<PAGE>
================================================================================
[LOGO] Wanger U.S. Small Cap Advisor
Semi-Annual Report
June 30, 1996
<PAGE>
================================================================================
Wanger U.S. Small Cap Advisor Semi-Annual Report 1996
In a Nutshell
- --------------------------------------------------------------------------------
For the first 6 months of 1996, Wanger U.S. Small Cap Advisor returned 32%, a
truly Olympian performance that was triple the returns on U.S. market averages.
Per Lipper Analytical Services, the Fund ranked #5 out of all 878 variable
insurance funds, based on the one year total return ending 6/30/96.
1996 has brought a bumper crop of big winners and only a few losers. Three
of our stocks doubled in price since New Year's Eve: Zoltek (carbon fiber
manufacturer), Dave & Buster's (theme restaurants/arcades) and United Meridian
(oil and gas exploration and production). We have sidestepped the much-hyped and
over-priced cult of technology, preferring instead to overweight the out-of-
favor energy group. Our high-energy portfolio benefited from African oil finds
(United Meridian), rising deep-sea drilling rig rental rates (Atwood) and the
burgeoning market for gas and electricity brokerage (NGC).
Your Fund's strong gains over the past 6 months won't be repeated every
semester. However, we will continue to follow our bottom-up, research-oriented
approach that has served you well so far.
Results to June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Last Last
2nd quarter 6 mos. 12 mos.
------------------------------------------
<S> <C> <C> <C>
Wanger U.S. Small Cap 15.5% 32.3% 42.5%
Dow-Jones 1.8% 11.8% 27.1%
Standard & Poor's 500 4.5% 10.1% 26.0%
Standard & Poor's MidCap 400 2.9% 9.2% 21.6%
Russell 2000 5.0% 10.4% 23.9%
</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 6/30/96: $15.32
================================================================================
The Value of a $10,000 Investment in Wanger U.S. Small Cap Advisor
May 3, 1995 through June 30, 1996
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Wanger US Small Cap Russell 2000
------------------- ------------
<S> <C> <C>
5/3/95 $10,000 $10,000
6/30/95 $10,770 $10,700
9/30/95 $12,060 $11,757
12/31/95 $11,600 $12,012
3/31/96 $13,297 $12,629
6/30/96 $15,531 $13,261
</TABLE>
Average Annual Total Return
1 yr: 42.5% Life: 44.7%
Inception 6/95 9/95 12/95 3/96 6/96
May 3, 1995 +7.7% +12.0% -3.8% +14.6% +15.5%
- --------------------------------------------------------------------------------
Wanger U.S. Small Cap Advisor Total Return for Each Period
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>
<TABLE>
<CAPTION>
==================================================================================================================================
Wanger U.S. Small Cap Advisor Statement of Investments (Unaudited) June 30, 1996
Number of Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks and Other Equity-Like
Securities--94.4%
Information--23.4%
- ----------------------------------------------------------------------------------------------------------------------------------
Broadcasting/CATV--8.4%
66,000 TCI Liberty Media Group (b) $ 1,749,000
Cable TV Programming
25,000 Data Transmission (b) 1,520,000
Electronic Information Services
41,000 C-Tec (b) 1,219,750
Cable TV/Local Telephone
58,000 International Family Entertainment (b) 1,073,000
Cable TV Programming
42,000 United Video Satellite (b) 882,000
Cable TV Programming
-----------
6,443,750
Mobile Communications--4.6%
97,500 COMARCO (b) 1,791,563
Wireless Network Testing
52,600 Mobile Telecommunication
Technologies (b) 769,275
Nationwide Paging
15,000 Cellular Communications of
Puerto Rico (b) 487,500
Cellular Franchises
22,000 Vanguard Cellular Systems (b) 478,500
Cellular Franchises
-----------
3,526,838
Computer Software/Services--5.5%
137,000 CACI International (b) 2,157,750
Computer Software Systems
21,000 Analysts International 882,000
Contract Programming Services
44,000 FactSet Research Systems (b) 880,000
On-Line Integrated Database Services
8,000 Compuware (b) 316,000
Development, Test & Maintenance Software/Services
-----------
4,235,750
Computer Systems--4.2%
57,000 Kronos (b) 2,023,500
Computerized Payroll Hardware/Software
46,200 ACT Manufacturing (b) 675,675
Electronics Contract Manufacturing
14,500 Solectron (b) 549,187
Electronics Contract Manufacturing
-----------
3,248,362
- ----------------------------------------------------------------------------------------------------------------------------------
Distribution--0.7%
16,000 Kent Electronics (b) $ 500,000
Electronics Distribution
==================================================================================================================================
Information - Total 17,954,700
Health Care--9.6%
- ----------------------------------------------------------------------------------------------------------------------------------
Biotechnology/Drug Delivery--1.1%
23,000 Watson Pharmaceuticals (b) 871,125
Generic Pharmaceuticals
Medical Equipment--4.7%
55,100 Steris (b) 1,763,200
Sterilization Equipment
49,000 Kinetic Concepts 759,500
Medical Equipment
30,000 Invacare 705,000
Home Health Care Equipment
14,000 Thermedics (b) 350,000
Industrial/Medical Equipment
-----------
3,577,700
Services--3.8%
75,000 Lincare Holdings (b) 2,943,750
Home Health Care Services
==================================================================================================================================
Health Care - Total 7,392,575
Consumer Goods/Services--9.6%
- ----------------------------------------------------------------------------------------------------------------------------------
Retail--1.3%
30,000 Borders Group (b) 967,500
Bookstores
Entertainment/Leisure--1.0%
36,000 Rio Hotel & Casino (b) 553,500
Casino/Hotel
60,000 Monarch Casino & Resort (b) 240,000
Casino/Hotel
-----------
793,500
Food--1.1%
50,000 Morton Restaurant Group (b) 875,000
Restaurants
</TABLE>
3
<PAGE>
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Wanger U.S. Small Cap Advisor (Unaudited) June 30, 1996
Statement of Investments
<TABLE>
<CAPTION>
Number of Shares Value
- --------------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------------
Manufacturers-6.2%
158,000 Rawlings Sporting Goods (b) $1,560,250
Sports Equipment
50,000 York Group 862,500
Casket Manufacturer
28,000 Newell 857,500
Household Goods
39,000 Toy Biz (b) 789,750
Toy Manufacturer
23,000 Unifi 646,875
Texturizing Fabric ---------
4,716,875
- --------------------------------------------------------------------
Consumer Goods/Services - Total 7,352,875
Finance-17.1%
- --------------------------------------------------------------------
Banks/Savings & Loans-6.1%
106,000 Imperial Thrift & Loan (b) 1,563,500
California Thrift
60,000 Texas Regional Bancshares 1,500,000
TexMex Bank
35,000 Coast Savings (b) 1,146,250
California Savings & Loan
22,000 Peoples Bank Bridgeport 489,500
Consumer Finance ---------
4,699,250
Insurance-1.6%
40,000 Penn Treaty American (b) 860,000
Long-Term Care Insurance
17,000 Leucadia National 416,500
Insurance Holding Company ---------
1,276,500
Money Management-4.6%
114,000 Baker Fentress 2,180,250
Closed-End Investment Company
63,000 SEI 1,330,875
Mutual Fund Distributor ---------
3,511,125
Credit Cards-2.1%
31,000 National Data 1,061,750
Credit Card/Medical Claims Processor
10,000 First USA 550,000
Credit Cards ---------
1,611,750
- --------------------------------------------------------------------
Other-2.7%
85,000 DVI Health Services (b) $1,338,750
Leases Medical Equipment
28,000 Americredit (b) 437,500
Used Auto Finance
20,400 Jayhawk Acceptance (b) 277,950
Used Auto Finance ----------
2,054,200
- --------------------------------------------------------------------
Finance - Total 13,152,825
Industrial Goods/Services-16.3%
- --------------------------------------------------------------------
Machinery-2.9%
50,000 Bearings 1,350,000
Distribution of Industrial Components
52,500 Thermo Fibertek (b) 885,938
Paper Recycling ---------
2,235,938
Steel-6.0%
75,000 Worthington Industries 1,565,625
Steel Processing
89,000 Atchison Casting (b) 1,401,750
Steel Foundries
90,000 Universal Stainless (b) 843,750
Semi-Fin Stainless Steel
40,000 Gibraltar Steel (b) 810,000
Steel Processing ---------
4,621,125
Furniture/Textiles-0.7%
33,000 Lilly Industries, Cl. A 561,000
Industrial Coatings
Services-6.7%
152,500 Wackenhut, Cl. B 2,802,187
Prison Management
50,000 Hub Group (b) 1,018,750
Freight Forwarder
51,000 AG Services of America (b) 650,250
Sells & Finances Seed/Chemicals
34,000 Thomas Group (b) 629,000
Consulting
----------
5,100,187
- --------------------------------------------------------------------
Industrial Goods/Services - Total 12,518,250
</TABLE>
4
<PAGE>
====================================================================
Wanger U.S. Small Cap Advisor (Unaudited) June 30, 1996
Statement of Investments
<TABLE>
<CAPTION>
Number of Shares Value
<S> <C>
- --------------------------------------------------------------------
ENERGY/MINERALS-18.4%
- --------------------------------------------------------------------
INDEPENDENT POWER-3.1%
43,000 Thermo Ecotek (b) $ 1,042,750
Bio Mass Operator
32,000 The AES Corporation (b) 904,000
Electric Generating Plants
19,000 Baldor Electric 427,500
Electric Motors
-----------
2,374,250
OIL/GAS PRODUCERS-8.7%
296,000 Tesoro Petroleum (b) 3,404,000
Oil Refinery/Gas Reserves
103,700 Global Natural Resources (b) 1,698,088
Oil/Gas Producers
31,000 United Meridian (b) 1,116,000
Oil/Gas Producer
100,000 Tipperary (b) 437,500
Oil/Gas Exploration
-----------
6,655,588
REFINING/MARKETING-2.9%
148,000 NGC 2,220,000
Gas Processing/Marketing
OIL SERVICES-3.7%
33,700 Atwood Oceanics (b) 1,508,075
Offshore Drilling
53,000 J Ray McDermott (b) 1,325,000
Offshore Construction
-----------
2,833,075
====================================================================
ENERGY/MINERALS - TOTAL 14,082,913
Principal Amount Value
====================================================================
TOTAL COMMON STOCKS AND OTHER
EQUITY-LIKE SECURITIES-94.4% $72,454,138
- --------------------------------------------------------------------
(Cost: $63,734,344)
SHORT-TERM OBLIGATION-6.0% 4,655,000
- --------------------------------------------------------------------
$4,655,000 State Street Bank Repurchase
Agreement 4.00% 7/1/96; 6/28/96 Agreement
Collateralized by U.S. Treasury Notes
(Cost: $4,655,000)
TOTAL INVESTMENTS-100.4% 77,109,138
- --------------------------------------------------------------------
(Cost: $68,389,344)
CASH AND OTHER ASSETS
LESS LIABILITIES-(0.4%) (322,494)
- --------------------------------------------------------------------
TOTAL NET ASSETS-100% $76,786,644
====================================================================
</TABLE>
Notes to Statement of Investments:
(a) At June 30, 1996, for federal income tax purposes cost of investments was
$68,389,344 and net unrealized appreciation was $8,719,794, consisting of
gross unrealized appreciation of $9,870,262 and gross unrealized
depreciation of $1,150,468.
(b) Non-income producing security.
See accompanying notes to financial statements.
5
<PAGE>
<TABLE>
=================================================================================================
Wanger U.S. Small Cap Advisor Statement of Assets and Liabilities (Unaudited) June 30, 1996
<S> <C> <C>
Assets
Investments, at value (cost: $68,389,344) $77,109,138
Organization costs 76,768
Receivable for:
Securities sold $ 1,393,542
Fund shares sold 873,903
Dividends and interest 3,015 2,270,460
- -------------------------------------------------------------------------------------------------
Total assets 79,456,366
Liabilities and Net Assets
Payable for:
Securities purchased 2,192,780
Fund shares redeemed 13,359
Amount owed to advisor 72,604
Other 390,979
- -------------------------------------------------------------------------------------------------
Total liabilities 2,669,722
- -------------------------------------------------------------------------------------------------
Net assets applicable to Fund shares outstanding $76,786,644
- -------------------------------------------------------------------------------------------------
Fund shares outstanding 5,012,945
- -------------------------------------------------------------------------------------------------
Pricing of Shares
Net asset value, offering price and redemption price per share $ 15.32
- -------------------------------------------------------------------------------------------------
Analysis of Net Assets
Paid-In capital $65,502,048
Undistributed net realized gain on sales of investments 2,821,506
Unrealized appreciation of investments 8,719,794
Accumulated net investment loss (256,704)
- -------------------------------------------------------------------------------------------------
Net assets applicable to Fund shares outstanding $76,786,644
- -------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
<TABLE>
===================================================================================
Wanger U.S. Small Cap Advisor Statement of Operations (Unaudited) June 30, 1996
Six months ended June 30, 1996
- -----------------------------------------------------------------------------------
<S> <C> <C>
Investment Income:
Dividends $ 95,858
Interest 32,659
- -----------------------------------------------------------------------------------
Total investment income 128,517
Expenses:
Investment advisory fee 213,274
Legal and audit fees and expenses 28,540
Amortization of organization costs 9,862
Transfer agent fees and expenses 9,261
Trustees' fees and expenses 9,000
Reports to shareholders 8,301
Custodian fees and expenses 6,640
Insurance 3,514
Other expenses 810
- -----------------------------------------------------------------------------------
Total Expenses 289,202
Less custodian fees paid indirectly (6,640)
- -----------------------------------------------------------------------------------
Net expenses 282,562
- -----------------------------------------------------------------------------------
Net investment loss (154,045)
Net realized and unrealized gain on investments:
Net realized gain on sales of investments 2,828,209
Net change in unrealized appreciation 8,280,351
- -----------------------------------------------------------------------------------
Net realized and unrealized gain on investments 11,108,560
- -----------------------------------------------------------------------------------
Net increase in net assets resulting from operations $10,954,515
===================================================================================
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
Wanger U.S. Small Cap Advisor Statement of Changes in Net Assets (Unaudited) June 30, 1996
- ----------------------------------------------------------------------------------------------------------------------------------
Inception
Six months ended May 3, 1995 through
June 30, 1996 December 31, 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
From operations:
Net investment loss $ (154,045) $ (102,659)
Net realized gain on sales of investments 2,828,209 59,816
Net change in unrealized appreciation 8,280,351 439,443
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 10,954,515 396,600
Distributions to shareholders from:
Net investment income - -
Net realized gain (66,519) -
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (66,519) -
From Fund share transactions:
Reinvestment of dividends and capital gain distributions 66,519 -
Proceeds from shares sold 44,598,337 24,819,962
- ----------------------------------------------------------------------------------------------------------------------------------
44,664,856 24,819,962
Payments for shares redeemed (669,744) (3,438,708)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 43,995,112 21,381,254
- ----------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 54,883,108 21,777,854
Net assets:
Beginning of period 21,903,536 125,682
- ----------------------------------------------------------------------------------------------------------------------------------
End of period (including accumulated net investment loss of $256,704 at June 30, 1996 and
$102,659 at December 31, 1995) $76,786,644 $21,903,536
==================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
======================================================================================================================
Wanger U.S. Small Cap Advisor Financial Highlights (Unaudited) June 30, 1996
Inception
Six months ended May 3, 1995 through
June 30, 1996 December 31, 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, beginning of period $11.60 $10.00
Income From Investment Operations
Net investment loss (.03) (.05)
Net realized and unrealized gain on investments 3.78 1.65
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.75 1.60
Less Distributions
Dividends from net investment income - -
Distributions from net realized gain (.03) -
- ----------------------------------------------------------------------------------------------------------------------
Total distributions (.03) -
- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $15.32 $11.60
- ----------------------------------------------------------------------------------------------------------------------
Total Return 32.34% 16.00%
Ratios/Supplemental Data:
Ratio of expenses to average net assets (a)(b) 1.31%* 2.08%*
Ratio of net investment loss to average net assets (a)(b) (.70)%* (1.44)%*
Portfolio turnover rate 70%* 59%*
Net assets at end of period $76,786,644 $21,903,536
The average commission paid per share on stock transactions for the six months
ended June 30, 1996 was $.0586.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
(a) In accordance with Securities and Exchange Commission rules, this ratio
reflects gross custodian fees. This ratio net of custodian fees paid
indirectly would have been 1.28% for the six months ended June 30, 1996 and
2.00% for the period ended December 31, 1995.
(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>
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Wanger U.S. Small Cap Advisor Notes to Financial Statements June 30, 1996
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.
2. Significant Accounting Policies
Security valuation
Investments are stated at current value. Securities traded on securities
exchanges or in over-the-counter markets in which transaction prices are
reported are valued at the last sales price at the time of valuation. Securities
for which there are no reported sales on the valuation date are valued at the
mean of the latest bid and ask quotations or, if there is no ask quotation, at
the most recent bid quotations. 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 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
The Fund has complied with the special provisions of the Internal Revenue Code
available to regulated investment companies and, in the manner provided therein,
distributes to its shareholders 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.
10
<PAGE>
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Wanger U.S. Small Cap Advisor Notes to Financial Statements June 30, 1996
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% up to $100
million, .95% in excess of $100 million and up to $250 million and .90% in
excess of $250 million.
WAM has voluntarily undertaken to reimburse the Fund to the extent that
ordinary operating expenses (computed based on net custodian fees) exceed 1.50%
(2.00% in 1995) of average net assets. WAM was not required to reimburse the
Fund under this undertaking for the six months ended June 30, 1996.
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 $9,000 for the six
months ended June 30, 1996 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.
WAM Brokerage Services, L.L.C., a wholly-owned subsidiary of WAM, is the
distributor of the Fund's shares and receives no compensation for its services.
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>
Six months ended Period ended
June 30, 1996 Dec. 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 3,166,467 2,170,461
Shares issued in reinvestment
of dividend and capital gain
distributions 5,157 --
3,171,624 2,170,461
Less shares redeemed 47,075 294,633
Net increase in shares outstanding 3,124,549 1,875,828
================================================================================
</TABLE>
5. Investment Transactions
<TABLE>
<CAPTION>
Six months ended
June 30, 1996
- --------------------------------------------------------------------------------
<S> <C>
Investment securities
(excluding money market instruments):
Purchases $55,361,457
Proceeds from sales 14,795,610
================================================================================
</TABLE>
11
<PAGE>
================================================================================
Wanger U.S. Small Cap Advisor
- --------------------------------------------------------------------------------
Trustees
Fred D. Hasselbring
Charles P. McQuaid
P. Michael Phelps
James A. Star
Ralph Wanger
- --------------------------------------------------------------------------------
Officers
Ralph Wanger, President
Charles P. McQuaid, Senior Vice President
Terence M. Hogan, Vice President
Leah J. Zell, Vice President
Merrillyn J. Kosier, Vice President and Secretary
Bruce H. Lauer, Vice President and Treasurer
Kenneth A. Kalina, Assistant Treasurer
- --------------------------------------------------------------------------------
Transfer Agent, Dividend Disbursing Agent and Custodian
State Street Bank and Trust Company
Attention: Wanger Advisors Trust
P.O. Box 8502
Boston, Massachusetts 02266-8502
1-800-4-WANGER
(1-800-492-6437)
- --------------------------------------------------------------------------------
Distributor
WAM Brokerage Services, L.L.C.
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606
(312) 634-9200
- --------------------------------------------------------------------------------
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
This report, including the unaudited financial statements, is submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution unless preceded or accompanied by a prospectus.
<PAGE>
================================================================================
[LOGO] Wanger International Small Cap Advisor
Semi-Annual Report
June 30, 1996
<PAGE>
================================================================================
Wanger International Small Cap Advisor Semi-Annual Report 1996
In a Nutshell
- --------------------------------------------------------------------------------
Wanger International Small Cap Advisor continued to enjoy remarkable performance
during the first half of 1996, up 27.8% versus 4.5% for foreign markets
generally. At the end of the half, your Fund celebrated its birthday with the
best one year total return record of all 878 variable insurance funds tracked by
Lipper Analytical Services. This ranking is based on the twelve month total
return ending 6/30/96.
This performance was not due to a couple of hot stocks. It was achieved
with a well diversified portfolio of over 65 positions in over 25 countries.
Stocks which performed extremely well for the Fund included a Korean insurance
company (Dongbu), a Mexican pharmaceutical distributor (Nadro), a Dutch stock
brokerage (Kempen), a Finnish computer consultancy (TT Tieto), an Italian mutual
fund manager (Fideuram), a Japanese maker of photolab equipment (Noritsu), and a
Chinese rice cracker producer (Want Want).
Results to June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Last Last
2nd quarter 6 mos. 12 mos.
--------------------------------------------
<S> <C> <C> <C>
Wanger Int'l Small Cap 10.9% 27.8% 56.6%
EAFE 1.6% 4.5% 13.3%
Lipper Int'l Small Co. 7.1% 13.5% 20.0%
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. All indices are unmanaged and returns include reinvested
dividends.
Net Asset Value Per Share as of 6/30/96: $17.14
================================================================================
The Value of a $10,000 Investment in Wanger International Small Cap Advisor
May 3, 1995 through June 30, 1996
[GRAPH APPEARS HERE]
Wanger Int'l Small Cap EAFE
---------------------- ----
5/3/95 $10,000 $10,000
6/30/95 $10,970 $ 9,825
9/30/95 $12,910 $10,234
12/31/95 $13,450 $10,649
3/31/96 $15,499 $10,956
6/30/96 $17,183 $11,130
Average Annual Total Return
1 yr: 56.6% Life: 59.5%
Inception 6/95 9/95 12/95 3/96 6/96
May 3, 1995 +9.7% +17.7% +4.2% +15.2% +10.9%
- --------------------------------------------------------------------------------
Wanger International Small Cap Advisor Total Return for Each Period
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.
2
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
Wanger International Small Cap Advisor Statement of Investments (Unaudited) June 30, 1996
Number of Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks and Other Equity-Like
Securities--95.4%
Europe--42.3%
- ----------------------------------------------------------------------------------------------------------------------------------
Germany/Austria--4.4%
5,120 Rhoen Klinikum $ 672,710
Hospital Management
1,700 Cewe Color Holdings 619,827
Photographic Developing/Printing
1,800 Biotest 573,512
Immunoglobulins
2,500 Fresenius Pfd. 452,060
Dialysis Equipment/Solutions
- ----------------------------------------------------------------------------------------------------------------------------------
2,318,109
Denmark--1.9%
5,000 Kompan International 677,634
Playground Equipment
6,000 Martin Group (b) 365,667
Computer Controlled Lights
- ----------------------------------------------------------------------------------------------------------------------------------
1,043,301
Netherlands--5.0%
80,466 Kempen 1,220,896
Stock Brokerage/Investment Management
30,285 Axxicon 965,146
Plastic Injection Moulds for Compact Discs
20,000 Toolex Alpha (b) 480,000
Compact Disc Manufacturing Equipment
- ----------------------------------------------------------------------------------------------------------------------------------
2,666,042
Finland--3.8%
20,000 TT Tieto (formerly known as
Tietotehdas, Cl. B) 955,640
Computer Services/Consulting
16,000 Raision Tehtaat 953,918
11,000 Raision Tehtaat Rights (b) 89,968
Foodstuffs/Specialty Chemicals
- ----------------------------------------------------------------------------------------------------------------------------------
1,999,526
Norway--0.8%
60,000 Sysdeco Group (b) 415,576
Software Tool Sets/Systems
- ----------------------------------------------------------------------------------------------------------------------------------
Sweden--4.1%
36,200 Esselte, Series A $ 730,983
Office Supplies/Related Equipment
62,080 Frontec, Series B (b) 762,435
Computer Consulting/Software
20,000 Tryckindustri 369,198
Printer
13,714 Pricer, Cl. B (b) 287,258
Electronic Shelf Labels for Supermarkets
- ----------------------------------------------------------------------------------------------------------------------------------
2,149,874
France--2.4%
5,400 Axime Ex Segin (b) 755,201
Computer Services/Consulting
5,000 Fininfo 521,531
Financial Data Feeds
- ----------------------------------------------------------------------------------------------------------------------------------
1,276,732
United Kingdom/Ireland--12.6%
140,000 Oriflame International 1,102,887
Natural Cosmetics
242,000 Medeva 943,809
Pharmaceuticals
135,000 Tunstall Group 790,807
Monitoring Equipment
1,400,000 Premier Oil 663,473
Oil/Gas Producer
150,000 Bluebird Toys 543,053
Toy Manufacturer
91,700 N. Brown Group 497,267
Mail Order Women's Clothing
58,500 Serco Group 492,663
Facilities Management
44,000 Edinburgh Fund Managers 468,315
Investment Management
55,000 Seton Healthcare Group 423,022
Pharmaceuticals
13,000 International Cabletel (b) 383,500
Cable TV/Telephone System
80,000 Ivory & Sime 334,378
Investment Management
- ----------------------------------------------------------------------------------------------------------------------------------
6,643,174
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
==============================================================================================================================
WANGER INTERNATIONAL SMALL CAP ADVISOR STATEMENT OF INVESTMENTS (UNAUDITED) JUNE 30, 1996
<S> <C>
Number of Shares Value
- ----------------------------------------------------------------------
PORTUGAL--0.2%
20,600 Filmes Lusomundo (b) $ 127,649
Newspapers, Radio, Video, Film
Distribution
SWITZERLAND--2.2%
1,400 Phoenix Mecano 691,220
Electrical Components Manufacturer
200 Christ (b) 159,783
Environmental Consulting
230 Kudelski (b) 330,750
Pay TV Decoding Software
- ----------------------------------------------------------------------
1,181,753
ITALY--4.9%
420,000 Banca Fideuram 913,425
Life Insurance/Mutual Funds
200,000 Esaote (b) 718,200
Medical Equipment
15,000 Cellular Communications
International (b) 506,250
Mobile Communications
300,000 Costa Crociere 434,442
Cruise Ship Line
- ----------------------------------------------------------------------
2,572,317
- ----------------------------------------------------------------------
EUROPE--TOTAL 22,394,053
Asia--34.9%
- ----------------------------------------------------------------------
HONG KONG/CHINA--3.4%
2,600,000 Golden Harvest Entertainment 940,447
Movie Distribution/Exhibition
900,000 Li and Fung 848,728
Sourcing of Consumer Goods
- ----------------------------------------------------------------------
1,789,175
JAPAN--14.6%
25,100 Hokuto 1,203,629
Mushroom Grower
22,500 Noritsu Koki 1,136,384
Photo Processing Lab Manufacturer
10,000 Ryohin Keikaku 900,720
Specialty Consumer Goods Retailer
11,400 Paramount Bed 778,430
Hospital Bed Manufacturer
25,600 Central Uni 707,157
Health Care/Medical Equipment
11,000 HIS 668,885
Travel Agent
15,000 Nihon Jumbo 601,696
Photo Processing Lab
10,000 Daimon 501,413
Discount Liquor Retailer
15,400 Royal 481,557
Auto Parts Retailer
10,000 Aucnet 446,713
Used Auto Auctions Via Satellite
26,000 Sari 303,400
Liquor Retailer
- ----------------------------------------------------------------------
7,729,984
MALAYSIA--2.2%
220,000 Malaysian Assurance Alliance 1,163,788
Life Insurance
INDONESIA/PHILIPPINES--5.2%
1,600,000 Int'l Container Terminal Services (b) 1,083,969
Container Handling Terminals/Port
Management (Philippines)
600,000 PILTEL (b) 916,031
Mobile Communications (Philippines)
230,000 Mustika Ratu 434,801
Traditional Cosmetics
400,000 Suba Indah 309,345
Beverage/Food
- ----------------------------------------------------------------------
2,744,146
INDIA--0.8%
30,000 IS Himalaya Fund (b) 429,000
Closed-End Fund
KOREA--2.6%
25,000 Dongbu Insurance (b) 1,352,626
Insurance
SINGAPORE--4.4%
650,000 Genting International 1,137,500
Cruise Line
285,000 Want Want Holdings 766,650
Snack Foods
411,134 Venture Manufacturing Warrants
7/26/99 (b) 422,348
Contract Manufacturer of Electronic
Goods
- ----------------------------------------------------------------------
2,326,498
THAILAND--1.7%
500,000 Shinawatra Satellite 905,512
Satellite Leasing
- ----------------------------------------------------------------------
ASIA--TOTAL 18,440,729
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
==============================================================================================================================
WANGER INTERNATIONAL SMALL CAP ADVISOR STATEMENT OF INVESTMENTS (UNAUDITED) JUNE 30, 1996
Number of Shares Value
- ----------------------------------------------------------------------
<S> <C>
Latin America - 10.2%
- ----------------------------------------------------------------------
MEXICO--4.4%
417,000 Nadro, Series L $1,246,049
Pharmaceutical Distributor
11,603 Ceteco Holdings 632,149
Retailer/Wholesaler of White/Brown Goods
45,000 Grupo Radio Centro 444,375
Radio Broadcasting
- ----------------------------------------------------------------------
2,322,573
BRAZIL/CHILE--1.9%
15,000 Genesis Chile Fund 622,500
Closed--End Fund (Chile)
550,000 Brazilian Smaller Companies Wts. (b) 365,750
Closed--End Fund
- ----------------------------------------------------------------------
988,250
ARGENTINA--3.9%
800,000 Siderca 1,089,525
Seamless Pipe for Oil Wells
500,000 Cresud (b) 1,001,402
Agriculture
- ----------------------------------------------------------------------
2,090,927
======================================================================
LATIN AMERICA--TOTAL 5,401,750
Other Countries---8.0%
- ----------------------------------------------------------------------
AUSTRALIA--5.8%
200,000 Publishing & Broadcasting 881,552
Media
721,655 Tyndall 880,423
Investment Management
1,500,000 Command Petroleum Holdings (b) 767,422
Oil/Gas Exploration
356,054 Austereo 571,710
Radio Broadcasting
- ----------------------------------------------------------------------
3,101,107
Principal Amount or
Number of Shares Value
- ----------------------------------------------------------------------
CANADA--2.2%
45,100 Shaw Industries $ 596,072
Pipe Inspection/Coating
210,000 Pan East Petroleum (b) 561,251
Oil/Gas Producer
- ----------------------------------------------------------------------
1,157,323
- ----------------------------------------------------------------------
OTHER--TOTAL 4,258,430
Total Common Stocks and Other
Equity-Like Securities--95.4% 50,494,962
- ----------------------------------------------------------------------
(Cost: $44,111,601)
Short-Term Obligation--4.0% 2,102,000
- ----------------------------------------------------------------------
$2,102,000 State Street Bank Repurchase
Agreement 4.0% 7/1/96; 6/28/96 Agreement
Collateralized by U.S. Treasury Notes
(Cost: $2,102,000)
Total Investments--99.4% 52,596,962
- ----------------------------------------------------------------------
($46,213,601)
Cash and Other Assets
Less Liabilities--0.6% 333,804
- ----------------------------------------------------------------------
Total Net Assets--100% $52,930,766
- ----------------------------------------------------------------------
</TABLE>
Notes to Statement of Investments:
(a) At June 30, 1996, for federal income tax purposes cost of investments was
$46,246,499 and net unrealized appreciation was $6,350,463 consisting of
gross unrealized appreciation of $7,823,641 and gross unrealized
depreciation of $1,473,178.
(b) Non-income producing security.
See accompanying notes to financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================
Wanger International Small Cap Advisor Statement of Investments (Unaudited) June 30, 1996
At June 30, 1996, the Fund's portfolio of investments as a percentage of net assets was diversified
as follows:
Value Percent
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Information
- ---------------------------------------------------------------------------------------------------
Software & Services $ 2,985,933 5.6 %
- ---------------------------------------------------------------------------------------------------
Mobile Communications 2,327,792 4.4
- ---------------------------------------------------------------------------------------------------
Broadcasting & CATV 2,281,137 4.3
- ---------------------------------------------------------------------------------------------------
Consumer Electronics 691,220 1.3
- ---------------------------------------------------------------------------------------------------
Computer Systems 365,667 0.7
- ---------------------------------------------------------------------------------------------------
8,651,749 16.3
Health Care
- ---------------------------------------------------------------------------------------------------
Biotechnology/Drug Delivery 3,314,041 6.3
- ---------------------------------------------------------------------------------------------------
Equipment 1,425,356 2.7
- ---------------------------------------------------------------------------------------------------
Hospital/Laboratory Supplies 1,230,490 2.3
- ---------------------------------------------------------------------------------------------------
Services 672,711 1.3
- ---------------------------------------------------------------------------------------------------
6,642,598 12.6
Consumer Goods & Services
- ---------------------------------------------------------------------------------------------------
Retail 8,311,606 15.7
- ---------------------------------------------------------------------------------------------------
Manufacturers 3,620,860 6.8
- ---------------------------------------------------------------------------------------------------
Entertainment & Leisure 3,461,514 6.5
- ---------------------------------------------------------------------------------------------------
Food 3,281,025 6.3
- ---------------------------------------------------------------------------------------------------
18,675,005 35.3
Finance
- ---------------------------------------------------------------------------------------------------
Money Management 5,234,686 9.9
- ---------------------------------------------------------------------------------------------------
Insurance 2,516,414 4.8
- ---------------------------------------------------------------------------------------------------
Other 1,247,864 2.3
- ---------------------------------------------------------------------------------------------------
8,998,964 17.0
Industrial Goods & Services
- ---------------------------------------------------------------------------------------------------
Services 3,964,975 7.5
- ---------------------------------------------------------------------------------------------------
Machinery Processing 480,000 0.9
- ---------------------------------------------------------------------------------------------------
4,444,975 8.4
Energy & Minerals
- ---------------------------------------------------------------------------------------------------
Oil & Gas Producers 1,992,146 3.8
- ---------------------------------------------------------------------------------------------------
Oil Services 1,089,525 2.0
- ---------------------------------------------------------------------------------------------------
3,081,671 5.8
Total Common Stocks and Other Equity-Like Securities 50,494,962 95.4
- ---------------------------------------------------------------------------------------------------
Cash and Other Assets
Less Liabilities 2,435,804 4.6
- ---------------------------------------------------------------------------------------------------
Net Assets $52,930,766 100.0%
- ---------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================================
Wanger International Small Cap Advisor Statement of Assets and Liabilities (Unaudited) June 30, 1996
<S> <C> <C>
Assets
Investments, at value (cost: $46,213,601) $52,596,962
Cash 450,173
Organization costs 76,768
Receivable for:
Securities sold $ 739,531
Fund shares sold 489,122
Dividends and interest 116,858 1,345,511
- -------------------------------------------------------------------------------------------------------------------------
Total assets 54,469,414
Liabilities and Net Assets
Payable for:
Securities purchased 1,401,016
Amount owed to advisor 73,005
Fund shares redeemed 39,895
Other 24,732
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,538,648
- -------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Fund shares outstanding $52,930,766
- -------------------------------------------------------------------------------------------------------------------------
Fund shares outstanding 3,088,766
- -------------------------------------------------------------------------------------------------------------------------
Pricing of Shares
Net asset value, offering price and redemption price per share $17.14
- -------------------------------------------------------------------------------------------------------------------------
Analysis of Net Assets
Paid-in capital $45,463,728
Undistributed net realized gain on sales of investments and foreign currency transactions 1,129,895
Unrealized appreciation of investments and foreign currency transactions 6,383,646
Accumulated net investment loss (46,503)
- -------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Fund shares outstanding $52,930,766
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
Wanger International Small Cap Advisor Statement of Operations (Unaudited) June 30, 1996
Six months ended June 30, 1996
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income:
Dividends (net of foreign taxes of $26,238) $ 240,908
Interest 10,178
- --------------------------------------------------------------------------------------------------------------------------------
Total investment income 251,086
Expenses:
Investment advisory fee 185,728
Custodian fees and expenses 31,138
Legal and audit fees and expenses 28,413
Amortization of organization costs 9,904
Reports to shareholders 8,927
Transfer agent fees and expenses 8,124
Trustees' fees and expenses 7,930
Insurance 3,530
Other expenses 507
- --------------------------------------------------------------------------------------------------------------------------------
Total expenses 284,201
Less custodian fees paid indirectly (20,543)
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses 263,658
- --------------------------------------------------------------------------------------------------------------------------------
Net investment loss (12,572)
Net realized and unrealized gain on investments:
Net realized gain on sales of investments 1,128,872
Net change in unrealized appreciation 5,273,692
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 6,402,564
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 6,389,992
- --------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap Advisor Statement of Changes in Net Assets (Unaudited)
================================================================================================================================
Inception
Six months ended May 3, 1995 through
June 30, 1996 December 31, 1995
- --------------------------------------------------------------------------------------------------------------------------------
From operations:
Net investment loss $ (12,572) $ (27,401)
Net realized gain on sales of investments 1,128,872 53,357
Net change in unrealized appreciation 5,273,692 1,109,954
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 6,389,992 1,135,910
Distributions to shareholders from:
Net investment income (6,530) -
Net realized gain (52,334) -
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (58,864) -
From Fund share transactions:
Reinvestment of dividends and capital gain distributions 58,864 -
Proceeds from shares sold 36,282,226 11,951,601
- --------------------------------------------------------------------------------------------------------------------------------
36,341,090 11,951,601
Payments for shares redeemed (1,110,376) (1,844,269)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 35,230,714 10,107,332
- --------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 41,561,842 11,243,242
Net Assets:
Beginning of Period 11,368,924 125,682
- --------------------------------------------------------------------------------------------------------------------------------
End of Period (including accumulated net investment loss of $46,503 at June 30, 1996
and $27,401 at December 31, 1995) $52,930,766 $11,368,924
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
Wanger International Small Cap Advisor Financial Highlights (Unaudited)
===========================================================================================================================
June 30, 1996
Inception
Six months ended May 3, 1995 through
June 30, 1996 December 31, 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, beginning of period $ 13.45 $ 10.00
Income From Investment Operations
Net investment loss .00 (.03)
Net realized and unrealized gain on investments 3.72 3.48
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.72 3.45
Less Distributions
Dividends from net investment income - -
Distributions from net realized gain (.03) -
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.03) -
- ---------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $ 17.14 $ 13.45
- ---------------------------------------------------------------------------------------------------------------------------
Total Return 27.76% 34.50%
Ratios/Supplemental Data
Ratio of expenses to average net assets (a) (b) 1.92%* 2.32%*
Ratio of net investment loss to average net assets (a) (b) (0.09)%* (0.81)%*
Portfolio turnover rate 63%* 14%*
Net assets at end of period $52,930,766 $11,368,924
The average commission rate paid per share on stock transactions for the six months
ended June 30, 1996 was $.0103.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
(a) In accordance with Securities and Exchange Commission rules, this ratio
reflects gross custodian fees. This ratio net of custodian fees paid
indirectly would have been 1.79% for the six months ended June 30, 1996 and
2.00% for the period ended December 31, 1995.
(b) The Fund was reimbursed by the Advisor for certain 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 June 30,
1996
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.
2. Significant Accounting Policies
Security valuation
Investments are stated at current value. Securities traded on securities
exchanges or in over-the-counter markets in which transaction prices are
reported are valued at the last sales price at the time of valuation. Securities
for which there are no reported sales on the valuation date are valued at the
mean of the latest bid and ask quotation or, if there is no ask quotation, at
the most recent bid quotation. Money market instruments having a maturity of 60
days or less from the valuation date are valued on an amortized cost basis.
Securities for which quotations are not readily available and any other assets
are valued at a fair value as determined in good faith by the Board of Trustees.
Foreign currency translations
Values of investments denominated in foreign currencies are converted into U.S.
dollars using the spot market rate of exchange at the time of valuation.
Purchases and sales of investments and dividend and interest income are
translated into U.S. dollars using the spot market rate of exchange prevailing
on the respective dates of such transactions. The gain or loss resulting from
changes in foreign exchange rates is included with net realized and unrealized
gain or loss from investments as appropriate.
Security transactions and investment income
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend date,
except that certain dividends from foreign securities are recorded as soon as
the information is available to the Fund. Interest income is recorded on the
accrual basis and includes amortization of discounts on money market instruments
and on long-term debt instruments when required for federal income tax purposes.
Realized gains and losses from security transactions are reported on an
identified cost basis.
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
The Fund has complied with the special provisions of the Internal Revenue Code
available to regulated investment companies and, in the manner provided therein,
distributes to its shareholders 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 has elected to mark-to-market its investment in Passive Foreign
Investment Companies ("PFICS") for income tax purposes. In accordance with this
election, the Fund recognized unrealized appreciation on PFICS of $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 June 30,
1996
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.
WAM has voluntarily undertaken to reimburse the Fund to the extent that
ordinary operating expenses (computed based on net custodian fees) exceed 1.90%
(2.00% in 1995) of average net assets. WAM was not required to reimburse the
Fund under this undertaking for the six months ended June 30, 1996.
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 $7,930 for the six
months ended June 30, 1996 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.
WAM Brokerage Services, L.L.C., a wholly-owned subsidiary of WAM, is the
distributor of the Fund's shares and receives no compensation for its services.
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>
Six months ended Period ended
June 30, 1996 Dec. 31, 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 2,308,174 986,106
Shares issued in reinvestment
of dividend and capital gain
distributions 3,911 -
- ----------------------------------------------------------------------------------
2,312,085 986,106
Less shares redeemed 68,501 153,492
- ----------------------------------------------------------------------------------
Net increase in shares outstanding 2,243,584 832,614
- ----------------------------------------------------------------------------------
5. Investment Transactions
Six months ended
June 30, 1996
- ----------------------------------------------------------------------------------
Investment securities
(excluding money market instruments):
Purchases $42,388,918
Proceeds from sales 9,132,536
- ----------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
==============================================================================================================
Wanger International Small Cap Advisor
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Trustees Fred D. Hasselbring James A. Star
Charles P. McQuaid Ralph Wanger
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
Leah J. Zell, Vice President Treasurer
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)
- --------------------------------------------------------------------------------------------------------------
Distributor WAM Brokerage Services, L.L.C.
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606
(312) 634-9200
- --------------------------------------------------------------------------------------------------------------
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
</TABLE>
This report, including the unaudited financial statements, is submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution unless preceded or accompanied by a prospectus.
