<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
[WANGER LOGO APPEARS HERE]
<PAGE>
Wanger Advisors Trust
1998 Semi-Annual Report
Contents
1 Squirrel Chatter
3 Funds at a Glance
4 Performance Review
Wanger U.S. Small Cap
6 Performance Review
Wanger International
Small Cap
8 Statement of Investments
Wanger U.S. Small Cap
12 Statement of Investments
Wanger International
Small Cap
16 Portfolio Diversification
Wanger International
Small Cap
17 Statements of Assets
and Liabilities
18 Statements of Operations
19 Statements of Changes in
Net Assets
20 Financial Highlights
Wanger U.S. Small Cap
21 Financial Highlights
Wanger International
Small Cap
22 Notes to Financial Statements
Wanger Asset Management, L.P. ("WAM") is one of the leading global small-cap
equity managers in the U.S. with 28 years of small-cap investment experience.
WAM manages over $7 billion in equities and is the investment adviser to Wanger
U.S. Small Cap, Wanger International Small Cap, Acorn Fund, Acorn International
and Acorn USA.
WAM uses a unique style of catching trends with small, attractively-priced
niche companies. For more complete information about our funds including the
Acorn funds, fees and expenses, call WAM Brokerage Services, L.L.C.,
distributor, at 1-800-5-WANGER for a prospectus. Read it carefully before you
invest or send money.
<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------
Squirrel Chatter--
Why is the Stock Market so High?
At the end of June, the S&P 500 index was 1134-28 times earnings. Over the long-
term, the average price-to-earnings ratio for the S&P 500 has been only 15 times
earnings. For the last couple of years, market commentators repeatedly have
warned that the market is too high, but the market keeps going up anyway. Why?
Markets are rather like bathtubs. In a tub, the water level rises when
water flows in faster than it drains out. Markets rise when money flows in from
investors faster than investment bankers can invent new securities. Mutual fund
investors have been a very important source of new money, but not the only one.
Another driving force is investment by foreigners in the U.S. stock and
bond markets. There have been two massive changes in the last five years, both
in the direction of increasing foreign ownership. First, the United States has
been running a large balance of trade deficit with the rest of the world since
the mid-1980s. The balance of trade deficit has run from $60 billion to $180
billion per year over this entire period, but the last few years have shown the
largest deficits. When several Asian economies blew up in the last half of 1997,
our balance of trade deficit got a lot worse. Asians stopped buying U.S.
exports, and the U.S. is taking even more imports from these countries, because
their currencies have depreciated and their goods have become cheaper. In 1997
the balance of trade deficit was about $180 billion, and it may reach $240
billion this year. Our balance of payments is made up of our large balance of
trade deficit and a smaller service income surplus. Our service income is $70-80
billion, which reduces our balance of payments deficit but does not come close
to eliminating it. The effect of a large balance of payments deficit is to put
dollar claims in the hands of foreign companies and individuals. This means that
foreigners who end up with our dollars have to buy American stocks, bonds, or
real estate with this money. The foreign dollar holders can sell dollars to
someone else, of course, but this only transfers the bucks to a different person
who still must own U.S. financial assets. In many cases, the final holder is a
bank that prefers to own short-term treasury bills. All this buying of U.S.
assets by foreigners is recorded as a large capital inflow into the U.S. over
this period.
The second massive change has been in the U.S. government deficit. From
1984 to 1987 we ran a large deficit every year, running from $110 to $320
billion per year. A large federal deficit means that the U.S. government has to
issue treasury bonds for that amount of money. Much of that imbalance of trade
results in foreign-purchased U.S. treasury securities. Since foreigners have to
buy U.S. assets with their balance of trade deficit dollars, the two dollar
figures from trade imbalance and new treasury issues pretty much offset each
other so that from 1993-1996, for instance, the net swing between these two
numbers was less than $50 billion dollars. This means that (from 1993-1996)
foreigners shipped us VCRs and automobiles and shoes and we paid them with
government bonds, and the net effect on financial prices was basically zero
because the two more or less balanced out. This year we have a big change in the
federal deficit. Instead of having an enormous deficit as we did a couple of
years ago, we now have a slight surplus. This means that net new issues of
government bonds have not been available, so all of the financial flows that
have been going overseas can no longer be neutralized by offsetting government
bond issuance. Therefore, instead of foreign money exerting a neutral effect on
U.S. asset prices, there is now an enormous net buying of existing financial
assets (both bonds and stocks) with foreign money, which will amount to $250
billion - $300 billion this year, up from $180 billion in 1997. In 1992, just
the opposite happened: the U.S. sold $241 billion more bonds than it received in
goods, so the budget deficit had a large net drag on U.S. financial markets.
(continued)
1
<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------
Squirrel Chatter--
Why is the Stock Market so High?
So if you look at the swing over a 6-year period, our balance of trade minus
bonds issued has gone from minus $241 billion to plus $290 billion--about
a $530 billion per year swing.
Foreign Impact on U.S. Market
($ Billions)
<TABLE>
<CAPTION>
1992 1997 1998 est
- ---------------------------------------------------------
<S> <C> <C> <C>
Trade Deficit 84 180 240
U.S. Govt. Deficit
(Surplus) 325 0 (50)
- ---------------------------------------------------------
Foreign Impact -241 180 290
</TABLE>
Foreign impact is amazingly large. ($290 billion would buy all of Merck plus all
of IBM). Where is this money going? Most goes into short- and long-term
government bonds. Some goes into the stock market ($65 billion in 1997). Now, if
foreign capital was affecting the market, how would it show up? The first thing
that would happen is that foreigners buying U.S. bonds would buy taxable bonds
and ignore municipals because the tax-exempt feature of municipal bonds is of no
use to a foreign holder. Therefore, you should see a decrease in the yield
spread between treasuries and municipals. That is occurring.
In the stock market, we would expect foreigners to favor blue chip U.S.
companies over small companies, and therefore one would see the Russell 1000
(the largest companies) do better than the Russell 2000 (much smaller
companies). This also has been happening. Of course, a third effect would be a
rising level of U.S. stock and bond prices, which is quite obviously happening,
although mutual fund inflows and corporate stock repurchases help push the stock
market higher, too. No one should argue that what happens in the U.S. financial
markets is driven by any one single factor, but I do contend that the enormous
increase in the amount of money invested by foreigners in U.S. financial assets
is one major factor in the extraordinary rise in stock and bond prices that we
have seen over the last year.
How long can this go on? The amount of money that foreigners will have to
invest in excess of new bond issues is going to go on for some period of time.
It can be ended if the U.S. government goes back into a substantial annual
deficit position, or if imports into the U.S. should decline dramatically. The
most likely cause of these events would be a recession within the U.S., which is
undoubtedly going to occur at some time within the next few years. A recession
would cause a decline in corporate profits. Imports would fall, reducing our
balance of trade deficit. So if there was a weak market associated with a
recession, it could be made worse by a drop in foreign inflows. Until that
recession occurs--and there is no sign of it yet--we expect that foreign inflows
will continue to be huge. So, for now, get used to "high" stock prices.
The market emphasis on blue-chip stocks has pushed the valuation of big
companies to high levels. Small company stocks have not gone up as much (compare
the Russell 2000 with the S&P 500). Our Wanger Advisors Trust stocks now
represent excellent value as compared with the S&P 500.
[PHOTO APPEARS HERE]
Ralph Wanger
Chief Investment Officer
Wanger Asset Management, L.P.
2
<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------
Funds at a Glance
- -------------------------------------------------------------
Wanger U.S. Small Cap
Results to June 30, 1998
<TABLE>
<CAPTION>
2nd qtr YTD Last 12
months
<S> <C> <C> <C>
Wanger U.S. Small Cap 2.0% 15.3% 32.8%
Russell 2000 -4.7% 4.9% 16.5%
S & P MidCap 400 -2.1% 8.6% 27.2%
S & P 500 3.3% 17.7% 30.2%
</TABLE>
Net Asset Value per share as of 6/30/98: $23.52
The Russell 2000 is formed by taking the 3,000 largest U.S. companies and then
eliminating the largest 1,000, leaving an unweighted small company index. The
S&P MidCap 400 is a market value-weighted index of 400 U.S. stocks that are in
the next tier down from the S&P 500. The S&P 500 is a broad market-weighted
average of blue-chip U.S. companies. All indexes are unmanaged and include
reinvested dividends.
- -------------------------------------------------------------
Wanger International Small Cap
Results to June 30, 1998
<TABLE>
<CAPTION>
2nd qtr YTD Last 12
months
<S> <C> <C> <C>
Wanger Int'l Small Cap 0.5% 22.4% 9.4%
EAFE 1.1% 15.9% 6.1%
Lipper Int'l Small Cap Funds Avg. 3.3% 22.2% 11.2%
Lipper Int'l Funds Average 0.7% 15.5% 8.2%
EMI (World ex-US) -0.4% 16.8% 0.6%
</TABLE>
Net Asset Value per share as of 6/30/98: $20.64
EAFE is Morgan Stanley's Europe, Australasia Far East Index, an unmanaged index
of companies throughout the world in proportion to world stock market
capitalization, excluding the U.S. and Canada. The Lipper Int'l Small Cap Funds
Avg. is calculated from the performance of a group of small-cap int'l funds. For
the 2nd qtr., YTD and 12-mos. periods above, the group consisted of 56, 56 and
37 funds, respectively. The Lipper Int'l Funds Avg. is an average of all int'l
funds tracked by Lipper, excluding the Int'l Small Cap Funds. This group
consisted of 570, 544 and 480 funds for the 2nd qtr., YTD and 12-mos. periods
above, respectively. The EMI is Salomon Brothers' index of the bottom 20% of
institutionally investable capital of countries, as selected by Salomon,
excluding the U.S. All indexes are unmanaged and returns include reinvested
dividends.
- -------------------------------------------------------------
Wanger U.S. Small Cap Top 5 Industries
As a % of net assets, as of 6/30/98
Information 35.4%
Finance 15.5%
Energy/Minerals 14.5%
Health Care 10.8%
Industrial Goods/Services 10.5%
- -------------------------------------------------------------
Wanger International Small Cap Top 5 Countries
As a % of net assets, as of 6/30/98
United Kingdom 15.4%
Netherlands 7.8%
Japan 7.0%
Sweden 6.7%
Finland 6.0%
- -------------------------------------------------------------
Wanger U.S. Small Cap Top 10 Holdings
Lincare Holdings 5.5%
Home Health Care Services
CalEnergy 4.7%
Power Plants
Centennial Cellular 4.4%
Cellular Franchises
Host Marriott Services 3.3%
Fast Food Kiosks in Airports
Tesoro Petroleum 3.1%
Oil Refinery/Gas Reserves
Kronos 3.0%
Time Accounting Software
& Clocks
First Health Group 2.9%
PPO Network
Data Transmission 2.9%
Network
Data Services for Farmers
Acceptance Insurance 2.9%
Crop Insurance
Micros Systems 2.8%
Information Systems for
Restaurants & Hotels
- -------------------------------------------------------------
Wanger International Small Cap Top 10 Holdings
Mapfre Vida 5.1%
Life Insurance/
Mutual Fund--Spain
Kempen 4.4%
Stock Brokerage/Investment
Management--Netherlands
Autogrill 3.7%
Tollway Restaurants--Italy
Euro Money Publications 3.6%
Financial Publications
United Kingdom
Tieto Corporation 3.4%
Computer Services/
Consulting--Finland
Hunter Douglas 3.3%
Decorative Window
Coverings--Netherlands
Li and Fung 2.9%
Sourcing of Consumer
Goods--Hong Kong
Seton Healthcare Group 2.9%
Pharmaceuticals
United Kingdom
Athens Medical Center 2.6%
Hospitals--Greece
Rhoen Klinikum 2.2%
Hospitals--Germany
- ------------------------
The funds' top 10 holdings and portfolio diversification vary with changes in
portfolio investments. See the Statements of Investments for complete lists of
the funds' holdings, including those described under Performance Review.
3
<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------
Performance Review Wanger U.S. Small Cap
For the first half of this year, mass mattered. Big stocks soared (S&P 500
gained +17.7%), and small-caps crept (Russell 2000 added +4.9%). Wanger U.S.
Small Cap had knockout performance for a flyweight fund, gaining +15.3% year-to-
date. Over the past year, your Fund has returned +32.8%, well ahead of its small
mates (Lipper Small-Cap Fund Average rose +17.7%), and better than the average
S&P leviathan (+30.2%). Even more thrilling, Wanger U.S. Small Cap is one of an
elite group of funds whose 3-year return beat the S&P 500!
Cable television stocks were the blockbusters of the first quarter. Our
headliners included Liberty Media (Discovery Channel, SportsChannels), United
Video (on-screen TV guides), Cablevision (New York cable system) and RCN
(bundles cable, phone and Internet services). A year ago, TV know-it-all's
bashed cable TV as a has-been technology for half-baked couch potatoes. A year
later, it's the experts who are abashed. Cable's entrenched customer base,
abundance of channels and speedy Internet access are making it a multimedia
king.
In the second quarter, your Fund was nearly symmetrical--39 stocks went up
and 40 fell down. Each industry group had its pair of have and have-not stocks.
In telecommunications, Centennial (cellular) soared, but RCN (new-wave telephone
entrepreneur) soured. In health care, Lincare (oxygen therapist) bubbled, but
Respironics (oxygen therapy equipment maker) stumbled. In transportation,
autos hummed (Insurance Auto Auctions), but trains wrecked (Hub Group's rail
freight agency). In energy, geothermal power was hot (CalEnergy), but oil & gas
were not (Tesoro).
The stock market's craze du jour is the Internet. Excitable chat room
junkies talk of nothing but 'Net. Yes, it's real. The Internet will transform
the way the world communicates and recreates. But the stock market has stretched
this insight to the point of absurdity. Internet stocks trade in a topsy-turvy
world where "profit" is a pejorative and companies are worth more money the more
money they choose to lose. Their valuations are fantastic, their fans
hyperbolic, their charts parabolic. In a word, we think they're "icky".
We will own Internet stocks once saner prices prevail. Meantime, our
Internet deficiency hasn't been a handicap. Wanger U.S. Small Cap ranked sixth
out of the 75 small-cap variable annuity funds tracked by Lipper over the past
twelve Internet-obsessed months.
We are happy to announce that Ben Andrews has joined our team, and will
follow consumer companies and special situations. Ben has five years experience
as a securities analyst, and was most recently with Rothschild Investment in
Chicago.
[PHOTO APPEARS HERE]
Robert A. Mohn
Lead Portfolio Manager
Wanger U.S. Small Cap
4
<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------
Wanger U.S. Small Cap Results to June 30, 1998
The Value of a $10,000 Investment in Total Return for Each Period
Wanger U.S. Small Cap May 3, 1995 through June 30, 1998
[GRAPH APPEARS HERE]
Wanger U.S. Small Cap Mountain Chart Plot Points
Wanger U.S. Small Cap Russell 2000 % on graph axis
--------------------- ------------ ---------------
05/03/95 $10,000 $10,000
06/30/95 $10,770 $10,519 + 7.7%
09/30/95 $12,060 $11,558 +12.0%
12/31/95 $11,600 $11,808 -3.8%
03/31/96 $13,297 $12,411 +14.6%
06/30/96 $15,351 $13,031 +15.5%
09/30/96 $15,792 $13,076 + 2.9%
12/31/96 $17,004 $13,756 + 7.7%
03/31/97 $16,366 $13,044 - 3.8%
06/30/97 $19,093 $15,159 +16.7%
09/30/97 $22,395 $17,415 +17.3%
12/31/97 $22,005 $16,830 - 1.7%
03/31/98 $24,865 $18,525 +13.0%
06/30/98 $25,361 $17,661 + 2.0%
Average
Annual Total
Return
1 year: 32.8%
3 Years: 33.0%
Life: 34.3%
- --------------------------------------------------------------------------------
This graph compares the results of $10,000 invested in Wanger U.S. Small Cap on
May 3, 1995 (the date the Fund began operations) through June 30, 1998 with the
Russell 2000 with dividends reinvested. The beginning date of the Russell 2000
is as of May 31, 1995. The performance data quoted is past performance and does
not guarantee future results. The investment return and principal value of an
investment will fluctuate so that investors' shares, when redeemed, may be worth
more or less than their original cost.
5
<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------
Performance Review Wanger International Small Cap
In the first six months of 1998, international stock markets were turbulent.
Asian stocks rose nicely in the first quarter, only to give back those gains in
the second quarter. European markets showed no such hesitation and galloped to
record highs with gains ranging from 17% in the UK to 35% in Italy. Briefly, it
looked as though small stocks would finally outperform large stocks, but by the
end of the half the difference in their returns was less than one percent.
Almost all foreign currencies weakened, complicating our task of making money
for you in dollars.
Your Fund did well in absolute terms and against its benchmarks. Its 22%
gain easily beat the three passive indices we track, and tied the Lipper
International Small Cap index of actively managed funds that compete with us.
We scored big with companies that benefit directly or indirectly from the
revolution taking place in European savings habits (basically a shift from
reliance on government retirement plans and bonds to private retirement savings
and stocks). Dutch money manager Kempen, British publisher Euro Money, and two
life insurance companies, Mapfre Vida in Spain, and St James Place in the UK,
were all multi-million dollar winners. While we had no multi-million dollar
losers, we did have a number of stocks affected by the Asian flu, and more
importantly, fear of the Asian flu. Venture Manufacturing, Electronic Resources,
Shinki, and Omni Industries all declined in price as a result.
We continue to strengthen our research team with the periodic addition of
new analysts, and are pleased to announce that Michael King has joined us to
follow Japanese stocks. Michael is fluent in Japanese, having lived in Hokkaido
and Tokyo for 5 years. We look forward to his contribution.
[PHOTO APPEARS HERE]
Marcel P. Houtzager
Lead Portfolio Manager
Wanger International
Small Cap
6
<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------
Wanger International Small Cap Results to June 30, 1998
The Value of a $10,000 Investment in Total Return for Each Period
Wanger International Small Cap May 3, 1995 through June 30, 1998
[GRAPH APPEARS HERE]
Wanger Int'l Small Cap Mountain Chart Plot Points
Wanger Int'l Small Cap EAFE % on graph axis
---------------------- ---- ---------------
05/03/95 $10,000 $10,000
06/30/95 $10,970 $ 9,825 +9.7%
09/30/95 $12,910 $10,234 +17.7%
12/31/95 $13,450 $10,649 +4.2%
03/31/96 $15,499 $10,956 +15.2%
06/30/96 $17,183 $11,130 +10.9%
09/30/96 $17,023 $11,116 -0.9%
12/31/96 $17,755 $11,293 +4.3%
03/31/97 $18,357 $11,112 +3.4%
06/30/97 $19,568 $12,558 +6.6%
09/30/97 $19,363 $12,470 -1.1%
12/31/97 $17,496 $11,493 -9.6%
03/31/98 $21,306 $13,184 +21.8%
06/30/98 $21,410 $13,324 +0.5%
Average
Annual Total
Return
1 year: 9.4%
3 Years: 25.0%
Life: 27.2%
- --------------------------------------------------------------------------------
This graph compares the results of $10,000 invested in Wanger International
Small Cap on May 3, 1995 (the date the Fund began operations) through June 30,
1998 with Morgan Stanley's Europe, Australasia Far East Index (EAFE), with
dividends reinvested. The beginning date of EAFE is as of May 31, 1995. The
performance data quoted is past performance and does not guarantee future
results. The investment return and principal value of an investment will
fluctuate so that investors' shares, when redeemed, may be worth more or less
than their original cost.
7
<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------
Wanger U.S. Small Cap Statement of Investments (unaudited) June 30,1998
<TABLE>
<S> <C>
Number of Value
Shares
Common Stocks and Other Equity-Like
Securities-93.0%
Information-35.4%
- -----------------------------------------------------------------
Broadcasting-2.9%
250,600 Data Transmission Network (b) $10,024,000
Data Services for Farmers
- ------------------------------------------------------------------
Cable Television-2.8%
88,000 Cablevision Systems (b) 7,348,000
Cable TV
61,600 Cable Michigan (b) 2,402,400
Classic Cable In Michigan
- -----------------------------------------------------------------
9,750,400
- ------------------------------------------------------------------
Television Programming-4.5%
222,000 Liberty Media Group,
Tele-Communications (b) 8,616,375
Cable TV & Satellite Dish Programming
177,100 United Video Satellite Group (b) 7,017,587
Cable TV & Satellite Dish Programming
- ------------------------------------------------------------------
15,633,962
- ------------------------------------------------------------------
Telephone Services-4.2%
491,400 RCN Corporation (b) 9,520,875
Metro Market: Voice, Video & Data Services
159,000 Commonwealth Telephone (b) 4,193,625
Rural Market: Local, Long Distance &
Internet Access
75,000 Startec Global Communications (b) 862,500
International Telecommunications
- ------------------------------------------------------------------
14,577,000
- ------------------------------------------------------------------
Mobile Communications-5.9%
411,000 Centennial Cellular (b) 15,335,437
Cellular Franchises
234,500 COMARCO (b) 5,012,437
Wireless Network Testing
- ------------------------------------------------------------------
20,347,874
- ------------------------------------------------------------------
Telecommunications Equipment- 0.9%
113,900 Aspect Telecommunications (b) $3,118,012
Call Center Equipment
- -------------------------------------------------------------------
Instrumentation-1.0%
126,000 Thermoquest (b) 1,882,125
Mass Spectrometry
85,000 Mettler Toledo International (b) 1,705,312
Laboratory Scales
- -------------------------------------------------------------------
3,587,437
- -------------------------------------------------------------------
Internet-0.7%
105,000 Mecklermedia (b) 2,349,375
Internet Trade Shows & Magazines
- -------------------------------------------------------------------
Business Information /
Marketing Services-2.9%
341,300 IntelliQuest Information (b)
Technology/Market Research 3,413,000
90,000 World Color Press (b)
Printing 3,150,000
138,700 American Business Information, Cl. B (b) 2,219,200
70,000 American Business Information, Cl. A (b) 1,067,500
Small Business Data
- -------------------------------------------------------------------
9,849,700
- -------------------------------------------------------------------
Transaction Processors-2.6%
205,100 National Data 8,973,125
Credit Card & Health Claims Processor
- -------------------------------------------------------------------
Computer Hardware /Related Systems-5.8%
286,600 Kronos (b) 10,389,250
Time Accounting Software & Clocks
296,000 Micros Systems (b) 9,795,750
Information Systems for Restaurants & Hotels
- -------------------------------------------------------------------
20,185,000
- -------------------------------------------------------------------
Gaming Equipment-0.4%
58,000 International Game Technology 1,406,500
Slot Machines & Progressive Jackpots
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------
Wanger U.S. Small Cap Statement of Investments (unaudited) June 30, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Number of Value
Shares
- --------------------------------------------------------------------------------
Computer Services-0.8%
<S> <C> <C>
143,500 Sykes Enterprises (b) $ 2,878,968
Call Center Services
- -------------------------------------------------------------------------------
Information-Total 122,681,353
Health Care-10.8%
- -------------------------------------------------------------------------------
Medical Equipment-0.0%
23,900 Cardiac Pathways (b) 170,287
Heart Surgery Devices
- -------------------------------------------------------------------------------
Biotechnology/Drug Delivery-0.5%
117,000 Synaptic Pharmaceuticals (b) 1,638,000
Receptor Targeted Drug Design
- -------------------------------------------------------------------------------
Services-10.3%
450,800 Lincare Holdings (b) 18,961,775
Home Health Care Services
354,000 First Health Group (b) 10,089,000
PPO Network
259,500 Magellan Health Services (b) 6,584,812
Mental Health Services
- -------------------------------------------------------------------------------
35,635,587
- -------------------------------------------------------------------------------
Health Care-Total 37,443,874
Consumer Goods/Services-3.5%
- -------------------------------------------------------------------------------
Retail-3.3%
787,500 Host Marriott Services (b) 11,467,968
Fast Food Kiosks in Airports
- -------------------------------------------------------------------------------
Casinos-0.2%
115,200 Monarch Casino & Resort (b) 734,400
Casino/Hotel in Reno
- -------------------------------------------------------------------------------
Consumer Goods/Services-Total 12,202,368
Finance-15.5%
- -------------------------------------------------------------------------------
Banks/Savings & Loans-4.9%
98,000 H.F. Ahmanson $ 6,958,000
California Savings & Loan
90,000 Texas Regional Bancshares 2,947,500
TexMex Bank
160,000 Coast Contingency Rights (b) 2,420,000
Litigation Claim Against US Government
67,500 Peoples Bank Bridgeport 2,337,187
Connecticut Savings & Loan
104,300 Imperial Thrift & Loan (b) 2,164,225
California Thrift & Loan
- -------------------------------------------------------------------------------
16,826,912
- -------------------------------------------------------------------------------
Finance Companies-0.4%
232,000 World Acceptance (b) 1,319,500
Small Consumer Loans
- -------------------------------------------------------------------------------
Insurance-8.2%
403,900 Acceptance Insurance (b) 9,920,793
Crop Insurance
328,000 UICI (b) 8,938,000
Health Insurance
130,000 AmerUs Life Holdings 4,208,750
Annuities/Life Insurance
92,000 Leucadia National 3,041,750
Insurance Holding Company
76,000 Penn Treaty American (b) 2,394,000
Nursing Home Insurance
- -------------------------------------------------------------------------------
28,503,293
- -------------------------------------------------------------------------------
Money Management-2.0%
66,000 SEI Investments 4,092,000
Mutual Fund Administration
152,900 Baker Fentress 2,799,981
Closed-End Investment Company
- -------------------------------------------------------------------------------
6,891,981
- -------------------------------------------------------------------------------
Finance-Total 53,541,686
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------
Wanger U.S. Small Cap Statement of Investments (unaudited) June 30,1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Number of Value
Shares
<C> <S> <C>
Industrial Goods/Services--10.5%
- --------------------------------------------------------------------------------
Machinery--1.5%
270,750 Farr (b) $3,333,609
Filters
91,000 Vallen (b) 1,808,625
Safety Products Distribution
- --------------------------------------------------------------------------------
5,142,234
- --------------------------------------------------------------------------------
Steel--2.7%
279,400 Atchison Casting (b) 4,994,275
Steel Foundries
126,400 Schnitzer Steel 2,986,200
Scrap Steel Processor
61,000 Gibraltar Steel (b) 1,250,500
Steel Processing
- --------------------------------------------------------------------------------
9,230,975
- --------------------------------------------------------------------------------
Specialty Chemicals--1.2%
196,000 Lilly Industries, Cl. A 4,238,500
Industrial Coatings
- --------------------------------------------------------------------------------
Outsourcing/Training Services--0.6%
75,000 Labor Ready (b) 2,264,064
Temporary Manual Labor
- --------------------------------------------------------------------------------
Other Industrial Services--4.5%
447,900 Wackenhut, Cl. B 9,629,850
Prison Management
366,400 Insurance Auto Auctions (b) 5,175,400
Auto Salvage Services
83,000 Compass International Services (b) 788,500
Collection Agencies
- --------------------------------------------------------------------------------
15,593,750
- --------------------------------------------------------------------------------
Industrial Goods/Services--Total 36,469,523
Energy/Minerals--14.5%
- --------------------------------------------------------------------------------
Independent Power--5.3%
539,000 CalEnergy (b) $16,203,690
Power Plants
38,000 AES Corporation (b) 1,997,375
Power Plants
- --------------------------------------------------------------------------------
18,201,065
- --------------------------------------------------------------------------------
Oil/Gas Producers--3.2%
678,300 Tesoro Petroleum (b) 10,768,015
Oil Refinery/Gas Reserves
139,000 Tipperary (b) 399,625
Oil & Gas Producer
- --------------------------------------------------------------------------------
11,167,640
- --------------------------------------------------------------------------------
Oil Refining/Marketing/Distribution--4.1%
219,000 Atmos Energy 6,679,500
Natural Gas Utility
137,000 Equitable Resources 4,178,500
Gas Utility & Gas Producer
279,100 Dynegy (formerly known as NGC) 3,488,750
Natural Gas Processing/Marketing
- --------------------------------------------------------------------------------
14,346,750
- --------------------------------------------------------------------------------
Oil Services--1.9%
96,000 J Ray McDermott (b) 3,984,000
Offshore Construction Company
221,000 GeoScience (b) 2,486,250
Offshore Seismic Equipment
- --------------------------------------------------------------------------------
6,470,250
- --------------------------------------------------------------------------------
Energy/Minerals--Total 50,185,705
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------
Wanger U.S. Small Cap Statement of Investments (unaudited) June 30, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Number of Value
Shares
<S> <C> <C>
Other Industries--2.8%
- --------------------------------------------------------------------------------
Real Estate--1.9%
64,800 Forest City Enterprises Cl. A $3,835,350
Shopping Centers
64,900 Gaylord Entertainment 2,093,025
Opryland Hotel & Other Assets
45,000 Cornerstone Properties 793,125
Downtown Office Buildings
- --------------------------------------------------------------------------------
6,721,500
- --------------------------------------------------------------------------------
Transportation--0.9%
129,000 Hub Group (b) 2,725,125
Freight Forwarder
66,000 Trailer Bridge (b) 264,000
Tug & Barge Transportation
- --------------------------------------------------------------------------------
2,989,125
- --------------------------------------------------------------------------------
Other Industries--Total 9,710,625
Total Common Stocks and Other
Equity-Like Securities--93.0% 322,235,134
- --------------------------------------------------------------------------------
(Cost: $ 242,928,786)
- --------------------------------------------------------------------------------
Short-Term Obligation--7.7% 26,598,000
$26,598,000 State Street Bank Repurchase Agreement
5.00% maturing 07/01/98; 06/30/98 Agreement Collateralized
by U.S. Treasury Notes
- --------------------------------------------------------------------------------
(Cost: $26,598,000)
Total Investments--100.7% 348,833,134
- --------------------------------------------------------------------------------
(Cost: $ 269,526,786)
Cash and Other Assets Less Liabilities--(0.7%) (2,319,583)
- --------------------------------------------------------------------------------
Total Net Assets--100% 346,513,551
================================================================================
</TABLE>
Notes to Statement of Investments:
(a) At June 30, 1998 for federal income tax purposes cost of investments was
$269,528,331 and net unrealized appreciation was $79,304,803 consisting of
gross unrealized appreciation of $87,105,197 and gross unrealized
depreciation of $7,800,394.
(b) Non-income producing security.
See accompanying notes to financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------------------
Wanger International Small Cap Statement of Investments (unaudited) June 30, 1998
- --------------------------------------------------------------------------------------------
Number of Value
Shares
<S> <C> <C>
Common Stocks and Other Equity-Like
Securities--93.9%
Europe--65.4%
- --------------------------------------------------------------------------------------------
Germany/Austria--5.5%
34,000 Rhoen Klinikum $ 3,362,326
Hospital Management
33,500 KTM Motorradholding 2,611,622
Off-Road Motorcycles (Austria)
160,000 Scala Business Solutions (b) 2,393,889
GIC Units
ERP Software (Austria)
- --------------------------------------------------------------------------------------------
8,367,837
- --------------------------------------------------------------------------------------------
Denmark--1.9%
20,000 Vest Wood 1,948,524
Furniture
12,000 Kompan International 1,003,344
Playground Equipment
- --------------------------------------------------------------------------------------------
2,951,868
- --------------------------------------------------------------------------------------------
Netherlands--7.8%
86,500 Kempen 6,697,350
Stock Brokerage/Investment Management
92,000 Hunter Douglas 4,997,545
Decorative Window Coverings
- --------------------------------------------------------------------------------------------
11,694,895
- --------------------------------------------------------------------------------------------
Finland--6.0%
67,900 Tieto Corporation, Cl. B 5,160,721
(formerly known as TT Tieto)
Computer Services/Consulting
150,000 Elcoteq Network 1,845,438
Electrical Components
99,200 Talentum 1,591,105
Trade Journals & Multimedia
6,500 Spar Finland 482,775
Grocery/Convenience Stores
- --------------------------------------------------------------------------------------------
9,080,039
- --------------------------------------------------------------------------------------------
Norway--0.5%
149,800 P4 Radio Hele Norge 712,543
Commercial Radio Station
- --------------------------------------------------------------------------------------------
Sweden--6.7%
106,000 Getinge Industrier 2,166,547
Sterilization & Disinfection Equipment
97,350 Elanders 1,562,502
Printer
125,000 Caran 1,457,698
Engineering Consulting
300,000 Micronic Laser Systems (b) 1,429,485
Electronics Production Equipment
30,200 Mandator 1,181,506
Computer Services/Consulting
325,000 Gylling Optima (b) 876,186
Batteries
75,000 Semcon 738,253
Computer Services/Consulting
20,000 Tryckindustri 589,349
Printing
13,100 Lifco (b) 64,063
Dental Supplies & Health Food
- --------------------------------------------------------------------------------------------
10,065,589
- --------------------------------------------------------------------------------------------
France--2.4%
15,000 Fininfo 2,654,647
Financial Data Feeds
10,000 Cie des Signaux 962,620
Computer Services/Telecom Equipment
- --------------------------------------------------------------------------------------------
3,617,267
See accompanying notes to financial statements.
</TABLE>
12
<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------
Wanger International Small Cap
Statement of Investments (unaudited) June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Value
Shares
- --------------------------------------------------------------------------------
<C> <S> <C>
United Kingdom--15.4%
135,000 Euro Money Publications $ 5,389,043
Financial Publications
350,000 Seton Healthcare Group 4,394,409
Pharmaceuticals
2,000,000 Electronics Boutique (b) 2,953,243
Videogame/Computer Software Stores
40,000 NTL (b) 2,140,000
Cable TV & Telephone System
350,000 Hogg Robinson 1,585,491
Corporate Travel Management
550,000 Medeva 1,569,223
Drugs for Hyperactive Children
160,000 Edinburgh Fund Managers 1,543,028
Investment Management
200,000 Oriflame International 1,484,964
Natural Cosmetics
240,000 Dorling Kindersley 844,928
Reference Books & CD-ROMs
60,000 Vosper Thornycroft 825,907
Naval Shipbuilding
100,000 Workplace Technologies 437,985
Network Integration
- --------------------------------------------------------------------------------
23,168,221
- --------------------------------------------------------------------------------
Spain/Portugal-- 8.2%
160,000 Mapfre Vida 7,650,401
Life Insurance/Mutual Funds
70,000 Investec (b) 3,220,712
Television/Sports Newspaper (Portugal)
100,000 Filmes Lusomundo (b) 1,488,739
Newspapers, Radio, Video, Film Distribution
(Portugal)
- --------------------------------------------------------------------------------
12,359,852
- --------------------------------------------------------------------------------
Switzerland--3.1%
4,000 Phoenix Mecano 2,584,390
Electrical Components
3,000 Societe Generale d'Affichage 1,305,379
Billboard Advertising
2,200 Hiestand 755,669
Bakery
- --------------------------------------------------------------------------------
4,645,438
- --------------------------------------------------------------------------------
Italy/Greece--7.9%
800,000 Autogrill Finanziari 5,652,724
Tollway Restaurants
200,000 Athens Medical Center (b) 3,937,163
Hospitals (Greece)
100,000 Banca Pop Commercia e Industria 1,698,968
Regional Bank
13,900 Cellular Communications International (b) 693,265
Mobile Communications
- --------------------------------------------------------------------------------
11,982,120
- --------------------------------------------------------------------------------
Europe--Total 98,645,669
Asia 16.6%
- --------------------------------------------------------------------------------
Hong Kong--3.7%
2,740,000 Li and Fung 4,420,155
Sourcing of Consumer Goods
6,250,000 Vanda Systems 1,129,240
Systems Integrator
- --------------------------------------------------------------------------------
5,549,395
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------
Wanger International Small Cap
Statement of Investments (unaudited) June 30, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Number of Value
Shares
<S> <C> <C>
- -------------------------------------------------------------------------------
Japan-7.0%
150,000 Kawasumi Labs $2,615,556
Laboratory Supplies
392,000 Belluna 2,245,487
Catalog Sales
140,040 Shinki 1,553,925
Loans to Consumers & Small Businesses
16,000 Ryohin Keikaku 1,533,306
Specialty Consumer Goods Retailer
39,000 Hokuto 1,095,939
Mushroom Grower
4,000 Shohkoh Fund 982,815
Loans to Small Businesses
71,300 Tecmo 426,407
Video Games
7,920 Central Uni 33,384
Health Care/Medical Equipment
- -------------------------------------------------------------------------------
10,486,819
- -------------------------------------------------------------------------------
Malaysia-0.2%
388,000 Computer Systems Advisor 241,359
Systems Integration & Software Services
- -------------------------------------------------------------------------------
Singapore-4.8%
1,300,400 Star Cruises (b) 2,483,764
Asian Cruise Line
1,037,000 Venture Manufacturing 1,964,131
Contract Electronics Manufacturer
6,800,000 Omni Industries (b) 1,026,339
Contract Electronics Manufacturer
3,600,000 Datapulse Technology 820,361
CD-ROM Replication
1,161,000 Electronic Resources 790,263
935,000 Electronic Resources Warrants 7/17/01 (b) 210,298
Distribution of Electronic Components
- -------------------------------------------------------------------------------
7,295,156
- -------------------------------------------------------------------------------
Thailand-0.9%
2,149,159 International Broadcasting (b) 1,422,611
Cable Television
- -------------------------------------------------------------------------------
Asia-Total 24,995,340
Latin America-4.5%
- -------------------------------------------------------------------------------
Mexico-2.3%
500,000 Grupo Continental 1,669,263
Coca-Cola Bottler
400,000 Corp Interamericana 1,112,842
de Entretenimiento (b)
Special Events & Live Entertainment
1,240,000 Nadro, Series L (b) 756,198
Pharmaceutical Distribution
- -------------------------------------------------------------------------------
3,538,303
- -------------------------------------------------------------------------------
Brazil-2.2%
150,000 Elevadores Atlas 2,528,964
Elevator Services
49,000 Bompreco GDS 710,500
Supermarket Chain
- -------------------------------------------------------------------------------
3,239,464
- -------------------------------------------------------------------------------
Latin America-Total 6,777,767
Other Countries-7.4%
- -------------------------------------------------------------------------------
Australia-2.9%
2,284,549 Tyndall Australia 2,971,125
228,454 Tyndall New Shares 282,963
Money Management & Insurance
462,965 Anaconda Nickel (b) 1,089,514
Nickel Mining
- -------------------------------------------------------------------------------
4,343,602
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
<TABLE>
<CAPTION>
Wanger Advisors Trust 1998 Semi-Annual Report
- -------------------------------------------------------------------------------------
Wanger International Small Cap
Statement of Investments (unaudited) June 30,1998
- -------------------------------------------------------------------------------------
Number of Value
Shares
<S> <C> <C>
Other Countries-7.4% (cont.)
- -------------------------------------------------------------------------------------
Canada-3.3%
145,400 Shaw Industries $ 1,740,133
Oil Field Services
92,000 Stackpole (b) 1,251,189
Autoparts
90,000 LGS Group (b) 1,009,800
10,000 LGS Group Special Warrants (b) 112,200
Computer Systems Integration
85,000 Club Monaco (b) 491,300
Specialty Apparel & Accessories
200,000 Dundee Realty Special Warrants (b) 353,597
Real Estate
- -------------------------------------------------------------------------------------
4,958,219
- -------------------------------------------------------------------------------------
Israel-1.2%
50,000 Orbotech (b) 1,818,750
Printed Circuit Board Manufacturing Equipment
- -------------------------------------------------------------------------------------
Other-Total 11,120,571
Total Common Stocks and Other
Equity-Like Securities-93.9% 141,539,347
- -------------------------------------------------------------------------------------
(Cost: $112,297,278)
- -------------------------------------------------------------------------------------
Short-Term Obligation-6.0% 9,018,000
$9,018,000 State Street Bank Repurchase Agreement
5.00% maturing 07/01/98; 06/30/98 Agreement Collateralized
by U.S. Treasury Notes
- -------------------------------------------------------------------------------------
(Cost: $ 9,018,000)
Total Investments 99.9% 150,557,347
- -------------------------------------------------------------------------------------
(Cost: $121,315,278)
- -------------------------------------------------------------------------------------
Cash and Other Assets Less Liabilities-0.1% 210,411
- -------------------------------------------------------------------------------------
Total Net Assets-100% 150,767,758
=====================================================================================
</TABLE>
Notes to Statement of Investments:
(a) At June 30, 1998 for federal income tax purposes cost of investments
was $121,392,549 and net unrealized appreciation was $29,164,798
consisting of gross unrealized appreciation of $42,254,635 and gross
unrealized depreciation of $13,089,837.
(b) Non-income producing security.
See accompanying notes to financial statements.
15
<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------
Wanger International Small Cap Portfolio Diversification June 30, 1998
At June 30, 1998 the Fund's portfolio of investments as a percentage of net
assets was diversified as follows:
<TABLE>
<CAPTION>
Value Percent
- -------------------------------------------------------------------
<S> <C> <C>
Information
Publishing $ 14,686,381 9.7%
Computer Services 10,973,671 7.3
Contract Manufacturing 3,810,832 2.5
CATV 3,562,611 2.4
Business Information/
Marketing Services 2,654,648 1.8
Business Software 2,393,889 1.6
Computer Hardware/
Related Equipment 1,818,750 1.2
Semiconductors/Related
Equipment 1,429,485 0.9
Advertising 1,305,380 0.8
Electronics Distribution 1,000,562 0.7
Radio 712,543 0.5
Mobile Communications 693,263 0.5
- -------------------------------------------------------------------
45,042,015 29.9
- -------------------------------------------------------------------
Health Care
Hospital Management 7,299,490 4.8
Pharmaceuticals 5,963,633 3.9
Hospital/Laboratory Supplies 4,782,104 3.2
Medical Equipment 97,448 0.1
- -------------------------------------------------------------------
18,142,675 12.0
- -------------------------------------------------------------------
Consumer Goods/Services
Retail 7,933,835 5.3
Restaurants 5,652,724 3.8
Nondurables 4,972,774 3.3
Travel 4,069,255 2.7
Furniture/Textile 1,948,524 1.3
Food 1,851,610 1.2
Beverages 1,669,263 1.1
Consumer Goods Distribution 1,238,974 0.8
Leisure Products 1,003,344 0.7
International Consumer Software 426,408 0.3
Other Durable Goods 4,997,542 3.3
Other Entertainment 1,112,842 0.7
- -------------------------------------------------------------------
36,877,095 24.5
Value Percent
- -------------------------------------------------------------------
Finance
Insurance $ 7,650,402 5.1%
Brokerage 6,697,350 4.4
Money Management 4,797,116 3.2
Finance Companies 2,536,741 1.7
Banks 1,698,968 1.1
- -------------------------------------------------------------------
23,380,577 15.5
- -------------------------------------------------------------------
Industrial Goods/Services
Outsourcing/Training Services 5,877,852 3.9
Electrical Components 4,429,827 2.9
Industrial Materials 1,251,190 0.8
Machinery 825,907 0.6
Other Industrial Services 2,528,964 1.7
- -------------------------------------------------------------------
14,913,740 9.9
- -------------------------------------------------------------------
Energy/Minerals
Oil Services 1,740,133 1.2
Non-Ferrous Metals 1,089,514 0.7
- -------------------------------------------------------------------
2,829,647 1.9
- -------------------------------------------------------------------
Other Industries
Real Estate 353,598 0.2
- -------------------------------------------------------------------
Total Common Stocks and
Other Equity-Like Securities 141,539,347 93.9
- -------------------------------------------------------------------
Short-Term Obligations 9,018,000 6.0
- -------------------------------------------------------------------
Cash and Other Assets less Liabilities 210,411 0.1
- -------------------------------------------------------------------
Net Assets $150,767,758 100.0%
===================================================================
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities June 30, 1998
(unaudited)
<TABLE>
<CAPTION>
Wanger U.S. Wanger International
Small Cap Small Cap
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments, at value (cost: Wanger U.S. Small Cap $269,526,786; $348,833,134 $150,557,347
Wanger International Small Cap $121,315,278)
Cash 1,477 73,818
Organization costs 36,758 36,758
Receivable for:
Securities sold 702,787 491,748
Fund shares sold 2,557,529 314,954
Dividends and interest 24,930 345,754
Other assets 650 650
- --------------------------------------------------------------------------------------------------------------------------
Total assets 352,157,265 151,821,029
Liabilities and Net Assets
Payable for:
Securities purchased 5,430,665 686,444
Fund shares redeemed 141,983 259,323
Amount owed to advisor 45,673 42,006
Other 25,393 65,498
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities 5,643,714 1,053,271
- --------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Fund shares outstanding $346,513,551 $150,767,758
- --------------------------------------------------------------------------------------------------------------------------
Fund shares outstanding 14,734,446 7,304,085
- --------------------------------------------------------------------------------------------------------------------------
Pricing of Shares
Net asset value, offering price and redemption price per share $23.52 $20.64
- --------------------------------------------------------------------------------------------------------------------------
Analysis of Net Assets
Paid-in capital $246,418,071 $121,231,293
Undistributed net realized gain (loss) on sales of investments and
foreign currency transactions 20,991,655 (128,997)
Net unrealized appreciation of investments and foreign currency transactions
(net of unrealized PFIC gains of $65,732 for Wanger International Small Cap) 79,306,348 29,172,403
Accumulated net investment income (loss) (202,523) 493,059
- --------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Fund shares outstanding $346,513,551 $150,767,758
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------
Statements of Operations For the Six Months Ended June 30, 1998
(unaudited)
<TABLE>
<CAPTION>
Wanger U.S. Wanger International
Small Cap Small Cap
====================================================================================================================================
<S> <C> <C>
Investment Income:
Dividends (net of foreign taxes of $163,539 for Wanger International Small Cap) $ 813,267 $ 1,401,182
Interest 550,583 167,430
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment income 1,363,850 1,568,612
====================================================================================================================================
Expenses:
Investment advisory 1,481,016 891,510
Custodian 13,022 113,201
Legal and audit 28,960 26,426
Reports to shareholders 10,317 10,317
Amortization of organization costs 9,906 9,906
Transfer agent 10,679 10,860
Trustees' 9,593 8,869
Insurance 1,281 1,281
Other 6,662 3,715
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 1,571,436 1,076,085
Custodian fees paid indirectly (5,063) (553)
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses 1,566,373 1,075,532
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (202,523) 493,080
Net realized and unrealized gain on investments:
Net realized gain on sales of investments 21,004,910 1,994,809
Net change in unrealized appreciation 22,787,122 24,232,818
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 43,792,032 26,227,627
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $43,589,509 $26,720,707
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
(unaudited)
<TABLE>
<CAPTION>
-------------------------------- --------------------------------
Wanger U.S. Small Cap Wanger International Small Cap
Six months Year Six months Year
ended ended ended ended
June 30, December 31, June 30, December 31,
1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations:
Net investment income (loss) $ (202,523) $ (206,969) $ 493,080 $ 148,271
Net realized gain (loss) on sales of investments 21,004,910 15,616,554 1,994,809 (616,933
Net change in unrealized appreciation 22,787,122 37,057,494 24,232,818 (2,999,052)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 43,589,509 52,467,079 26,720,707 (3,467,714)
Distributions to shareholders from:
Net investment income - - (1,532,876) -
Net realized gain (15,422,770) (3,530,225) - (2,453,253)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (15,422,770) (3,530,225) (1,532,876) (2,453,253)
From Fund share transactions:
Reinvestment of dividends and capital
gain distributions 15,407,847 3,530,225 1,530,069 2,453,253
Proceeds from other shares sold 50,007,308 109,491,784 14,236,547 54,111,870
- -----------------------------------------------------------------------------------------------------------------------------
65,415,155 113,022,009 15,766,616 56,565,123
Payments for shares redeemed (17,934,170) (20,050,947) (10,846,847) (14,839,080)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from
Fund share transactions 47,480,985 92,971,062 4,919,769 41,726,043
- -----------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 75,647,724 141,907,916 30,107,600 35,805,076
- -----------------------------------------------------------------------------------------------------------------------------
Net assets:
Beginning of period 270,865,827 128,957,911 120,660,158 84,855,082
- -----------------------------------------------------------------------------------------------------------------------------
End of period (a) $346,513,551 $270,865,827 $150,767,758 $120,660,158
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes accumulated net investment income (loss) of ($202,523) and $493,059
at June 30, 1998 for Wanger U.S. Small Cap and Wanger International Small Cap,
respectively.
See accompanying notes to financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
Wanger Advisors Trust 1998 Semi-Annual Report
- ------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap Financial Highlights
(unaudited)
May 3, 1995
Six months ended Year ended Year ended through
June 30, 1998 December 31, 1997 December 31, 1996 December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, beginning of period $21.46 $16.97 $11.60 $10.00
Income From Investment Operations
Net investment loss (c) (.01) (.02) (.06) (.05)
Net realized and unrealized gain on
investments 3.23 4.90 5.46 1.65
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.22 4.88 5.40 1.60
Less Distributions
Dividends from net investment income - - - -
Distributions from net realized gain (1.16) (.39) (.03) -
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (1.16) (.39) (.03) -
Net Asset Value, end of period $23.52 $21.46 $16.97 $11.60
- ------------------------------------------------------------------------------------------------------------------------
Total Return 15.25% 29.41% 46.59% 16.00%
Ratios/Supplemental Data
Ratio of expenses to average net assets
[a) (b) 1.01%* 1.06% 1.21% 2.08%*
Ratio of net investment loss to average
net assets (b) (.13%*) (.10%) (.41%) (1.44%)*
Portfolio turnover rate 41%* 34% 46% 59%*
Net assets at end of period $346,513,551 $270,865,827 $128,957,911 $21,903,536
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized
(a) In accordance with a requirement of the Securities and Exchange Commission,
this ratio reflects gross custodian fees. This ratio net of custodian fees
paid indirectly would have been 1.04% for the year ended December 31, 1997,
1.19% for the year ended December 31, 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 income to
average net assets for the period ended December 31, 1995 would have been
2.35% and (1.71%), respectively.
(c) Net investment loss per share for the six months ended June 30, 1998 and
the years ended December 31, 1997 and 1996 was based upon the average
shares outstanding during the period.
See accompanying notes to financial statements.
20
<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------
Wanger International Small Cap Financial Highlights
(unaudited)
<TABLE>
<CAPTION>
Six months ended Year ended Year ended May 3, 1995 through
June 30, 1998 December 31, 1997 December 31, 1996 December 31, 1995
====================================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, beginning of period $ 17.05 $ 17.71 $ 13.45 $ 10.00
Income From Investment Operations
Net investment income (loss) (c) .07 .02 (.09) (.03)
Net realized and unrealized gain (loss) on investments 3.74 (.26) 4.38 3.48
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.81 (.24) 4.29 3.45
Less Distributions
Dividends from net investment income (.22) -- -- --
Distributions from net realized gain and unrealized
gain reportable for federal income taxes -- (.42) (.03) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.22) (.42) (.03) --
Net Asset Value, end of period $ 20.64 $ 17.05 $ 17.71 $ 13.45
====================================================================================================================================
Total Return 22.38% (1.46%) 32.01% 34.50%
Ratios/Supplemental Data
Ratio of expenses to average net assets (a) (b) 1.53%* 1.60% 1.79% 2.32%
Ratio of net investment income (loss)
to average net assets (b) .70%* .12% (.56%) (.81%)*
Portfolio turnover rate 47%* 60% 50% 14%*
Net assets at end of period $150,767,758 $120,660,158 $84,855,082 $11,368,924
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized
(a) In accordance with a requirement of the Securities and Exchange Commission,
this ratio reflects gross custodian fees. This ratio net of custodian fees
paid indirectly would have been 1.59% for the year ended December 31, 1997,
1.75% for the year ended December 31, 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 income to
average net assets for the period ended December 31, 1995 would have been
4.20% and (2.69%), respectively.
(c) Net investment income (loss) per share for the six months ended June 30,
1998 and the years ended December 31, 1997 and 1996 was based upon the
average shares outstanding during the period.
See accompanying notes to financial statements.
21
<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
1. Nature of Operations
Wanger U.S. Small Cap and Wanger International Small Cap ("the Funds") are
series of Wanger Advisors Trust ("the Trust"), an open-end management
investment company organized as a Massachusetts business trust. The investment
objective of each Fund is to seek long-term growth of capital. The Funds are
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 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.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results may differ from those estimated.
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 each Fund's cash balances maintained with
the custodian. This presentation does not affect the determination of Fund
shares outstanding.
FEDERAL INCOME TAXES, DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
The Funds have complied with the special provisions of the Internal Revenue Code
available to regulated investment companies and, in the manner provided therein,
distribute all of their taxable income, as well as any net realized gain on
sales of investments and foreign currency transactions reportable for federal
income tax purposes.
Wanger International Small Cap has elected to mark-to-market its
investments in Passive Foreign Investment Companies ("PFICs") for income tax
purposes. Cumulative net unrealized appreciation recognized in prior years was
$1,391,583 at December 31, 1997. Cumulative net unrealized appreciation
recognized in prior years on PFICs sold through June 30, 1998 amounted to
$1,325,851. Distributions to shareholders from net investment income relating to
PFICs, were $1,226,459 in 1998, which are treated as ordinary income for federal
income tax purposes.
Wanger International Small Cap intends to utilize provisions of the federal
income tax law that allows it to carry a realized capital loss forward for eight
years following the year of the loss and offset such losses against future
realized gains. At December 31, 1997, the Fund had a capital loss carryforward
of $382,694 which will expire December 31, 2005.
Dividends and distributions payable to each Fund's shareholders are
recorded by the Fund on the ex-dividend date.
22
<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
3. Transaction 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. Each Fund pays WAM a monthly advisory
fee based upon average daily net assets at the following rates:
<TABLE>
<CAPTION>
Wanger U.S. Wanger International
Small Cap Small Cap
- --------------------------------------------------------------------------------
<S> <C> <C>
Average Daily Net Assets:
For the first $100 million 1.00% 1.30%
Next $150 million .95% 1.20%
In excess of $250 million .90% 1.10%
- --------------------------------------------------------------------------------
</TABLE>
The investment advisory agreement also provides that WAM will reimburse the
Funds to the extent that ordinary operating expenses (computed based on net
custodian fees) exceed 1.50% for Wanger U.S. and 1.90% for Wanger International
Small Cap, of average net assets. WAM was not required to reimburse the Funds
under these agreements for the six months ended June 30, 1998.
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. Wanger U.S. Small Cap and Wanger International Small Cap incurred
trustees' fees and expenses of $9,593 and $8,869 respectively, for the six
months ended June 30, 1998 to trustees not affiliated with WAM.
WAM advanced $100,000 to each Fund 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 each Fund's shares and receives no compensation for its services
4. Borrowing Arrangements
The trust participates in a $250,000,000 credit facility which was entered into
to facilitate portfolio liquidity. No amounts have been borrowed under this
facility.
- --------------------------------------------------------------------------------
5. 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>
----------------------------------- -----------------------------------
Wanger U.S.Small Cap Wanger International Small Cap
Six months ended Year ended Six months ended Year ended
June 30, 1998 December 31, 1997 June 30, 1998 December 31, 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,212,695 5,806,192 711,328 2,963,636
Shares issued in reinvestment of dividend and
capital gain distributions 686,318 210,886 76,657 136,747
- --------------------------------------------------------------------------------------------------------------------------
2,899,013 6,017,078 787,985 3,100,383
Less shares redeemed 788,412 991,354 562,663 812,741
- --------------------------------------------------------------------------------------------------------------------------
Net increase in shares outstanding 2,110,601 5,025,724 225,322 2,287,642
==========================================================================================================================
</TABLE>
6. Investment Transactions
The aggregate cost of purchases and proceeds from sales other than short-term
obligations for the six months ended June 30, 1998 were:
<TABLE>
<CAPTION>
Wanger U.S. Wanger International
Small Cap Small Cap
<S> <C> <C>
Purchases $89,379,426 $36,778,365
Sales 60,362,818 30,827,992
- -------------------------------------------------------------------------
</TABLE>
23
<PAGE>
Wanger Advisors Trust 1998 Semi-Annual Report
- --------------------------------------------------------------------------------
Wanger Advisors Trust
Trustees
Fred D. Hasselbring
Charles P. McQuaid
James A. Star
Ralph Wanger
Officers
Ralph Wanger
President
Charles P. McQuaid
Senior Vice President
Marcel P. Houtzager
Vice President
Robert A. Mohn
Vice President
Leah J. Zell
Vice President
Merrillyn J. Kosier
Senior 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
Distributor
WAM Brokerage
Services, L.L.C.
227 West Monroe Street
Suite 3000
Chicago, Illinois 60606
1-800-5-WANGER
(1-800-592-6437)
Investment Advisor
Wanger Asset
Management, L.P.
227 West Monroe Street
Suite 3000
Chicago, Illinois 60606
1-800-5-WANGER
(1-800-592-6437)
Legal Counsel
Bell, Boyd & Lloyd
Chicago, Illinois
This report, including the unaudited schedules of investments and financial
statements, is submitted for the general information of the shareholders of the
Wanger Advisors Trust. This report is not authorized for distribution unless
preceded or accompanied by a prospectus.
24
<PAGE>
Wanger Advisors Trust
