WANGER ADVISORS TRUST 1999 Annual Report
WANGER 99
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WANGER ADVISORS TRUST
1999 ANNUAL REPORT
CONTENTS
2 From Chain Mail To E-Mail
4 Funds at a Glance
6 Performance Review
Wanger U.S. Small Cap
8 Performance Review
Wanger International
Small Cap
10 Performance Review
Wanger Twenty
12 Performance Review
Wanger Foreign Forty
14 Statement of Investments
Wanger U.S. Small Cap
18 Statement of Investments
Wanger International
Small Cap
22 Portfolio Diversification
Wanger International
Small Cap
23 Statement of Investments
Wanger Twenty
25 Statement of Investments
Wanger Foreign Forty
28 Portfolio Diversification
Wanger Foreign Forty
29 Statements of Assets
and Liabilities
30 Statements of Operations
31 Statements of Changes in
Net Assets
32 Financial Highlights
Wanger U.S. Small Cap
33 Financial Highlights
Wanger International
Small Cap
34 Financial Highlights
Wanger Twenty
35 Financial Highlights
Wanger Foreign Forty
36 Notes to Financial Statements
38 Report of Independent Auditors
39 Prospectus Supplement
WANGER ASSET MANAGEMENT, L.P. ("WAM") IS ONE OF THE LEADING GLOBAL SMALL-CAP
EQUITY MANAGERS IN THE U.S. WITH 29 YEARS OF SMALL-CAP INVESTMENT EXPERIENCE.
WAM MANAGES OVER $9 BILLION IN EQUITIES AND IS THE INVESTMENT ADVISER TO WANGER
U.S. SMALL CAP, WANGER INTERNATIONAL SMALL CAP, WANGER TWENTY, WANGER FOREIGN
FORTY AND THE ACORN FAMILY OF FUNDS.
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.
WANGER 99
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Wanger Advisors Trust 1999 Annual Report
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FROM CHAIN MAIL TO E-MAIL
A FIVE-MINUTE HISTORY OF THE WORLD
During the early part of the last millennium, the hotbed of ideas that moved
civilization forward came from the Steppes of Asia, not the Valley of Silicon.
The Western Hemisphere wasn't even on the map at that point, and Europe was an
insignificant, rather primitive gang of quarreling principalities at the wrong
end of the Eurasian landmass.
The center of power, and the center of civilization, was ruled by Genghis Khan
and his children. He and his unstoppable armies created a gigantic empire that
spread across Mongolia and China, and included Persia and Russia. Nobody in
Europe knew the extent or power of the Mongol Empire until young Marco Polo
traveled across Asia in the 1280s. Years later, he returned to his native Venice
with a sack of jewels and a pack of tall tales about lands of gigantic, rich
cities, an opulent and sophisticated court, and advanced technology. Most of his
contemporaries thought he was kidding. Here are two examples of Marco's stories
that sounded crazy in 1290, but after a few centuries, changed the world.
ROCKS THAT BURNED
Marco Polo wrote:
It is a fact that all over the country of Cathay there is a kind of black
stone existing in beds in the mountains, which they dig out and burn like
firewood. If you supply the fire with them at night, and see that they are
well kindled, you will find them still alight in the morning; and they
make such capital fuel that no other is used throughout the country. It is
true that they have plenty of wood also, but they do not burn it, because
those stones burn better and cost less.1
Modern technology is based on burning rocks. The story of the Industrial
Revolution is how our lives changed when we learned how to burn coal to run
ships and trains, and make electricity for motors and computers. Adopting oil
and gas was also part of the story. As The Economist put it, "Coal was to power
Britain's industrial revolution, and, later, as steam-powered machinery spread,
the first steps in its agricultural revolution too. ... Today's oil-driven world
and tomorrow's driven by who knows what owe their birth to coal."2
MONEY THAT GROWS ON TREES
In Medieval Europe, coins made of gold and silver were scarce and often of
questionable quality. Marco Polo reported how Kublai Khan turned tree bark into
money:
The Emperor's Mint then is in this same City of Cambaluc [Beijing today],
and the way it is wrought is such that you might say he hath the Secret of
Alchemy in perfection, and you would be right! For he makes his money
after this fashion.
He makes them take the bark of a certain tree, in fact the Mulberry Tree,
the leaves of which are the food of the silkworms, -- these trees being so
numerous that whole districts are full of them. ...
... All these pieces of paper are issued with as much solemnity and
authority as if they were of pure gold or silver.
And the Khan causes every year to be made such a vast quantity of this
money, which costs him nothing, that it must equal in amount all the
treasure of the world.3
That's right folks, the Chinese invented the Fed. China's first version of paper
money appeared in 1024. In contrast, 13th century European governments were
weak, with poor communications, primitive legal systems, and no fiscal policy
above the level of extortion. Europe's first attempt at paper money came 400
years later when Johan Palmstruch founded the Stockholm Banco in 1656. His was a
private company that intended to issue paper money, enjoying royal privileges in
return for a royal cut. After sustained lobbying and a public-relations effort
that would be impressive today, an issue of bank notes followed in 1661. But the
venture over-reached
2
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Wanger Advisors Trust 1999 Annual Report
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itself, issued too many notes and crashed disastrously in 1667. Palmstruch was
disgraced and - fickle government - was sentenced to death.4
Paper money has had a mixed career since, with a number of disastrous
hyper-inflationary episodes. The test of a modern government's strength and
sense is, like Kublai Khan's, the ability to issue credible paper money. "Strong
government" has been another central theme of the last two centuries, with both
beneficial and destructive results.
History from Marco Polo to Alan Greenspan mainly explains how the language of
the Internet turned out to be English instead of Turkish, Chinese, or Arabic.5
Marco Polo was a 13th century primitive visiting a superior civilization. Five
hundred years later, the tides reversed. Europe adopted coal, paper money,
printing, gunpowder and the magnetic compass from China, and went on to build
technology, wealth and power. China preferred stability and stagnation. Europe
had taken control of the world by the end of the 19th century.
History hasn't ended yet. The European empires dissolved in the 20th century.
Asia, no longer stagnant, now has many countries that fully match Western wealth
and technology.
Is there a message here for investors? We already know that everything changes
with time. Venice, Constantinople, and Cordoba now exist as outdoor museums
where tourists come to admire their 13th century glory. England was a minor
province for some French kings then; no one in the 13th century would have put
the English on a world power list. In the same way, stocks have had their times
of leadership followed by stagnation or extinction. One hundred years ago, the
best stock in the United States was the Pennsylvania Railroad. Later favorites
would include GM, U.S. Steel, RCA, Sears, DuPont, Schlumberger, and IBM, all of
which are still around but not what they once were. A few have had longevity:
GE, Merck.
Will current favorites fade? Wal-Mart without Sam and Microsoft without billg
might well. Many of the new Internet companies will suffer the biggest massacre
of naifs since the Children's Crusade. Will new companies become favorites? Of
course. We will try to find some of them. Our small-company, global approach
ought to keep working. The next seven hundred years look very promising.
Photo of: Ralph Wanger
Ralph Wanger
Chief Investment Officer
Wanger Asset Management, L.P.
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1 The Travels Of Marco Polo, Yule-Cordier edition, p. 442.
Dover Publications, 1993, a republication of a 1903 version.
2 The Economist, December 31, 1999, p. 75.
3 The Travels Of Marco Polo, op. cit, p. 442.
4 The Economist, op. cit, p. 91.
5 If you need an Internet Service Provider (ISP) in one of these languages,
Startec Global has one for you.
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Wanger Advisors Trust 1999 Annual Report
FUNDS AT A GLANCE
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WANGER U.S. SMALL CAP
RESULTS TO DECEMBER 31, 1999
Last 12
4th quarter months
WANGER U.S. SMALL CAP 17.8% 25.1%
Russell 2000 18.4% 21.3%
S & P MidCap 400 17.2% 14.7%
S & P 500 14.9% 21.0%
WANGER U.S. SMALL CAP N.A.V. AS OF 12/31/99: $24.88
The Russell 2000 is formed by taking the 3,000 largest U.S. companies and then
eliminating the largest 1,000, leaving a mainly 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 returns include
reinvested dividends.
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WANGER U.S. SMALL CAP TOP 5 INDUSTRIES
As a % of net assets, as of 12/31/99
Information 48.4%
Energy/Minerals 13.4%
Finance 10.7%
Health Care 9.1%
Industrial Goods/Services 4.9%
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WANGER U.S. SMALL CAP TOP 10 HOLDINGS
Micros Systems 8.0%
Information systems for restaurants and hotels
MidAmerican Energy 6.4%
Growth utility
RCN Corporation 4.8%
Metro market CLEC: Voice, video and Internet services
Lincare Holdings 4.5%
Home health care services
Telephone and
Data Systems 4.1%
Cellular and telephone services
Kronos 3.4%
Labor management solutions
Sykes Enterprises 3.3%
Call center services
Aspect
Communications 3.1%
Call center equipment
National Data 2.9%
Credit card and health
claims processor
First Health Group 2.7%
PPO network
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WANGER INTERNATIONAL SMALL CAP
RESULTS TO DECEMBER 31, 1999
Last 12
4th quarter months
WANGER INTERNATIONAL SMALL CAP 57.4% 126.4%
EMI (World ex-US) 9.1% 23.5%
EAFE 17.0% 27.0%
Lipper International
Small-Cap Funds Avg. 32.3% 75.4%
Lipper International Funds Avg. 25.7% 40.8%
WANGER INTERNATIONAL SMALL CAP N.A.V. AS OF 12/31/99: $43.67
The EMI is Salomon Brothers' index of the bottom 20% of institutionally
investable capital of countries, as selected by Salomon, excluding the U.S. EAFE
is Morgan Stanley's Europe, Australasia and Far East Index, an unmanaged index
of companies throughout the world in proportion to world stock market
capitalization, excluding the U.S. and Canada. The Lipper International
Small-Cap Funds Average is calculated from the performance of a group of
small-cap international funds. For the fourth quarter and 12-month periods
above, the group consisted of 74 and 70 funds, respectively. The Lipper
International Funds Average is an average of all international funds tracked by
Lipper, excluding the international small-cap funds. This group consisted of 658
and 618 funds for the fourth quarter and 12 months, respectively. All indexes
are unmanaged and returns include reinvested dividends.
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WANGER INTERNATIONAL SMALL CAP TOP 5 COUNTRIES
As a % of net assets, as of 12/31/99
Sweden 15.2%
Singapore 11.4%
Japan 10.2%
Netherlands 8.9%
France 7.0%
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WANGER INTERNATIONAL SMALL CAP TOP 10 HOLDINGS
Icon Medialab 5.0%
Web site development-Sweden
Omni Industries 4.2%
Electronic manufacturing services-Singapore
Star Cruises 4.0%
Cruise line-Singapore
Trans Cosmos 3.8%
Information technology services and investments-Japan
Information Highway 3.2%
Internet consulting-Sweden
Datacraft Asia 2.9%
Network integrator-Singapore
Li & Fung 2.6%
Sourcing of consumer
goods-Hong Kong
Talentum 2.3%
Trade journals and Internet services-Finland
Class Editori 2.2%
Newspapers and on-line
financial data-Italy
Prosodie 2.1%
Automated call centers-France
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Wanger Advisors Trust 1999 Annual Report
FUNDS AT A GLANCE
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WANGER TWENTY
RESULTS TO DECEMBER 31, 1999
4th quarter Life of Fund
WANGER TWENTY 17.7% 34.3%
Russell 2000 18.4% 19.7%
S & P MidCap 400 17.2% 19.4%
S & P 500 14.9% 16.2%
WANGER TWENTY N.A.V. AS OF 12/31/99: $13.43
Life of Fund performance for Wanger Twenty is from inception (2/1/99) through
12/31/99. The Russell 2000 is formed by taking the 3,000 largest U.S. companies
and then eliminating the largest 1,000, leaving a mainly 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 returns
include reinvested dividends.
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WANGER TWENTY TOP 5 INDUSTRIES
As a % of net assets, as of 12/31/99
Information 35.0%
Consumer Goods/Services 18.9%
Finance 17.7%
Energy/Minerals 10.3%
Health Care 10.3%
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WANGER TWENTY TOP 10 HOLDINGS
First Health 7.0%
PPO network
AmeriCredit 7.0%
Auto lending
Liberty Media Group,
AT&T 6.6%
Cable and satellite programming
AES Corporation 6.0%
Power plants
RCN 5.8%
Metro market CLEC: Voice,
video and Internet services
McLeod USA 5.6%
Super regional CLEC:
Local, long distance
and Internet services
SEI Investments 5.5%
Mutual fund administration
Telephone and
Data Systems 5.4%
Cellular and telephone services
H&R Block 4.6%
Tax preparation
MidAmerican Energy 4.4%
Growth utility
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Each fund's top 10 holdings and portfolio diversification vary with
changes in portfolio investments. See the Statements of Investments for complete
lists of a fund's holdings, including those described under Performance Review.
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WANGER FOREIGN FORTY
RESULTS TO DECEMBER 31, 1999
4th quarter Life of Fund
WANGER FOREIGN FORTY 57.9% 83.9%
EAFE 17.0% 27.3%
SSB Cap Range $2-10B 10.8% 27.0%
Lipper International
Funds Index 24.7% 37.8%
WANGER FOREIGN FORTY N.A.V. AS OF 12/31/99: $18.39
Life of Fund performance for Wanger Foreign Forty is from inception (2/1/99)
through 12/31/99. EAFE is Morgan Stanley's Europe, Australasia and Far East
Index, an unmanaged widely recognized international benchmark that comprises 20
major markets in Europe, Australia, and the Far East. The SSB Cap Range $2-10B
is Salomon Smith Barney's two to 10 billion U.S. dollar security market
capitalization subset of its Broad Market Index. It represents a mid-cap
developed market index, excluding the U.S. The Lipper International Funds Index
measures the performance of the 30 largest non-U.S. funds tracked by Lipper. All
indexes are unmanaged and returns include reinvested dividends.
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WANGER FOREIGN FORTY TOP 5 COUNTRIES
AS A % OF NET ASSETS, AS OF 12/31/99
United Kingdom 20.8%
Italy 8.8%
Singapore 7.8%
Japan 7.3%
Spain 6.3%
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WANGER FOREIGN FORTY TOP 10 HOLDINGS
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Star Cruises 5.3%
Cruise line-Singapore
Softbank Corporation 5.0%
Internet services/investment holding-Japan
Jazztel 4.2%
Telecommunication and data services-Spain
Audiofina 3.9%
Media conglomerate-Belgium
Celestica 3.9%
Electronic manufacturing services-Canada
Global TeleSystems 3.5%
Telecommunications provider-United States
Airtours 3.2%
Packaged tour vacations-
United Kingdom
Logica 3.1%
Computer software & services-
United Kingdom
Editoriale L'Espresso 3.1%
Newspapers and
magazines-Italy
Energis 2.9%
Telecommunication services-
United Kingdom
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Wanger Advisors Trust 1999 Annual Report
PERFORMANCE REVIEW WANGER U.S. SMALL CAP
Your Fund outperformed the stock market indexes both large and small in 1999.
Wanger U.S. Small Cap returned 25.1% last year, beating the small-cap Russell
2000's 21.3% return and the large-cap S&P 500's 21.0% return. Most of our
performance came in the final quarter of the year, when Wanger U.S. Small Cap
gained 17.8%, the Russell 2000 gained 18.4%, and the S&P 500 was up 14.9%.
Technology and telephones were our biggest winners. Tech stocks roared all
year, ending 1999 with a deafening crescendo. Our top holding, Micros Systems (a
management systems company for restaurants and hotels), more than doubled in
price to become the largest position in your Fund. Aspect, a call-center
technology provider, was another tech winner.
Internet stocks continued to climb as concept stocks, ignoring fusty ideas
such as profitability. Our Internet plays included RCN (rcn.com), up 170%, TV
Guide (TV web portal), up 265%, and Project Software (mro.com), up 170%. Some
Internet magic also rubbed off on our wireless telephone stocks (Telephone and
Data Systems and Price Communications), as investors realized cellular phones
will be the newest way to surf the Web.
Our insurance stocks were disappointing. Our two worst-performing stocks were
UICI and Acceptance Insurance, both caught with their reserves down in the
fourth quarter. Both stocks overshot to the downside and currently trade at
prices that we believe offer favorable risk/reward tradeoffs.
The investing world has recently fixated on growth vs. value stocks,
forgetting the small-cap, large-cap feud. We are pleased that small caps have
been outperforming large caps since last April. We are optimistic that small
caps will continue their good showing in the year 2000. After all, why do you
think they call the small-cap index the Russell 2000?
Photo of: Robert A. Mohn
ROBERT A. MOHN
Portfolio Manager
Wanger U.S. Small Cap
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Wanger Advisors Trust 1999 Annual Report
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WANGER U.S. SMALL CAP RESULTS TO DECEMBER 31, 1999
The Value of a $10,000 Investment in
Wanger U.S. Small Cap
TOTAL RETURN FOR EACH PERIOD
MAY 3, 1995 THROUGH DECEMBER 31, 1999
Line Chart:
WANGER U.S. SMALL CAP Russell 2000
5/3/95 10000 10000
12/31/95 11600 11808
12/31/96 17004 13756
12/31/97 22005 16830
12/30/98 23916 16404
12/31/99 29909 20247
AVERAGE ANNUAL
TOTAL RETURN
1 year: 25.06%
3 Years: 20.71%
Life: 26.44%
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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 December 31, 1999 with
the Russell 2000 with dividends and capital gains reinvested. The beginning date
of the Russell 2000 is as of May 3, 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
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Wanger Advisors Trust 1999 Annual Report
PERFORMANCE REVIEW WANGER INTERNATIONAL SMALL CAP
Wanger International Small Cap enjoyed a record year. Our gain of 126% was more
than double our nearest benchmark (the Lipper International Small Cap Funds
Index had a return of 63%) and we ranked first of the 126 funds in the Lipper
Variable Annuity International Funds category for the 1-year period ended
12/31/99.
As we mentioned in the previous report, our overweight position in Asian
markets drove our performance through June. Japanese stocks rose 116%, Singapore
130% and Malaysian names were up 105% through June 30. In the second half of the
year, it was Europe's turn. Our French stocks were up 129%, German names
increased 140%, and in Sweden we saw gains of 204%. In several Asian markets,
small caps outperformed large caps during the period, but the reverse was true
in Europe.
As our returns illustrate, we did a number of things well in 1999. We picked
the right sectors and the right stocks and we were able to do this while
maintaining the high level of diversification that is a cornerstone of our
investment strategy.
In Asia our two winning themes were outsourced manufacturing (largely in Hong
Kong and Singapore) and technology (mostly in Japan). Omni Industries and
Venture Manufacturing both scored gains of 200% or more and made $15 million for
the Fund. Trans Cosmos and Datacraft were up even more with Trans Cosmos, a
Japanese Internet conglomerate, up fifteen fold for a gain of nearly $15
million. Credit for these picks goes to Wanger Asset Management's Roger Edgley
and Michael King.
In Europe, our most lucrative stock picks were in Internet consulting and in
media. Peter's close eye on Sweden got us into their world-class Internet
consulting stocks early. We are now following this theme into other markets.
Looking forward, we will continue to strive to invest in international companies
that are niche leaders.
Photo of: Marcel P. Houtzager
MARCEL P. HOUTZAGER
Lead Portfolio Manager
Photo of: Peter Zaldivar
PETER ZALDIVAR
Co-Portfolio Manager
8
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Wanger Advisors Trust 1999 Annual Report
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WANGER INTERNATIONAL SMALL CAP RESULTS TO DECEMBER 31, 1999
THE VALUE OF A $10,000 INVESTMENT IN
WANGER INTERNATIONAL SMALL CAP
TOTAL RETURN FOR EACH PERIOD
MAY 3, 1995 THROUGH DECEMBER 31, 1999
Line Chart:
WANGER INTERNATIONAL EMI
SMALL CAP (World ex-U.S.)
5/3/95 10000 10000
12/31/95 13450 10123
12/31/96 17755 10855
12/31/97 17496 9835
12/31/98 20352 11030
12/31/99 46072 13619
AVERAGE ANNUAL
TOTAL RETURN
1 year: 126.37%
3 Years: 37.42%
Life: 38.70%
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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 December
31, 1999 with the EMI (World ex-U.S.), with dividends and capital gains
reinvested. 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.
9
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Wanger Advisors Trust 1999 Annual Report
PERFORMANCE REVIEW WANGER TWENTY
Wanger Twenty finished 1999 up 34.3%, outperforming the 19.4% S&P MidCap 400
return and the S&P 500's 16.2% gain for the period beginning February 1 and
ending December 31, 1999. Looking back on the fund's first 10 months, we are
pleased with our start and we thank our shareholders for the confidence they
showed as initial investors.
Several stocks contributed to Wanger Twenty's performance. The biggest
winners were our telecommunications stocks. Telephone and Data Systems, a
cellular phone and personal communication services provider, rose 138% during
the 10 months following the company's announcement of the sale of its Aerial
Communications subsidiary to Voicestream Wireless. RCN, a competitive local
exchange carrier (CLEC), gained 74% as investors (including Paul Allen,
co-founder of Microsoft and owner of the Portland Trail Blazers) realized the
value of its residential local phone, cable, and data networks.
Another telecommunications stock, McLeod USA, gained 62% for the Fund during the
period. McLeod, like RCN, is a CLEC, but provides services to businesses rather
than residential communities. Other strong performing stocks included Liberty
Media, up 119% for the period, and AES Corp, an independent power producer, up
106%.
Losers came from the insurance industry, a tough area for investors despite
low valuations. UICI, an insurance and specialty finance company, and
Progressive, an auto insurer, both had disappointing years. We felt a recovery
in this sector was imminent but we now believe there are better opportunities
elsewhere.
Our success in these first months is largely due to the collaborative efforts
of the Wanger Asset Management research team. Our sincere thanks go to Ralph
Wanger, Chuck McQuaid, Rob Mohn, Laura McKenna, Jason Selch, and Ben Andrews.
Photo of: John H. Park
JOHN H. PARK
Co-Portfolio Manager
Photo of: Mark H. Yost
MARK H. YOST
Co-Portfolio Manager
10
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Wanger Advisors Trust 1999 Annual Report
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WANGER TWENTY RESULTS TO DECEMBER 31, 1999
THE VALUE OF A $10,000 INVESTMENT IN
WANGER TWENTY
TOTAL RETURN FOR THE PERIOD
FEBRUARY 1 THROUGH DECEMBER 31, 1999
Line chart:
WAMGER TWENTY S & P MidCap 400
2/1/99 10000 10000
3/31/99 10530 9741
4/30/99 12150 10509
5/31/99 12220 10555
6/30/99 12530 11120
7/31 12510 10884
8/31 11420 10511
9/30 11410 10186
10/31 12250 10705
11/30 12510 11267
12/31 13430 11937
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This graph compares the results of $10,000 invested in Wanger Twenty on February
1, 1999 through December 31, 1999, to the S&P MidCap 400 Index, with dividends
and capital gains reinvested. 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.
TOTAL RETURN
4th qtr: 17.70%
Life of Fund: 34.30%
11
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Wanger Advisors Trust 1999 Annual Report
PERFORMANCE REVIEW WANGER FOREIGN FORTY
Wanger Foreign Forty was up 83.9% for the 10-month period ended December 31,
1999, more than double the returns of the Salomon Smith Barney Cap Range $2-10
Billion Index (+24%), the EAFE (+ 27%) and the Lipper International Funds Index
(+38%). Launched on February 1, 1999, we are very pleased with the Fund's strong
beginning and hope that our shareholders are too.
Much of the gain for the period came in the fourth quarter as the Fund
advanced 57.9% on the strength of our information technology (IT) stocks. There
was no slowing of the Fund's largest position, Softbank. Up a staggering 1,169%
for the 10-month period, this Japanese Internet company was an obvious winner
for the portfolio. Spain's Jazztel, a telecommunications services company, was
up 311% for the period and was also among the Fund's top performers. Benefiting
from Internet-related services, two Italian publishing names -- Editoriale
L'Espresso (+266%) and SEAT Pagine Gialle (+204%) -- posted strong gains.
On the downside, Mapfre Vida, a Spanish life insurance company, fell out of
favor with investors. We view this as a solid business with strong prospects, a
stance that its parent company seems to agree with. As of the writing of this
report, the parent has announced plans to buy out minority shareholders at a
premium price.
Looking forward, we believe we are well positioned in areas where mid-caps
have the right balance of scale, financial strength, and entrepreneurial spirit,
to be leaders. These industry groups include emerging telecommunication
services, IT services, outsourcing services and media. In addition, the
valuation gap between large- and mid-cap stocks is working in our favor,
allowing us to pick up high-quality names at good prices.
Photo of: Marcel P. Houtzager
MARCEL P. HOUTZAGER
Co-Portfolio Manager
Photo of: Roger Edgley
ROGER EDGLEY
Co-Portfolio Manager
12
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Wanger Advisors Trust 1999 Annual Report
WANGER FOREIGN FORTY RESULTS TO DECEMBER 31, 1999
THE VALUE OF A $10,000 INVESTMENT IN
WANGER FOREIGN FORTY
TOTAL RETURN FOR EACH PERIOD
FEBRUARY 1 THROUGH DECEMBER 31, 1999
Line Chart:
WANGER FOREIGN FORTY EAFE
2/1/99 10000 10000
3/31/99 10190 10169
4/30/99 10620 10581
5/31/99 10480 10036
6/30 11350 10428
7/31 11650 10738
8/31 11800 10777
9/30 11650 10885
10/31 12160 11293
11/30 14530 11685
12/31 18390 12734
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This graph compares the results of $10,000 invested in Wanger Foreign Forty on
February 1, 1999 through December 31, 1999, to the EAFE Index, with dividends
and capital gains reinvested. 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.
TOTAL RETURN
4th qtr: 57.85%
Life of Fund: 83.90%
13
<PAGE>
Wanger Advisors Trust 1999 Annual Report
WANGER U.S. SMALL CAP STATEMENT OF INVESTMENTS DECEMBER 31,1999
- --------------------------------------------------------------------------------
Number of Value
Shares
COMMON STOCKS-89.5%
INFORMATION-48.4%
- --------------------------------------------------------------------------------
BROADCASTING-1.3%
250,600 Data Transmission Network (b) $4,322,850
Data Services for Farmers
18,000 Young Broadcasting (b) 918,000
Television Stations
- --------------------------------------------------------------------------------
5,240,850
- --------------------------------------------------------------------------------
TELEVISION PROGRAMMING-1.8%
128,400 TV Guide (b) 5,521,200
TV Program Guides & Programming
36,900 Classic Communications (b) 1,349,156
Cable Television in Rural Areas
- --------------------------------------------------------------------------------
6,870,356
- --------------------------------------------------------------------------------
RADIO-0.2%
36,300 Salem Communications (b) 821,287
Radio Stations for Religious Programming
- --------------------------------------------------------------------------------
TELEPHONE SERVICES-6.1%
389,500 RCN (b) 18,890,750
Metro Market CLEC: Voice, Video &
Data Services
94,300 Commonwealth Telephone (b) 4,986,113
Rural Market CLEC: Local, Long Distance &
Internet Services
- --------------------------------------------------------------------------------
23,876,863
- --------------------------------------------------------------------------------
MOBILE COMMUNICATIONS-7.2%
128,000 Telephone and Data Systems 16,128,000
Cellular & Telephone Services
234,500 COMARCO (b) (c) 5,510,750
Wireless Network Testing
173,400 Price Communications (b) 4,822,688
Cellular Telephone Services
73,000 Diversinet (b) 1,606,000
Wireless PKI Security
- --------------------------------------------------------------------------------
28,067,438
- --------------------------------------------------------------------------------
Number of Value
Shares
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT-3.1%
305,900 Aspect Communications (b) $11,968,337
Call Center Equipment
- --------------------------------------------------------------------------------
BUSINESS INFORMATION/MARKETING SERVICES-2.7%
194,300 CACI International (b) 4,396,037
Technology Services for Government
56,700 Getty Images (b) 2,771,212
Photographs for Publications &
Electronic Media
151,000 PRIMEDIA (b) 2,491,500
Specialty Magazines & Other Publications
122,500 Telespectrum Worldwide (b) 872,813
Call Center Services
- --------------------------------------------------------------------------------
10,531,562
- --------------------------------------------------------------------------------
BUSINESS SOFTWARE-3.0%
501,300 JDA Software Group (b) 8,208,787
Applications Software & Services for Retailers
63,000 Project Software (b) 3,496,500
Enterprise Maintenance Software
- --------------------------------------------------------------------------------
11,705,287
- --------------------------------------------------------------------------------
TRANSACTION PROCESSORS-2.9%
338,300 National Data 11,481,056
Credit Card & Health Claims Processor
- --------------------------------------------------------------------------------
COMPUTER HARDWARE/RELATED SYSTEMS-12.3%
423,500 Micros Systems (b) 31,339,000
Information Systems for Restaurants & Hotels
222,900 Kronos (b) 13,374,000
Labor Management Solutions
129,000 American Power Conversion (b) 3,402,375
Uninterruptible Power Systems
- --------------------------------------------------------------------------------
48,115,375
- --------------------------------------------------------------------------------
SEMICONDUCTORS/RELATED EQUIPMENT-1.4%
232,000 Galileo Technology (b) 5,597,000
Semiconductors for Networking Equipment
See accompanying notes to financial statements.
14
<PAGE>
Wanger Advisors Trust 1999 Annual Report
WANGER U.S. SMALL CAP STATEMENT OF INVESTMENTS DECEMBER 31,1999
- --------------------------------------------------------------------------------
Number of Value
Shares
- --------------------------------------------------------------------------------
CONTRACT MANUFACTURING-0.1%
9,000 Applied Power $330,750
Electronic Enclosures & Industrial Products
- --------------------------------------------------------------------------------
GAMING EQUIPMENT-0.6%
113,000 International Game Technology 2,295,312
Slot Machines & Progressive Jackpots
- --------------------------------------------------------------------------------
COMPUTER SERVICES-4.7%
294,900 Sykes Enterprises (b) 12,938,737
Call Center Services
630,000 Aztec Technology Partners (b) 2,874,375
Technology Staffing Services
151,700 Computer Task Group 2,247,056
Application Development & Staffing Services
16,600 Meta Group (b) 315,400
IT Publications & Consulting Services
- --------------------------------------------------------------------------------
18,375,568
- --------------------------------------------------------------------------------
CONSUMER SOFTWARE-0.2%
88,000 3DO Company (b) 800,250
Entertainment Software
- --------------------------------------------------------------------------------
INTERNET RELATED-0.8%
122,000 Online Resources (b) 2,028,250
Internet Banking
20,000 Radware (b) 862,500
Internet Infrastructure/Internet Traffic
- --------------------------------------------------------------------------------
2,890,750
- --------------------------------------------------------------------------------
INFORMATION-TOTAL 188,968,041
HEALTH CARE-9.1%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY/DRUG DELIVERY-1.1%
55,000 Myriad Genetics (b) 2,530,000
Gene Discovery & Diagnostic Products
45,100 Genome Therapeutics (b) 727,238
Gene Discovery Services
- --------------------------------------------------------------------------------
Number of Value
Shares
- --------------------------------------------------------------------------------
BIOTECHNOLOGY/DRUG DELIVERY-1.1% (CONT)
31,000 Genset (b) $590,938
Genomics
39,000 Synaptic Pharmaceuticals (b) 263,250
Receptor Targeted Drug Design
32,500 Genzyme Molecular Oncology Division (b) 227,500
Gene Expression Technology & Cancer Drugs
- --------------------------------------------------------------------------------
4,338,926
- --------------------------------------------------------------------------------
SERVICES-8.0%
504,000 Lincare Holdings (b) 17,482,500
Home Health Care Services
386,000 First Health (b) 10,373,750
PPO Network
552,700 Magellan Health Services (b) 3,488,919
Mental Health Services
- --------------------------------------------------------------------------------
31,345,169
- --------------------------------------------------------------------------------
HEALTH CARE-TOTAL 35,684,095
CONSUMER GOODS/SERVICES-1.5%
- --------------------------------------------------------------------------------
NONDURABLES-0.2%
91,700 NuSkin Enterprises (b) 831,031
Personal Care/Herbal Products
- --------------------------------------------------------------------------------
RETAIL-0.7%
50,500 Whole Foods Market (b) 2,341,938
Natural Food Supermarkets
45,000 MotherNature.com (b) 329,063
Healthy Living E-Commerce
- --------------------------------------------------------------------------------
2,671,001
- --------------------------------------------------------------------------------
CASINOS-0.2%
115,200 Monarch Casino & Resort (b) 604,800
Casino/Hotel in Reno
See accompanying notes to financial statements.
15
<PAGE>
Wanger Advisors Trust 1999 Annual Report
WANGER U.S. SMALL CAP STATEMENT OF INVESTMENTS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Number of Value
Shares
- --------------------------------------------------------------------------------
CONSUMER SERVICES-0.4%
112,000 ITT Educational Services (b) $1,729,000
Technology Oriented Post Secondaty
Degree Programs
- --------------------------------------------------------------------------------
CONSUMER GOODS/SERVICES-TOTAL 5,835,832
FINANCE-10.7%
- --------------------------------------------------------------------------------
BANKS/SAVINGS & LOANS-1.5%
82,000 Texas Regional Bancshares 2,378,000
TexMex Bank
79,500 Peoples Bank Bridgeport 1,679,438
Connecticut Savings & Loan
51,400 Chittenden 1,522,725
Vermont & West Massachusetts Bank
11,000 TCF Financial 273,625
Great Lakes Bank
- --------------------------------------------------------------------------------
5,853,788
- --------------------------------------------------------------------------------
FINANCE COMPANIES-2.7%
509,400 AmeriCredit (b) 9,423,900
Auto Lending
232,000 World Acceptance (b) 1,116,500
Personal Loans
- --------------------------------------------------------------------------------
10,540,400
- --------------------------------------------------------------------------------
INSURANCE-4.3%
586,600 UICI (b) 6,195,963
Health Insurance
21,000 Markel (b) 3,255,000
Specialty Insurance
403,900 Acceptance Insurance (b) 2,347,669
Crop Insurance
92,000 Leucadia National 2,127,500
Insurance Holding Company
- --------------------------------------------------------------------------------
Number of Value
Shares
- --------------------------------------------------------------------------------
INSURANCE-4.3% (CONT)
66,000 Protective Life $2,099,625
Life/Dental Insurance
30,000 Terra Nova 900,000
Specialty Insurance
- --------------------------------------------------------------------------------
16,925,757
- --------------------------------------------------------------------------------
MONEY MANAGEMENT-2.2%
51,000 SEI Investments 6,069,797
Mutual Fund Administration
167,700 Baker Fentress 2,379,244
Closed-End Investment Company
- --------------------------------------------------------------------------------
8,449,041
- --------------------------------------------------------------------------------
FINANCE-TOTAL 41,768,986
INDUSTRIAL GOODS/SERVICES-4.9%
- --------------------------------------------------------------------------------
MACHINERY-0.1%
48,700 Farr (b) 474,825
Filters
- --------------------------------------------------------------------------------
STEEL-0.5%
192,400 Atchison Casting (b) 1,755,650
Steel Foundries
- --------------------------------------------------------------------------------
SPECIALTY CHEMICALS-0.7%
189,600 Lilly Industries, Cl. A 2,547,750
Industrial Coatings
- --------------------------------------------------------------------------------
OTHER INDUSTRIAL SERVICES-3.6%
412,100 Insurance Auto Auctions (b) 6,490,575
Auto Salvage Services
516,400 Wackenhut, Cl. B 5,325,375
Prison Management
198,000 Labor Ready 2,400,750
Temporary Manual Labor
- --------------------------------------------------------------------------------
14,216,700
- --------------------------------------------------------------------------------
INDUSTRIAL GOODS/SERVICES-TOTAL 18,994,925
See accompanying notes to financial statements.
16
<PAGE>
Wanger Advisors Trust 1999 Annual Report
WANGER U.S. SMALL CAP STATEMENT OF INVESTMENTS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Number of Value
Shares
ENERGY/MINERALS- 13.4%
- --------------------------------------------------------------------------------
INDEPENDENT POWER-7.1%
737,600 MidAmerican Energy $24,847,900
Growth Utility
38,000 AES Corporation (b) 2,840,500
Power Plants
- --------------------------------------------------------------------------------
27,688,400
- --------------------------------------------------------------------------------
OIL/GAS PRODUCERS-2.1%
688,900 Tesoro Petroleum (b) 7,965,406
Oil Refinery/Gas Reserves
- --------------------------------------------------------------------------------
DISTRIBUTION/MARKETING/REFINING-4.2%
304,100 Dynegy 7,393,431
Natural Gas; Electric Processing & Marketing
137,000 Equitable Resources 4,572,375
Natural Gas Utility & Producer
223,000 Atmos Energy 4,557,563
Natural Gas Utility
- --------------------------------------------------------------------------------
16,523,369
- --------------------------------------------------------------------------------
ENERGY/MINERALS-TOTAL 52,177,175
OTHER INDUSTRIES-1.5%
- --------------------------------------------------------------------------------
REAL ESTATE-0.6%
47,000 The Rouse Company 998,750
Shopping Malls
25,900 Gaylord Entertainment (b) 775,381
Opryland Hotel & Other Assets
25,000 Cornerstone Properties 365,625
Downtown Office Buildings
21,400 Consolidated Tomoka 272,850
Daytona Beach Area
- --------------------------------------------------------------------------------
2,412,606
- --------------------------------------------------------------------------------
Principal Amount or Value
Number of Shares
- --------------------------------------------------------------------------------
TRANSPORTATION-0.9%
174,000 Hub Group (b) $3,480,000
Freight Forwarder
- --------------------------------------------------------------------------------
OTHER INDUSTRIES-TOTAL 5,892,606
TOTAL COMMON STOCKS-89.5% 349,321,660
- --------------------------------------------------------------------------------
(COST: $272,240,922)
SHORT-TERM OBLIGATIONS-11.2%
- --------------------------------------------------------------------------------
$19,944,000 Associates First Capital 4.00%
Maturing 01/03/00 19,939,568
15,000,000 AT&T Corporation 3.50%
Maturing 01/07/00 14,991,250
9,000,000 Abbott Laboratories 3.75%
Maturing 01/13/00 8,988,750
- --------------------------------------------------------------------------------
(AMORTIZED COST: $43,919,568) 43,919,568
TOTAL INVESTMENTS-100.7% 393,241,228
- --------------------------------------------------------------------------------
(COST: $316,160,490)
CASH AND OTHER ASSETS LESS LIABILITIES- (0.7%) (2,531,755)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS-100% $390,709,473
================================================================================
NOTES TO STATEMENT OF INVESTMENTS:
(a) At December 31, 1999, for federal income tax purposes, cost of investments
was $316,759,044 and net unrealized appreciation was $75,482,184 consisting
of gross unrealized appreciation of $116,915,906 and gross unrealized
depreciation of $40,433,722.
(b) Non-income producing security.
(c) On December 31, 1999, the fund held 5.47% of the outstanding voting shares
of COMARCO. The aggregate cost and value of investments in this company
at December 31, 1999, was $4,123,854 and $5,510,750, respectively. The
market value of this security represents 1.14% of the total net assets at
December 31, 1999. There were no purchases, proceeds from sales of dividends
received from this company during the year ended December 31, 1999.
See accompanying notes to financial statements.
17
<PAGE>
Wanger Advisors Trust 1999 Annual Report
WANGER INTERNATIONAL SMALL CAP STATEMENT OF INVESTMENTS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Number of Value
Shares
COMMON STOCKS-97.4%
EUROPE-51.5%
- --------------------------------------------------------------------------------
GERMANY/AUSTRIA-2.0%
80,000 GFK (b) $3,220,320
Market Research
18,000 Dialog Semiconductor (b) 1,331,401
Custom Semiconductors for Cell Phones
70,000 Entrium (b) 1,070,756
Telephone & Internet Bank
15,000 Austria Technologies 769,858
Printed Circuit Board Manufacturer
- --------------------------------------------------------------------------------
6,392,335
- --------------------------------------------------------------------------------
NETHERLANDS-8.9%
300,000 Detron Group (b) 6,460,767
Computer Services for Telcos
151,818 Computer Service Solutions (b) 3,941,777
Computer Services
100,000 Versatel (b) 3,522,225
Telecom Services for Business Parks
120,000 Unique International 2,475,621
Temporary Employment
107,500 UCC Holding (b) 2,428,700
Offshore Surveying
60,000 Fugro 2,228,059
Offshore Surveying
80,000 Hunter Douglas 2,173,716
Decorative Window Coverings
40,353 Endemol Entertainment 2,166,503
Game Show Producer
51,666 Kempen 2,053,766
Stock Brokerage/Investment Management
13,000 Fox Kids Europe (b) 166,148
Cartoons
- --------------------------------------------------------------------------------
27,617,282
- --------------------------------------------------------------------------------
Number of Value
Shares
- --------------------------------------------------------------------------------
FINLAND-2.9%
290,000 Talentum $7,033,381
Trade Journals & Internet Services
100,000 PMJ Automec 1,174,411
Automated Electronics Assemby Equipment
25,000 F-Secure (b) 729,604
Security Software
- --------------------------------------------------------------------------------
8,937,396
- --------------------------------------------------------------------------------
NORWAY-2.8%
168,200 Enitel (b) 5,023,957
3,100 Enitel Warrants 10/26/04 (b) 19,869
Telecommunication Services
500,000 Visma (b) 3,733,620
Business Software for Ships
- --------------------------------------------------------------------------------
8,777,446
- --------------------------------------------------------------------------------
SWEDEN-15.2%
450,000 Icon Medialab (b) 15,651,254
Internet Consulting
60,000 Information Highway 9,940,662
Internet Consulting
100,000 Modern Times Group (b) 4,958,581
TV, Newspapers & Electronic Commerce
247,000 Mandator 3,685,917
Computer Services/Consulting
250,000 Semcon 2,937,548
Technical Consultant
15,000 Framtidsfabriken (b) 2,714,294
Internet Consulting
60,000 Connecta (b) 2,044,533
Internet Consulting
55,000 IBS (b) 1,544,563
Business Software
300,000 Micronic Laser Systems (b) 1,339,522
Electronics Production Equipment
See accompanying notes to financial statements.
18
<PAGE>
Wanger Advisors Trust 1999 Annual Report
WANGER INTERNATIONAL SMALL CAP STATEMENT OF INVESTMENTS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Number of Value
Shares
- --------------------------------------------------------------------------------
SWEDEN-15.2% (CONT)
50,000 Entra Data (b) $1,280,771
Business Software
32,000 Effnet Group (b) 1,146,819
Telecommunications Equipment
- --------------------------------------------------------------------------------
47,244,464
- --------------------------------------------------------------------------------
FRANCE-7.0%
23,800 Prosodie 6,653,624
Automated Call Centers
17,000 FI System (b) 5,166,601
Internet Consulting
15,000 Fininfo 3,773,813
Data Feeds for French Banks & Brokers
40,000 Ipsos (b) 3,304,854
Market Research
35,196 Cegedim 2,479,365
Medical Market Research
23,600 Genset (b) 449,875
Genomics
- --------------------------------------------------------------------------------
21,828,132
- --------------------------------------------------------------------------------
UNITED KINGDOM-5.6%
600,000 Informa Group (b) 5,898,194
Business Information Provider
1,000,000 Taylor Nelson 4,418,395
Market Research Services
500,000 Hogg Robinson 1,958,795
Corporate Travel Management
250,000 Photobition Group 1,330,769
Production of Graphics for Exhibits
16,000 Baltimore Technologies 1,324,711
Security Software
129,000 Edinburgh Fund Managers (b) 1,106,602
Investment Management
- --------------------------------------------------------------------------------
Number of Value
Shares
- --------------------------------------------------------------------------------
UNITED KINGDOM-5.6% (CONT)
75,000 Bloomsbury Publishing (b) $986,869
Publishing
295,000 Chloride Group 464,658
Electrical Equipment Manufacturer/Retailer
135,500 Electronics Boutique 101,789
Videogame/Computer Software Stores
- --------------------------------------------------------------------------------
17,590,782
- --------------------------------------------------------------------------------
SPAIN/PORTUGAL-2.7%
150,000 Mapfre Vida 3,456,812
Life Insurance/Mutual Funds
200,000 Prosegur 1,789,290
Security Guards
30,000 PT Multimedia (Portugal) (b) 1,704,858
Cable & Satellite Operator
100,000 Filmes Lusomundo (Portugal) (b) 1,408,890
Newspapers, Radio, Video, Film Distribution
- --------------------------------------------------------------------------------
8,359,850
- --------------------------------------------------------------------------------
SWITZERLAND-0.3%
500 Bachem 801,736
Drug Manufacturer
- --------------------------------------------------------------------------------
ITALY-4.1%
400,000 Class Editore 6,963,942
Newspapers & On-Line Financial Data
150,000 Banca Pop Commercia e Industria 5,283,338
12,500 Banca Pop Commercia e Industria 396,250
New Shares
Regional Bank
- --------------------------------------------------------------------------------
12,643,530
- --------------------------------------------------------------------------------
EUROPE-TOTAL 160,192,953
See accompanying notes to financial statements.
19
<PAGE>
Wanger Advisors Trust 1999 Annual Report
WANGER INTERNATIONAL SMALL CAP STATEMENT OF INVESTMENTS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Number of Value
Shares
ASIA-28.9%
- --------------------------------------------------------------------------------
HONG KONG-2.6%
328,000 Li & Fung $8,227,954
Sourcing of Consumer Goods
- --------------------------------------------------------------------------------
JAPAN-10.2%
28,000 Trans Cosmos 11,941,700
Information Technology Services & Investments
28,000 Moshi Moshi Hotline 3,861,880
Telemarketing
11,800 Drake Beam Morin 3,843,686
Employment Outplacement Services
15,500 Nichii Gakkan 3,030,862
7,750 Nichii Gakkan New (b) 1,515,431
Health Care Services
22,000 Pasona Softbank 1,747,432
Temporary Employment Services
16,000 Venture Link 1,385,112
Retail Franchises
6,000 C-Two Network 1,355,766
Discount Food Retailer
7,500 Don Quijote 1,173,824
Retail Franchises
46,300 Nichiei 1,005,439
Commercial Lender
12,100 Wilson Learning 591,803
Corporate Training
40,000 Optex 395,187
Industrial Sensors
- --------------------------------------------------------------------------------
31,848,122
- --------------------------------------------------------------------------------
TAIWAN-1.9%
500,000 Systex 3,409,272
Systems Integrator & Internet Services
400,000 Hitron Technology (b) 2,396,050
Network Integration & Internet Services
- --------------------------------------------------------------------------------
5,805,322
- --------------------------------------------------------------------------------
Number of Value
Shares
- --------------------------------------------------------------------------------
MALAYSIA-0.3%
388,000 Computer Systems Advisor $878,117
Systems Integration & Software Services
- --------------------------------------------------------------------------------
SINGAPORE-11.4%
7,200,000 Omni Industries 13,055,539
Contract Electronics Manufacturer
1,210,400 Star Cruises 12,346,080
Cruise Line
1,080,941 Datacraft Asia 8,971,810
Network Integrator
100,000 Venture Manufacturing 1,146,803
Electronic Manufacturing Services
- --------------------------------------------------------------------------------
35,520,232
- --------------------------------------------------------------------------------
SOUTH KOREA-2.5%
240,000 S1 Corporation 4,142,668
Home/Business Security Services
10,000 Cheil Jedang 1,153,677
Consumer Staples
15,000 Cheil Communications 1,134,742
Advertising
70,000 Comtec Systems 949,362
Computer Services
84,614 Korea Technology Investment Corp. (b) 516,402
Venture Capital
- --------------------------------------------------------------------------------
7,896,851
- --------------------------------------------------------------------------------
ASIA-TOTAL 90,176,598
LATIN AMERICA-4.8%
- --------------------------------------------------------------------------------
MEXICO-2.0%
1,000,000 Corp Interamericana 3,994,723
de Entretenimiento (b)
Special Events and Live Entertainment
1,600,000 Grupo Continental 2,330,343
Beverages
- --------------------------------------------------------------------------------
6,325,066
See accompanying notes to financial statements.
20
<PAGE>
Wanger Advisors Trust 1999 Annual Report
WANGER INTERNATIONAL SMALL CAP STATEMENT OF INVESTMENTS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Number of Value
Shares
- --------------------------------------------------------------------------------
BRAZIL-2.8%
300,000 Globo Cabo (b) $5,400,000
Cable Television
100,000 Tele Celular 3,175,000
Mobile Communications
- --------------------------------------------------------------------------------
8,575,000
- --------------------------------------------------------------------------------
LATIN AMERICA-TOTAL 14,900,066
OTHER COUNTRIES-12.2%
- --------------------------------------------------------------------------------
AUSTRALIA-4.5%
800,000 ERG 4,493,880
Smart Card Systems for Public Transportation
1,750,000 Powertel (b) 3,081,330
Telecommunications Provider
500,000 Keycorp (b) 2,690,415
Smart Card Technology
750,000 AAPT (b) 2,567,228
Telecommunications Provider
800,000 Powerlan (b) 777,888
Computer Services
200,000 BMC Media.com (b) 381,060
Advertising
- --------------------------------------------------------------------------------
13,991,801
- --------------------------------------------------------------------------------
CANADA-5.8%
154,000 MDSI Mobil Data Solutions (b) 3,965,500
Wireless Software
200,000 Penn West Petroleum (b) 3,906,250
Oil & Gas Producer
635,000 AltaGas Services (b) 2,634,126
Natural Gas Gatherer and Processor
120,000 Corus Entertainment (b) 2,447,456
CATV Programming & Radio Stations
250,000 Ulster Petroleum (b) 2,221,032
Oil & Gas Producer
- --------------------------------------------------------------------------------
Principal Amount or Value
Number of Shares
- --------------------------------------------------------------------------------
CANADA-5.8% (CONT)
200,000 Rand A Technology (b) $1,922,013
Value Added Reseller of CAD/CAM Software
43,000 Teklogix International (b) 869,573
Wireless Logistics Tracking Systems
- --------------------------------------------------------------------------------
17,965,950
- --------------------------------------------------------------------------------
UNITED STATES-0.1%
50,000 Azurix (b) 446,875
Owner & Operator of Water Utilities
- --------------------------------------------------------------------------------
ISRAEL-1.8%
194,000 Galileo Technology (b) 4,680,250
Communications Semiconductors
20,000 Radware (b) 862,500
Internet Infrastructure & Internet Traffic
- --------------------------------------------------------------------------------
5,542,750
- --------------------------------------------------------------------------------
OTHER-TOTAL 37,947,376
TOTAL COMMON STOCKS-97.4% 303,216,993
- --------------------------------------------------------------------------------
(COST: $ 151,878,149)
SHORT-TERM OBLIGATION-2.5%
- --------------------------------------------------------------------------------
$7,822,000 Associates First Capital 4.00%
Maturing 01/03/00 7,820,261
- --------------------------------------------------------------------------------
(AMORTIZED COST: $7,820,261)
TOTAL INVESTMENTS-99.9% 311,037,254
- --------------------------------------------------------------------------------
(COST: $ 159,698,410)
CASH AND OTHER ASSETS LESS LIABILITIES-0.1% 293,718
- --------------------------------------------------------------------------------
TOTAL NET ASSETS-100% $311,330,972
================================================================================
NOTES TO STATEMENT OF INVESTMENTS:
(a) At December 31, 1999, for federal income tax purposes, cost of investments
was $159,712,819 and net unrealized appreciation was $151,324,435 consisting
of gross unrealized appreciation of $158,483,012 and gross unrealized
depreciation of $7,158,577.
(b) Non-income producing security.
(c) At December 31, 1999, $85,778,525 or 27.6% of the Fund's net assets was
denominated in the Euro currency.
See accompanying notes to financial statements.
21
<PAGE>
Wanger Advisors Trust 1999 Annual Report
WANGER INTERNATIONAL SMALL CAP PORTFOLIO DIVERSIFICATION DECEMBER 31, 1999
AT DECEMBER 31, 1999 THE FUND'S PORTFOLIO OF INVESTMENTS AS A
PERCENTAGE OF NET ASSETS WAS DIVERSIFIED AS FOLLOWS:
Value Percent
- --------------------------------------------------
INFORMATION
Telephone Services $41,531,732 13.3%
Computer Services 33,295,096 10.7
Internet Related 25,475,063 8.2
Publishing 21,351,663 6.9
Business Software 20,777,549 6.7
Business Information &
Marketing Services 17,434,506 5.6
Contract Manufacturing 14,202,342 4.6
Semiconductors &
Related Equipment 7,351,173 2.4
Transaction Processors 7,184,295 2.3
Advertising 4,439,596 1.4
Domestic Consumer Software 3,965,500 1.3
Telecom 3,522,225 1.1
Radio 2,447,456 0.8
Telecommunications
Equipment 2,396,049 0.8
Television Programming 2,332,652 0.7
Computer Hardware &
Related Equipment 2,009,221 0.6
Mobile Communications 869,573 0.3
TV Broadcasting 381,060 0.1
- --------------------------------------------------
210,966,751 67.8
- --------------------------------------------------
HEALTH CARE
Health Care Services 4,546,293 1.5
Biotechnology/Drug Delivery 449,875 0.1
- --------------------------------------------------
4,996,168 1.6
- --------------------------------------------------
CONSUMER GOODS/SERVICES
Travel 14,304,875 4.6
Entertainment 8,971,810 2.9
Consumer Services 8,137,391 2.6
Food 2,509,443 0.8
Beverages 2,330,343 0.8
Durable Goods 2,173,716 0.7
Retail 1,275,612 0.4
- --------------------------------------------------
39,703,190 12.8
Value Percent
- --------------------------------------------------
FINANCE
Banks $6,750,345 2.2%
Insurance 3,456,812 1.1
Brokerage 2,053,766 0.7
Money Management 1,623,005 0.5
Finance Companies 1,005,439 0.3
- --------------------------------------------------
14,889,367 4.8
- --------------------------------------------------
INDUSTRIAL GOODS/SERVICES
Outsourcing &
Training Services 14,240,298 4.6
Industrial Services 3,843,686 1.2
Machinery 1,174,410 0.4
Electrical Components 1,165,045 0.4
Specialty Chemicals 801,736 0.2
- --------------------------------------------------
21,225,175 6.8
- --------------------------------------------------
ENERGY/MINERALS
Oil/Gas Producers 6,127,282 2.0
Oil Services 4,862,185 1.5
- --------------------------------------------------
10,989,467 3.5
- --------------------------------------------------
OTHER
Regulated Utilities 446,875 0.1
- --------------------------------------------------
- --------------------------------------------------
TOTAL COMMON STOCKS 303,216,993 97.4
- --------------------------------------------------
SHORT-TERM OBLIGATION 7,820,261 2.5
- --------------------------------------------------
CASH AND OTHER ASSETS
LESS LIABILITIES 293,718 0.1
- --------------------------------------------------
NET ASSETS $311,330,972 100.0%
==================================================
See accompanying notes to financial statements.
22
<PAGE>
Wanger Advisors Trust 1999 Annual Report
WANGER TWENTY STATEMENT OF INVESTMENTS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Number of Value
Shares
COMMON STOCKS-92.2%
Information-35.0%
- --------------------------------------------------------------------------------
TELEVISION PROGRAMMING-6.6%
7,600 Liberty Media Group, AT&T (b) $431,300
CATV & Satellite Dish Programming
- --------------------------------------------------------------------------------
TELEPHONE SERVICES-11.3%
7,800 RCN (b) 378,300
Metro Market CLEC:Voice, Video &
Internet Services
6,200 McLeod USA, Inc. (b) 365,025
Super Regional CLEC: Local, Long Distance &
Internet Services
- --------------------------------------------------------------------------------
743,325
- --------------------------------------------------------------------------------
MOBILE COMMUNICATIONS-5.4%
2,800 Telephone and Data Systems 352,800
Cellular & Telephone Franchises
- --------------------------------------------------------------------------------
BUSINESS INFORMATION-4.6%
6,900 H&R Block 301,875
Tax Preparation
- --------------------------------------------------------------------------------
TRANSACTION PROCESSORS-3.6%
7,000 National Data 237,562
Credit Card & Health Claims Processor
- --------------------------------------------------------------------------------
INSTRUMENTATION-3.5%
6,000 Tektronix 233,250
Analytical Instruments
- --------------------------------------------------------------------------------
INFORMATION-TOTAL 2,300,112
HEALTH CARE-10.3%
- --------------------------------------------------------------------------------
SERVICES-10.3%
17,000 First Health (b) 456,875
PPO Network
6,300 Lincare Holdings (b) 218,531
Home Health Care Services
- --------------------------------------------------------------------------------
HEALTH CARE-TOTAL 675,406
Number of Value
Shares
Consumer Goods/Services-18.9%
- --------------------------------------------------------------------------------
FURNITURE-3.9%
11,000 Herman Miller $253,000
Office Furniture
- --------------------------------------------------------------------------------
MANUFACTURERS-3.7%
9,000 Jones Apparel (b) 244,125
Women's Apparel
- --------------------------------------------------------------------------------
CRUISE LINES-3.2%
4,300 Royal Caribbean Cruises 212,044
Cruises to Caribbean & Alaska
- --------------------------------------------------------------------------------
CASINOS-4.0%
10,000 Harrah's Entertainment (b) 264,375
Casinos & Riverboats
- --------------------------------------------------------------------------------
OTHER INDUSTRIAL SERVICES-4.1%
22,000 ServiceMaster 270,875
Facilities Management
- --------------------------------------------------------------------------------
CONSUMER GOODS/SERVICES-TOTAL 1,244,419
FINANCE-17.7%
- --------------------------------------------------------------------------------
FINANCE COMPANIES-6.9%
24,500 AmeriCredit (b) 453,250
Auto Lending
- --------------------------------------------------------------------------------
INSURANCE-5.4%
3,000 Progressive 219,375
Auto Insurance
12,800 UICI (b) 135,200
Insurance/Specialty Finance
- --------------------------------------------------------------------------------
354,575
- --------------------------------------------------------------------------------
MONEY MANAGEMENT-5.4%
3,000 SEI Investments 357,047
Mutual Fund Administration
- --------------------------------------------------------------------------------
FINANCE-TOTAL 1,164,872
See accompanying notes to financial statements.
23
<PAGE>
Wanger Advisors Trust 1999 Annual Report
WANGER TWENTY STATEMENT OF INVESTMENTS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Principal Amount or Value
Number of Shares
ENERGY/MINERALS-10.3%
- --------------------------------------------------------------------------------
INDEPENDENT POWER-10.3%
5,200 AES Corporation (b) $388,700
Power Plants
8,500 MidAmerican Energy 286,344
Growth Utility
- --------------------------------------------------------------------------------
ENERGY/MINERALS-TOTAL 675,044
TOTAL COMMON STOCKS-92.2% 6,059,853
- --------------------------------------------------------------------------------
(COST: $5,290,334)
SHORT-TERM OBLIGATIONS-6.6%
- --------------------------------------------------------------------------------
$325,000 Associates First Capital 4.00% 324,928
Maturing 01/03/00
108,000 State Street Bank Repurchase 108,000
Agreement, 2.00%, Maturing 01/03/00;
12/31/99 Agreement Collateralized
by U.S. Treasury Notes
- --------------------------------------------------------------------------------
(AMORTIZED COST: $432,928) 432,928
TOTAL INVESTMENTS-98.8 % 6,492,781
- --------------------------------------------------------------------------------
(COST: $5,723,262)
CASH AND OTHER ASSETS LESS LIABILITIES-1.2% 77,350
- --------------------------------------------------------------------------------
TOTAL NET ASSETS-100% $6,570,131
================================================================================
Notes to Statement of Investments:
(a) At December 31, 1999, for federal income tax purposes, cost of investments
was $5,737,245 and net unrealized appreciation was $755,536 consisting of
gross unrealized appreciation of $1,228,678 and gross unrealized
depreciation of $473,142.
(b) Non-income producing security.
See accompanying notes to financial statements.
24
<PAGE>
Wanger Advisors Trust 1999 Annual Report
WANGER FOREIGN FORTY STATEMENT OF INVESTMENTS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Number of Value
Shares
COMMON STOCKS AND OTHER EQUITY-LIKE
SECURITIES-86.3%
EUROPE-56.5%
- --------------------------------------------------------------------------------
GERMANY-1.4%
600 MobilCom $51,324
Telecommunications Services
900 Rhoen Klinikum 33,059
Hospital Management
- --------------------------------------------------------------------------------
84,383
- --------------------------------------------------------------------------------
BELGIUM-3.9%
3,000 Audiofina 226,429
Television Broadcaster
- --------------------------------------------------------------------------------
NETHERLANDS-5.1%
1,500 Getronics 119,554
Computer Services
1,512 ASR Verzekeringsgrp 96,165
Insurance
2,600 Hunter Douglas 70,646
Decorative Window Coverings
1,000 Fox Kids Europe (b) 12,781
Programming/Cartoons
- --------------------------------------------------------------------------------
299,146
- --------------------------------------------------------------------------------
FINLAND-1.0%
800 Comptel (b) 56,227
Telephone Billing Software
- --------------------------------------------------------------------------------
SWEDEN-2.4%
2,000 Netcom (b) 140,532
Telecommunication Services
- --------------------------------------------------------------------------------
FRANCE-3.7%
700 Atos (b) 115,952
Computer Services/Transaction Processing
200 M6 Metropole TV 99,025
Television Broadcaster
- --------------------------------------------------------------------------------
214,977
- --------------------------------------------------------------------------------
Number of Value
Shares
- --------------------------------------------------------------------------------
UNITED KINGDOM-20.8%
30,000 Airtours $184,167
Packaged Tour Vacations
7,000 Logica 180,597
Computer Software & Services
3,500 Energis (b) 168,158
Telecommunication Services
40,000 St. James Capital 142,810
Life Insurance
7,000 Sema Group 125,977
Computer Software & Services
10,000 Carlton Communications 97,415
Television Broadcaster
750 NTL (b) 93,563
Voice, Video & Data Services
5,000 WPP Group 79,240
Advertising
8,000 Thus (b) 50,145
Telecommunication Services
1,500 Serco Group 47,072
Facilities Management
9,000 Bodycote 43,473
Materials Technology & Metal Processing
- --------------------------------------------------------------------------------
1,212,617
- --------------------------------------------------------------------------------
IRELAND-1.9%
12,000 Irish Life & Permanent 113,516
Insurance & Savings Products
- --------------------------------------------------------------------------------
SPAIN-6.3%
3,750 Jazztel (b) 244,219
Telecommunication Services
4,000 Indra Sistemas 75,074
Computer Services
2,000 Mapfre Vida 46,091
Life Insurance/Mutual Funds
- --------------------------------------------------------------------------------
365,384
See accompanying notes to financial statements.
25
<PAGE>
Wanger Advisors Trust 1999 Annual Report
WANGER FOREIGN FORTY STATEMENT OF INVESTMENTS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Number of Value
Shares
- --------------------------------------------------------------------------------
SWITZERLAND-1.2%
15 Cie Fin Richemont $35,842
Luxury Goods, Tobacco & Pay TV
20 Pargesa Holdings 32,698
Industrial & Media Conglomerate
- --------------------------------------------------------------------------------
68,540
- --------------------------------------------------------------------------------
ITALY-8.8%
15,236 Editoriale L'Espresso 176,173
Newspapers & Magazines
12,000 Banca Fideuram 142,016
Life Insurance/Mutual Funds
25,000 SEAT Pagine Gialle 82,018
Yellow Pages Publisher
20,000 Saipem 72,256
Offshore Construction
3,000 Autogrill 37,738
Restaurants & Catering for Travelers
- --------------------------------------------------------------------------------
510,201
- --------------------------------------------------------------------------------
EUROPE-TOTAL 3,291,952
ASIA-17.4%
- --------------------------------------------------------------------------------
HONG KONG-2.3%
15,000 SmarTone Telecom 72,361
Mobile Telecommunications
100,000 Pacific Century Insurance (b) 60,140
Life Insurance
- --------------------------------------------------------------------------------
132,501
- --------------------------------------------------------------------------------
JAPAN-7.3%
300 Softbank 287,000
Internet Services/Investment Holdings
500 Nintendo 83,048
Video Games
150 Shohkoh Fund 59,351
Commercial Lender
- --------------------------------------------------------------------------------
429,399
Principal Amount or Value
Number of Shares
- --------------------------------------------------------------------------------
SINGAPORE-7.8%
30,000 Star Cruises $306,000
Cruise Line
13,000 Venture Manufacturing 149,084
Electronic Manufacturing Services
- --------------------------------------------------------------------------------
455,084
- --------------------------------------------------------------------------------
ASIA-TOTAL 1,016,984
OTHER COUNTRIES-12.4%
- --------------------------------------------------------------------------------
CANADA-5.7%
4,000 Celestica (b) 223,451
Electronic Manufacturing Services
3,000 Canadian Natural Resources (b) 73,113
Oil & Gas Producer
2,000 Power Financial 33,185
Financial Services Holding Company
- --------------------------------------------------------------------------------
329,749
- --------------------------------------------------------------------------------
ISRAEL-2.4%
4,000 Amdocs (b) 138,000
Telecommunications Billing & Customer
Care Software
- --------------------------------------------------------------------------------
UNITED STATES-4.3%
$149,000 Global TeleSystems, 5.75% Cv. 199,101
Note Due 7/1/10
Telecommunications Services
6,000 Azurix (b) 53,625
Owner/Operator of Water Utilities
- --------------------------------------------------------------------------------
252,726
- --------------------------------------------------------------------------------
OTHER-TOTAL 720,475
See accompanying notes to financial statements.
26
<PAGE>
Wanger Advisors Trust 1999 Annual Report
WANGER FOREIGN FORTY STATEMENT OF INVESTMENTS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Principal Value
Amount
TOTAL COMMON STOCKS AND
OTHER EQUITY-LIKE SECURITIES-86.3% $5,029,411
- --------------------------------------------------------------------------------
(COST: $3,383,399)
SHORT-TERM OBLIGATION-5.3%
- --------------------------------------------------------------------------------
$306,000 Associates First Capital 4.00%
Maturing 01/03/00 305,932
- --------------------------------------------------------------------------------
(AMORTIZED COST: $305,932)
TOTAL INVESTMENTS-91.6% 5,335,343
- --------------------------------------------------------------------------------
(COST: $ 3,689,331)
CASH AND OTHER ASSETS LESS LIABILITIES-8.4% 490,785
- --------------------------------------------------------------------------------
TOTAL NET ASSETS-100% $5,826,128
================================================================================
Notes to Statement of Investments:
(a) At December 31, 1999, for federal income tax purposes, cost of investments
was $3,696,293 and net unrealized appreciation was $1,639,050 consisting of
gross unrealized appreciation of $1,749,711 and gross unrealized
depreciation of $110,661.
(b) Non-income producing security.
(c) At December 31, 1999, $1,870,263 or 32.1% of the Fund's net assets was
denominated in the Euro currency.
See accompanying notes to financial statements.
27
<PAGE>
Wanger Advisors Trust 1999 Annual Report
WANGER FOREIGN FORTY PORTFOLIO DIVERSIFICATION DECEMBER 31, 1999
AT DECEMBER 31, 1999 THE FUND'S PORTFOLIO OF INVESTMENTS AS A
PERCENTAGE OF NET ASSETS WAS DIVERSIFIED AS FOLLOWS:
Value Percent
- --------------------------------------------------
INFORMATION
Telephone Services $564,538 9.7%
Computer Services 542,080 9.3
Publishing 463,173 7.9
TV Broadcasting 422,868 7.3
Telecom 244,219 4.2
Instrumentation 199,101 3.4
Contract Manufacturing 149,084 2.6
Business Software 138,000 2.4
CATV 93,563 1.6
Advertising 79,240 1.3
Business Information &
Marketing Services 75,074 1.3
Television Programming 12,781 0.2
- --------------------------------------------------
2,983,721 51.2
- --------------------------------------------------
HEALTH CARE
Hospital Management 33,059 0.6
- --------------------------------------------------
CONSUMER GOODS/SERVICES
Travel 490,167 8.4
International Consumer
Software 83,048 1.4
Durable Goods 70,646 1.2
Leisure Products 56,227 1.0
Restaurants 37,738 0.7
Entertainment 35,842 0.6
- --------------------------------------------------
773,668 13.3
- --------------------------------------------------
FINANCE
Insurance 491,909 8.4
Money Management 142,016 2.4
Investment Companies 59,350 1.0
Closed-End Funds 32,698 0.6
- --------------------------------------------------
725,973 12.4
Value Percent
- --------------------------------------------------
INDUSTRIAL GOODS/SERVICES
Electrical Components $223,451 3.8%
Outsourcing and
Training Services 47,072 0.8
Industrial Materials 43,473 0.8
- --------------------------------------------------
313,996 5.4
- --------------------------------------------------
ENERGY/MINERALS
Oil/Gas Producers 73,113 1.3
Oil Services 72,256 1.2
- --------------------------------------------------
145,369 2.5
- --------------------------------------------------
OTHER
Regulated Utilities 53,625 0.9
- --------------------------------------------------
TOTAL COMMON STOCKS AND
OTHER EQUITY-LIKE
SECURITIES 5,029,411 86.3
- --------------------------------------------------
SHORT-TERM OBLIGATION 305,932 5.3
- --------------------------------------------------
TOTAL INVESTMENTS 5,335,343 91.6
- --------------------------------------------------
CASH AND OTHER ASSETS
LESS LIABILITIES 490,785 8.4
- --------------------------------------------------
NET ASSETS $5,826,128 100.0%
==================================================
See accompanying notes to financial statements.
28
<PAGE>
<TABLE>
Wanger Advisors Trust 1999 Annual Report
STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 1999
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
WANGER WANGER WANGER WANGER
U.S. SMALL CAP INTERNATIONAL TWENTY FOREIGN
SMALL CAP FORTY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value (cost: Wanger U.S. Small Cap
$316,160,490; $393,241,228 $311,037,254 $6,492,781 $5,335,343
Wanger International Small Cap $159,698,410;
Wanger Twenty $5,723,262; Wanger Foreign
Forty $3,689,331)
Cash 61 190,820 403 43,463
Organization costs 6,711 6,711 -- --
Receivable for:
Securities sold -- 1,746,099 407,406 261,554
Fund shares sold 656,862 583,431 52,950 236,116
Dividends and interest 26,648 144,335 2,296 7,225
Other assets 3,409 4,785 64 31
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 393,934,919 313,713,435 6,955,900 5,883,732
LIABILITIES AND NET ASSETS
Payable for:
Securities purchased 2,990,622 19,605 359,108 43,488
Fund shares redeemed 195,033 2,281,870 13,357 --
Amount owed to advisor 8,844 7,107 9,017 152
Other 30,947 73,881 4,287 13,964
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 3,225,446 2,382,463 385,769 57,604
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Fund shares outstanding $390,709,473 $311,330,972 $6,570,131 $5,826,128
====================================================================================================================================
Fund shares outstanding 15,704,298 7,128,362 489,305 316,780
====================================================================================================================================
PRICING OF SHARES
Net asset value, offering price and redemption
price per share $24.88 $43.67 $13.43 $18.39
====================================================================================================================================
ANALYSIS OF NET ASSETS
Paid-in capital $264,394,492 $120,767,930 $5,520,471 $3,780,585
Undistributed net realized gain on sales of
investments and foreign currency transactions 48,752,400 39,225,530 280,141 401,583
Net unrealized appreciation of investments and foreign
currency transactions (net of unrealized PFIC gains
of $5,826 for Wanger Foreign Forty) 77,080,738 151,337,512 769,519 1,640,182
Undistributed net investment income 481,843 -- -- 3,778
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Fund shares outstanding $390,709,473 $311,330,972 $6,570,131 $5,826,128
See accompanying notes to financial statements.
29
</TABLE>
<PAGE>
<TABLE>
Wanger Advisors Trust 1999 Annual Report
STATEMENTS OF OPERATIONS
<CAPTION>
WANGER WANGER WANGER WANGER
U.S. SMALL CAP INTERNATIONAL TWENTY FOREIGN FORTY
Inception Inception
February 1 February 1
Year Ended Year Ended through through
December 31, December 31, December 31, December 31,
1999 1999 1999 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes of $171,245 for Wanger $2,520,432 $1,669,203 $19,675 $22,542
International Small Cap and $2,131 for
Wanger Foreign Forty)
Interest 1,350,409 105,490 1,592 4,401
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment income 3,870,841 1,774,693 21,267 26,943
EXPENSES:
Investment advisory 3,172,578 2,231,975 35,044 19,994
Custodian 48,168 295,019 2,431 8,683
Legal and audit 57,923 47,565 15,250 15,115
Reports to shareholders 14,559 14,811 7,300 7,300
Amortization of organization costs 21,643 19,976 -- --
Transfer agent 21,808 21,716 17,600 17,500
Trustees 31,610 16,817 251 121
Insurance 4,511 2,183 16 8
Other 22,326 10,739 107 57
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses 3,395,126 2,660,801 77,999 68,778
Less custodian fees paid indirectly (6,128) (4,963) (2,173) (2,783)
Less reimbursement of expenses by advisor -- -- (26,027) (37,004)
- -----------------------------------------------------------------------------------------------------------------------------------
Net expenses 3,388,998 2,655,838 49,799 28,991
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 481,843 (881,145) (28,532) (2,048)
Net realized and unrealized gain on investments:
Net realized gain on sales of investments 49,157,155 47,468,114 308,673 401,583
Net change in unrealized appreciation 26,975,880 124,783,648 769,519 1,646,008
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 76,133,035 172,251,762 1,078,192 2,047,591
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $76,614,878 $171,370,617 $1,049,660 $2,045,543
===================================================================================================================================
See accompanying notes to financial statements.
30
</TABLE>
<PAGE>
<TABLE>
Wanger Advisors Trust 1999 Annual Report
STATEMENTS OF CHANGES IN NET ASSETS
-------------------------- --------------------------- ------------ -------------
WANGER WANGER WANGER WANGER
U.S. SMALL CAP INTERNATIONAL TWENTY FOREIGN FORTY
Inception Inception
February 1 February 1
Year Ended Year Ended Year Ended Year Ended through through
December 31, December 31, December 31, December 31, December 31, December 31,
1999 1998 1999 1998 1999 1999
- -----------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $481,843 $(783,423) $(881,145) $220,138 $(28,532) $(2,048)
Net realized gain (loss) on sales of
investments 49,157,155 31,406,965 47,468,114 (2,995,916) 308,673 401,583
Net change in unrealized appreciation 26,975,880 (6,414,368) 124,783,648 21,548,547 769,519 1,646,008
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 76,614,878 24,209,174 171,370,617 18,772,769 1,049,660 2,045,543
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- (2,396,217) (1,532,876) -- --
Net realized gain (31,015,042) (15,422,770) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (31,015,042) (15,422,770) (2,396,217) (1,532,876) -- --
FROM FUND SHARE TRANSACTIONS:
Reinvestment of dividends and capital
gain distributions 30,987,684 15,407,847 2,391,782 1,530,069 -- --
Proceeds from other shares sold 39,307,491 94,608,919 30,696,445 26,836,486 6,997,548 4,072,887
- -----------------------------------------------------------------------------------------------------------------------------------
70,295,175 110,016,766 33,088,227 28,366,555 6,997,548 4,072,887
Payments for shares redeemed (64,304,419) (50,550,116) (31,984,964) (25,013,297) (1,477,077) (292,302)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from
Fund share transactions 5,990,756 59,466,650 1,103,263 3,353,258 5,520,471 3,780,585
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 51,590,592 68,253,054 170,077,663 20,593,151 6,570,131 5,826,128
NET ASSETS:
Beginning of period 339,118,881 270,865,827 141,253,309 120,660,158 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
End of period $390,709,473 $339,118,881 $311,330,972 $141,253,309 $6,570,131 $5,826,128
- -----------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME $481,843 -- -- $2,396,102 -- $3,778
===================================================================================================================================
See accompanying notes to financial statements.
31
<PAGE>
Wanger Advisors Trust 1999 Annual Report
WANGER U.S. SMALL CAP FINANCIAL HIGHLIGHTS
May 3, 1995
Year ended Year ended Year ended Year ended through
December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $22.18 $21.46 $16.97 $11.60 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (c) .03 (.05) (.02) (.06) (.05)
Net realized and unrealized gain on investments 4.79 1.93 4.90 5.46 1.65
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 4.82 1.88 4.88 5.40 1.60
LESS DISTRIBUTIONS
Dividends from net investment income -- -- -- -- --
Distributions from net realized gain (2.12) (1.16) (.39) (.03) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (2.12) (1.16) (.39) (.03) --
NET ASSET VALUE, END OF PERIOD $24.88 $22.18 $21.46 $16.97 $11.60
===================================================================================================================================
TOTAL RETURN (D) 25.06% 8.68% 29.41% 46.59% 16.00%
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (a) (b) 1.02% 1.02% 1.06% 1.21% 2.08%*
Ratio of net investment income (loss)
to average net assets (b) .14% (.25%) (.10%) (.41%) (1.44%)*
Portfolio turnover rate 35% 34% 34% 46% 59%*
Net assets at end of period $390,709,473 $339,118,881 $270,865,827 $128,957,911 $21,903,536
- --------------------------------------------------------------------------------
*Annualized
(a) In accordance with a requirement of the Securities and Exchange Commission,
this ratio reflects total expenses prior to the reduction of custodian fees
for cash balances it maintains with the custodian ("custodian fees paid
indirectly"). 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 (prior to custodian fees paid indirectly) 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 income (loss) per share for the years ended December 31,
1999, 1998, 1997 and 1996 was based upon the average shares outstanding
during the period.
(d) Total return is not annualized for periods less than one year.
See accompanying notes to financial statements.
32
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Wanger Advisors Trust 1999 Annual Report
WANGER INTERNATIONAL SMALL CAP FINANCIAL HIGHLIGHTS
May 3, 1995
Year ended Year ended Year ended Year ended through
December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $19.62 $17.05 $17.71 $13.45 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (c) (.13) .03 .02 (.09) (.03)
Net realized and unrealized gain (loss)
on investments 24.52 2.76 (.26) 4.38 3.48
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 24.39 2.79 (.24) 4.29 3.45
LESS DISTRIBUTIONS
Dividends from net investment income (.34) (.22) -- -- --
Distributions from net realized gain and unrealized
gain reportable for federal income taxes -- -- (.42) (.03) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.34) (.22) (.42) (.03) --
NET ASSET VALUE, END OF PERIOD $43.67 $19.62 $17.05 $17.71 $13.45
===================================================================================================================================
TOTAL RETURN (D) 126.37% 16.33% (1.46%) 32.01% 34.50%
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (a) (b) 1.49% 1.55% 1.60% 1.79% 2.32%*
Ratio of net investment income (loss) to average
net assets (b) (.49%) .16% .12% (.56%) (.81%)*
Portfolio turnover rate 75% 56% 60% 50% 14%*
Net assets at end of period $311,330,972 $141,253,309 $120,660,158 $84,855,082 $11,368,924
- --------------------------------------------------------------------------------
*Annualized
(a) In accordance with a requirement of the Securities and Exchange Commission,
this ratio reflects total expenses prior to the reduction of custodian fees
for cash balances it maintains with the custodian ("custodian fees paid
indirectly"). 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 (prior to custodian fees paid indirectly) 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 years ended December 31,
1999, 1998, 1997 and 1996 was based upon the average shares outstanding
during the period.
(d) Total return is not annualized for periods less than one year.
See accompanying notes to financial statements.
</TABLE>
33
<PAGE>
Wanger Advisors Trust 1999 Annual Report
WANGER TWENTY FINANCIAL HIGHLIGHTS
February 1, 1999 through
December 31, 1999
- -------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (c) (.08)
Net realized and unrealized gain on investments 3.51
- -------------------------------------------------------------------------------
Total from investment operations 3.43
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.43
===============================================================================
TOTAL RETURN (D) 34.30%
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (a) (b) 1.41%*
Ratio of net investment loss to average net assets (b) (.77%)*
Portfolio turnover rate 113%*
Net assets at end of period $6,570,131
- --------------------------------------------------------------------------------
*Annualized
(a) In accordance with a requirement of the Securities and Exchange Commission,
this ratio reflects total expenses prior to the reduction of custodian fees
for cash balances it maintains with the custodian ("custodian fees paid
indirectly"). This ratio net of custodian fees paid indirectly would have
been 1.35% for the period ended December 31, 1999.
(b) The fund was reimbursed by the Advisor for certain expenses from February
1, 1999 through December 31, 1999. Without the reimbursement, the ratio of
expenses (prior to custodian fees paid indirectly) to average net assets
and the ratio of net investment loss to average net assets for the period
ended December 31, 1999 would have been 2.12% and (1.48%), respectively.
(c) Net investment loss per share for the period ended December 31, 1999 was
based upon the average shares outstanding during the period.
(d) Total return is not annualized for periods less than one year.
See accompanying notes to financial statements.
34
<PAGE>
Wanger Advisors Trust 1999 Annual Report
WANGER FOREIGN FORTY FINANCIAL HIGHLIGHTS
February 1, 1999 through
December 31, 1999
- -------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (c) (.01)
Net realized and unrealized gain on investments 8.40
- -------------------------------------------------------------------------------
Total from investment operations 8.39
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $18.39
===============================================================================
TOTAL RETURN (D) 83.90%
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (a) (b) 1.59%*
Ratio of net investment loss to average net assets (b) (.10%)*
Portfolio turnover rate 91%*
Net assets at end of period $5,826,128
- --------------------------------------------------------------------------------
*Annualized
(a) In accordance with a requirement of the Securities and Exchange Commission,
this ratio reflects total expenses prior to the reduction of custodian fees
for cash balances it maintains with the custodian ("custodian fees paid
indirectly"). This ratio net of custodian fees paid indirectly would have
been 1.45 % for the year ended December 31, 1999.
(b) The fund was reimbursed by the Advisor for certain expenses from February
1, 1999 through December 31, 1999. Without the reimbursement, the ratio of
expenses (prior to custodian fees paid indirectly) to average net assets
and the ratio of net investment loss to average net assets for the period
ended December 31, 1999 would have been 3.45% and (1.96%), respectively.
(c) Net investment loss per share for the period ended December 31, 1999 was
based upon the average shares outstanding during the period.
(d) Total return is not annualized for periods less than one year.
See accompanying notes to financial statements.
35
<PAGE>
Wanger Advisors Trust 1999 Annual Report
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
Wanger US Small Cap, Wanger International Small Cap, Wanger Twenty and Wanger
Foreign Forty ("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. The amount is disclosed as a reduction of total expenses in the
Statements of Operations.
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. In
accordance with this election, the Fund had no unrealized appreciation from
investments in PFICs at December 31, 1999. Cumulative net unrealized
appreciation recognized in prior years on PFICs sold in 1999 amounted to
$83,762.
Wanger Foreign Forty has also has elected to mark-to-market its investments
in Passive Foreign Investment Companies ("PFICS") for income tax purposes. In
accordance with this election, the Fund had $5,826 of unrealized appreciation
from investments in PFICs at December 31, 1999.
Dividends and distributions payable to each Fund's shareholders are recorded
by the Fund on the ex-dividend date.
Reclassifications have been made in 1999 for Wanger International Small Cap
and Wanger Twenty in the accompanying analysis of net assets from undistributed
net investment income to net realized gain on the sale of investments of
$964,907 and $28,532, respectively. These reclassifications were made to reflect
differences between financial reporting and income tax basis and had no impact
on net asset value.
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. Each Fund pays WAM a monthly advisory
fee based upon average daily net assets at the following rates:
WANGER U.S. SMALL CAP
Average Daily Net Assets
For the first $100 million 1.00%
Next $150 million .95%
In excess of $250 million .90%
36
<PAGE>
Wanger Advisors Trust 1999 Annual Report
NOTES TO FINANCIAL STATEMENTS
WANGER INTERNATIONAL SMALL CAP
Average Daily Net Assets
For the first $100 million 1.30%
Next $150 million 1.20%
In excess of $250 million 1.10%
WANGER TWENTY
On average daily net assets .95%
WANGER FOREIGN FORTY
On average daily net assets 1.00%
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 a percentage of average net assets. This amount is 1.50%
for Wanger U.S. Small Cap, 1.90% for Wanger International Small Cap, 1.35% for
Wanger Twenty and 1.45% for Wanger Foreign Forty. WAM was not required to
reimburse Wanger U.S. Small Cap or Wanger International Small Cap under these
agreements for the year ended December 31, 1999. Wanger Twenty and Wanger
Foreign Forty were reimbursed $26,027 and $37,004, respectively, for the period
ended December 31, 1999.
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 Funds paid the following trustees' fees and expenses to trustees
not affiliated with WAM:
1999
Wanger U.S. Small Cap $31,610
Wanger International Small Cap 16,817
Wanger Twenty 251
Wanger Foreign Forty 121
WAM advanced $100,000 in connection with the organization and initial
registration of Wanger U.S. Small Cap and Wanger International Small Cap. These
costs are being amortized and reimbursed to WAM over the period May, 1995
through April, 2000. WAM paid all organization costs associated with the
organization of Wanger Twenty and Wanger Foreign Forty. These costs amounted to
$ 20,816. WAM will not be reimbursed for these costs by the Funds.
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
Wanger U.S. Small Cap and Wanger International Small Cap participate in a
$250,000,000 credit facility which was entered into to facilitate portfolio
liquidity. No amounts were borrowed under this facility during 1999.
5. FUND SHARES 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:
WANGER U.S. SMALL CAP Year ended Year ended
December 31, 1999 December 31, 1998
Shares sold 1,827,456 4,370,518
Shares issued in reinvestment of
dividend and capital gain
distributions 1,675,771 686,318
- -------------------------------------------------------------------------------
3,503,227 5,056,836
Less shares redeemed 3,089,752 2,389,858
- -------------------------------------------------------------------------------
Net increase in shares outstanding 413,475 2,666,978
WANGER INTERNATIONAL SMALL CAP Year ended Year ended
December 31, 1999 December 31, 1998
Shares sold 1,101,093 1,389,310
Shares issued in reinvestment
of dividend and capital gain
distributions 119,889 76,657
- -------------------------------------------------------------------------------
1,220,982 1,465,967
Less shares redeemed 1,290,574 1,346,776
- -------------------------------------------------------------------------------
Net decrease in shares outstanding (69,592) 119,191
WANGER TWENTY Period ended
December 31, 1999
Shares sold 612,940
Less shares redeemed 123,635
- --------------------------------------------------------------------------------
Net increase in shares outstanding 489,305
WANGER FOREIGN FORTY Period ended
December 31, 1999
Shares sold 342,192
Less shares redeemed 25,412
- --------------------------------------------------------------------------------
Net increase in shares outstanding 316,780
6. INVESTMENT TRANSACTIONS
The aggregate costs of purchases and proceeds from sales other than short-term
obligations in 1999 were:
---------------------------------------------------------------
WANGER U.S. WANGER WANGER WANGER
SMALL CAP INTERNATIONAL TWENTY FOREIGN FORTY
SMALL CAP
PURCHASES $106,139,136 $132,788,428 $8,919,902 $4,748,084
SALES 147,545,241 138,231,907 3,938,241 1,766,268
37
<PAGE>
Wanger Advisors Trust 1999 Annual Report
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
Wanger Advisors Trust
We have audited the accompanying statements of assets and liabilities, including
the schedule of invest ments of Wanger U.S. Small Cap, Wanger International
Small Cap, Wanger Twenty and the Wanger Foreign Forty portfolios, comprising the
Wanger Advisors Trust, as of December 31, 1999, the related statements of
operations, changes in net assets, and the financial highlights for the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements.
Our procedures included confirmation of investments owned as of December 31,
1999, by cor respon dence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respec tive Funds of the Wanger Advisors Trust as of December 31, 1999,
the results of their operations and changes in their net assets and financial
highlights for the periods indicated therein, in conformity with accounting
principles generally accepted in the United States.
ERNST & YOUNG LLP
Chicago, Illinois
February 4, 2000
38
<PAGE>
WANGER U.S. SMALL CAP
WANGER INTERNATIONAL SMALL CAP
WANGER TWENTY
WANGER FOREIGN FORTY
SUPPLEMENT DATED JANUARY 4, 2000
TO PROSPECTUS DATED MAY 1, 1999 OF WANGER ADVISORS TRUST
As of December 31, 1999, Mr. Roger Edgley is the Co-portfolio manager, with
Marcel Houtzager, of Wanger Foreign Forty. He has also been named a Co-portfolio
manager of Acorn Foreign Forty, effective December 31, 1999. Mr. Edgley joined
Wanger Asset Management ("WAM") as an analyst in 1994, and was named Managing
Director and Director of Research of WAM in 1998. Before joining WAM, Mr. Edgley
was an analyst at Crosby Securities.
39
<PAGE>
WANGER ADVISORS TRUST
TRUSTEES
Fred D. Hasselbring
Charles P. McQuaid
P. Michael Phelps
Ralph Wanger
Patricia H. Werhane
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
John H. Park
Vice President
Mark H. Yost
Vice President
Peter Zaldivar
Vice President
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, LLC
Chicago, Illinois
INDEPENDENT AUDITORS
Ernst & Young LLP
Chicago, Illinois
This report, including the audited schedules of investments and financial
statements, is submitted for the general information of the shareholders of the
Wanger Advisors Trust. This report is not authorized for distribution unless
preceded or accompanied by a prospectus.
<PAGE>
WANGER ADVISORS TRUST
WANGER ADVISORS TRUST
WAM BROKERAGE SERVICES, L.L.C.
227 WEST MONROE STREET
SUITE 3000
CHICAGO, IL 60606
PRSRT STD
U.S. Postage Paid
Andrew Associates
OL2568A
2/00
