285,000 0
- ----------------------------------------------------------------
Real Estate
Sunstone Hotel Investors 243,000 0
</TABLE>
14
<PAGE>
A
<TABLE>
<CAPTION>
Acorn Fund
. Statement of Investments (unaudited) March 31, 1997
Number of Shares Value (000)
- --------------------------------------------------------------
Common Stocks and Other
Equity-Like Securities: 93.0%
- --------------------------------------------------------------
<C> <S> <C>
Information: 17.9%
.Broadcasting/CATV: 1.6%
560,000 C-Tec $ 15,820
1,000,000 Tele-Communications,
Series A TCI Group 12,000
44,000 Tele-Communications, Cum. Pfd. 2,662
300,000 TCA Cable TV 9,075
300,000 Granite Broadcasting 2,887
80,000 Cablevision Systems 2,380
44,000 Argyle Television 1,111
- --------------------------------------------------------------
45,935
.Programming for CATV/TV/
Satellites: 4.3%
2,400,000 Tele-Communications,
Liberty Media Group 47,850
800,000 Data Transmission Network 21,000
700,000 International Family Entertainment 14,262
700,000 United Video Satellite 11,725
300,000 BET Holdings, Cl. A 8,887
327,000 HSN 8,298
300,000 Gaylord Entertainment 6,450
280,000 Macrovision 2,415
- --------------------------------------------------------------
120,887
.Mobile Communications: 1.9%
500,000 Telephone and Data Systems 19,188
450,000 CoreComm 6,525
355,000 COMARCO 6,212
850,000 Mobile Telecommunication
Technologies 5,312
465,000 Vanguard Cellular Systems 5,115
350,000 Palmer Wireless 4,287
450,000 PriCellular 3,713
300,000 Centennial Cellular 3,112
- --------------------------------------------------------------
53,464
.Computer Software/Services: 3.3%
605,000 Systems & Computer Technology 11,722
600,000 Informix 9,075
400,000 American Management Systems 8,800
246,000 BRC Holdings 8,179
130,000 Compuware 8,157
Principal Amount or
Number of Shares Value (000)
- --------------------------------------------------------------
360,000 Analysts International $ 7,920
340,000 BDM International 7,480
210,000 Keane 6,904
343,000 CACI International 5,574
160,000 Sterling Commerce 4,640
369,000 Computer Language Research 4,428
125,000 Micros Systems 4,359
250,000 Wonderware 2,438
208,333 Source Informatics Cv. Pfd. 2,360
- --------------------------------------------------------------
92,036
.Gaming Equipment: 1.0%
1,800,000 International Game Technology 29,025
.Consumer Software: 0.5%
300,000 Broderbund Software 6,562
280,000 Activision 3,150
450,000 Spectrum HoloByte 2,813
- --------------------------------------------------------------
12,525
.Business Information: 0.6%
700,000 American Business Information 13,650
885,714 GIGA Cv. Pfd. 3,100
- --------------------------------------------------------------
16,750
.Contract Manufacturing: 1.5%
545,000 Solectron 27,318
500,000 ACT Manufacturing 10,375
287,000 Altron 4,843
- --------------------------------------------------------------
42,536
.Instrumentation: 1.3%
685,000 Thermo Instrument Systems 19,865
$5,000,000 Thermo Optek, 5% Note Due 10/15/00 5,266
300,000 IFR Systems 4,500
229,000 Thermoquest 3,121
$1,500,000 Thermoquest, 5% Note Due 8/15/00 1,580
100,000 Thermo Bio Analysis 925
65,000 Metrika Systems 487
- --------------------------------------------------------------
35,744
.Distribution: 0.9%
1,090,000 Pioneer-Standard Electronics 13,897
300,000 Kent Electronics 6,900
450,000 Richey Electronics 5,288
- --------------------------------------------------------------
26,085
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
A
Acorn Fund
. Statement of Investments (unaudited)
Number of Shares Value (000)
-------------------------------------------------------------
<C> <S> <C>
.Components/Peripherals: 1.0%
600,000 Kronos $ 10,500
400,000 American Power Conversion 8,650
250,000 Oak Industries 4,937
375,000 Planar Systems 4,125
-------------------------------------------------------------
28,212
--------
Information: Total 503,199
-------------------------------------------------------------
Health Care: 9.6%
.Biotechnology/Drug Delivery: 1.9%
450,000 Watson Pharmaceuticals 16,088
260,000 RP Scherer 13,488
450,000 Inhale Therapeutic Systems 8,606
228,000 Biogen 8,521
800,000 Corvas International 4,400
800,000 Corvas International Warrants 800
253,000 CIMA Labs 1,518
130,000 Genome Therapeutics 894
-------------------------------------------------------------
54,315
.Medical Equipment: 2.5%
1,162,000 Respironics 24,693
740,000 Invacare 17,390
1,000,000 Kinetic Concepts 14,250
300,000 Affymetrix 7,209
275,000 Innovasive Devices 3,025
125,000 Trex Medical 1,453
63,000 Thermedics 984
-------------------------------------------------------------
69,004
.Hospital/Laboratory Supplies: 0.7%
273,000 Hillenbrand Industries 10,886
322,000 Sybron International 8,936
-------------------------------------------------------------
19,822
.Services: 4.5%
1,000,000 Lincare Holdings 41,250
1,000,000 HealthCare Compare 40,625
498,000 HBO & Company 23,655
400,000 Magellan Health Services 9,850
505,000 United Payors and Providers 7,196
300,000 Walsh International 2,325
-------------------------------------------------------------
124,901
--------
Health Care: Total 268,042
Principal Amount or
Number of Shares Value (000)
-------------------------------------------------------------
Consumer Goods/Services: 8.8%
.Retail: 2.0%
1,960,000 Borders $ 36,995
295,000 Quality Food Centers 12,390
700,000 Host Marriott Services 6,212
48,000 Duckwall Alco Stores 678
-------------------------------------------------------------
56,275
.Recreational Vehicles: 1.6%
1,100,000 Harley-Davidson 37,262
320,000 Thor Industries 7,480
-------------------------------------------------------------
44,742
.Food: 0.3%
634,000 Au Bon Pain 4,081
135,000 Dave & Buster's 3,004
-------------------------------------------------------------
7,085
.Entertainment/Leisure: 3.2%
1,400,000 Carnival 51,800
310,000 Royal Caribbean Cruises 9,455
215,000 GC Companies 8,439
276,000 Carmike Cinemas 7,900
472,000 Hollywood Park, Cv. Pfd. 5,812
140,000 Showboat 2,765
180,000 Rio Hotel & Casino 2,520
535,000 Monarch Casino & Resort 1,204
80,000 Acres Gaming 380
$6,250,000 Grand Palais Casino 14%
Note Due 2/25/98 313
-------------------------------------------------------------
90,588
.Manufacturers: 1.7%
700,000 Newell 23,450
565,000 Wolverine World Wide 20,623
232,000 Norwood Promotional 3,132
-------------------------------------------------------------
47,205
--------
Consumer Goods/Services: Total 245,895
-------------------------------------------------------------
Finance: 13.6%
.Banks: 1.2%
380,000 Texas Regional Bancshares 12,350
285,000 Union Planters 11,578
260,000 TCF 10,303
-------------------------------------------------------------
34,231
</TABLE>
16
<PAGE>
A
<TABLE>
<CAPTION>
Number of Shares Value (000)
- -----------------------------------------------------------
<C> <S> <C>
.Savings & Loans: 3.4%
845,000 Peoples Bank Bridgeport $ 27,462
528,000 Coast Savings 20,922
323,000 Washington Mutual 15,605
671,000 Washington Federal 15,265
538,000 Commonwealth Bancorp 8,137
280,000 Imperial Thrift & Loan 4,165
156,000 Indiana Federal 4,075
- -----------------------------------------------------------
95,631
.Insurance: 2.1%
836,000 Baldwin & Lyons, Cl. B 14,525
247,000 Foremost 14,326
351,000 United Fire & Casualty 10,793
350,000 PXRE Corporation 8,969
216,000 Leucadia National 5,940
318,000 ALLIED Life Financial 5,446
- -----------------------------------------------------------
59,999
.Money Management: 2.7%
880,000 United Asset Management 22,550
865,000 Baker Fentress 15,462
618,000 SEI 12,978
1,648,000 Phoenix Duff and Phelps 12,566
231,000 BISYS 7,276
100,000 T. Rowe Price 3,713
- -----------------------------------------------------------
74,545
.Credit Cards: 3.2%
1,013,000 First USA 42,926
575,000 National Data 20,341
531,000 ADVANTA, Cl. A 14,271
247,000 ADVANTA, Cl. B 6,391
275,000 Concord EFS 5,156
- -----------------------------------------------------------
89,085
.Other: 1.0%
935,000 Americredit 16,246
1,390,000 World Acceptance 7,819
310,000 DVI Health Services 3,449
- -----------------------------------------------------------
27,514
--------
Finance: Total 381,005
</TABLE>
<TABLE>
<CAPTION>
Principal Amount or
Number of Shares Value (000)
- -----------------------------------------------------------
- -----------------------------------------------------------
Industrial Goods/Services: 9.9%
<C> <S> <C>
.Steel: 2.1%
1,110,000 Worthington Industries $ 21,229
520,000 Gibraltar Steel 10,400
350,000 Schnitzer Steel 8,925
374,000 Atchison Casting 7,199
340,000 Steel Dynamics 5,950
295,000 A M Castle 5,126
105,000 Metal Management 919
- -----------------------------------------------------------
59,748
.Machinery: 3.4%
975,000 Thermo Electron 30,103
800,000 Baldor Electric 20,100
340,000 Applied Industrial Technologies 11,900
148,000 Nordson 7,585
675,000 Thermo Fibertek 6,117
96,000 Mine Safety Appliances 6,096
135,000 Valmont Industries 5,265
110,000 Applied Power 4,620
189,000 Hein-Werner 1,205
500,000 Stevens International, Cl. A 375
34,000 Stevens International, Cl. B 77
- -----------------------------------------------------------
93,443
.Industrial Suppliers: 1.3%
600,000 Unifi 18,300
750,000 Lilly Industries, Cl. A 13,594
244,000 U.S. Can 3,721
- -----------------------------------------------------------
35,615
.Services: 3.1%
1,185,000 World Color Press 24,144
800,000 Expeditors International
of Washington 19,200
851,000 Wackenhut, Cl. B 12,127
45,000 Wackenhut, Cl. A 726
430,000 Hub Group 10,750
450,000 Material Sciences 7,594
434,000 Thermo TerraTech 3,960
210,000 HA.LO Industries 3,202
300,000 Thomas Group 2,925
$2,900,000 Western Water, 9% Cv.
Note Due 9/25/05 2,900
- -----------------------------------------------------------
87,528
--------
Industrial Goods/Services: Total 276,334
</TABLE>
17
<PAGE>
A
Acorn Fund
.Statement of Investments (unaudited)
<TABLE>
<CAPTION>
Number of Shares Value (000)
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Energy/Minerals: 10.1%
<C> <S> <C>
.Independent Power: 3.3%
900,000 AES Corporation $50,400
1,852 AES Corporation Warrants 57
950,000 CalEnergy 32,300
585,000 Thermo Ecotek 8,263
110,000 Thermo Optek 1,320
- -------------------------------------------------------------------
92,340
.Oil/Gas Producers: 2.7%
1,900,000 Seagull Energy 34,200
1,200,000 Tesoro Petroleum 12,600
300,000 United Meridian 9,038
475,000 Forest Oil 6,294
160,000 KCS Energy 5,260
350,000 Costilla Energy 5,075
920,000 Tipperary 4,198
110,000 Abraxas Petroleum Rights 167
- -------------------------------------------------------------------
76,832
.Distribution/Marketing/Refining: 1.5%
630,000 Southern Union 14,411
800,000 NGC 12,600
303,000 Atmos Energy 7,689
150,000 KN Energy 5,925
110,000 United Cities Natural Gas 2,530
- -------------------------------------------------------------------
43,155
.Oil Services: 2.3%
350,000 Energy Ventures 21,569
298,000 Atwood Oceanics 18,513
385,000 J Ray McDermott 9,336
400,000 Veritas DGC 7,900
370,000 Pride Petroleum 7,678
- -------------------------------------------------------------------
64,996
.Mining: 0.3%
300,000 Zeigler Coal Holding 7,125
--------
Energy/Minerals: Total 284,448
- -------------------------------------------------------------------
Real Estate: 3.1%
829,000 The Rouse Company 24,248
400,000 Macerich 11,200
619,000 Homestead Village 10,446
125,000 Homestead Village Warrants 906
</TABLE>
<TABLE>
<CAPTION>
Number of Shares Value (000)
- -------------------------------------------------------------------
<C> <S> <C>
233,000 Forest City Enterprises, Cl. B $ 9,902
185,000 Forest City Enterprises, Cl. A 7,862
210,000 Equity Residential Properties Trust 9,319
165,000 Weingarten Realty Investors 6,992
120,000 First Washington Realty Trust, Cv. Pfd. 3,540
150,000 First Washington Realty Trust 3,394
-------
Real Estate: Total 87,809
- -------------------------------------------------------------------
Foreign Securities: 20.0%
.Canada: 1.0%
800,000 Ranger Oil 7,600
200,000 Shaw Industries, Cl. A 4,271
150,000 Cognos 3,900
125,000 BCE Mobile Communications 3,800
500,000 Shaw Communications, Cl. B 3,529
115,000 Veritas Energy Services 2,362
200,000 Cogeco Cable 1,498
- -------------------------------------------------------------------
26,960
.United Kingdom: 4.0%
3,100,000 Medeva 15,652
1,200,000 Serco Group 13,596
1,920,000 Amvesco 10,814
81,000 Amvesco ADR 4,394
400,000 NTL 8,450
1,700,000 Securicor Group, Cl. A 8,179
650,000 Comcast UK Cable Partners 7,231
700,000 Powerscreen International 7,063
1,075,000 N. Brown Group 6,875
600,000 Edinburgh Fund Managers 5,394
350,000 Getty Communications, Cl. A 5,250
580,000 Oriflame 4,857
270,000 Airtours 4,374
1,200,000 Body Shop International 3,694
1,000,000 Capital 3,407
530,000 Ethical Holdings 2,650
- -------------------------------------------------------------------
111,880
.Germany/Austria: 0.6%
180,000 Flughafen Wien (Austria) 8,243
425,000 United International Holdings (Austria) 4,037
16,000 Escada 2,752
8,000 Binding-Brauerei 2,278
- -------------------------------------------------------------------
17,310
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Value (000)
- --------------------------------------------------------------------
<C> <S> <C>
.Nordic Countries: 2.9%
350,000 WM Data Nordic (Sweden) $30,523
650,000 Getinge Industrier (Sweden) 11,734
240,000 Autoliv (Sweden) 10,369
220,000 Pricer, Cl. B (Sweden) 7,680
220,000 Pricer, Cl. B Rights (Sweden) 274
725,000 SensoNor (Norway) 6,978
50,000 Hennes & Mauritz, Cl. B (Sweden) 6,697
260,000 Esselte, Series A (Sweden) 6,178
- --------------------------------------------------------------------
80,433
.Netherlands: 0.6%
125,000 Hunter Douglas 10,162
250,000 Getronics 8,130
- --------------------------------------------------------------------
18,292
.Switzerland: 0.7%
6,000 Societe Generale de Surveillance 12,287
14,000 Liechtenstein Global Trust 7,872
- --------------------------------------------------------------------
20,159
.France: 1.1%
128,000 Axime Ex Segin 15,146
70,000 Cetelem 8,295
27,000 Guilbert 5,037
20,000 Canal Plus 3,930
- --------------------------------------------------------------------
32,408
.Spain/Portugal: 0.3%
185,000 Vallehermoso 4,306
375,000 Filmes Lusomundo (Portugal) 3,241
- --------------------------------------------------------------------
7,547
.Italy/Greece: 1.4%
4,000,000 Banca Fideuram 10,358
260,000 Hellenic Bottling (Greece) 8,445
300,000 Cellular Communications International 8,325
1,000,000 Saipem 4,658
170,000 Industrie Natuzzi 4,059
1,200,000 Costa Crociere 2,733
- --------------------------------------------------------------------
38,578
.Israel: 0.1%
200,000 Pec Israel Economic 3,775
.Eastern Europe: 0.1%
20,000 Gedeon Richter (Hungary) 1,292
.India: 0.2%
300,000 IS Himalaya Fund 4,110
39,393 Housing Development Finance 3,020
- --------------------------------------------------------------------
7,130
.Hong Kong: 0.4%
4,500,000 Varitronix International 6,852
7,318,000 JCGHoldings 5,761
- --------------------------------------------------------------------
12,613
.China: 0.5%
730,000 AES China Generating 12,045
200,000 The Investment Company of China 942
- --------------------------------------------------------------------
12,987
.Singapore: 0.5%
5,100,000 Genting International 15,096
.Malaysia: 0.3%
1,350,000 Resorts World 5,772
255,000 O.Y.L. Industries 2,520
- --------------------------------------------------------------------
8,292
.Thailand: 0.1%
3,300,000 Sinpinyo Fund V 1,302
.Korea/Taiwan: 1.1%
115,000 Formosa Fund (Taiwan) 12,362
460,000 President Enterprises (Taiwan) 8,625
4,000 SK Telecom (formerly known
as Korea Mobile Telecom) 3,626
283,250 SK Telecom ADR (formerly known
as Korea Mobile Telecom GDS) 2,903
155,000 Kookmin Bank 2,704
300,000 Korea-Europe Fund 1,335
- --------------------------------------------------------------------
31,555
.Indonesia: 0.2%
195,501 Unilever Indonesia 3,898
1,700,000 Tigaraksa Satria 2,372
- --------------------------------------------------------------------
6,270
.Japan: 1.5%
110,000 Nintendo 7,890
174,000 Noritsu Koki 7,519
246 NTT Data 6,537
110,000 Paramount Bed 4,584
75,000 Secom 4,210
</TABLE>
19
<PAGE>
Acorn Fund
.Statement of Investments (unaudited)
<TABLE>
<CAPTION>
Number of Shares Value (000)
- -------------------------------------------------------------------------------
<C> <S> <C>
40,000 Nichiei $ 3,102
720,000 Tokyu Land 2,437
90,000 Sankyo 1,905
130,000 Heiwa 1,711
30,000 Aucnet 715
34,000 Mr. Max 349
- -------------------------------------------------------------------------------
40,959
.Australia/New Zealand: 0.5%
1,700,000 Sky City (New Zealand) 7,973
800,000 Village Roadshow 2,665
550,000 Village Roadshow Pfd. 1,483
600,000 PetSec Energy 2,493
450,000 Burswood Property Trust 490
- -------------------------------------------------------------------------------
15,104
.Mexico: 0.8%
2,500,000 Kimberly Clark de Mexico 10,103
2,000,000 Nadro, Series L 7,010
496,000 Grupo Radio Centro 4,278
170,000 Cofar, Series B 255
- -------------------------------------------------------------------------------
21,646
.Brazil: 0.4%
130,000,000 Cemig $ 5,346
10,000,000 Itau Banco PN 5,168
- -------------------------------------------------------------------------------
10,514
.Other Latin America: 0.7%
3,000,000 Siderca (Argentina) 6,331
130,000 Banco Latinoamericano
de Export (Panama) 6,142
160,000 IRSA (Argentina) 5,960
- -------------------------------------------------------------------------------
18,433
----------
Foreign: Total 560,535
43,200 Miscellaneous Securities: 0.0% 22
Total Common Stocks and Other
----------
Equity-Like Securities: 93.0% 2,607,289
----------
Short-Term Obligations: 7.1% 198,756
----------
Total Investments: 100.1% 2,806,045
----------
Cash and Other Assets Less Liabilities: (0.1%) (2,644)
----------
Total Net Assets: 100% $2,803,401
- -------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
A
Acorn Fund
.Foreign Portfolio Diversification
At March 31, 1997, the 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 $ 52,042 1.9%
Broadcasting/CATV 32,953 1.2
Software/Services 32,186 1.1
Mobile Communications 26,833 1.0
Distribution 4,148 0.1
- ----------------------------------------------------
148,162 5.3
.Health Care
Biotechnology/Drug Delivery 30,100 1.1
Equipment 11,734 0.4
Hospital/Laboratory Supplies 4,584 0.2
- ----------------------------------------------------
46,418 1.7
.Consumer Goods/Services
Manufacturers 58,715 2.1
Entertainment/Leisure 41,556 1.5
Retail 33,348 1.2
Food 19,348 0.7
- ----------------------------------------------------
152,967 5.5
</TABLE>
<TABLE>
Value (000) Percent
- ----------------------------------------------------
<S> <C> <C>
.Finance
Money Management $ 51,011 1.8%
Banks 27,647 1.0
Other 28,013 1.0
- ----------------------------------------------------
106,671 3.8
.Industrial Goods/Services
Services 30,495 1.1
Machinery Processing 14,041 0.5
- ----------------------------------------------------
44,536 1.6
.Energy/Minerals
Independent Power 17,391 0.6
Oil/Gas Producers 12,455 0.4
Oil Services 10,989 0.4
- ----------------------------------------------------
40,835 1.4
.Real Estate 12,703 0.4
.Transportation 8,243 0.3
-----------------
Total Foreign Portfolio $560,535 20.0%
====================================================
</TABLE>
21
<PAGE>
I
Acorn International
.Major Portfolio Changes in the First Quarter
<TABLE>
<CAPTION>
Number of Shares
--------------------
12/31/96 3/31/97
Additions
- -------------------------------------------------------
Europe
<S> <C> <C>
.Germany/Austria
Boewe Systec 0 60,000
IVG Holdings 0 200,000
KTM-Motorradholding 5,000 29,000
.Denmark
Falck 16,000 25,000
.Finland
Talentum 0 80,000
.Norway
Atex Media Solutions 0 500,000
.Sweden
Atle 0 355,000
Getinge Industrier 800,000 975,000
Scala International 35,000 50,000
.France
Canal Plus 20,000 27,000
Groupe AB 30,000 110,000
Groupe Partouche 15,000 30,000
.United Kingdom
Aberdeen Trust 0 1,950,000
Dorling Kindersley 700,000 900,000
HALMA 1,400,000 2,000,000
Hozelock Group 5,000 238,000
Peek 3,000,000 4,000,000
Planning Sciences 150,000 250,000
.Switzerland
Disetronic Holding 1,500 2,600
Societe Generale d'Affichage 12,000 16,000
.Italy
Autogrill Finanziari 0 1,350,000
Banca Pop Commercia e Industria 0 100,000
Danieli 0 175,000
Fila Holdings 0 60,000
Mediolanum 400,000 600,000
Saes Getters 0 125,000
Unipol 0 1,000,000
</TABLE>
<TABLE>
<CAPTION>
Number of Shares
--------------------
12/31/96 3/31/97
<S> <C> <C>
.Netherlands
Hunter Douglas 110,000 125,000
.Poland
Amica Wronki 0 210,000
Bank Inicjatyw Gospodarczych 0 2,550,000
Best Company, Series D 0 85,000
- -------------------------------------------------------
Asia
.Hong Kong
China HK Photo Prods 0 7,000,000
Innovative International Holdings 0 5,500,000
TVB 65,000 1,300,000
Vanda Systems 1,500,000 7,200,000
.Japan
Aderans 50,000 150,000
Amway Japan 70,000 110,000
Belluna 80,000 199,700
Fuji Software ABC 0 130,000
Koei 0 50,000
Nidec 0 121,000
(includes effect of 10% stock dividend)
Orix 25,000 140,000
People 60,000 115,000
(includes effect of 20% stock dividend)
Ryohin Keikaku 50,000 75,000
Shinki 50,000 240,000
(includes effect of 20% stock dividend)
Shohkoh Fund 0 30,000
Softbank 0 78,000
(includes effect of 30% stock dividend)
.Korea
S1 Corporation 10,260 23,000
.Philippines
Mondragon International 3,700,000 12,100,000
- -------------------------------------------------------
Latin America
.Mexico
Grupo Industrial Bimbo 1,200,000 1,500,000
Tubos de Acero de Mexico 0 250,000
.Brazil
Elevadores Atlas 150,000 370,000
</TABLE>
22
<PAGE>
I
<TABLE>
<CAPTION>
Number of Shares
-------------------
12/31/96 3/31/97
<S> <C> <C>
.Argentina
Perez Companc 230,000 600,000
.Chile
Embotelladora Andina 70,000 120,000
- -------------------------------------------
Other Countries
.Australia
Anaconda Nickel 0 2,000,000
Hudson Conway 175,000 420,000
Siddons Ramset 272,000 600,000
.Canada
Bracknell 0 1,000,000
Shermag 0 300,000
.Israel
ZAG Industries 75,000 200,000
.South Africa
Energy Africa 0 405,000
</TABLE>
<TABLE>
<CAPTION>
Number of Shares
-------------------
12/31/96 3/31/97
Sales
- ---------------------------------------------------
<S> <C> <C>
Europe
.Germany
Escada 40,000 26,000
Fresenius 120,000 90,000
Fresenius Pfd. 5,000 0
Marschollek Lautenschlager 50,000 40,000
.Norway
Aker Maritime 500,000 200,000
Elkjoep Norge 200,000 80,000
Sysdeco 660,000 0
.Sweden
Frontec, Series B 300,000 150,000
WM Data Nordic 700,000 650,000
.France
CEP Communications 30,000 0
.United Kingdom
Bluebird Toys 1,100,000 0
Capita Group 2,000,000 1,400,000
N. Brown Group 1,610,000 1,460,000
Premier Oil 12,000,000 6,000,000
.Italy/Greece
Ergo Bank 100,000 228
Tecnost 1,600,000 0
.Turkey
Sabah Yayincilik 48,974,000 0
.Spain
Oscar Mayer S.A. 7,000 0
.Netherlands
Getronics 920,000 850,000
.Russia
RAO Gazprom 62,500 0
</TABLE>
23
<PAGE>
I
Acorn International
.Major Portfolio Changes in the First Quarter
<TABLE>
<CAPTION>
Number of Shares
---------------------
12/31/96 3/31/97
- -------------------------------------------------------------------
<S> <C> <C>
Asia
.Hong Kong
Chen Hsong Holdings 1,000,000 0
Vitasoy International Holdings 15,000,000 8,900,000
.Pakistan
Pakistan State Oil 219,035 59,035
.Japan
Aucnet 110,000 65,000
Itariyard 150,000 90,000
Mr. Max 120,000 26,000
Sanyo Shinpan 110,000 33,000
(includes effect of 10% stock dividend)
.Korea
Daehan City Gas 95,000 70,000
(includes effect of 25% stock dividend)
Kookmin Bank 460,000 290,000
Shinsegae 74,161 0
SK Telecom (formerly known as
Korea Mobile Telecom) 20,500 15,000
(includes effect of 3% stock dividend)
.Malaysia
O.Y.L. Industries 770,000 450,000
.Philippines
PILTEL 8,000,000 0
- -------------------------------------------------------------------
Latin America
.Mexico
GBM Atlantico 353,375 0
Grupo Radio Centro 700,000 579,000
.Brazil
Cemig Pfd. 215,000,000 185,000,000
Banco Itau Pfd. 23,000,000 20,000,000
</TABLE>
<TABLE>
<CAPTION>
Number of Shares
---------------------
12/31/96 3/31/97
.Argentina
<S> <C> <C>
Siderar 240,000 0
Siderca 6,000,000 4,000,000
.Panama
Panamerican Beverages 100,000 0
.Central America
Ceteco Holdings 100,000 0
.Aruba
Global Casinos Cv. Pfd. 450,000 0
Global Casinos 22,500 0
- ----------------------------------------------------
Other Countries
>Australia
Burswood Property Trust 3,700,000 670,000
Village Roadshow Pfd., Cl. A 4,000,000 3,000,000
</TABLE>
24
<PAGE>
Acorn International
.Statement of Investments (unaudited) March 31, 1997
<TABLE>
<CAPTION>
Number of Shares Value (000)
- -------------------------------------------------------------------------------
Common Stocks and Other
Equity-Like Securities: 90.3%
- -------------------------------------------------------------------------------
<S> <C> <C>
Europe: 50.0%
.Germany/Austria: 5.5%
165,000 Rhoen Klinikum Pfd. $ 19,779
100,000 Rhoen Klinikum 12,827
Hospital Management
90,000 Fresenius 19,420
Dialysis Equipment & Solutions
190,000 Flughafen Wien 8,700
Vienna Airport Authority (Austria)
40,000 Marschollek Lautenschlager 8,631
Financial Planning
200,000 IVG Holdings 6,929
Real Estate
21,000 Cewe Color Holding 5,349
Photographic Developing & Printing
15,000 Pfleiderer 4,765
Construction Materials
26,000 Escada 4,473
Fancy Dresses
15,000 Binding-Brauerei 4,271
Brewer
400,000 United International Holdings 3,800
Cable Television for Austria &
Other Countries (Austria)
60,000 Boewe Systec 1,978
Envelope Stuffing Machines
29,000 KTM-Motorradholding 1,815
Off-Road Motorcycles (Austria)
- -------------------------------------------------------------------------------
102,737
.Denmark: 0.6%
25,000 Falck 6,883
Provider of Emergency Services
31,000 Kompan International 3,975
Playground Equipment
20,000 Carli Gry 1,038
Casual Clothing
- -------------------------------------------------------------------------------
11,896
.Finland: 3.7%
500,000 TT Tieto, Cl. B 41,492
Computer Services/Consulting
370,000 Benefon 8,666
Mobile Telephones
100,000 Vaisala, Cl. A 6,592
Meteorological Instruments
80,000 Fiskars, Series A 6,540
Scissors & Gardening Tools
105,000 Sentra, Cl. A 5,819
Convenience Stores, Restaurants
80,000 Talentum 856
Trade Journals
- -------------------------------------------------------------------------------
69,965
.Norway: 0.9%
1,000,000 SensoNor 9,624
Electronic Sensors for Airbags
200,000 Aker Maritime 3,365
Oil Field Equipment & Services
80,000 Elkjoep Norge 2,267
Consumer Electronics Retailer
500,000 Atex Media Solutions 1,175
Software Toolsets & Systems
- -------------------------------------------------------------------------------
16,431
.Sweden: 8.1%
650,000 WM Data Nordic 56,685
Computer Services/Consulting
150,000 Hennes & Mauritz, Cl. B 20,090
Apparel Stores
975,000 Getinge Industrier 17,601
Sterilization & Disinfection Equipment
450,000 Pricer, Cl. B 15,709
450,000 Pricer Rights 561
Electronic Shelf Labels for Supermarkets
320,000 Autoliv 13,826
Seatbelts & Airbags
315,000 Esselte, Series A 7,484
Office Supplies & Related Equipment
355,000 Atle 5,113
Investment Company
50,000 Scala International 4,978
Accounting Software
160,000 Hexagon 4,662
Industrial Conglomerate
315,000 Bure Investment 4,098
Health Care Services & Investments
150,000 Frontec, Series B 1,513
Electronic Commerce Software & Services
- -------------------------------------------------------------------------------
152,320
.France: 4.4%
200,000 Axime Ex Segin 23,665
Computer Services
94,000 Cetelem 11,139
Credit Cards
62,000 NRJ 8,504
Radio Network
40,000 Guilbert 7,462
Office Supplies Distribution
70,000 Spir Communications 6,554
Regional Newspapers
</TABLE>
25
<PAGE>
Acorn International
.Statement of Investments (unaudited)
<TABLE>
<CAPTION>
Number of Shares Value (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
50,000 Technip 5,366
Engineering & Construction
27,000 Canal Plus 5,305
Pay TV
50,000 Virbac 5,259
Drugs for Animals
40,000 Fininfo 5,223
Data Feeds for French Banks & Brokers
30,000 Groupe Partouche 2,665
Casinos
110,000 Groupe AB 1,059
Television Programming
- -------------------------------------------------------------------------------
82,201
.United Kingdom: 11.7%
1,800,000 Serco Group 20,394
Facilities Management
1,400,000 Capita Group 16,207
Outsourcing Government Services
1,900,000 Oriflame International 15,911
Natural Cosmetics Sold Door-to-Door
1,550,000 Powerscreen International 15,640
Mobile Crushing & Screening Equipment
3,000,000 Medeva 15,147
Drugs for Hyperactive Children
467,000 NTL 9,865
Cable TV & Telephone System
1,460,000 N. Brown Group 9,338
Mail Order Clothing in Large Sizes
3,700,000 City Centre Restaurants 9,143
Fast Food Restaurants
2,500,000 Capital 8,518
Classy Casinos
4,000,000 St. James Place 8,374
Life Insurance
1,700,000 Securicor Group, Cl. A 8,179
Mobile Communications
1,700,000 Rotork 7,607
Valve Actuators for Oil & Water Pipelines
710,000 Edinburgh Fund Managers 6,383
Investment Management
410,000 Vosper Thornycroft Holdings 6,008
Naval Shipbuilding
2,000,000 HALMA 5,846
Fire Detection Devices & Burglar Alarms
720,000 Seton Healthcare Group 5,763
Pharmaceuticals
500,000 Comcast UK Cable Partners 5,562
Cable TV & Telephone System
1,800,000 Body Shop International 5,542
Natural Cosmetics & Toiletries
1,400,000 Ivory & Sime 5,264
Investment Management
4,000,000 Peek 5,156
Traffic Control Systems
13,000,000 Electronics Boutique 5,016
Videogame/Computer Software Stores
500,000 Expro International Group 4,023
Oil Field Services
900,000 Dorling Kindersley 3,990
Reference Books & CD-ROMs
6,000,000 Premier Oil 3,497
Oil & Gas Producer
670,000 Ethical Holdings 3,350
Drug Delivery
900,000 Tunstall 3,177
"I've fallen and I can't get up" Monitors
1,950,000 Aberdeen Trust 3,122
Money Management
250,000 Planning Sciences 2,250
Database & Business Intelligence Software
238,000 Hozelock Group 1,663
Garden Hoses
- -------------------------------------------------------------------------------
219,935
.Switzerland: 2.9%
6,500 Societe Generale de Surveillance 13,310
Inspection/Testing of Trade Goods
25,000 Phoenix Mecano 11,801
Electrical Components Manufacturer
13,000 Liechtenstein Global Trust 7,309
Banking & Investment Management
8,000 Suedelektra Holding 6,775
Diversified Pool of Commodity-Related Projects
16,000 Societe Generale d'Affichage 6,442
Billboard Advertising
2,600 Disetronic Holding 5,306
Insulin Pens & Infusion Pumps
10,000 Prodega 2,777
Cash-and-Carry Retailer
- -------------------------------------------------------------------------------
53,720
.Italy/Greece: 5.8%
7,100,000 Banca Fideuram 18,386
Life Insurance & Mutual Funds
2,500,000 Saipem SPA 11,644
Pipeline Construction & Drilling Contractor
275,000 Hellenic Bottling 8,933
Coca-Cola Bottler (Greece)
600,000 Gewiss 8,524
Electrical Plugs & Switches
</TABLE>
26
<PAGE>
I
<TABLE>
<CAPTION>
Number of Shares Value (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
550,000 Banca Popolare Di Bergamo $ 8,391
Regional Bank
3,100,000 Crociere 7,061
Mediterranean Cruise Line
2,000,000 Editoriale L'Espresso 6,887
Newspapers & Magazines
150,000 Intracom 5,693
Telecommunications Equipment (Greece)
600,000 Mediolanum 5,337
Life Insurance & Mutual Funds
200,000 Industrie Natuzzi 4,775
Leather Couches
1,100,000 Banca Di Legnano 4,068
Regional Bank
60,000 Fila Holdings 3,262
Athletic Shoes
1,000,000 Unipol 3,105
Life & Auto Insurance
400,000 Attica Enterprises 3,018
Ferry Line (Greece)
80,000 Cellular Communications International 2,220
Mobile Communications
1,350,000 Autogrill Finanziari 2,007
Tollway Restaurants
125,000 Saes Getters 1,798
Getters used in TVs/PCs
175,000 Danieli 1,249
Steel-making Machinery
100,000 Banca Pop Commercia e Industria 1,319
Regional Bank
228 Ergo Bank 14
Bank (Greece)
- -----------------------------------------------------------------------------
107,691
>Spain/Portugal: 1.8%
110,000 Campofrio Alimentacion 7,294
Sausage Maker
100,000 Mapfre Vida 6,384
Life Insurance & Mutual Funds
160,000 Cortefiel 4,909
Apparel Retailer
200,000 Vallehermoso 4,655
Residential Property Developer & Landlord
250,000 Estoril Sol 3,428
Casino Resort (Portugal)
170,000 Lusotur 2,888
Real Estate/Resort Developer (Portugal)
16,000 Zardoya Otis 1,749
Elevator Maintenance
150,000 Filmes Lusomundo 1,296
Newspapers, Radio, Video,
Film Distribution (Portugal)
350,000 Televisao Independente 960
Television Station (Portugal)
- -----------------------------------------------------------------------------
33,563
>Netherlands: 3.8%
850,000 Getronics 27,642
Computer Consulting
620,000 Kempen 16,328
Stock Brokerage/Investment Management
125,000 Hunter Douglas 10,162
Blinds
300,000 Fugro McClelland 6,397
Engineering, Consulting & Surveying
280,000 Telegraaf Holdings 6,045
Newspaper Publisher
50,000 Wegener 5,011
Newspaper Publisher
- -----------------------------------------------------------------------------
71,585
>Hungary: 0.3%
145,000 Cofinec 4,386
Consumer Goods Packaging
20,000 Gedeon Richter 1,292
Generic Drugs
- -----------------------------------------------------------------------------
5,678
>Poland: 0.5%
2,550,000 Bank Inicjatyw Gospodarczych 3,318
Warsaw Bank
210,000 Amica Wronki 1,878
Appliance Manufacturer
200,000 Bank Komunalny 1,626
Gdansk - Area Bank
85,000 Best Company, Series D 1,604
Electronics Retailer
- -----------------------------------------------------------------------------
8,426
-----------
Europe: Total 936,148
- -----------------------------------------------------------------------------
Asia: 24.3%
>China: 0.3%
350,000 AES China Generating 5,775
Independent Power
>Hong Kong: 2.6%
6,000,000 Varitronix International 9,137
LCD Manufacturer
11,000,000 JCG Holdings 8,659
Consumer Finance
10,000,000 Li and Fung 8,259
Sourcing of Consumer Goods
</TABLE>
27
<PAGE>
I
Acorn International
>Statement of Investments (unaudited)
<TABLE>
<CAPTION>
Number of Shares Value (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
1,300,000 TVB $ 5,285
Television Broadcasting
12,000,000 Manhattan Card 4,142
Chase's Local Credit Card
20,000,000 Golden Harvest Entertainment 3,355
Movie Distribution & Exhibition
8,900,000 Vitasoy International Holdings 3,130
Soya Milk Manufacturer
7,200,000 Vanda Systems 3,089
Systems Integrator
5,500,000 Innovative International Holdings 2,183
Auto Accessories
7,000,000 China HK Photo Prods 2,078
Photography Products
- -----------------------------------------------------------------------------
49,317
>India/Pakistan: 1.0%
82,702 Housing Development Finance 6,340
Mortgage Lender
300,000 IS Himalaya Fund 4,110
Closed-End Fund
1,047,800 Zee Telefilms 2,570
Hindi Television Programming & Broadcasting
299,450 Max India 1,711
50,000 Max India Zero Coupon 286
50,000 Max India New Shares 286
Penicillin & Mobile Phones
810,000 Tube Investment GDR 1,458
Bicycle Manufacturer
342,100 Kotak Mahindra Finance 508
Consumer Finance
59,035 Pakistan State Oil 412
Oil Distribution (Pakistan)
2,000,000 Centurion Quantum Growth 254
Closed-End Fund
- -----------------------------------------------------------------------------
17,935
>Japan: 9.7%
270,000 Noritsu Koki 11,667
Photo Processing Lab Manufacturer
130,000 Nichiei 10,080
Lender to Small & Medium Size Businesses
299,000 Hokuto 9,322
Mushroom Grower
163,000 Secom 9,150
Security Alarm Systems
330 NTT Data 8,769
Computer Services/Consulting
110,000 Nintendo 7,890
Video Games
325,000 Meitec 6,510
Engineering Outsourcing
235,000 Konami 6,434
Entertainment Software/Hardware
30,000 Shohkoh Fund 6,324
Lender to Small and Medium Size Businesses
140,000 Orix 6,163
Leasing Company
78,000 Softbank 4,945
Publisher/Software Distributor
115,000 HIS 4,923
Travel Agent
75,000 Ryohin Keikaku 4,876
Designer & Retailer of Muji Brand
Specialty Consumer Goods
165,000 Lasertec 4,851
Manufacturer of LCD & Photomask
Defect Detectors
110,000 Paramount Bed 4,584
Hospital Bed Manufacturer
1,330,000 Tokyu Land 4,501
Real Estate
121,000 Nidec 4,476
Manufacturer of Motors for Hard Disk Drives
230,000 Mirai Industry 4,366
Manufacturer of Plastic Housing Components
195,000 Sankyo 4,126
Pachinko Machine Manufacturer
240,000 Shinki 4,071
Corporate & Consumer Lending
240,000 Central Uni 3,732
Health Care/Medical Equipment
650,000 Chuo Trust & Banking 3,549
Banking
130,000 Fuji Software ABC 3,360
Computer Services/Consulting
255,000 Heiwa 3,357
Pachinko Machine Manufacturer
150,000 Aderans 3,247
Hairpieces & Wigs
115,000 People 3,065
Sports Clubs
110,000 Amway Japan 3,021
Network Sales
70,000 Promise 2,929
Consumer Finance
120,000 NuSkin Asia Pacific 2,895
Network Sales
142,000 Mars Engineering 2,879
Gaming Systems & Machinery
</TABLE>
28
<PAGE>
I
<TABLE>
<CAPTION>
Number of Shares Value (000)
- -------------------------------------------------------------------------
<S> <C> <C>
150,000 Arrk Corporation $2,726
Industrial Modeling
135,000 Xebio 2,671
Sporting Goods Retailer
55,000 Tiemco 2,643
Fishing Equipment
430,000 Nanto Bank 2,535
Banking
126,020 Nihon Jumbo 2,524
Photo Processing Lab
199,700 Belluna 2,419
Catalog Sales
33,000 Sanyo Shinpan 1,663
Consumer Finance
65,000 Aucnet 1,549
Used Auto Auctions Via Satellite
165,000 Shochiku 1,359
Film, Television & Kabuki Producer
50,000 Koei 783
Video Game Software
90,000 Itariyard 683
Designer/Wholesaler of Women's Apparel
86,000 Cats 633
Pest Control
26,000 Mr. Max 267
Household Goods & Appliance Retailer
- -------------------------------------------------------------------------
182,517
.Korea/Taiwan: 3.4%
15,000 SK Telecom (formerly known as
Korea Mobile Telecom) 13,598
Mobile Communications
480,000 President Enterprises 9,000
Food Manufacturer & Distributor (Taiwan)
80,000 Formosa Fund 8,600
Closed-End Fund (Taiwan)
70,000 Taipei Fund 7,455
Closed-End Fund (Taiwan)
23,000 S1 Corporation 6,434
Systems Security
290,000 Kookmin Bank 5,059
Retail Bank
178,970 Dongbu Fire & Marine Insurance 4,457
Non-Life Insurance
230,000 Formosa Growth Fund 4,198
Closed-End Fund (Taiwan)
70,000 Daehan City Gas 3,596
Gas Utility
150,000 Baring Taiwan Fund 1,894
Closed-End Fund (Taiwan)
- -------------------------------------------------------------------------
64,291
.Malaysia: 2.1%
2,350,000 Malaysian Assurance Alliance 13,554
Insurance
2,000,000 Malaysian Oxygen 10,810
Industrial Gases
3,300,000 Arab Malaysian Finance 9,850
Consumer Finance
450,000 O.Y.L. Industries 4,447
Air Conditioners
- -------------------------------------------------------------------------
38,661
.Indonesia: 1.4%
3,000,000 Bank Niaga 8,996
Banking
1,600,000 Modern Photo Film 5,364
Fuji Film Distributor
2,900,900 Tigaraksa Satria 4,047
Distributor of Consumer Goods
230,000 Unilever 4,586
Consumer Goods
3,000,000 Mustika Ratu 3,639
Traditional Cosmetics
- -------------------------------------------------------------------------
26,632
.Philippines: 1.4%
25,000,000 Int'l Container Terminal Services 14,935
Container Handling Terminals &
Port Management
3,000,000 Philippine Savings Bank 6,031
Banking
12,100,000 Mondragon International 5,163
Casinos/Resort
- -------------------------------------------------------------------------
26,129
.Singapore: 1.6%
5,500,000 Genting International 16,280
Cruise Line
3,050,000 Venture Manufacturing 7,470
2,500,000 Venture Manufacturing Wts. 7/26/99 4,342
Contract Electronics Manufacturer
750,000 Datacraft Asia 1,590
Networking Services
- -------------------------------------------------------------------------
29,682
.Thailand: 0.8%
4,700,000 Shinawatra Satellite 5,609
Satellite Leasing
320,000 Bangkok Insurance 4,805
Finance/Insurance
200,000 Serm Suk 3,234
Pepsi Bottler
</TABLE>
29
<PAGE>
Acorn International
.Statement of Investments (unaudited)
<TABLE>
<CAPTION>
Number of Shares Value (000)
- -----------------------------------------------------------------------
<S> <C> <C>
2,600,000 Sinpinyo Fund V $ 1,026
Closed-End Fund
- -----------------------------------------------------------------------
14,674
--------
Asia: Total 455,613
- -----------------------------------------------------------------------
Latin America: 8.2%
.Mexico: 2.9%
3,000,000 Kimberly Clark de Mexico 12,123
Paper Products
3,000,000 Nadro, Series L 10,516
Pharmaceutical Distributor
1,500,000 Grupo Industrial Bimbo 9,267
Bread, Baked Goods & Snacks
450,000 Bufete Industrial 9,225
Engineering & Construction
579,000 Grupo Radio Centro 4,994
Radio Stations & Networks
250,000 Tubos de Acero de Mexico 4,281
Seamless Pipe for Oil Wells
2,100,000 Fondo Opcion, Series B 2,648
Real Estate Investment Fund
4,900,000 Grupo Herdez, Series B 1,816
Sauces & Condiments
107,000 Cofar 160
Drug Stores
- -----------------------------------------------------------------------
55,030
.Brazil: 2.1%
20,000,000 Banco Itau Pfd. 10,337
Bank
185,000,000 Cemig Pfd. 7,607
Electric Utility
3,500,000 White Martins 5,678
Industrial Gases
35,000,000 Telemig Pfd. 4,737
35,000,000 Telemig 4,687
Telecommunications
370,000 Elevadores Atlas 4,536
Elevator Services
1,000,000 Brazilian Smaller Companies Warrants 725
Closed-End Fund
- -----------------------------------------------------------------------
38,307
.Argentina: 1.5%
320,000 IRSA 11,920
Real Estate Management & Development
4,000,000 Siderca 8,441
Seamless Pipe for Oil Wells
600,000 Perez Companc 4,638
Oil & Gas Producer
1,400,000 Cresud 2,590
Grain & Cattle Farms
220,470 Cerveceria Biekert 392
Brewer
- -----------------------------------------------------------------------
27,981
.Chile: 1.2%
150,000 Genesis Chile Fund 6,712
Closed-End Fund
250,000 Santa Isabel 6,469
Grocery Stores
260,000 Banco BHIF 5,557
Financial Services
120,000 Embotelladora Andina 4,455
Coca-Cola Bottler
- -----------------------------------------------------------------------
23,193
.Peru: 0.1%
2,527,334 Enrique Ferreyros 2,288
795,685 Enrique Ferreyros Rights 30
Heavy Machinery Dealer
- -----------------------------------------------------------------------
2,318
.Panama: 0.4%
150,000 Banco Latinoamericano
de Exportaciones 7,088
Trade Financing
--------
Latin America: Total 153,917
- -----------------------------------------------------------------------
Other Countries: 7.5%
.Australia/New Zealand: 3.9%
2,000,000 Publishing & Broadcasting 10,786
Media & TV Broadcasting
1,750,000 Sky City 8,207
Casino & Hotel (New Zealand)
3,000,000 Village Roadshow Pfd. Cl. A 8,090
Film Distribution, Exhibition & Production
4,000,000 Austereo 7,714
Radio Stations
1,400,000 Petsec Energy 5,817
Oil & Gas Producer
4,600,000 Sonic Healthcare 5,770
Pathology Labs
3,600,000 Tyndall Australia 5,616
Money Management & Insurance
1,970,000 Skilled Engineering 5,220
Temporary Skilled Labor
2,000,000 Anaconda Nickel 5,064
Nickel Mining
420,000 Hudson Conway 4,346
Casino Managers
600,000 Siddons Ramset 3,339
Manufacturer & Distributor of
Construction Materials
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Value (000)
- -------------------------------------------------------------
<S> <C> <C>
600,000 PDL Holdings $ 2,856
Electrical Equipment Manufacturer &
Distributor (New Zealand)
670,000 Burswood Property Trust 730
Perth Casino & Resort
- -------------------------------------------------------------
73,555
.Canada: 2.8%
1,000,000 Ranger Oil 9,500
Oil & Gas Producer
450,000 Shaw Industries 9,609
Oil Field Services
395,000 Veritas Energy Services 8,113
Geophysical Contractor
215,000 Cinar Films 5,267
Children's Television Programming
1,400,000 Pan East Petroleum 4,560
Oil & Gas Producer
600,000 Shaw Communications 4,235
Cable TV
500,000 Cogeco 3,257
Cable TV
1,000,000 Bracknell 2,787
Speciality Contractor
300,000 Shermag 2,704
Manufacturer of Solid Wood Furniture
300,000 Cogeco Cable 2,248
Cable TV
250,000 Fundy Cable 1,086
Cable TV
- -------------------------------------------------------------
53,366
.Israel: 0.7%
325,000 Blue Square Israel 5,769
Supermarkets & Department Stores
200,000 Pec Israel Economic 3,775
Industrial Holdings
200,000 ZAG Industries 2,712
Plastic Hardwares
- -------------------------------------------------------------
12,256
.South Africa: 0.1%
405,000 Energy Africa 1,878
Oil & Gas Producer
----------
Other: Total 141,055
- -------------------------------------------------------------
Foreign Corporations, Operations in the U.S.: 0.3%
161,000 Carnival 5,957
Cruise Ship Line (Panama)
Foreign Corporations, Operations ----------
in the U.S.: Total 5,957
4,744 Miscellaneous Securities: 0.0% 18
Total Common Stocks and Other ----------
Equity-Like Securities: 90.3% 1,692,708
----------
Short-Term Obligations: 9.3% 173,935
----------
Total Investments: 99.6% 1,866,643
----------
Cash and Other Assets Less Liabilities: 0.4% 7,262
----------
Total Net Assets: 100% $1,873,905
- -------------------------------------------------------------
</TABLE>
31
<PAGE>
Acorn International
.Portfolio Diversification
At March 31, 1997, 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 $114,459 6.1%
Broadcasting/CATV 88,801 4.7
Software/Services 85,649 4.6
Mobile Communications 49,979 2.7
Distribution 39,707 2.1
Consumer Electronics 24,816 1.3
Instrumentation 8,390 0.5
Equipment 5,693 0.3
- -------------------------------------------------------------
417,494 22.3
.Health Care
Biotechnology/Drug Delivery 42,784 2.3
Services 36,704 1.9
Hospital/Laboratory Supplies 29,774 1.6
Equipment 26,639 1.4
- -------------------------------------------------------------
135,901 7.2
.Consumer Goods/Services
Retail 157,106 8.4
Manufacturers 122,906 6.5
Entertainment/Leisure 79,204 4.3
Food 71,724 3.8
Recreational Vehicles 3,273 0.2
- -------------------------------------------------------------
434,213 23.2
.Finance
Money Management $ 118,566 6.3%
Banks 75,967 4.0
Insurance 27,382 1.5
Other 129,255 6.9
- -------------------------------------------------------------
351,170 18.7
.Industrial Goods/Services
Services 132,555 7.1
Machinery Processing 62,322 3.3
Steel 10,289 0.5
Forest Products/Construction 4,765 0.3
- -------------------------------------------------------------
209,931 11.2
.Energy/Minerals
Oil/Gas Producers 48,813 2.6
Oil Services 27,473 1.5
Independent Power 16,978 0.9
Mining 5,064 0.3
Refining/Marketing 412 0.0
- -------------------------------------------------------------
98,740 5.3
.Real Estate 33,541 1.8
.Transportation 11,718 0.6
Short-Term Obligations 173,935 9.3
-----------------------
Total Investments $1,866,643 99.6%
- -------------------------------------------------------------
</TABLE>
32
<PAGE>
The Acorn A
- --------------------------- I
Family of Funds U
.Trustees
Irving B. Harris
Chairman
James H. Lorie
Vice Chairman
Leo A. Guthart
Jerome Kahn, Jr.
David C. Kleinman
Charles P. McQuaid
Roger S. Meier
Adolph Meyer, Jr.
Ralph Wanger
.Officers
Ralph Wanger
President
Charles P. McQuaid
Senior Vice President
Terence M. Hogan
Vice President
Leah J. Zell
Vice President
Robert A. Mohn
Vice President
Marcel P. Houtzager
Vice President
Merrillyn J. Kosier
Vice President and Secretary
Bruce H. Lauer
Vice President and Treasurer
Kenneth A. Kalina
Assistant Treasurer
.Investment Advisor
Wanger Asset Management, L.P.
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606
1-800-9-ACORN-9
(1-800-922-6769)
e-mail: [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
This report, including the unaudited schedules of investments 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.
<PAGE>
[PICTURE OF ACORNS]
The Acorn
- ------------------------------
Family of Funds
WAM Brokerage Services, L.L.C.
P.O. Box 8502
Boston, MA 02266-8502
