<PAGE>
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[LOGO]
Wanger U.S. Small Cap Advisor
Annual Report
December 31, 1995
<PAGE>
- -------------------------------------------------------------------------------
Wanger U.S. Small Cap Advisor Annual Report 1995
In a Nutshell
- --------------------------------------------------------------------------------
Wanger U.S. Small Cap Advisor returned 16% to investors during the eight months
the Fund was in operation during 1995. Through September, our performance was
boosted by a number of winners in our information and finance groups. Our best
stocks were Silver King (TV stations), Sierra On-line (computer games) and Aames
(home equity lending). We more than doubled our money in each stock.
The fourth quarter of 1995 was more of a struggle. Rising U.S. consumer debt
delinquencies and bankruptcies spooked our credit card stocks (First USA,
Peoples Bank). A few weak energy stocks also hurt performance. Our disappointing
fourth quarter results pushed us slightly below the market averages shown in the
table for the period from the commencement of the Fund's operations (May 3,
1995) through the end of the year.
Our approach to investing is to buy the stocks of small- and medium-size
companies that we believe will benefit from favorable long-term social,
economic, or political trends. We have packed our portfolio with these companies
and are ready for the new year. Bring on 1996!
Results to December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Since
4th quarter May 3, 1995
------------------------
<S> <C> <C>
Wanger U.S. Small Cap Advisor -- 3.8% 16.0%
Dow-Jones 7.5% 20.4%
Standard & Poor's 500 6.0% 21.8%
Standard & Poor's MidCap 1.4% 18.7%
Russell 2000 2.2% 20.1%
</TABLE>
The Dow Jones Industrial Average includes 30 big companies. The S&P 500 is a
broad market-weighted average, still blue chip dominated. The S&P MidCap 400 is
a market value weighted index of 400 stocks that are in the next tier down from
the S&P 500. The Russell 2000 is formed by taking 3,000 companies and then
eliminating the largest 1,000 leaving a good small company index. All indices
are unmanaged and returns include reinvested dividends.
Net Asset Value Per Share as of 12/31/95: $11.60
- --------------------------------------------------------------------------------
The Value of a $10,000 Investment in Wanger U.S. Small Cap Advisor
May 3, 1995 through December 31, 1995
[GRAPH APPEARS HERE]
Wanger US Small Cap Russell 2000
------------------- ------------
5/3/95 $10,000 $10,000
5/31/95 $ 9,870 $10,172
6/30/95 $10,770 $10,700
7/31/95 $11,560 $11,316
8/31/95 $11,940 $11,550
9/30/95 $12,060 $11,757
10/31/95 $11,380 $11,231
11/30/95 $11,640 $11,703
12/31/95 $11,600 $12,012
This graph compares the results of $10,000 invested in Wanger U.S. Small Cap
Advisor on May 3, 1995 (the date the Fund began operations) with the Russell
2000 with dividends reinvested. Past performance does not guarantee future
results. The investment return and principal value of an investment in the Fund
will fluctuate so that Fund shares, when redeemed, may be worth more or less
than their original cost.
2
<PAGE>
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Wanger U.S. Small Cap Advisor Statement of Investments December 31, 1995
<TABLE>
<CAPTION>
Number of Shares Value
- --------------------------------------------------------------------------------
Common Stocks and Other Equity-Like
Securities--94.9%
Information Group--24.5%
- --------------------------------------------------------------------------------
Broadcasting and CATV--4.6%
<S> <C> <C>
20,000 Tele-Communications, Liberty $ 537,500
Media Group (b)
19,000 International Family Entertainment (b) 311,125
12,000 Jones Intercable, Cl. A (b) 148,500
- --------------------------------------------------------------------------------
997,125
Mobile Communications--4.6%
15,000 Cellular Communications of 416,250
Puerto Rico (b)
18,000 Vanguard Cellular Systems (b) 364,500
10,600 Mobile Telecommunication 226,575
Technologies (b)
- --------------------------------------------------------------------------------
1,007,325
Software--2.2%
25,500 CACI International (b) 302,813
4,300 Business Records Corporation (b) 169,850
- --------------------------------------------------------------------------------
472,663
Instrumentation--2.7%
30,000 COMARCO (b) 435,000
10,000 Thermo Spectra (b) 156,250
- --------------------------------------------------------------------------------
591,250
Computer Systems--2.5%
12,500 Solectron (b) 551,563
Distribution--2.1%
22,200 Richey Electronics (b) 288,600
23,000 Bell Microproducts (b) 166,750
- --------------------------------------------------------------------------------
455,350
Components and Peripherals--5.8%
15,000 In Focus Systems (b) 541,875
25,000 Oak Industries (b) 468,750
14,000 Planar Systems (b) 267,750
- --------------------------------------------------------------------------------
1,278,375
- --------------------------------------------------------------------------------
Information Group--Total 5,353,651
Health Care Group--8.9%
- --------------------------------------------------------------------------------
Medical Equipment--7.2%
42,000 Kinetic Concepts $ 504,000
30,000 AMSCO International (b) 446,250
14,000 Thermedics (b) 388,500
9,000 Invacare 227,250
- --------------------------------------------------------------------------------
1,566,000
Services--1.7%
15,000 Lincare Holding (b) 375,000
- --------------------------------------------------------------------------------
Health Care Group--Total 1,941,000
Consumer Goods and Services Group--14.0%
- --------------------------------------------------------------------------------
Retail--4.0%
30,000 Borders (b) 555,000
18,500 Dave & Buster's 224,312
10,000 Duckwall Alco Stores (b) 102,500
- --------------------------------------------------------------------------------
881,812
Entertainment and Leisure--3.3%
20,000 Rio Hotel & Casino (b) 237,500
13,000 Station Casinos (b) 190,125
5,000 GC Companies (b) 167,500
35,000 Monarch Casino & Resort (b) 122,500
- --------------------------------------------------------------------------------
717,625
Restaurants--1.8%
35,000 Quantum Restaurant Group (b) 393,750
Manufacturers--4.9%
21,000 Newell Companies 543,375
15,000 Liz Claiborne 416,250
10,000 Hampshire Group (b) 120,000
- --------------------------------------------------------------------------------
1,079,625
- --------------------------------------------------------------------------------
Consumer Group--Total 3,072,812
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Wanger U.S. Small Cap Advisor Statement of Investments December 31, 1995
Number of Shares Value
- --------------------------------------------------------------------------------
<S> <C>
Finance Group-22.7%
- --------------------------------------------------------------------------------
Savings & Loans-5.7%
18,000 Washington Federal $ 461,250
22,000 Peoples Bank Bridgeport 418,000
10,000 Bell Bancorp 357,500
- --------------------------------------------------------------------------------
1,236,750
Insurance-3.9%
18,000 Transnational Re 441,000
17,000 Leucadia National 425,000
- --------------------------------------------------------------------------------
866,000
Money Management-1.7%
17,000 SEI Corporation 369,750
Credit Cards-4.3%
20,000 National Data 495,000
10,000 First USA 443,750
- --------------------------------------------------------------------------------
938,750
Other-7.1%
35,000 Baker Fentress 586,250
30,000 DVI Health Services (b) 420,000
28,000 Americredit (b) 381,500
30,000 Cash America International 165,000
- --------------------------------------------------------------------------------
1,552,750
- --------------------------------------------------------------------------------
Finance Group-Total 4,964,000
Industrial Goods and Services-14.1%
- --------------------------------------------------------------------------------
Machinery-2.8%
25,000 Zoltek Companies (b) $ 418,750
10,600 Atchison Casting (b) 127,200
3,750 Baldor Electric 75,468
- --------------------------------------------------------------------------------
621,418
Steel-1.2%
8,000 UCAR International (b) 270,000
Furniture and Textiles-3.9%
33,000 Lilly Industries, Cl. A 420,750
19,000 Unifi 420,375
- --------------------------------------------------------------------------------
841,125
Services-6.2%
29,000 Wackenhut, Cl. B 449,500
35,000 AG Services of America (b) 332,500
25,000 NuCo2 (b) 325,000
19,000 Thomas Group (b) 256,500
- --------------------------------------------------------------------------------
1,363,500
- --------------------------------------------------------------------------------
Industrial Group-Total 3,096,043
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Wanger U.S. Small Cap Advisor Statement of Investments December 31, 1995
Number of Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Energy and Minerals Group--10.7%
- --------------------------------------------------------------------------------
Cogeneration--4.8%
24,000 The AES Corporation (b) $ 573,000
29,000 Thermo Ecotek (b) 485,750
- --------------------------------------------------------------------------------
1,058,750
Oil & Gas Producer--3.5%
36,000 Abraxas Petroleum (b) 225,000
25,000 Tesoro Petroleum (b) 215,625
10,000 United Meridian (b) 173,750
14,700 Global Natural Resources (b) 154,350
- --------------------------------------------------------------------------------
768,725
Refining/Marketing--1.0%
24,000 NGC Corporation 213,000
Oil Services--1.4%
7,000 Atwood Oceanics (b) 176,750
5,000 Seacor Holdings (b) 135,000
- --------------------------------------------------------------------------------
311,750
- --------------------------------------------------------------------------------
Energy Group--Total 2,352,225
- --------------------------------------------------------------------------------
Total Common Stocks and Other
Equity-Like Securities--94.9% $20,779,731
- --------------------------------------------------------------------------------
(Cost: $20,340,288)
Cash and Other Assets
Less Liabilities--5.1% 1,123,805
- --------------------------------------------------------------------------------
Total Net Assets--100% $21,903,536
- --------------------------------------------------------------------------------
</TABLE>
Notes To Statement of Investments:
a) At December 31, 1995, for federal income tax purposes cost of investments
was $20,340,288 and net unrealized appreciation was $439,443 consisting of
gross unrealized appreciation of $1,596,638 and gross unrealized
depreciation of $1,157,195.
b) Non-income producing security.
See accompanying notes to financial statements.
5
<PAGE>
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Report of Independent Auditors
To the Shareholders of Wanger U.S. Small
Cap Advisor and the Trustees of
Wanger Advisors Trust
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Wanger U.S. Small Cap Advisor as of December
31, 1995, the related statements of operations and changes in net assets and the
financial highlights for the period from May 3, 1995 (commencement of
operations) through December 31, 1995. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides 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 Wanger
U.S. Small Cap Advisor at December 31, 1995, the results of its operations and
changes in its net assets and the financial highlights for the period from May
3, 1995 through December 31, 1995 in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 31, 1996
6
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Wanger U.S. Small Cap Advisor Statement of Assets December 31, 1995
and Liabilities
<S> <C> <C>
Assets
Investments, at value (cost: $20,340,288) $20,779,731
Cash 1,045,491
Organization costs 86,672
Receivable for:
Fund shares sold $305,337
Dividends 13,525 318,862
- -------------------------------------------------------------------------------
Total assets 22,230,756
Liabilities and Net Assets
Payable for:
Securities purchased 225,000
Amount owed to advisor 86,780
Other 15,440
- -------------------------------------------------------------------------------
Total liabilities 327,220
- -------------------------------------------------------------------------------
Net assets applicable to Fund shares outstanding $21,903,536
- -------------------------------------------------------------------------------
Fund shares outstanding 1,888,396
- -------------------------------------------------------------------------------
Pricing of Shares
Net asset value, offering price and redemption price per share $ 11.60
- -------------------------------------------------------------------------------
Analysis of Net Assets
Paid-in capital $21,506,936
Undistributed net realized gain on sales of investments 59,816
Unrealized appreciation of investments 439,443
Net investment loss (102,659)
- -------------------------------------------------------------------------------
Net assets applicable to Fund shares outstanding $21,903,536
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
================================================================================
U.S. Small Cap Advisor Statement of Operations December 31, 1995
May 3, 1995 through December 31, 1995
<S> <C>
Investment Income:
Dividends $ 40,287
Interest 46
- -------------------------------------------------------------------------------
Total investment income 40,333
Expenses:
Investment advisory fee 71,496
Custodian fees and expenses 5,384
Legal and audit fees and expenses 52,389
Reports to shareholders 4,437
Transfer agent fees and expenses 2,172
Amortization of organization costs 13,328
Trustees' fees and other expenses 13,000
Insurance 4,941
Other expenses 1,025
- -------------------------------------------------------------------------------
Total Expenses 168,172
Less custodian fees paid indirectly (5,384)
Less reimbursement of expenses by advisor (19,796)
- -------------------------------------------------------------------------------
Net expenses 142,992
- -------------------------------------------------------------------------------
Net investment loss (102,659)
Net realized and unrealized gain on investments:
Net realized gain on sales of investments 59,816
Net change in unrealized appreciation 439,443
- -------------------------------------------------------------------------------
Net realized and unrealized gain on investments 499,259
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 396,600
================================================================================
Wanger U.S. Small Cap Advisor Statement May 3, 1995 through December 31, 1995
of Changes in Net Assets
- -------------------------------------------------------------------------------
From operations:
- -------------------------------------------------------------------------------
Net investment loss $ (102,659)
Net realized gain on sales of investments 59,816
Net change in unrealized appreciation 439,443
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations 396,600
From Fund share transactions:
Proceeds from shares sold 24,819,962
Payments for shares redeemed (3,438,708)
- -------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 21,381,254
- -------------------------------------------------------------------------------
Total increase in net assets 21,777,854
Net assets:
Beginning of period (May 3, 1995) 125,682
- -------------------------------------------------------------------------------
End of period (including net investment loss of $102,659) $21,903,536
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
================================================================================================
Wanger U.S. Small Cap Advisor Financial Highlights December 31, 1995
May 3, 1995 through December 31, 1995
- ------------------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, beginning of period $ 10.00
Income From Investment Operations
Net investment loss (.05)
Net realized and unrealized gain on investments 1.65
- ------------------------------------------------------------------------------------------------
Total from investment operations 1.60
Net Asset Value, end of period $ 11.60
================================================================================================
Total Return 16.00%
Ratios / Supplemental Data:
Ratio of expenses to average net assets (a) (b) 2.08%*
Ratio of net investment loss to average net assets (b) (1.44)%*
Portfolio turnover rate 59%*
Net assets at end of period $21,903,536
================================================================================================
</TABLE>
* Annualized
a) In accordance with a requirement by the Securities and Exchange Commission,
this ratio reflects gross custodian fees. This ratio net of custodian fees
paid indirectly would have been 2.00%.
b) The Fund was reimbursed by the Advisor for certain net expenses from May 3,
1995 through December 31, 1995. Without the reimbursement, the ratio of
expenses to average net assets and the ratio of net investment loss to
average net assets would have been 2.35% and (1.71%), respectively.
See accompanying notes to financial statements.
9
<PAGE>
===============================================================================
Wanger U.S. Small Cap Advisor Notes to Financial Statements December 31, 1995
1. Nature of operations
Wanger U.S. Small Cap Advisor (the "Fund") is a series of Wanger Advisors Trust
(the "Trust"), an open-end management investment company organized as a
Massachusetts business trust. The investment objective of the Fund is to seek
long-term growth of capital. The Fund is available only for allocation to
certain life insurance company separate accounts established for the purpose of
funding qualified and non-qualified variable annuity contracts, and may also be
offered directly to certain types of pension plans and retirement arrangements.
The Fund commenced operations on May 3, 1995.
2. Significant Accounting Policies
Security valuation
Investments are stated at current value. Securities traded on securities
exchanges or in over-the-counter markets in which transaction prices are
reported are valued at the last sales price at the time of valuation, or lacking
any reported sales on that day, at the midpoint of the most recent bid and
offer. Money market instruments having a maturity of 60 days or less from the
valuation date are valued on an amortized cost basis. Securities for which
quotations are not readily available and any other assets are valued at a fair
value as determined in good faith by the Board of Trustees.
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.
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.
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 the Fund's investments and other assets, less liabilities, by the
number of Fund shares outstanding.
Custodian fees
Custodian fees are reduced based on the Fund's cash balances maintained with the
custodian. This presentation does not affect the determination of net investment
income.
10
<PAGE>
===============================================================================
Wanger U.S. Small Cap Advisor Notes to Financial Statements December 31, 1995
Federal income taxes, dividends and distributions to shareholders
It is the Fund's policy to comply with the special provisions of the Internal
Revenue Code available to regulated investment companies and, in the manner
provided therein, to distribute all of its taxable income, as well as any net
realized gain on sales of investments reportable for federal income tax
purposes.
Dividends and distributions payable to its shareholders are recorded by the
Fund on the ex-dividend date.
3. Transactions with Affiliates
The Fund's portfolio and business affairs are managed by its investment advisor,
Wanger Asset Management, L.P. ("WAM"). The Fund pays WAM a monthly advisory fee
based upon average daily net assets at the following annual rates: 1% up to $100
million, .95% in excess of $100 million and up to $250 million, and .90% in
excess of $250 million.
The investment advisory agreement also provides that WAM will reimburse the
Fund to the extent that ordinary operating expenses (computed based on net
custodian fees) exceed 2% of average net assets. For the period ended December
31, 1995, WAM reimbursed the Fund $19,796.
Certain officers and trustees of the Trust are also principals of WAM. The
Trust makes no direct payments to its officers and trustees who are affiliated
with WAM. The Fund incurred trustees' fees and expenses of $13,000 in 1995 to
trustees not affiliated with WAM.
WAM advanced $100,000 in connection with the organization and initial
registration of the Fund. These costs are being amortized and reimbursed to WAM
over the period May, 1995 through April, 2000.
4. Fund Share Transactions
Proceeds and payments on Fund shares as shown in the statement of changes in net
assets are in respect of the following numbers of shares:
<TABLE>
<CAPTION>
Period ended 12/31/95
- ---------------------------------------------------------------
<S> <C>
Shares sold 2,170,461
Less shares redeemed 294,633
- ---------------------------------------------------------------
Net increase in shares outstanding 1,875,828
===============================================================
</TABLE>
5. Investment transactions
<TABLE>
<CAPTION>
Period ended 12/31/95
- ---------------------------------------------------------------
<S> <C>
Investment securities
(excluding money market instruments):
Purchases $24,736,475
Proceeds from sales 4,456,003
===============================================================
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
========================================================================================================================
Wanger U.S. Small Cap Advisor
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Trustees Fred D. Hasselbring James A. Star
Terence M. Hogan Ralph Wanger
Charles P. McQuaid Leah J. Zell
P. Michael Phelps
- ------------------------------------------------------------------------------------------------------------------------
Officers Ralph Wanger, President Merrillyn J. Kosier,
Charles P. McQuaid, Senior Vice President Vice President and Secretary
Terence M. Hogan, Vice President Bruce H. Lauer, Vice President and Treasurer
Leah J. Zell, Vice President Kenneth A. Kalina, Assistant Treasurer
- ------------------------------------------------------------------------------------------------------------------------
Transfer Agent, Dividend State Street Bank and Trust Company
Disbursing Agent and Attention: Wanger Advisors Trust
Custodian P.O. Box 8502
Boston, Massachusetts 02266-8502
1-800-4-WANGER
(1-800-492-6437)
- ------------------------------------------------------------------------------------------------------------------------
Investment Advisor Wanger Asset Management, L.P.
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606
(312) 634-9200
- ------------------------------------------------------------------------------------------------------------------------
Legal Counsel Bell, Boyd & Lloyd
Chicago, Illinois
- ------------------------------------------------------------------------------------------------------------------------
Auditors Ernst & Young LLP
Chicago, Illinois
</TABLE>
This report, including the audited financial statements contained herein, is
submitted for the general information of the shareholders of the Fund. This
report is not authorized for distribution unless preceded or accompanied by a
prospectus.
<PAGE>
=============================================================================
[LOGO] Wanger International Small Cap Advisor
Annual Report
December 31, 1995
<PAGE>
=============================================================================
Wanger International Small Cap Advisor Annual Report 1995
In a Nutshell
- -----------------------------------------------------------------------------
Wanger International Small Cap Advisor had an extraordinary 1995. We began
operations on May 3, 1995. For the period from May 3 to the end of the year,
the foreign markets were up about 2%. Your fund went up 34.5%.
For the fourth quarter of 1995, your fund was up 4.2%, ahead of the two
market averages shown in the table.
Many of the best stocks of 1995 were in Europe. Our fund is a small cap
fund, not an emerging markets fund, so we have the majority of our investments
in the developed markets of Europe, Japan, Canada, and Australia. We
participate in the high-risk, high-return emerging markets, but only with part
of our money.
Results to December 31, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Since
4th quarter May 3, 1995
-------------------------
<S> <C> <C>
Wanger Int'l Small Cap 4.2% 34.5%
EAFE 3.6% 4.1%
Lipper Int'l Small Co. -0.3% 7.5%
Funds Average
</TABLE>
EAFE is Morgan Stanley's Europe, Australia and Far East Index. EAFE is an
unmanaged index of companies throughout the world in proportion to world stock
market capitalization, excluding the U.S. and Canada. The Lipper International
Small Company Funds Average is a new group comprised of twelve small company
international funds.
Net Asset Value Per Share as of 12/31/95: $13.45
=============================================================================
The Value of a $10,000 Investment in
Wanger International Small Cap Advisor
May 3, 1995 through December 31, 1995
[GRAPH APPEARS HERE]
Total Return
Life of Fund 34.5%
<TABLE>
<CAPTION>
Wanger International
Measurement Period Small Cap Advisor EAFE
- ------------------ -------------------- ----------
<S> <C> <C>
5/3/95 $10,000 $10,000
5/31/95 $10,790 $ 9,867
6/30/95 $10,970 $ 9,681
7/31/95 $11,910 $10,270
8/31/95 $12,290 $ 9,864
9/30/95 $12,910 $10,044
10/31/95 $12,700 $ 9,760
11/30/95 $12,660 $10,019
12/31/95 $13,450 $10,409
</TABLE>
This graph compares the results of $10,000 invested in Wanger International
Small Cap Advisor on May 3, 1995 (the date the Fund began operations) with
Morgan Stanley's Europe, Australia and Far East Index (EAFE). Past performance
does not guarantee future results. The investment return and principal value of
an investment in the Fund will fluctuate so that Fund shares, when redeemed, may
be worth more or less than their original cost.
===================================================================
5/95 6/95 9/95 12/31/95
+9.7% +17.7% +4.2%
-------------------------------------------------------------------
Wanger International Small Cap Advisor Total Return for Each Period
2
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================
Wanger International Small Cap Advisor Statement of Investments December 31, 1995
Number of Shares Value
- --------------------------------------------------------------------------------
<S> <C>
Common Stocks and Other Equity-Like
Securities--95.3%
Europe--45.8%
- --------------------------------------------------------------------------------
Germany/Austria--4.6%
- --------------------------------------------------------------------------------
3,120 Rhoen Klinikum Ord. $ 309,537
Hospital Management
1,200 BWT 123,324
Water Filtration Systems (Austria)
1,000 Fresenius Pfd. 95,019
Dialysis Equipment and Solutions
- --------------------------------------------------------------------------------
527,880
Denmark--2.7%
- --------------------------------------------------------------------------------
6,000 Martin Group (b) 313,966
Computer Controlled Lights
Netherlands--3.4%
- --------------------------------------------------------------------------------
20,000 Axxicon Group (b) 368,037
Plastic Injection Moulds for Compact Discs
Finland--2.9%
- --------------------------------------------------------------------------------
10,000 Tietotehdas, Cl. B 324,720
Computer Services/Consulting
Norway--1.7%
- --------------------------------------------------------------------------------
8,000 Elkjoeb Norge 198,797
Consumer Electronics Retailer
Sweden--6.2%
- --------------------------------------------------------------------------------
12,000 Pricer, Cl. B (b) 202,807
Electronic Shelf Labels for Supermarkets
9,000 Althin Medical AB 183,341
Dialysis & Other Medical Equipment
15,000 HL Display 165,233
Retail Display Systems
5,250 Frontec, Series B (b) 151,313
Computer Consulting and Software
- --------------------------------------------------------------------------------
702,694
France--8.4%
- --------------------------------------------------------------------------------
6,000 Axime Ex Segin (b) 462,529
Computer Services/Consulting
10,000 Coflexip 188,750
Flexible Pipe for Subsea Oil Wells
1,500 Guilbert 176,362
Office Supplies Distributor
1,400 Spir Communication 128,535
Newspaper Publisher & Printer
- --------------------------------------------------------------------------------
956,176
United Kingdom/Ireland--10.5%
- --------------------------------------------------------------------------------
55,000 Oriflame International 345,842
Natural Cosmetics
44,500 Serco Group 253,563
Facilities Management
30,000 Capita Group 132,747
Outsourcing Government Services
5,000 International Cabletel (b) 122,500
Cable TV & Telephone System
20,000 N. Brown Group 83,219
Mail Order Women's Clothing
12,400 Seton Healthcare Group 76,046
Pharmaceuticals
10,000 Biocompatibles International (b) 73,749
Contact Lenses, Coronary Stents & Other
Medical Devices
50,000 City Centre Restaurants 72,972
Fast Food Restaurants
15,000 Body Shop International 35,399
Natural Cosmetics and Toiletries
- --------------------------------------------------------------------------------
1,196,037
Switzerland--2.1%
- --------------------------------------------------------------------------------
300 Phoenix Mecano 150,691
Electrical Components Manufacturer
80 Suedelektra Holding (b) 86,208
Diversified Pool of Commodity-Related Projects
- --------------------------------------------------------------------------------
236,899
Italy--3.3%
- --------------------------------------------------------------------------------
16,000 Brembo (b) 185,334
Manufacturer of Disk Brake Systems
50,000 Costa Crociere Ord. 122,156
Cruise Ship Line
46,000 Tecnost 75,386
ATM, Lotto and Toll Collection Equipment
Manufacturer
- --------------------------------------------------------------------------------
382,876
- --------------------------------------------------------------------------------
Europe--Total 5,208,082
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================
Wanger International Small Cap Advisor Statement of Investments December 31, 1995
Number of Shares Value
- --------------------------------------------------------------------------------
Asia--31.9%
- --------------------------------------------------------------------------------
Hong Kong/China--7.7%
- --------------------------------------------------------------------------------
<S> <C> <C>
1,000,000 Golden Harvest Entertainment $265,132
Movie Distribution & Exhibition
90,000 New World Infrastructure (b) 172,271
Infrastructure Investments (China)
150,000 Li and Fung 133,859
Sourcing of Consumer Goods
60,000 Varitronix International 111,355
LCD Manufacturer
200,000 Chen Hsong Holdings 104,759
Plastic Injection Machines
120,000 JCG Holdings 87,688
Consumer Finance
- --------------------------------------------------------------------------------
875,064
Japan--9.6%
- --------------------------------------------------------------------------------
7,000 Hokuto 254,459
Mushroom Grower
2,500 Autobacs Seven 207,929
Auto Parts Retailer
3,600 Sankyo Company 167,507
Pachinko Machine Manufacturer
3,300 Aucnet 159,946
Used Auto Auctions Via Satellite
6,000 Heiwa 156,456
Pachinko Machine Manufacturer
2,000 Paramount Bed 139,589
Hospital Bed Manufacturer
- --------------------------------------------------------------------------------
1,085,886
Malaysia--3.8%
- --------------------------------------------------------------------------------
50,000 Sistem Televisyen Malaysia 180,189
Television Franchise
33,750 Malaysian Assurance Alliance 152,865
Insurance
13,000 O.Y.L. Industries 100,866
Air Conditioners
- --------------------------------------------------------------------------------
433,920
Indonesia/Philippines--7.2%
- --------------------------------------------------------------------------------
280,000 Suba Indah 186,748
Beverage and Food Manufacturer
350,000 Int'l Container Terminal Services (b) 183,473
Container Handling Terminals & Port
Management (Philippines)
350,000 Universal Robina 173,466
Snack Foods (Philippines)
150,000 PILTEL (b) 151,544
Mobile Communications (Philippines)
80,000 Mustika Ratu (b) 127,706
Traditional Cosmetics
- --------------------------------------------------------------------------------
822,937
Singapore--3.6%
- --------------------------------------------------------------------------------
70,000 Venture Manufacturing Warrants 111,347
7/26/99 (b)
Contract Manufacturer of Electronic Goods
17,000 Clipsal Industries 38,420
Electrical Components
160,000 Genting International 260,800
Cruise Line
- --------------------------------------------------------------------------------
410,567
- --------------------------------------------------------------------------------
Asia--Total 3,628,374
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================
Wanger International Small Cap Advisor Statement of Investments December 31, 1995
Number of Shares Value
- --------------------------------------------------------------
<S> <C> <C>
Latin America--8.0%
- --------------------------------------------------------------
Mexico--5.8%
- --------------------------------------------------------------
61,500 Nadro, Series L $207,528
Pharmaceutical Distributor
21,000 Grupo Radio Centro 154,875
Radio Stations and Networks
10,000 Kimberly Clark De Mexico 151,071
Paper Products
10,000 Bufete Industrial (b) 150,000
Engineering and Construction
- --------------------------------------------------------------
663,474
Brazil/Chile--2.2%
- --------------------------------------------------------------
5,000 Genesis Chile Fund 202,500
Closed-End Fund (Chile)
70,000 Brazilian Smaller Companies Warrants (b) 49,000
Closed-End Fund (Brazil)
- --------------------------------------------------------------
251,500
- --------------------------------------------------------------
Latin America--Total 914,974
Other Countries--9.6%
- --------------------------------------------------------------
Australia/New Zealand--6.5%
- --------------------------------------------------------------
60,000 Publishing & Broadcasting 209,333
Media & TV Broadcasting
114,300 Austereo 161,553
Media - Radio
25,000 PDL Holdings 138,933
Electrical Equipment Manufacturer &
Distributor (New Zealand)
80,000 Just Jeans Holdings 115,453
Jeans & Fashion Retail Stores
350,000 Command Petroleum Holdings (b) 106,750
Oil and Gas Exploration
- --------------------------------------------------------------
732,022
- --------------------------------------------------------------
Canada--3.1%
- --------------------------------------------------------------
50,000 Tesco (b) 242,870
Rental of Drilling Equipment
20,000 Veritas Energy Services (b) 109,979
Geophysical Contractor
- --------------------------------------------------------------
352,849
- --------------------------------------------------------------
Other--Total 1,084,871
Total Common Stocks and Other
Equity-Like Securities--95.3% 10,836,301
- --------------------------------------------------------------
(Cost:$9,726,347)
Cash and Other Assets
Less Liabilities--4.7% 532,623
- --------------------------------------------------------------
Total Net Assets--100% $11,368,924
- --------------------------------------------------------------
</TABLE>
Notes to Statement of Investments:
a) At December 31, 1995, for federal income tax purposes cost of investments
was $9,759,245 and net unrealized appreciation was $1,077,056 consisting of
gross unrealized appreciation of $1,329,208 and gross unrealized depreciation
of $252,152.
b) Non-income producing security.
See accompanying notes to financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================
Wanger International Small Cap Advisor Statement of Investments December 31, 1995
At December 31, 1995, the Fund's portfolio of investments as a percentage of net assets was diversified
as follows:
Value Percent
- ----------------------------------------------------
<S> <C> <C>
Information Group
- ----------------------------------------------------
Computer Systems $ 936,666 8.2%
- ----------------------------------------------------
Broadcasting and CATV 828,450 7.3
- ----------------------------------------------------
Consumer Electronics 499,263 4.4
- ----------------------------------------------------
Mobile Communications 151,544 1.3
- ----------------------------------------------------
Software 151,313 1.3
- ----------------------------------------------------
Distribution 128,535 1.2
- ----------------------------------------------------
2,695,771 23.7
Health Care
- ----------------------------------------------------
Biotechnology/Drug Delivery 388,333 3.4
- ----------------------------------------------------
Services 383,286 3.4
- ----------------------------------------------------
Hospital/Laboratory Supplies 234,608 2.1
- ----------------------------------------------------
Equipment 183,341 1.6
- ----------------------------------------------------
1,189,568 10.5
Consumer Goods and Services
- ----------------------------------------------------
Retail 1,650,847 14.5
- ----------------------------------------------------
Entertainment and Leisure 706,919 6.2
- ----------------------------------------------------
Manufacturers 705,024 6.2
- ----------------------------------------------------
Food 687,645 6.1
- ----------------------------------------------------
3,750,435 33.0
Finance Group
- ----------------------------------------------------
Money Management 423,771 3.7
- ----------------------------------------------------
Other 1,042,853 9.2
- ----------------------------------------------------
1,466,624 12.9
Industrial Goods and Services
- ----------------------------------------------------
Machinery Processing 752,081 6.6
- ----------------------------------------------------
Services 183,473 1.6
- ----------------------------------------------------
Forest Products and Construction 150,000 1.3
- ----------------------------------------------------
1,085,554 9.5
Energy and Minerals
- ----------------------------------------------------
Oil Services 431,620 3.8
- ----------------------------------------------------
Oil and Gas Producers 216,729 1.9
- ----------------------------------------------------
648,349 5.7
Total Common Stocks and
Other Equity-Like Securities 10,836,301 95.3
- ----------------------------------------------------
Cash and Other Assets
less Liabilities 532,623 4.7
- ----------------------------------------------------
Net Assets $11,368,924 100.0%
- ----------------------------------------------------
</TABLE>
===============================================================================
Report of Independent Auditors
To the Shareholders of Wanger International Small Cap Advisor and the Trustees
of Wanger Advisors Trust
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Wanger International Small Cap Advisor as of
December 31, 1995, the related statements of operations and changes in net
assets and the financial highlights for the period from May 3, 1995
(commencement of operations) through December 31, 1995. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides 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 Wanger
International Small Cap Advisor at December 31, 1995, the results of its
operations and changes in its net assets and the financial highlights for the
period from May 3, 1995 through December 31, 1995 in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 31, 1996
6
<PAGE>
<TABLE>
<CAPTION>
===============================================================================================================
Wanger International Small Cap Advisor Statement of Assets and Liabilities December 31, 1995
<S> <C> <C>
Assets
Investments, at value (cost: $9,726,347) $10,836,301
Cash 883,814
Organization costs 86,672
Receivable for:
Securities sold 79,781
Dividends 2,963
Fund shares sold 177,438 260,182
- ---------------------------------------------------------------------------------------------------------------
Total assets 12,066,969
Liabilities and Net Assets
Payable for:
Securities purchased 594,769
Fund shares redeemed 81
Amount owed to advisor 86,740
Other 16,455
- ---------------------------------------------------------------------------------------------------------------
Total liabilities 698,045
- ---------------------------------------------------------------------------------------------------------------
Net assets applicable to Fund shares outstanding $11,368,924
- ---------------------------------------------------------------------------------------------------------------
Fund shares outstanding 845,182
===============================================================================================================
Pricing of Shares
Net asset value, offering price and redemption price per share $13.45
- ---------------------------------------------------------------------------------------------------------------
Analysis of Net Assets
Paid-in capital $10,233,014
Accumulated net realized gain on sales of investments and foreign currency transactions 53,357
Unrealized appreciation of investments and foreign currency transactions 1,109,954
Net investment loss (27,401)
- ---------------------------------------------------------------------------------------------------------------
Net assets applicable to Fund shares outstanding $11,368,924
===============================================================================================================
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
==============================================================================================
Wanger International Small Cap Advisor Statement of Operations December 31, 1995
May 3, 1995 through December 31, 1995
- ----------------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign taxes of $5,769) $ 39,708
Interest 161
- ----------------------------------------------------------------------------------------------
Total investment income 39,869
Expenses:
Investment advisory fee 43,726
Custodian fees and expenses 19,208
Legal and audit fees and expenses 40,560
Reports to shareholders 3,199
Amortization of organization costs 13,328
Trustees' fees 13,000
Insurance 4,941
Other expenses 3,186
- ----------------------------------------------------------------------------------------------
Total expenses 141,148
Less custodian fees paid indirectly (10,886)
Less reimbursement of expenses by advisor (62,992)
- ----------------------------------------------------------------------------------------------
Net expenses 67,270
- ----------------------------------------------------------------------------------------------
Net investment loss (27,401)
Net realized and unrealized gain on investments:
Net realized gain on sales of investments 53,290
Net realized gain on foreign currency transactions 67
Net change in unrealized appreciation 1,109,954
- ----------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 1,163,311
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 1,135,910
==============================================================================================
Wanger International Small Cap Advisor Statement of Changes in Net Assets
==============================================================================================
From operations:
Net investment loss $ (27,401)
Net realized gain on sales of investments 53,290
Net realized gain on foreign currency transactions 67
Net change in unrealized appreciation 1,109,954
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,135,910
From Fund share transactions:
Proceeds from shares sold 11,951,601
Payments for shares redeemed (1,844,269)
- ----------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 10,107,332
- ----------------------------------------------------------------------------------------------
Total increase in net assets 11,243,242
Net Assets:
- ----------------------------------------------------------------------------------------------
Beginning of period (May 3, 1995) 125,682
- ----------------------------------------------------------------------------------------------
End of period (including net investment loss of $27,401) $11,368,924
==============================================================================================
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Wanger International Small Cap Advisor Financial Highlights December 31, 1995
May 3, 1995 through December 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
Net Asset Value, beginning of period $ 10.00
Income From Investment Operations
Net investment loss (.03)
Net realized and unrealized gain on investments 3.48
- --------------------------------------------------------------------------------
Total from investment operations 3.45
Net Asset Value, end of period $ 13.45
================================================================================
Total Return 34.50%
Ratios/Supplemental Data
Ratio of expenses to average net assets (a) (b) 2.32%*
Ratio of net investment loss to average net assets (b) (0.81)%*
Portfolio turnover rate 14%*
Net assets at end of period $11,368,924
================================================================================
</TABLE>
* Annualized
a) In accordance with a requirement by the Securities and Exchange Commission,
this ratio reflects gross custodian fees. This ratio net of custodian fees
paid indirectly would have been 2.00%.
b) The Fund was reimbursed by the Advisor for certain net expenses from May 3,
1995 through December 31, 1995. Without the reimbursement, the ratio of
expenses to average net assets and the ratio of net investment loss to
average net assets would have been been 4.20% and (2.69)%, respectively.
See accompanying notes to financial statements.
9
<PAGE>
==============================================================================
Wanger International Small Cap Advisor
Notes to Financial Statements December 31, 1995
1. Nature of operations
Wanger International Small Cap Advisor (the "Fund") is a series of Wanger
Advisors Trust (the "Trust"), an open-end management investment company
organized as a Massachusetts business trust. The investment objective of the
Fund is to seek long-term growth of capital. The Fund is available only for
allocation to certain life insurance company separate accounts established for
the purpose of funding qualified and non-qualified variable annuity contracts,
and may also be offered directly to certain types of pension plans and
retirement arrangements. The Fund commenced operations on May 3, 1995.
2. Significant Accounting Policies
Security valuation
Investments are stated at current value. Securities traded on securities
exchanges or in over-the-counter markets in which transaction prices are
reported are valued at the last sales price at the time of valuation, or lacking
any reported sales on that day, at the midpoint of the most recent bid and
offer. Money market instruments having a maturity of 60 days or less from the
valuation date are valued on an amortized cost basis. Securities for which
quotations are not readily available and any other assets are valued at a fair
value as determined in good faith by the Board of Trustees.
Foreign currency translations
Values of investments denominated in foreign currencies are converted into U.S.
dollars using the spot market rate of exchange at the time of valuation.
Purchases and sales of investments and dividend and interest income are
translated into U.S. dollars using the spot market rate of exchange prevailing
on the respective dates of such transactions. The gain or loss on investments
resulting from changes in foreign exchange rates is included with net realized
and unrealized gain or loss as appropriate.
Security transactions and investment income
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend date,
except that certain dividends from foreign securities are recorded as soon as
the information is available to the Fund. Interest income is recorded on the
accrual basis and includes amortization of discounts on money market instruments
and on long-term debt instruments when required for federal income tax purposes.
Realized gains and losses from security transactions are reported on an
identified cost basis.
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 the Fund's investments and other assets, less liabilities, by the
number of Fund shares outstanding.
Custodian fees
Custodian fees are reduced based on the Fund's cash balances maintained with the
custodian. This presentation does not affect the determination of net investment
income.
Federal income taxes, dividends and distributions
to shareholders
It is the Fund's policy to comply with the special provisions of the Internal
Revenue Code available to regulated investment companies and, in the manner
provided therein, to distribute all of its taxable income, as well as any net
realized gain on sales of investments and foreign currency transactions
reportable for federal income tax purposes.
The Fund will elect to mark-to-market its investment in Passive Foreign
Investment Companies ("PFICs") for income tax purposes. In accordance with this
election, the Fund recognized unrealized appreciation on PFICs of $32,898 for
the period ended December 31, 1995.
Dividends and distributions payable to its shareholders are recorded by the
Fund on the ex-dividend date.
10
<PAGE>
==============================================================================
Wanger International Small Cap Advisor
Notes to Financial Statements December 31, 1995
3. Transactions with Affiliates
The Fund's investment advisor, Wanger Asset Management, L.P., ("WAM") furnishes
continuing investment supervision to the Fund and is responsible for overall
management of the Fund's business affairs. The Fund pays WAM a monthly advisory
fee based upon average daily net assets at the following rates: 1.3% up to $100
million, 1.2% in excess of $100 million and up to $250 million and 1.1% in
excess of $250 million.
The investment advisory agreement also provides that WAM will reimburse the
Fund to the extent that ordinary operating expenses (computed based on net
custodian fees) exceed 2% of average net assets. For the year ended December 31,
1995, WAM reimbursed the Fund $62,992.
Certain officers and trustees of the Trust are also principals of WAM. The
Trust makes no direct payments to its officers and trustees who are affiliated
with WAM. The Fund incurred trustees' fees and expenses of $13,000 in 1995 to
trustees not affiliated with WAM.
WAM advanced $100,000 in connection with the organization and initial
registration of the Fund. These costs are being amortized and reimbursed to WAM
over the period May, 1995 through April, 2000.
4. Fund Share Transactions
Proceeds and payments on Fund shares as shown in the statement of changes in net
assets are in respect of the following numbers of shares:
<TABLE>
<CAPTION>
Period ended 12/31/95
- ------------------------------------------------------------------------------
<S> <C>
Shares sold 986,106
Less shares redeemed 153,492
- ------------------------------------------------------------------------------
Net increase in shares outstanding 832,614
==============================================================================
</TABLE>
5. Investment transactions
<TABLE>
<CAPTION>
Period ended 12/31/95
- ------------------------------------------------------------------------------
<S> <C>
Investment securities
(excluding money market instruments):
Purchases $10,188,942
Proceeds from sales 516,063
==============================================================================
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
========================================================================================================================
Wanger International Small Cap Advisor
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Trustees Fred D. Hasselbring James A. Star
Terence M. Hogan Ralph Wanger
Charles P. McQuaid Leah J. Zell
P. Michael Phelps
- ------------------------------------------------------------------------------------------------------------------------
Officers Ralph Wanger, President Merrillyn J. Kosier,
Charles P. McQuaid, Senior Vice President Vice President and Secretary
Terence M. Hogan, Vice President Bruce H. Lauer, Vice President and Treasurer
Leah J. Zell, Vice President Kenneth A. Kalina, Assistant Treasurer
- ------------------------------------------------------------------------------------------------------------------------
Transfer Agent, Dividend State Street Bank and Trust Company
Disbursing Agent and Attention: Wanger Advisors Trust
Custodian P.O. Box 8502
Boston, Massachusetts 02266-8502
1-800-4-WANGER
(1-800-492-6437)
- ------------------------------------------------------------------------------------------------------------------------
Investment Advisor Wanger Asset Management, L.P.
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606
(312) 634-9200
- ------------------------------------------------------------------------------------------------------------------------
Legal Counsel Bell, Boyd & Lloyd
Chicago, Illinois
- ------------------------------------------------------------------------------------------------------------------------
Auditors Ernst & Young LLP
Chicago, Illinois
</TABLE>
This report, including the audited financial statements contained herein, is
submitted for the general information of the shareholders of the Fund. This
report is not authorized for distribution unless preceded or accompanied by a
prospectus.
