-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UDQAlmSLospwBF4IidF3PDFw/vxodOuwO26uYhAsFIFG1IREWSA4ZTb363/X2x9I s1EdERmUBvJP/D9irIi7rA== 0000891804-04-000596.txt : 20040305 0000891804-04-000596.hdr.sgml : 20040305 20040304174113 ACCESSION NUMBER: 0000891804-04-000596 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040305 EFFECTIVENESS DATE: 20040305 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WANGER ADVISORS TRUST CENTRAL INDEX KEY: 0000929521 IRS NUMBER: 362692100 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-08748 FILM NUMBER: 04649839 BUSINESS ADDRESS: STREET 1: 227 WEST MONROE STREET STE 3000 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3126349200 MAIL ADDRESS: STREET 1: 227 WEST MONROE STREET STE 3000 CITY: CHICAGO STATE: IL ZIP: 60606-5016 N-CSR 1 file001.txt WANGER ADVISORS TRUST UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-8748 --------------------- Wanger Advisors Trust ------------------------------------------------------------------------------ (Exact name of registrant as specified in charter) 227 West Monroe, Suite 3000, Chicago, Illinois 60606 - ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip code) Vincent Pietropaolo, Esq. Columbia Management Group, Inc. One Financial Center Boston, MA 02111 - ------------------------------------------------------------------------------ (Name and address of agent for service) Registrant's telephone number, including area code: 1-617-772-3698 ------------------- Date of fiscal year end: 12/31/2003 ------------------ Date of reporting period: 12/31/2003 ----------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. 2003 Annual Report Wanger U.S. Smaller Companies Wanger International Small Cap Wanger Twenty Wanger Foreign Forty Logo: Squirrel WANGER ADVISOR FUNDS - ------------------------------------------------------ managed by Columbia Wanger Asset Management, L.P. Logo: Squirrel WANGER ADVISORS FUNDS 2003 ANNUAL REPORT CONTENTS 2 Don't Bet The Farm 4 Performance Review Wanger U.S. Smaller Companies 6 Performance Review Wanger International Small Cap 8 Performance Review Wanger Twenty 10 Performance Review Wanger Foreign Forty 12 Statement of Investments Wanger U.S. Smaller Companies 18 Statement of Investments Wanger International Small Cap 23 Portfolio Diversification Wanger International Small Cap 24 Statement of Investments Wanger Twenty 26 Statement of Investments Wanger Foreign Forty 28 Portfolio Diversification Wanger Foreign Forty 30 Statements of Assets and Liabilities 31 Statements of Operations 32 Statements of Changes in Net Assets 34 Financial Highlights Wanger U.S. Smaller Companies 35 Financial Highlights Wanger International Small Cap 36 Financial Highlights Wanger Twenty 37 Financial Highlights Wanger Foreign Forty 38 Notes to Financial Statements 42 Report of Independent Auditors 43 Federal Income Tax Information 44 Trustees and Management of Wanger Advisors Funds COLUMBIA WANGER ASSET MANAGEMENT, L.P. ("COLUMBIA WAM") IS ONE OF THE LEADING GLOBAL SMALL-CAP EQUITY MANAGERS IN THE U.S. WITH MORE THAN 30 YEARS OF SMALL-CAP INVESTMENT EXPERIENCE. COLUMBIA WAM MANAGES MORE THAN $17.4 BILLION IN EQUITIES AND IS THE INVESTMENT ADVISER TO WANGER U.S. SMALLER COMPANIES, WANGER INTERNATIONAL SMALL CAP, WANGER TWENTY, WANGER FOREIGN FORTY AND THE COLUMBIA ACORN FAMILY OF FUNDS. FOR MORE COMPLETE INFORMATION ABOUT OUR FUNDS, INCLUDING THE COLUMBIA ACORN FUNDS, OUR FEES, RISKS ASSOCIATED WITH INVESTING, OR EXPENSES, CALL 1-800-4-WANGER FOR A PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. THIS REPORT IS NOT AN OFFER OF THE SHARES OF THE COLUMBIA ACORN FUND FAMILY. Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- Logo: Squirrel DON'T BET THE FARM How do you run a mutual fund to get good results? Are the investing rules the same for managing small-cap/mid-cap funds and large-cap funds? Here are some of my personal opinions on these questions. We believe some basic principles apply to any stock portfolio. (1) Diversification reduces risk, so own mid-cap stocks and a small-cap fund. (2) International stocks add additional beneficial diversification. (3) The market often over-values growth stocks, so pay close attention to valuation. (4) Big winners take years to develop, so think long term. So what are the differences in managing small-, mid- and large-cap funds? Many large-company portfolios are run according to the rules expressed in Charles Ellis's book, Winning the Loser's Game.1 He tells us to play it safe. Start with a portfolio that mirrors the market and try to avoid big losers (fraud such as Enron and WorldCom, overpriced growth such as Cisco at $80 2). One could say he starts with the S&P 500 and reduces it to the Ellis 495 by getting rid of some potential big losers. The Winning the Loser's Game strategy may work for a big-company portfolio, but it is not the way we like to run a small-cap fund. Small-cap is a winner's game. You want to be a Barry Bonds or a Sammy Sosa and hit 50 home runs. If you get the homers, you are a hero; you can strike out a lot of times but no one will care very much. As an example, International Game Technology (IGT) has been a great long-term winner for the funds. In the 2003 season, IGT hit a grand slam - an additional unrealized gain of $175 million!3 Even if you strike out more often than you would like, one big winner more than offsets a half-dozen $10 million losers. The funds had fine results in 2003 due to the success we had in many stocks. Writing about success, however, is less colorful than writing about failure; there are more plays about Nero than about Marcus Aurelius. When it comes to investing, there are only a few ways to fail. You can buy a company that runs into unexpected problems. Sometimes you buy into a speculative company you know is high risk and the company just doesn't make it. The unfortunate speculators who bought Cisco at $80 lost mere hundreds of billions of dollars compared to the more unfortunate speculators gulled by the Enron and WorldCom frauds. Of course bubbles and speculation have a long history. The first overpricing bubble on record was the tulip-mania boom in Holland in 1636. Tulips were a new "high-tech" flower in Europe but the price of strangely colored varieties went way too high, creating a nasty collapse. Tulip-bulb farming today is still important to the Dutch but it is no longer high tech. Farmers can fool you. About 25 years ago there was an Oregon company called Melridge run by a Dutch farmer. He grew lily bulbs. I planted some bulbs in my mother's garden and got beautiful lilies. But could history repeat itself? Could there be a problem with Melridge similar to the problem in the Netherlands more than 350 years before? Yes. The accounts were falsified and Melridge was plowed under. A few years before that, I had put some personal money into Maine Sugar. The promoter was a potato processor in Aroostook County, Maine. He believed that the climate and soil there was favorable for growing sugar beets. He floated stock to build a sugar refinery and invited a planeload of New York analysts to come see the sugar beet fields under cultivation. The analysts got on a bus and were driven to a field where the CEO dug up a giant sugar beet. The analysts had never seen such a large sugar beet (most of them had never seen a farm, for that matter). They got back on the bus, and after another ten minutes arrived at another field. The CEO dug up a sugar beet bigger than the first one. The bus continued to another farm field where again an impressive beet was unearthed. When the analysts arrived back in New York, they wrote buy reports based on the great number of farms growing sugar beets. Maine Sugar dissolved a few months later, and the city-boy analysts realized that they had been shown the same field three times in a row. (None of our funds owned either Melridge or Maine Sugar). 2 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- The latest foolish farm fraud is Parmalat, an Italian company in the milk business. (Parma latte, get it?) The funds advised by Columbia Wanger Asset Management lost a few million dollars in Parmalat. Big banks that did business with Parmalat could lose hundreds of millions of dollars in bad loans. One of the centerpieces of the fraud was a made-up bank deposit of 3.95 billion euros (about $5 billion). The Parmalat officials allegedly handed the auditors a hastily forged document purporting to be the bank's acknowledgement of the deposit. The auditors appear to have accepted the false affidavit without making their own inquiry ("Hey, we are facing a deadline and it's only five billion.") and allowed the company to continue its fraud for a few more months, roping us in. How could we have avoided getting caught? Talking to company management more often probably would not have helped at all; after all, the bank lenders, the bond rating agencies, and auditor were fooled, and they had much freer access to the company's internal records then any outside financial analyst could ever get. One answer would have been to talk to Parmalat's suppliers, in this case the dairy farmers. After the collapse, someone did ("Parma Farmers Had One Rule: Don't Deal With Parmalat," Bloomberg NEWS, January 19, 2004). Achille Coelli, director of the Union of Parma Farmers said, "Farmers here won't work with Parmalat. Tanzi [the CEO] never had a good reputation. The company was a slow payer, so only one percent of the milk produced in Parma province was sold to Parmalat." Obvious red flag? Sure. Did any analyst do this check before the collapse? Don't think so. What conclusions do we want to draw from this crying over spilt milk, besides the vaguely comforting notion that not all fraud occurs in the USA? First, a smart crook can fool some of the people all of the time. Second, really star-quality analytic work could help discover frauds sooner, but much of the time that doesn't happen. Third, complete skepticism would have you avoid fraud, but you would avoid the good investments too. An investor must balance skepticism and credulity just as one balances risk/return or growth/value. Fourth, diversification dilutes the negative effect of one bad stock. Since fraud tends to hit you one at a time, it's a strike out, but it doesn't cost you the season. The benefits you get from big winners far outweigh a few losers. COLUMBIA WAM NEWS John Park has been named director of domestic research for Columbia Wanger Asset Management, L.P. John joined the firm in 1993. He has managed Wanger Twenty since its 1999 inception. On the retail side, he has been lead portfolio manager of Columbia Acorn Select since its 1998 start date and he was also named as a co-portfolio manager of Columbia Acorn Fund in 2003. We'd like to welcome two new analysts to the team. John Emerson joined us mid-year to cover domestic media stocks and Kenneth Wooden joined our international team in early December to cover Japanese equities. Photo of: RALPH WANGER RALPH WANGER Founder, Advisor and Trustee Columbia Wanger Asset Management, L.P. - -------------------------------------------------------------------------------- 1 Ellis, Charles D., Winning the Loser's Game: Timeless Strategies for Successful Investing, McGraw-Hill Trade, 4th Edition, March 14, 2002. 2 No fund advised by Columbia Wanger Asset Management, L.P., owns or has owned Enron, WorldCom or Cisco. 3 The dollar gain for the one-year period ended December 31, 2003 reflects the total gain in the stock across all funds/accounts advised by Columbia Wanger Asset Management, L.P., that held IGT. 3 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- Logo: Squirrel PERFORMANCE REVIEW WANGER U.S. SMALLER COMPANIES Small caps dominated large caps in 2003. The S&P 500, up 28.68%, had a good year but did not come close to reaching small-cap returns. The more speculative small-cap stocks drove the rally. We selectively put money into down-and-out growth stocks over the year, driving Wanger U.S. Smaller Companies up 43.22% for the year, just below the Russell 2000's 47.25% gain. Technology stocks led the rally in 2003. In Wanger U.S. Smaller Companies, Novell and Micros Systems were among the top moneymakers for the year. Novell, up 215%, is a leading provider of network printer, directory, and file services. Security Identity Management and Linux are two fast-growing markets in which Novell is building a name for itself. Micros had a 93% annual gain. After years of waiting, hotels are finally starting to upgrade their computer systems. Micros is benefiting from this initiative with revenue growth in its hotel and restaurant integration software up nearly 20%. In the financial sector, AmeriCredit posted top gains, up 104% for the year. Credit loss reports showed that for the first time in 27 months AmeriCredit had a year-over-year drop in losses in November. Aspect Communications was another big percentage winner, up 452% for the year. Aspect's next generation products have started to take off and financing and management problems that plagued the company in the past have been worked out, benefiting stockholders. The notable poor performer was First Health Group, down 20% in the year. First Health's competition aggressively lowered prices, putting pressure on the company. Home health care service provider Lincare also fell as the government moved to cut oxygen reimbursement rates, a major source of revenue for Lincare. Disappointing sales marked down the stock price for retailer Gadzooks. What a difference a year makes. Last year, all areas of the market - small, mid, large - ended the year down in double digits. This year, small-cap gains neared 50%, mid caps cleared 35% and large caps came in at about 30%. So, what's next? Small caps did so well in 2003 that there is some concern that they are getting overpriced. We still believe that small caps are in for a very long period of outperformance. As for valuations, we have a list of stocks that are attractive to buy at current levels. Today that list is smaller than it was six months ago but we believe there continue to be small-cap stocks to buy at good prices. Small-cap stocks are often more volatile and less liquid than the stocks of larger companies. Small companies may have a shorter history of operations than larger companies and may have a less diversified product line, making them more susceptible to market pressure. As of 12/31/03, the Fund's positions in the holdings mentioned were: Novell, 1.7%; Micros Systems, 2.3%; AmeriCredit, 2.2%; Aspect Communications, 1.6%; First Health Group, 2.2%; Lincare, 3.2%; Gadzooks, 0.1%. Photo of: ROBERT A. MOHN ROBERT A. MOHN Portfolio Manager 4 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT IN TOTAL RETURN FOR EACH PERIOD, WANGER U.S. SMALLER COMPANIES MAY 3, 1995 THROUGH DECEMBER 31, 2003 AVERAGE ANNUAL RETURN - ------------------------------------ 1 year 5 years Life of fund 43.22% 8.80% 16.10% LINE CHART: WANGER U.S. SMALLER COMPANIES RUSSELL 2000 5/3/95 10000 10000 5/31/95 9870 10179.4 6/30/95 10770 10707.5 11560 11324.3 11940 11558.6 12060 11765 11380 11238.8 11640 11711 12/31/95 11600 12019.9 11950 12007.1 12580 12381.3 13296.8 12633.3 14689.6 13308.8 15471.1 13833.3 6/30/96 15350.9 13265.3 14529.2 12106.6 15090.4 12809.4 15791.8 13310.1 15902 13105 16423.1 13645 12/31/96 17004.2 14002.6 17475.2 14282.4 16994.2 13936.1 16365.5 13278.5 16355.3 13315.5 17985.7 14796.9 6/30/97 19093.1 15431 20200.6 16149.1 20703 16518.6 22394.9 17727.7 21995 16948.9 21892.5 16839.2 12/31/97 22005.3 17134 21554.1 16863.6 23379.3 18110.6 24865.1 18857.5 25803.2 18961.8 24886.7 17940.6 6/30/98 25361.1 17978.3 23959.3 16522.9 20357.9 13314.5 20875.5 14356.5 21597.9 14942 22600.7 15724.8 12/31/98 23916.2 16697.8 23452.6 16919.8 22223.3 15549.3 22387.9 15792.1 24320.6 17207.2 25004.8 17458.6 6/30/99 26374.5 18248 27216 17747.3 25677.3 17090.5 25388.8 17094.2 26939.5 17163.5 28201.8 18188.3 12/31/99 29908.8 20247.2 28911 19922 30029 23211.9 29076.9 21681.5 26163.7 20376.8 24858.3 19189.2 6/30/00 25545.4 20862 25174.3 20190.8 26672.2 21731.4 26740.9 21092.7 26768.4 20151.1 25146.9 18082.6 12/31/00 27469.2 19635.5 27936.4 20657.8 27469.2 19302.4 26306.2 18358.2 29276.5 19794.3 30472.8 20280.9 6/30/01 31669.2 20981.2 31710.5 19845.5 30307.8 19204.5 26567.5 16619.3 27213.8 17591.9 28987.7 18953.8 12/31/01 30596.6 20123.7 30527.8 19914.4 29634 19368.6 32219.2 20925.3 32246.8 21116 30651.6 20178.8 6/30/02 28753.9 19177.6 25027.3 16281.2 24958.6 16239.7 23225.9 15073.5 24546 15556.8 26498.7 16945.1 12/31/02 25453.6 16001.6 24958.6 15558.8 24601 15088.6 24669.8 15282.9 26815 16732 29125.2 18527.6 6/30/03 29716.5 18862.9 31462.9 20043.1 33168.1 20962.1 32549.3 20575.2 35643.3 22303 36193.4 23094.5 12/31/03 36454.6 23563 This graph compares the results of $10,000 invested in Wanger U.S. Smaller Companies on May 3,1995 (the date the Fund began operations) through December 31, 2003 with the Russell 2000. Dividends and capital gains are 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. DUE TO ONGOING MARKET VOLATILITY, PERFORMANCE IS SUBJECT TO SUBSTANTIAL SHORT-TERM FLUCTUATIONS. Wanger U.S. Smaller Companies is a diversified fund that invests primarily in the stocks of small- and medium-size U.S. companies. Smaller company stocks are often more volatile or less liquid than the stocks of larger companies. MUTUAL FUND PERFORMANCE CHANGES OVER TIME. CURRENT RETURNS FOR THE FUND MAY BE DIFFERENT THAN THAT SHOWN. - -------------------------------------------------------------------------------- RESULTS TO DECEMBER 31, 2003 4th quarter 1 year WANGER U.S. SMALLER COMPANIES 12.00% 43.22% Russell 2000 14.52 47.25 S&P MidCap 400 13.19 35.62 S&P 500 12.18 28.68 NAV AS OF 12/31/03: $26.51 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 include reinvested dividends. It is not possible to invest directly in an index. Performance numbers reflect all Fund expenses but do not include any insurance charge imposed by your insurance company's separate accounts. If performance included the effect of these additional charges, it would be lower. Portfolio holdings will vary in the future. - -------------------------------------------------------------------------------- TOP 5 INDUSTRIES As a % of net assets, as of 12/31/03 Information 36.5% Consumer Goods/Services 16.9 Health Care 13.1 Finance 10.5 Energy/Minerals 7.4 - -------------------------------------------------------------------------------- TOP 10 HOLDINGS As a % of net assets, as of 12/31/03 1. ITT Educational Services 5.3% Post Secondary Degree Programs 2. Kronos 3.2% Labor Management Solutions 3. Lincare Holdings 3.2% Home Health Care Services 4. Western Wireless 2.4% Rural Cellular Phone Services 5. Micros Systems 2.3% Information Systems for Restaurants & Hotels 6. First Health Group 2.2% PPO Network 7. AmeriCredit 2.2% Auto Lending 8. JDA Software Group 2.1% Applications/Software & Services for Retailers 9. Commonwealth Telephone 1.7% Rural Phone Franchises & CLEC 10. Novell 1.7% Directory, Identity Management & Authorization Software 5 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- Logo: Squirrel PERFORMANCE REVIEW WANGER INTERNATIONAL SMALL CAP Wanger International Small Cap finished 2003 on a strong note. The Fund's annual return of 48.86% fell short of the Citigroup EMI Global ex-US return of 55.02% but beat the MSCI EAFE return of 38.59%. Stocks outside the Fund's core strategy, mainly basic material stocks, soared during the year, dampening the Fund's return. Even though we didn't beat the Citigroup EMI Global ex-US Index, the absolute return for the year is the second best in Wanger International Small Cap's history. Wanger International Small Cap's best stocks for the year came from a variety of industries. ASE Test, a semiconductor packaging and testing company in Taiwan, rose 272% on a recovery in demand for semiconductors. Global Bio-Chem Technology Group, a maker of corn starch and corn gluten headquartered in Hong Kong, was up 133%. United Services Group, a temporary staffing service in the Netherlands, was up 114%, and Anglo Irish Bank, a niche middle-market bank in Ireland, was up nearly 125% for the year in Wanger International Small Cap. The Fund's three worst performers were all sold out of the portfolio before year-end. Hagemeyer, an industrial supply company in the Netherlands, was down 37% when we exited the position. Ireland's Waterford Wedgewood, a maker of fine crystal, tableware and cookware, fell 51% in the year. Lindex, a maker of ladies' and children's wear in Sweden, was down 23% on weak sales. Investments in foreign securities have special risks, including political or economic instability, higher costs, different regulations, accounting standards, trading practices and levels of information, and currency exchange rate fluctuations. Small-cap stocks are often more volatile and less liquid than the stocks of larger companies. Small companies may have a shorter history of operations than larger companies and may have a less diversified product line, making them more susceptible to market pressure. As of 12/31/03, the Fund's positions in the holdings mentioned were: ASE Test, 1.2%; Global Bio-Chem Technology Group, 1.2%; United Services Group, 1.2%; Anglo Irish Bank, 1.9%; Hagemeyer, 0.0%; Waterford Wedgewood, 0.0%; Lindex, 0.0%. Photo of: TODD M. NARTER Photo of: CHRISTOPHER J. OLSON TODD M. NARTER Co-Portfolio Manager CHRISTOPHER J. OLSON Co-Portfolio Manager 6 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT IN TOTAL RETURN FOR EACH PERIOD, WANGER INTERNATIONAL SMALL CAP MAY 3, 1995 THROUGH DECEMBER 31, 2003 AVERAGE ANNUAL RETURN - ------------------------------------ 1 year 5 years Life of fund 48.86% 10.53% 15.00% LINE CHART: WANGER CITIGROUP EMI INTERNATIONAL GLOBAL SMALL CAP EX-US 5/3/95 10000 10000 5/31/95 10790 10000 6/30/95 10970 9889.52 11910 10443.6 12290 10196.5 12910 10265.1 12700 9958.24 12660 10044 12/31/95 13450 10421.5 14260 10667.4 15170 10792 15499.1 11019.5 16251 11587.8 16782.4 11497 6/30/96 17183.4 11491.6 16722.2 11045.5 17023 11155.1 17023 11217.3 17183.4 11145.9 17704.7 11338.3 12/31/96 17754.8 11051.5 18246.1 10892.4 18687.2 11111.1 18357.5 10973 18203.6 10824 18983.4 11462.3 6/30/97 19568.3 11753.3 19558 11639.9 18460.1 11130.5 19363.1 11308.5 18388.3 10760.2 17967.5 10261.7 12/31/97 17495.5 10048.2 18142 10363.6 19588.8 11147.3 21306.5 11686.3 21866.7 11780.8 21887.4 11880.9 6/30/98 21410.2 11462.2 21099 11389.7 17904.1 9892.94 17437.3 9673.65 18101.2 10340.2 19605.3 10696.5 12/31/98 20352.2 10923.1 20694.5 10847 20570 10643.8 21564.1 11104.9 23399.8 11782.2 23726.9 11492.6 6/30/99 25404.3 11939.7 27556.5 12324.9 28928 12541.8 29265.6 12484.8 30088.5 12370.9 36175.8 12815.9 12/31/99 46071.7 13688.2 46799.6 13427.3 56294.6 13943.9 54788.8 14005.8 46480.7 13086.1 42600.5 12812.5 6/30/00 44628 13590.7 43055 13140.4 45583.5 13516.6 41179 12822.6 36797.7 12046.8 33453.5 11515.9 12/31/00 33243.8 11966 34910.1 12188.8 32556.3 11715.2 29861.7 10807.9 30388.6 11515.3 31170.4 11492.1 6/30/01 29742.8 11102.3 28026.2 10776.7 27907.2 10747.1 23692.2 9347.86 24780 9727.68 25748.7 10127.6 12/31/01 26173.6 10211 25714.8 10026.1 25357.8 10193.9 27006.4 10858.1 28179.2 11084.2 28485.1 11438.9 6/30/02 27635.3 10992.8 24729 10053.2 23743.2 9992.95 21142.9 9070.53 21414.8 9275.51 22332.6 9622.17 12/31/02 22553.5 9507.62 22298.6 9347.86 21533.8 9181.06 21069.1 9091.63 22979.8 9948.74 24941.8 10796.8 6/30/03 25777.7 11199.7 26613.6 11598.7 27893.1 12153.3 29087.3 12709 31356.3 13633.4 32089.9 13881.6 12/31/03 33574.1 14738.7 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, 2003 with the Citigroup EMI Global ex-US. Dividends and capital gains are 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. DUE TO ONGOING MARKET VOLATILITY, PERFORMANCE IS SUBJECT TO SUBSTANTIAL SHORT-TERM FLUCTUATIONS. Wanger International Small Cap is a diversified fund that invests primarily in the stocks of non-U.S. companies with capitalizations of less than $2 billion. Smaller company stocks are often more volatile or less liquid than the stocks of larger companies. Investments in foreign securities have special risks, including political or economic instability, higher costs, different regulations, accounting standards, trading practices and levels of information and currency exchange rate fluctuations. MUTUAL FUND PERFORMANCE CHANGES OVER TIME. CURRENT RETURNS FOR THE FUND MAY BE DIFFERENT THAN THAT SHOWN. - -------------------------------------------------------------------------------- RESULTS TO DECEMBER 31, 2003 4th quarter 1 year WANGER INTERNATIONAL SMALL CAP 15.43% 48.86% Citigroup EMI Global ex-US 15.97 55.02 MSCI EAFE 17.08 38.59 Lipper International Small Cap Funds Index 14.77 55.10 NAV AS OF 12/31/03: $19.68 The Citigroup EMI Global ex-US is an index of the bottom 20% of institutionally investable capital of developed and emerging countries, selected by the index sponsor, outside the United States. MSCI EAFE is Morgan Stanley's Europe, Australasia and Far East Index, an index of companies throughout the world in proportion to world stock market capitalization, excluding the U.S. and Canada. Lipper Indexes include the largest funds tracked by Lipper, Inc. in the named category. The Lipper International Small Cap Funds Index is made up of the 10 largest non-U.S. funds investing in small-cap companies. All indexes are unmanaged and returns include reinvested dividends. It is not possible to invest directly in an index. Performance numbers reflect all Fund expenses but do not include any insurance charge imposed by your insurance company's separate accounts. If performance included the effect of these additional charges, it would be lower. Portfolio holdings will vary in the future. - -------------------------------------------------------------------------------- TOP 5 COUNTRIES As a % of net assets, as of 12/31/03 United Kingdom 15.7% France 8.1 Netherlands 7.2 Ireland 6.8 Germany 6.7 - -------------------------------------------------------------------------------- TOP 10 HOLDINGS As a % of net assets, as of 12/31/03 1. Anglo Irish Bank 1.9% Corporate Lending & Private Banking - Ireland 2. Amplifon 1.8% Hearing Aid Retailer - Italy 3. Grafton Group 1.4% Builders, Wholesalers & DIY Retailing - Ireland 4. Central European Distribution 1.3% Spirits & Wine Distribution - Poland 5. International Greetings 1.2% Private Label Greeting Products - United Kingdom 6. United Services Group 1.2% Temporary Staffing Services - Netherlands 7. ASE Test 1.2% Semiconductor Packaging & Test Services - Taiwan 8. French Connection 1.2% Clothing Wholesaler & Retailer - United Kingdom 9. Global Bio-Chem Technology Group 1.2% Corn-based Food Products - Hong Kong 10. Aalberts Industries 1.2% Flow Control & Heat Treatment - Netherlands 7 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- Logo: Squirrel PERFORMANCE REVIEW WANGER TWENTY Wanger Twenty returned 30.73% in 2003, trailing the S&P MidCap 400's 35.62% return but beating the S&P 500's 28.68% gain. While we are pleased with the Fund's absolute result, we are disappointed that Wanger Twenty underperformed since it was leading its primary benchmark through the first three quarters of the year. Electronic Arts gained 96% in 2003, as sales and earnings consistently beat expectations. Guidant, the Fund's largest position, returned 93% as investors came to appreciate the company's fast growing defibrillator business as well as its potential growth making drug-eluting stents. (A drug-eluting stent is a little wire-mesh tube that keeps an artery open after an angioplasty procedure.) On the downside, First Health Group, one of the Fund's biggest positions, fell 20% for the year as the company lowered its sales and earnings for 2004 due to increased competition in the managed-care industry. We believe the long-term outlook remains sound and we have added to the Fund's position in First Health. Most other losses for the year were relatively small in position size or percentages. In fact, all losses combined contributed to just a 3.43% drop for the Fund. Perhaps the biggest detractor to performance was the conservative nature of Wanger Twenty; only five of the Fund's stocks were up 70% or more. While the market has rewarded the Fund's more conservative stance in the past, highly speculative stocks had the most impressive gains in 2003 and Wanger Twenty did not keep pace. Furthermore, as the market has bounced back, we have seen few opportunities to buy such stocks at prices that fairly compensate us for the risks incurred. I am justifiably proud of the terrific efforts put forth by our investment team in 2003. My thanks to Ralph Wanger, Chuck McQuaid, Rob Mohn, Ben Andrews, Susie Hultquist, Harold Lichtenstein, Grant McKay, Rob Chalupnik, Todd Griesbach, David Frank, and John Emerson for their invaluable contributions. I am also grateful to Shelley Maish and Mike Olah for providing Herculean efforts in trading throughout the year. Finally, thank you for your continued support as a Wanger Twenty shareholder. Wanger Twenty is a non-diversified fund. The performance of each of its holdings will have a greater impact on the Fund's total return, and may make the Fund's returns more volatile than a more diversified fund. Mid-cap stocks tend to be more volatile and may be less liquid than the stocks of larger companies. As of 12/31/03, the Fund's positions in the holdings mentioned were: Electronic Arts, 3.7%; Guidant, 8.5%; First Health Group, 6.5%. Photo of: JOHN H. PARK JOHN H. PARK Portfolio Manager 8 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT IN TOTAL RETURN FOR EACH PERIOD, WANGER TWENTY FEBRUARY 1, 1999 THROUGH DECEMBER 31, 2003 AVERAGE ANNUAL TOTAL RETURN - ------------------------------------- 1 year 3 years Life of fund 30.73% 9.63% 14.39% LINE CHART: WANGER S&P TWENTY MIDCAP 400 2/1/99 10000 10000 2/28/99 9750 9476.42 10530 9741.15 12150 10509.5 12220 10555.1 6/30/99 12530 11120.2 12510 10883.9 11420 10510.9 11410 10186.3 12250 10705.4 12510 11267.2 12/31/99 13430 11936.9 13090 11600.7 13100 12412.6 13696.7 13451.5 13049.5 12981.8 12694.5 12819.8 6/30/00 13822 13008.1 13404.4 13213.6 14782.4 14688.9 15064.3 14588.3 15126.9 14093.6 13748.9 13029.8 12/31/00 14698.9 14026.6 15231.3 14339 14312.6 13520.7 13790.7 12515.5 14761.5 13896.1 15555 14219.7 6/30/01 15220.9 14162.3 15053.9 13951.4 14427.5 13495 13592.3 11816.4 13895.1 12339.1 15387.9 13257 12/31/01 16035.2 13941.9 15763.8 13869.5 15398.4 13886.5 15920.3 14879.2 15043.4 14809.6 15481.9 14559.9 6/30/02 15210.5 13494.2 14302.2 12187.1 14698.9 12248.4 13978.6 11261.6 14813.8 11749.6 15450.6 12429.3 12/31/02 14813.8 11918.6 14709.4 11570.2 14751.1 11294.7 15022.5 11389.9 15889 12216.9 16786.8 13229.3 6/30/03 17277.5 13398 17997.8 13873.3 18718.2 14502.6 18311 14280.6 19083.5 15360.4 18979.1 15895.6 12/31/03 19365.4 16163.8 This graph compares the results of $10,000 invested in Wanger Twenty on February 1, 1999 (the date the Fund began operations) through December 31, 2003, 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. DUE TO ONGOING MARKET VOLATILITY, PERFORMANCE IS SUBJECT TO SUBSTANTIAL SHORT-TERM FLUCTUATIONS. Part of the performance shown is due to the Fund's purchase of securities in IPOs. The impact of IPO purchases declines as a Fund grows large. Wanger Twenty is a non-diversified fund that invests primarily in the stocks of medium- to larger-size U.S. companies. Each stock may represent a significant part of its overall portfolio. The performance of each of these larger holdings will have a greater impact on Wanger Twenty's total return and may make the fund's returns more volatile than a more diversified fund. Mid-cap stocks are more volatile and may be less liquid than large-cap stocks. Performance results reflect any voluntary waivers or reimbursements of Fund expenses by the Advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. MUTUAL FUND PERFORMANCE CHANGES OVER TIME. CURRENT RETURNS FOR THE FUND MAY BE DIFFERENT THAN THAT SHOWN. - -------------------------------------------------------------------------------- RESULTS TO DECEMBER 31, 2003 4th quarter 1 year WANGER TWENTY 5.76% 30.73% S&P MidCap 400 13.19 35.62 S&P 500 12.18 28.68 Lipper Mid-Cap Growth Funds Index 10.98 35.42 NAV AS OF 12/31/03: $18.55 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. The Lipper Mid-Cap Growth Funds Index measures the performance of the 30 largest mid-cap growth funds tracked by Lipper. All indexes are unmanaged and include reinvested dividends. It is not possible to invest directly in an index. Performance numbers reflect all Fund expenses but do not include any insurance charge imposed by your insurance company's separate accounts. If performance included the effect of these additional charges, it would be lower. Portfolio holdings will vary in the future. - -------------------------------------------------------------------------------- TOP 5 INDUSTRIES As a % of net assets, as of 12/31/03 Information 29.2% Consumer Goods/Services 27.6 Health Care 19.1 Finance 12.9 Industrial Goods/Services 3.8 - -------------------------------------------------------------------------------- TOP 10 HOLDINGS As a % of net assets, as of 12/31/03 1. Guidant 8.5% Stents, Defibrillators & Other Cardiac Medical Devices 2. First Health Group 6.5% PPO Network 3. Interpublic Group 5.7% Advertising 4. Synopsys 4.8% Software for Designing Semiconductor Chips 5. International Game Technology 4.4% Slot Machines & Progressive Jackpots 6. TCF Financial 4.3% Great Lakes Bank 7. Expeditors International of Washington 3.8% International Freight Forwarder 8. PeopleSoft 3.7% HR, ERP, CRM & Supply Chain Software 9. Weight Watchers 3.7% Weight Loss Program 10. Electronic Arts 3.7% Entertainment Software 9 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- Logo: Squirrel PERFORMANCE REVIEW WANGER FOREIGN FORTY After three years of posting dreary results, the international markets rose sharply in 2003. Wanger Foreign Forty finished the year up 41.24% vs. a 49.65% gain for the benchmark Citigroup World ex-US Cap Range $2-10B Index and a 38.59% return for the large-cap MSCI EAFE Index. In the fourth quarter, the Fund gained 16.85%, outperforming the benchmark return of 15.81% and nearing the MSCI EAFE gain of 17.08%. Market interest in Japan and in more speculative stocks in general cooled in the fourth quarter, benefiting the Fund's relative return. But the Fund's more conservative stance toward Japan and higher-risk stocks dampened annual performance. Still, we believe an annual return of over 40%, achieved without speculative maneuvering, should delight most shareholders. Three of the Fund's top performers during the year were banks offering niche services. Anglo Irish Bank, the Fund's largest holding, finished up 125% in the Fund for the year. The corporate lending environment in the United Kingdom remained robust and Anglo Irish Bank continued to benefit. Ireland's Depfa Bank, a provider of public-sector financing, finished the year up 158%. Another banking winner in Wanger Foreign Forty was DNB Holding, a full-service commercial bank in Norway. Shares finished up 51% for the year. Problem stocks for the year included Kaba Holding, a maker of building security systems in Switzerland, down 26%. We sold the position due to weakness in its U.S. business. Oriental Land, a Disney theme park operator in Japan, was down 28% when we sold out of the position. Bad weather combined with less foot traffic took its toll on park revenues and eventually the share price. Orix, a leasing and financial services provider in Japan, was down 30%. We sold out of the position before year-end. Mid-cap stocks tend to be more volatile and may be less liquid than the stocks of larger companies. Investments in foreign securities have special risks, including political or economic instability, higher costs, different regulations, accounting standards, trading practices and levels of information, and currency exchange rate fluctuations. As of 12/31/03, the Fund's positions in the holdings mentioned were: Anglo Irish Bank, 5.9%; Depfa Bank, 3.0%; DNB Holding, 3.5%; Kaba Holding, 0.0%; Oriental Land, 0.0%; Orix, 0.0%. Photo of: TODD M. NARTER Photo of: CHRISTOPHER J. OLSON TODD M. NARTER Co-Portfolio Manager CHRISTOPHER J. OLSON Co-Portfolio Manager 10 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT IN TOTAL RETURN FOR EACH PERIOD, WANGER FOREIGN FORTY FEBRUARY 1, 1999 THROUGH DECEMBER 31, 2003 AVERAGE ANNUAL TOTAL RETURN - -------------------------------------- 1 year 3 years Life of fund 41.24% -4.24% 9.88% LINE CHART: WANGER CITIGROUP FOREIGN WORLD FORTY EX-US $2-10B 2/1/99 10000 10000 2/28/99 10020 9749.77 10190 10135.2 10620 10700.9 10480 10249.1 6/30/99 11350 10623.5 11650 11020.5 11800 11144.4 11650 11183.3 12160 11188.5 14530 11507.9 12/31/99 18390 12387.9 17890 11789.1 21580 11940.8 20853 12298.7 20915.8 11806 19303.7 11615.9 6/30/00 20193.5 12231.9 19816.6 11836.4 20863.4 12208.1 19827.1 11802.4 19356 11436.7 17042.5 11096.1 12/31/00 18099.8 11637.7 18884.9 11579.9 16812.2 11159.3 14664.2 10288.7 15748.3 11048.3 15702.7 10953.9 6/30/01 15052.2 10668.9 14333.2 10401.2 14082.2 10306.9 11811.2 9109.73 12404.6 9475.62 12941 9814.29 12/31/01 13283.4 9835.46 12655.7 9545.09 12495.9 9690.43 12918.2 10244.8 13237.7 10432.4 13351.8 10763.9 6/30/02 12906.8 10390.2 11537.3 9459.68 11731.3 9437.26 10864 8592.87 10898.3 8746.3 11217.8 9191.66 12/31/02 11252 8932.62 10704.3 8708.44 10270.6 8545.54 10357.9 8399.58 11343.3 9141.85 12317.2 9797.43 6/30/03 12386 10076.9 12603.7 10481.4 13142.2 11085.7 13600.5 11542.5 14528.6 12433.7 14860.9 12538.3 12/31/03 15892.1 13367.3 This graph compares the results of $10,000 invested in Wanger Foreign Forty on February 1, 1999 (the date the Fund began operations) through December 31, 2003, to the Citigroup World ex-US Cap Range $2-10B 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. DUE TO ONGOING MARKET VOLATILITY, PERFORMANCE IS SUBJECT TO SUBSTANTIAL SHORT-TERM FLUCTUATIONS. Wanger Foreign Forty is a diversified fund that invests in the stocks of medium- to larger-size companies with market capitalizations of $2 to $25 billion. Prior to 2/1/02, Wanger Foreign Forty was a non-diversified fund, meaning that the performance of its holdings would have a greater impact on Wanger Foreign Forty's total return and may make the fund's returns more volatile than a more diversified international fund. Mid-cap stocks are more volatile and may be less liquid than large-cap stocks. Investments in foreign securities have special risks, including political or economic instability, higher costs, different regulations, accounting standards, trading practices and levels of information, and currency exchange rate fluctuations. Performance results reflect any voluntary waivers or reimbursements of Fund expenses by the Advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. MUTUAL FUND PERFORMANCE CHANGES OVER TIME. CURRENT RETURNS FOR THE FUND MAY BE DIFFERENT THAN THAT SHOWN. - -------------------------------------------------------------------------------- RESULTS TO DECEMBER 31, 2003 4th quarter 1 year WANGER FOREIGN FORTY 16.85% 41.24% Citigroup World ex-US Cap Range $2-10B 15.81 49.65 MSCI EAFE 17.08 38.59 Lipper International Funds Index 15.45 36.00 NAV AS OF 12/31/03: $13.87 MSCI EAFE is Morgan Stanley's Europe, Australasia and Far East Index, a widely recognized international benchmark that comprises 20 major markets in Europe, Australia and the Far East. The Citigroup World ex-U.S. Cap Range $2-10B is a subset of the broad market, selected by the index sponsor, representing the mid-cap developed market, excluding the U.S. Lipper Indexes include the largest funds tracked by Lipper, Inc. in the named category. The Lipper International Funds Index is made up of the 30 largest non-U.S. funds. All indexes are unmanaged and returns include reinvested dividends. It is not possible to invest directly in an index. Performance numbers reflect all Fund expenses but do not include any insurance charge imposed by your insurance company's separate accounts. If performance included the effect of these additional charges, it would be lower. Portfolio holdings will vary in the future. - -------------------------------------------------------------------------------- TOP 5 COUNTRIES As a % of net assets, as of 12/31/03 Ireland 18.9% United Kingdom 17.1 Japan 9.2 Switzerland 9.0 France 8.8 - -------------------------------------------------------------------------------- TOP 10 HOLDINGS As a % of net assets, as of 12/31/03 1. Anglo Irish Bank 5.9% Corporate Lending & Private Banking - Ireland 2. Kerry Group 4.2% Specialty Food Ingredient Company - Ireland 3. Rhoen-Klinikum 4.2% Hospital Management - Germany 4. DNB Holding 3.5% Bank - Norway 5. BG Group 3.4% Oil & Gas Producer- United Kingdom 6. Lion Nathan 3.4% Beer Brewer/ Distributor- Australia 7. Depfa Bank 3.0% International Public Sector Finance - Ireland 8. Irish Life & Permanent 3.0% Savings Products - Ireland 9. Neopost 3.0% Postage Meter Machines - France 10. Grafton Group 2.8% Builders, Wholesalers & DIY Retailing - Ireland 11 Wanger Advisor Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER U.S. SMALLER COMPANIES STATEMENT OF INVESTMENTS DECEMBER 31, 2003 - ---------------------------------------------------------------------- Number of Value Shares COMMON STOCKS-93.1% INFORMATION-36.5% - ---------------------------------------------------------------------- TELEVISION PROGRAMMING-0.9% 620,000 Mediacom Communications (b) $5,375,400 Cable Television Franchises 138,500 Gray Television 2,094,120 Mid Market Affiliated TV Stations - ---------------------------------------------------------------------- 7,469,520 - ---------------------------------------------------------------------- RADIO-2.4% 395,900 Salem Communications (b) 10,736,807 Radio Stations for Religious Programming 427,000 Spanish Broadcasting (b) 4,483,500 Spanish Language Radio Stations 130,900 Saga Communications (b) 2,425,577 Radio Stations in Small & Mid-sized Cities 110,000 Cumulus Media, Cl. A (b) 2,420,000 Radio Stations in Small Cities - ---------------------------------------------------------------------- 20,065,884 - ---------------------------------------------------------------------- TELECOMMUNICATIONS/WIRELINE COMMUNICATIONS-1.7% 368,300 Commonwealth Telephone (b) 13,903,325 Rural Phone Franchises & CLEC - ---------------------------------------------------------------------- MOBILE COMMUNICATIONS-4.1% 1,057,000 Western Wireless (b) 19,406,520 Rural Cellular Phone Services 495,000 Crown Castle International (b) 5,459,850 Communication Towers in USA & UK 86,000 Telephone & Data Systems 5,379,300 Cellular & Telephone Services 351,750 COMARCO (b) 3,869,250 Wireless Network Testing - ---------------------------------------------------------------------- 34,114,920 - ---------------------------------------------------------------------- TELECOMMUNICATIONS EQUIPMENT-2.1% 837,800 Aspect Communications (b) 13,203,728 Call Center Equipment 340,000 Andrew (b) 3,913,400 Wireless Infrastructure Equipment 70,500 Symmetricom (b) 513,240 Network Timing & Synchronization Devices - ---------------------------------------------------------------------- 17,630,368 - ---------------------------------------------------------------------- Number of Value Shares - ---------------------------------------------------------------------- BUSINESS INFORMATION/MARKETING SERVICES/ MARKETING-2.3% 415,000 Navigant Consulting (b) $7,826,900 Consulting Firm 153,700 Getty Images (b) 7,704,981 Photographs for Publications & Electronic Media 92,900 Information Holdings (b) 2,053,090 Scientific & Medical Publications, Patent Information 200,000 InfoUSA (b) 1,484,000 Business Data for Sales Leads - ---------------------------------------------------------------------- 19,068,971 - ---------------------------------------------------------------------- BUSINESS/CONSUMER SOFTWARE-12.9% 657,825 Kronos (b) 26,056,448 Labor Management Solutions 442,900 Micros Systems (b) 19,204,144 Information Systems for Restaurants & Hotels 1,030,000 JDA Software Group (b) 17,005,300 Applications/Software & Services for Retailers 1,320,000 Novell (b) 13,886,400 Directory, Identity Management & Authorization Software 350,327 PeopleSoft (b) 7,987,456 HR, ERP, CRM & Supply Chain Software 515,000 Mapics (b) 6,741,350 Mid Market ERP Software 429,800 MRO Software (b) 5,785,108 Enterprise Management Software 628,200 E.Piphany (b) 4,529,322 CRM Software 121,800 Group 1 Software (b) 2,146,116 Address Verification Software 90,000 SPSS (b) 1,609,200 Statistical Analysis Software 34,000 Activision (b) 618,800 Entertainment Software 24,500 THQ (b) 414,295 Entertainment Software - ---------------------------------------------------------------------- 105,983,939 - ---------------------------------------------------------------------- INTERNET-0.6% 505,600 DoubleClick (b) 5,167,232 Internet Advertising & Direct Marketing Statistical Data See accompanying notes to financial statements. 12 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER U.S. SMALLER COMPANIES STATEMENT OF INVESTMENTS DECEMBER 31, 2003 - ---------------------------------------------------------------------- Number of Value Shares - ---------------------------------------------------------------------- TRANSACTION PROCESSORS-2.0% 273,440 Global Payments $12,884,493 Credit Card Processor 176,000 Euronet Worldwide (b) 3,168,000 ATM Processor 21,000 Pegasus Systems (b) 219,870 Transaction Processor for Hotel Industry - ---------------------------------------------------------------------- 16,272,363 - ---------------------------------------------------------------------- COMPUTER HARDWARE/RELATED SYSTEMS-1.7% 415,800 Seachange International (b) 6,403,320 Systems for Video on Demand & Ad Insertion 29,900 Zebra Technologies (b) 1,984,463 Bar Code Printing Hardware, Supplies & Software 50,000 Avocent (b) 1,826,000 Computer Control Switches 40,000 Rogers (b) 1,764,800 PCB Laminates & High Performance Foams 35,000 Applied Films (b) 1,155,700 Thin-Film Glass Coating Equipment 301,205 SensAble Technologies (b)(c) 560,241 Sensory Devices for Computer Based Sculpting - ---------------------------------------------------------------------- 13,694,524 - ---------------------------------------------------------------------- CONTRACT MANUFACTURING-0.5% 220,000 Plexus (b) 3,777,400 Electronic Manufacturing Services - ---------------------------------------------------------------------- SEMICONDUCTORS/RELATED EQUIPMENT-1.8% 325,000 Integrated Circuit Systems (b) 9,259,250 Silicon Timing Devices 70,000 Littelfuse (b) 2,017,400 Little Fuses 68,600 Microsemi (b) 1,686,188 Analog/Mixed Signal Semiconductors 165,900 IXYS (b) 1,551,165 Power Semiconductors - ---------------------------------------------------------------------- 14,514,003 - ---------------------------------------------------------------------- Number of Value Shares - ---------------------------------------------------------------------- INSTRUMENTATION-1.5% 288,000 Tektronix (b) $9,100,800 Analytical Instruments 60,000 Trimble Navigation (b) 2,234,400 GPS-Based Instruments 25,000 Mettler Toledo (b) 1,055,250 Laboratory Equipment - ---------------------------------------------------------------------- 12,390,450 - ---------------------------------------------------------------------- COMPUTER SERVICES-2.0% 753,000 RCM Technologies (b)(d) 5,549,610 Technology Staffing Services 705,500 AnswerThink Consulting (b) 3,915,525 IT Integrator for Fortune 2000 170,000 Pomeroy Computer Resources (b) 2,505,800 Network Integration Services 137,000 American Management Systems (b) 2,064,590 Software Development Services 149,700 Ciber (b) 1,296,402 Software Services & Staffing 256,600 Analysts International (b) 864,742 Technology Staffing Services - ---------------------------------------------------------------------- 16,196,669 - ---------------------------------------------------------------------- INFORMATION-TOTAL 300,249,568 HEALTH CARE-13.1% - ---------------------------------------------------------------------- BIOTECHNOLOGY/DRUG DELIVERY-2.1% 540,000 Nektar Therapeutics (b) 7,349,400 Pulmonary Drug Delivery 325,000 Applera Celera Genomics (b) 4,520,750 Diagnostics & Drug Development 278,000 Enzon (b) 3,336,000 Polymer Delivery Technology for Improved Drugs 250,000 Locus Discovery, Series D. Pfd. (b)(c) 1,000,000 High Throughput Rational Drug Design 154,231 SYRRX, Series C (b)(c) 802,001 X-Ray Crystallography 42,000 Myriad Genetics (b) 540,120 Gene Discovery & Diagnostic Products - ---------------------------------------------------------------------- 17,548,271 See accompanying notes to financial statements. 13 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER U.S. SMALLER COMPANIES STATEMENT OF INVESTMENTS DECEMBER 31, 2003 - ---------------------------------------------------------------------- Number of Value Shares - ---------------------------------------------------------------------- MEDICAL EQUIPMENT-3.6% 412,000 Edwards Lifesciences (b) $12,392,960 Heart Valves 213,600 Visx (b) 4,944,840 Laser Eye Surgery 93,500 Orthofix International (b) 4,579,630 Bone Fixation & Stimulation Devices 98,500 ICU Medical (b) 3,376,580 Intravenous Therapy Products 338,000 Novoste (b) 1,619,020 Radiation Catheters for In-Stent Restenosis 31,300 Diagnostic Products 1,436,983 Immunodiagnostic Kits 35,000 CTI Molecular Imaging 591,850 Medical Diagnostic Devices 25,000 Viasys Healthcare (b) 515,000 Respiratory & Neurology Medical Equipment - ---------------------------------------------------------------------- 29,456,863 - ---------------------------------------------------------------------- MEDICAL SUPPLIES-0.5% 100,700 Techne (b) 3,804,446 Cytokines, Antibodies, Other Reagents For Life Sciences - ---------------------------------------------------------------------- SERVICES-6.9% 866,000 Lincare Holdings (b) 26,005,980 Home Health Care Services 933,000 First Health Group (b) 18,156,180 PPO Network 481,800 NDCHealth Group 12,343,716 Health Claims Processing & Drug Marketing Services 44,000 Medquist (b) 706,640 Medical Transcription Services - ---------------------------------------------------------------------- 57,212,516 - ---------------------------------------------------------------------- HEALTH CARE-TOTAL 108,022,096 CONSUMER GOODS/SERVICES-16.9% - ---------------------------------------------------------------------- RETAIL-5.7% 270,500 Aeropostale (b) 7,417,110 Mall Based Teen Retailer - ---------------------------------------------------------------------- Number of Value Shares - ---------------------------------------------------------------------- RETAIL-5.7% (CONT) 289,150 Christopher & Banks (b) $5,647,100 Specialty Women's Retailer at Moderate Price Levels 99,000 Zale Corp (b) 5,266,800 Specialty Retailer of Jewelry 145,000 Petco Animal Supplies (b) 4,415,250 Pet Supplies & Services 116,600 Urban Outfitters (b) 4,320,030 Eclectic Home & Apparel Retailer 425,000 Winn Dixie Stores 4,228,750 Supermarkets in the Southeast US 120,750 Hot Topic (b) 3,557,295 Music Inspired Retailer of Apparel, Accessories & Gifts 163,000 Genesco (b) 2,466,190 Multi-Concept Branded Footware Retailer 50,000 Michaels Stores 2,210,000 Craft & Hobby Specialty Retailer 50,000 Ann Taylor (b) 1,950,000 Womens Apparel Retailer 65,000 Abercrombie & Fitch (b) 1,606,150 Teen Apparel Retailer 67,000 Borders (b) 1,468,640 Bookstores 655,000 Gadzooks (b)(d) 1,015,250 Teen Apparel Retailer 150,000 Gaiam (b) 892,500 Healthy Living Catalog & E-Commerce 20,000 Chico's Fas 739,000 Women's Specialty Retail - ---------------------------------------------------------------------- 47,200,065 - ---------------------------------------------------------------------- APPAREL-2.3% 485,400 Steven Madden (b) 9,902,160 Wholesaler/Retailer of Fashion Footware 192,000 Coach (b) 7,248,000 Designer & Retailer of Branded Leather Accessories 59,200 Oxford Industries 2,005,696 Branded & Private Label Apparel - ---------------------------------------------------------------------- 19,155,856 See accompanying notes to financial statements. 14 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER U.S. SMALLER COMPANIES STATEMENT OF INVESTMENTS DECEMBER 31, 2003 - ---------------------------------------------------------------------- Number of Value Shares - ---------------------------------------------------------------------- ENTERTAINMENT/LEISURE PRODUCTS-0.8% 51,300 International Speedway Motors $2,291,058 Largest Motorsport Racetrack Owner & Operator 90,000 Action Performance 1,764,000 Motorsport Collectibles & Merchandising 50,000 Leapfrog Enterprises (b) 1,326,500 Educational Toys 45,000 Speedway Motors 1,301,400 Motorsport Racetrack Owner & Operator - ---------------------------------------------------------------------- 6,682,958 - ---------------------------------------------------------------------- CASINOS-0.4% 75,000 Alliance Gaming (b) 1,848,750 Diversified Gaming Company 107,700 Monarch Casino & Resort (b) 1,187,931 Casino/Hotel in Reno - ---------------------------------------------------------------------- 3,036,681 - ---------------------------------------------------------------------- FURNITURE & TEXTILES-0.6% 110,000 Herman Miller 2,669,700 Office Furniture 33,000 Mohawk Industries (b) 2,327,820 Carpet & Flooring Manufacturer - ---------------------------------------------------------------------- 4,997,520 - ---------------------------------------------------------------------- DURABLE GOODS-0.3% 42,000 American Woodmark 2,312,100 Kitchen Cabinets - ---------------------------------------------------------------------- NON-DURABLES-0.3% 47,000 Scotts Company (b) 2,780,520 Consumer Lawn & Garden Products - ---------------------------------------------------------------------- TRAVEL-0.1% 150,000 LaQuinta (b) 961,500 Owner/Franchiser of Mid-Priced Hotels - ---------------------------------------------------------------------- CONSUMER SERVICES-6.4% 927,000 ITT Educational Services (b) 43,541,190 Post Secondary Degree Programs 390,000 Coinstar (b) 7,043,400 Owner/Operator of Coin Counting Machines - ---------------------------------------------------------------------- Number of Value Shares - ---------------------------------------------------------------------- CONSUMER SERVICES-6.4% (CONT) 101,500 Central Parking $1,515,395 Owner, Operator & Manager of Parking Lots & Garages - ---------------------------------------------------------------------- 52,099,985 - ---------------------------------------------------------------------- CONSUMER GOODS/SERVICES - TOTAL 139,227,185 FINANCE-10.5% - ---------------------------------------------------------------------- BANKS/SAVINGS & LOANS-2.6% 158,500 TCF Financial 8,138,975 Great Lakes Bank 90,000 Downey Financial 4,437,000 California Home Lender 105,500 Chittenden 3,549,020 Vermont & Western Massachusetts Bank 85,200 Anchor Bancorp Wisconsin 2,121,480 Wisconsin Thrift 53,350 Texas Regional Bancshares 1,973,950 TexMex Bank 34,800 Peoples Bank Bridgeport 1,134,480 Connecticut Savings & Loan - ---------------------------------------------------------------------- 21,354,905 - ---------------------------------------------------------------------- FINANCE COMPANIES-2.7% 1,135,400 AmeriCredit (b) 18,086,922 Auto Lending 217,100 World Acceptance (b) 4,322,461 Personal Loans - ---------------------------------------------------------------------- 22,409,383 - ---------------------------------------------------------------------- INSURANCE-4.0% 427,000 HCC Insurance Holdings 13,578,600 Aviation Insurance 39,000 Markel (b) 9,886,890 Specialty Insurance 92,000 Leucadia National 4,241,200 Insurance Holding Company 97,000 Harleysville Group 1,929,330 Commercial & Personal Lines Insurance 35,000 Philadelphia Consolidated Holding (b) 1,709,050 Specialty Insurance See accompanying notes to financial statements. 15 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER U.S. SMALLER COMPANIES STATEMENT OF INVESTMENTS DECEMBER 31, 2003 - ---------------------------------------------------------------------- Number of Value Shares - ---------------------------------------------------------------------- INSURANCE-4.0% (CONT) 57,400 United National Group $1,014,258 Specialty Insurance - ---------------------------------------------------------------------- 32,359,328 - ---------------------------------------------------------------------- MONEY MANAGEMENT-1.2% 321,000 SEI Investments 9,780,870 Mutual Fund Administration - ---------------------------------------------------------------------- FINANCE - TOTAL 85,904,486 INDUSTRIAL GOODS/SERVICES-6.6% - ---------------------------------------------------------------------- INDUSTRIAL GOODS-1.0% 98,000 Clarcor 4,321,800 Mobile & Industrial Filters 45,100 Mine Safety Appliances 3,585,901 Safety Equipment 10,300 Intermagnetics General (b) 228,248 Superconducting Wire - ---------------------------------------------------------------------- 8,135,949 - ---------------------------------------------------------------------- MACHINERY-2.0% 243,000 Esco Technologies (b) 10,606,950 Filtration & Test Equipment 90,000 Ametek 4,343,400 Aerospace/Industrial Instruments 26,300 Pentair 1,201,910 Pumps, Water Treatment & Tools - ---------------------------------------------------------------------- 16,152,260 - ---------------------------------------------------------------------- WATER-0.9% 133,000 Cuno (b) 5,988,990 Filtration & Fluids Clarification 70,000 Insituform Technologies (b) 1,155,000 Water/Sewer Pipe Repair - ---------------------------------------------------------------------- 7,143,990 - ---------------------------------------------------------------------- STEEL-0.2% 50,000 Gibraltar Steel 1,257,500 Steel Processing - ---------------------------------------------------------------------- CONSTRUCTION-0.2% 30,000 Florida Rock Industries 1,645,500 Concrete & Aggregates - ---------------------------------------------------------------------- Number of Value Shares - ---------------------------------------------------------------------- SPECIALTY CHEMICALS & INDUSTRIAL MATERIALS-0.5% 95,000 Spartech $2,340,800 Plastics Distribution & Compounding 70,000 Schulman 1,492,400 Plastics Distribution & Compounding - ---------------------------------------------------------------------- 3,833,200 - ---------------------------------------------------------------------- INDUSTRIAL DISTRIBUTION-0.3% 100,000 Nuco2 (b) 1,267,000 Bulk CO2 Gas Distribution to Restaurants 50,000 Airgas 1,074,000 Industrial Gas Distributor - ---------------------------------------------------------------------- 2,341,000 - ---------------------------------------------------------------------- LOGISTICS-0.6% 174,000 Hub Group (b) 3,747,960 Truck & Rail Freight Forwarder 59,600 Forward Air (b) 1,639,000 Freight Transportation Between Airports - ---------------------------------------------------------------------- 5,386,960 - ---------------------------------------------------------------------- OTHER INDUSTRIAL SERVICES-0.9% 412,100 Insurance Auto Auctions (b) 5,377,905 Auto Salvage Services 125,000 Clark/Bardes Consulting (b) 2,405,000 Executive Compensation & Benefits Consulting - ---------------------------------------------------------------------- 7,782,905 - ---------------------------------------------------------------------- INDUSTRIAL GOODS/SERVICES-TOTAL 53,679,264 ENERGY/MINERALS-7.4% - ---------------------------------------------------------------------- OIL/GAS PRODUCERS-2.4% 148,000 Western Gas 6,993,000 Oil Producer & Coal Seam Gas Producer 265,000 Ultra Petroleum (b) 6,524,300 Natural Gas Producer 108,400 Southwestern Energy (b) 2,590,760 Oil & Gas Exploration/Production 75,000 Quicksilver (b) 2,422,500 Natural Gas & Coal Seam Gas Producer 40,000 Evergreen Resources (b) 1,300,400 Coal Seam Gas Producer - ---------------------------------------------------------------------- 19,830,960 16 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER U.S. SMALLER COMPANIES STATEMENT OF INVESTMENTS DECEMBER 31, 2003 - ---------------------------------------------------------------------- Number of Value Shares - ---------------------------------------------------------------------- OIL SERVICES-3.0% 490,700 FMC Technologies (b) $11,433,310 Deep Water Oil & Gas Well Head Manufacturer 1,195,600 Newpark Resources (b) 5,726,924 Oilfield Fluid Management & Equipment Rental 105,000 Carbo Ceramics 5,381,250 Natural Gas Well Stimulants 205,000 Key Energy Services (b) 2,113,550 Oil & Gas Well Workover Services - ---------------------------------------------------------------------- 24,655,034 - ---------------------------------------------------------------------- DISTRIBUTION/MARKETING/REFINING-2.0% 236,000 Equitable Resources 10,129,120 Natural Gas Utility & Producer 168,000 Atmos Energy 4,082,400 Natural Gas Utility 80,000 Oneok 1,766,400 Natural Gas Utility, Marketing & Processing 115,000 Aquila (b)(c) 809,600 Electric Utility Holding Company - ---------------------------------------------------------------------- 16,787,520 - ---------------------------------------------------------------------- ENERGY/MINERALS-TOTAL 61,273,514 OTHER INDUSTRIES-2.1% - ---------------------------------------------------------------------- REAL ESTATE-1.5% 152,000 Chelsea Property Group 8,331,120 Outlet Malls 47,000 The Rouse Company 2,209,000 Regional Shopping Malls 100,000 Crescent Real Estate Equities 1,713,000 Class A Office Buildings 25,000 Highland Hospitality (b) 272,500 Hotel Real Estate Investment Trust - ---------------------------------------------------------------------- 12,525,620 - ---------------------------------------------------------------------- REGULATED UTILITIES-0.6% 250,000 Northeast Utilities 5,042,500 Regulated Electric Utility - ---------------------------------------------------------------------- OTHER INDUSTRIES-TOTAL 17,568,120 TOTAL COMMON STOCKS (COST: $505,313,202)-93.1% 765,924,233 - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Principal Value Amount SHORT-TERM OBLIGATIONS-7.0% - ----------------------------------------------------------------------- $25,000,000 Sara Lee, 1.14% due 01/06/04 $24,996,042 32,479,000 Repurchase agreement with State Street Bank & Trust Co, dated 12/31/03, due 01/02/04 at 0.85%, collateralized by Federal National Mortgage Association Notes, maturing 08/15/04, market value $33,128,869 (repurchase proceeds $32,480,534) 32,479,000 - ----------------------------------------------------------------------- (AMORTIZED COST: $57,475,042) 57,475,042 TOTAL INVESTMENTS (COST: $562,788,244)-100.1% (a) 823,399,275 - ----------------------------------------------------------------------- CASH AND OTHER ASSETS LESS LIABILITIES-(0.1%) (740,780) - ----------------------------------------------------------------------- TOTAL NET ASSETS-100% $822,658,495 ====================================================================== NOTES TO STATEMENT OF INVESTMENTS: (a) At December 31, 2003, cost for federal income tax purposes is $563,020,398. The net unrealized appreciation was $260,378,877 consisting of gross unrealized appreciation of $286,819,477 and gross unrealized depreciation of $26,440,600. (b) Non-income producing security. (c) Denotes a restricted security, which is subject to restrictions on resale under federal securities laws. These securities are valued in good faith by the Board of Trustees. At December 31, 2003, these securities amounted to $3,171,842 which represents 0.4% of net assets. Additional information on these securities is as follows: Acquisition Security Date Shares Cost Value - -------------------------------------------------------------------------------- Aquila 10/25-11/14/01 115,000 $2,433,066 $ 809,600 Locus Discovery, Series D. Pfd. 09/05/01 250,000 1,000,000 1,000,000 SensAble Technologies 04/04/00 301,205 1,000,000 560,241 SYRRX, Series C 01/04/01 154,231 1,002,502 802,001 ---------- ---------- $5,435,568 $3,171,842 ========== ========== (d) At December 31, 2003, the Fund held the following percentages of the outstanding voting shares of the companies listed below: Gadzooks 7.15% RCM Technologies 7.07% The aggregate cost and value of these companies at December 31, 2003, was $4,124,000 and $3,869,000, respectively. Investments in affiliated companies represent 0.47% of total net assets at December 31, 2003. The change in unrealized gain in these companies amounted to $2,276,000 during the period ended December 31, 2003. There was no other investment activity during the period. See accompanying notes to financial statements. 17 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER INTERNATIONAL SMALL CAP STATEMENT OF INVESTMENTS DECEMBER 31, 2003 - ---------------------------------------------------------------------- Number of Value Shares COMMON STOCKS-94.8% EUROPE-67.1% - ---------------------------------------------------------------------- GERMANY/AUSTRIA-8.2% 75,000 Rhoen-Klinikum $3,874,345 Hospital Management 28,600 Mayr Melnhof (Austria) 3,434,096 Cartonboard & Packaging 100,000 GFK 2,875,207 Market Research Services 383,000 Takkt 2,847,110 Mail Order Retailer of Office & Warehouse Durables 43,574 Beru 2,838,386 Auto Parts & Electronics 200,000 Deutsche Beteiligung 2,724,013 Private Equity 95,000 Wienerberger (Austria) 2,535,146 Bricks & Clay Roofing Tiles 118,000 Hugo Boss Designs 2,371,353 Fashion Apparel 95,000 DIS - Deutscher Industrie Services 2,215,560 Temporary Employment 90,000 Zapf Creation 2,169,257 Toy Manufacturer 36,850 Rational 2,089,777 Commercial Oven Manufacturer 50,000 Kali & Salz 1,370,826 Potash Products, Fertilizers, Salt & Waste Management - ---------------------------------------------------------------------- 31,345,076 - ---------------------------------------------------------------------- DENMARK-0.5% 17,500 Kobenhavns Lufthavne 2,049,000 Copenhagen Airport Manager - ---------------------------------------------------------------------- NORWAY-1.7% 190,000 Ekornes 3,505,851 Niche Furniture Manufacturer 460,000 Tomra Systems 2,767,177 Reverse Vending Machines - ---------------------------------------------------------------------- 6,273,028 - ---------------------------------------------------------------------- FINLAND-2.2% 412,200 Sponda 3,432,914 Office & Warehouse Property Company - ---------------------------------------------------------------------- Number of Value Shares - ---------------------------------------------------------------------- FINLAND-2.2% (CONT) 73,000 Amer Group $3,159,389 Branded Sporting Goods 64,600 Jaakko Poyry 1,774,363 Engineering Consultants in Forestry & Energy - ---------------------------------------------------------------------- 8,366,666 - ---------------------------------------------------------------------- SWEDEN-3.2% 157,500 Hexagon 4,291,792 Diversified Engineering 271,000 Nobia 2,825,742 Kitchen Interiors Manufacturing & Distribution 366,000 Intrum Justitia (b) 1,933,600 Receivables Management & Debt Collection 70,000 Munters 1,693,360 Moisture & Humidity Control 52,000 Castellum 1,229,007 Office, Warehouse & Retail Property Company 66,500 Biotage (b) 108,171 Discovery Chemistry (Microwaves & Purification) - ---------------------------------------------------------------------- 12,081,672 - ---------------------------------------------------------------------- FRANCE/BELGIUM-8.6% 110,000 Rubis 4,222,976 Tank Storage & LPG Supplier 48,409 Camaieu 3,751,066 Women's Apparel Retailer 40,000 Algeco 3,434,625 Modular Construction 41,000 Bacou Dalloz (b) 3,202,794 Safety Equipment 15,000 Imerys 3,154,286 Industrial Minerals Producer 120,000 Fininfo 2,825,817 Data Feeds for French Banks & Brokers 50,000 Neopost 2,519,901 Postage Meter Machines 30,000 Vallourec 2,494,702 Seamless Tubes 50,000 Norbert Dentressangle 2,056,239 Transport See accompanying notes to financial statements. 18 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER INTERNATIONAL SMALL CAP STATEMENT OF INVESTMENTS DECEMBER 31, 2003 - ---------------------------------------------------------------------- Number of Value Shares - ---------------------------------------------------------------------- FRANCE/BELGIUM-8.6% (CONT) 60,100 Omega Pharma (Belgium) $1,908,220 OTC Products,Pharmacy & Dental Supplies 20,000 Bonduelle 1,825,668 Producer of Canned, Frozen & Fresh Vegetables 145,000 Cerep (b) 1,498,081 Health Care - ---------------------------------------------------------------------- 32,894,375 - ---------------------------------------------------------------------- GREECE-1.1% 218,000 Intralot 4,251,879 Lottery & Gaming Systems & Services - ---------------------------------------------------------------------- UNITED KINGDOM/IRELAND-22.5% 450,000 Anglo Irish Bank (Ireland) 7,092,891 Corporate Lending & Private Banking 800,000 Grafton Group (Ireland) 5,513,543 Builders, Wholesalers & DIY Retailing 900,000 International Greetings 4,723,246 Private Label Greeting Products 750,000 French Connection 4,428,043 Clothing Wholesaler & Retailer 225,000 Kerry Group (Ireland) 4,223,984 Specialty Food Ingredient Company 450,000 Business Post Group 4,144,889 UK Parcel & Express Mail Service 790,000 Care UK 4,075,451 Nursing Home & Psychiatric Care Facilities 825,000 Expro International 3,976,202 Offshore Oil Field Services 750,000 Hit Entertainment 3,942,732 Children's Television Shows 1,450,000 RPS Group 3,811,308 Environmental Consulting 650,000 Kensington 3,799,928 Non-Conforming Mortgage Company 30,000 Depfa Bank (Ireland) 3,783,631 International Public Sector Finance 200,000 Irish Life & Permanent (Ireland) 3,225,473 Savings Products - ---------------------------------------------------------------------- Number of Value Shares - ---------------------------------------------------------------------- UNITED KINGDOM/IRELAND-22.5% (CONT) 650,000 Charles Taylor Group $3,063,148 Insurance 640,000 Bloomsbury Publishing 2,976,037 Publishing 1,800,000 Tullow Oil (b) 2,755,227 Oil & Gas Producer 130,000 Cobham 2,708,101 Aerospace 314,000 Spectris 2,386,355 Electronic Instruments & Controls 700,000 Metal Bulletin 2,311,641 Publisher - Metals, Derivatives & Hedge Fund Journals 180,000 Jurys Doyle Hotel (Ireland) 2,199,874 Hotel Group 561,500 Nestor Healthcare Group 2,064,751 Healthcare Staffing Company 200,000 Jardine Lloyd Thompson 1,883,229 Business Insurance Broker 210,000 Burberry 1,370,116 Apparel Retailer 400,000 TDG Group 1,353,069 Logistics & Storage Company 70,000 Intermediate Capital 1,319,510 European Provider of Mezzanine Capital 325,000 Ricardo 1,119,673 Auto Engine Design 100,000 McCarthy & Stone 922,872 Builder of Retirement Apartments 50,000 Topps Tiles 506,508 Retail Tile Company - ---------------------------------------------------------------------- 85,681,432 - ---------------------------------------------------------------------- SWITZERLAND-3.6% 6,500 Geberit International 3,194,052 Plumbing Supplies 8,000 BKW Energie 3,097,066 Electric Utility 8,000 Hiestand Holding 2,780,247 Bakery Goods See accompanying notes to financial statements. 19 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER INTERNATIONAL SMALL CAP STATEMENT OF INVESTMENTS DECEMBER 31, 2003 - ---------------------------------------------------------------------- Number of Value Shares - ---------------------------------------------------------------------- SWITZERLAND-3.6% (CONT) 12,700 Kaba Holdings $2,566,071 Building Security Systems 5,000 Sika 2,157,925 Chemicals for Construction & Industrial Application - ---------------------------------------------------------------------- 13,795,361 - ---------------------------------------------------------------------- ITALY-3.5% 242,000 Amplifon 6,875,676 Hearing Aid Retailer 320,000 Granitifiandre 2,777,939 Leading Innovator in the Stoneware Industry 50,000 Davide Campari 2,425,405 Beverages 300,000 De Longhi 1,254,911 Consumer Appliances for Heating, Air Conditioners & Cooking - ---------------------------------------------------------------------- 13,333,931 - ---------------------------------------------------------------------- SPAIN-3.1% 110,000 Gamesa (b) 3,615,932 Wind Turbines 356,000 Cortefiel 3,274,359 Apparel Retailer 244,100 Abengoa 1,774,586 Engineering & Construction 79,200 Zardoya Otis (b) 1,646,503 Elevator Maintenance & Service Provider 100,000 Red Electrica 1,637,936 Spanish Power Grid - ---------------------------------------------------------------------- 11,949,316 - ---------------------------------------------------------------------- LUXEMBOURG-0.4% 145,300 SES Global 1,464,566 Satellite Broadcasting Services - ---------------------------------------------------------------------- NETHERLANDS-7.2% 201,122 United Services Goup 4,599,278 Temporary Staffing Services 170,035 Aalberts Industries 4,398,258 Flow Control & Heat Treatment - ---------------------------------------------------------------------- Number of Value Shares - ---------------------------------------------------------------------- NETHERLANDS-7.2% (CONT) 96,400 OPG Groep $4,378,605 Pharmaceutical Wholesaler & Retailer 69,276 Fugro 3,561,201 Survey & GPS Services 135,000 IM Tech 3,500,520 Technical Engineering 106,184 Sligro Food Group 3,271,082 Food Service & Wholesaling 69,135 Hunter Douglas 3,232,529 Decorative Window Coverings 40,952 Am NV 317,841 Property Developer - ---------------------------------------------------------------------- 27,259,314 - ---------------------------------------------------------------------- POLAND-1.3% 152,350 Central European Distribution (b) 4,814,260 Spirits & Wine Distribution - ---------------------------------------------------------------------- EUROPE-TOTAL 255,559,876 ASIA-19.4% - ---------------------------------------------------------------------- HONG KONG/CHINA-8.2% 7,128,000 Global Bio-Chem Technology Group 4,406,943 Corn-Based Food Products 8,450,000 Ngai Lik Industrial 3,482,853 China Based A/V Contract Manufacturer 1,000,000 Techtronic Industries 2,769,280 Power Tool Manufacturer 6,000,000 Sinotrans (China) (b) 2,704,878 Integrated Logistics in China 10,000,000 Vitasoy 2,485,912 Soy Food Brands 8,000,000 Convenience Retail 2,318,467 Exclusive Circle K Franchisee 3,600,000 Aeon Credit Service 2,306,875 Credit Card Issuer 3,000,000 Hainan Meilan Airport (China) (b) 2,086,621 Chinese Airport Operator 5,000,000 Linmark 2,044,759 Apparel/Hard Goods Sourcing Agent See accompanying notes to financial statements. 20 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER INTERNATIONAL SMALL CAP STATEMENT OF INVESTMENTS DECEMBER 31, 2003 - ---------------------------------------------------------------------- Number of Value Shares - ---------------------------------------------------------------------- HONG KONG/CHINA-8.2% (CONT) 10,000,000 Lerado Group $1,932,056 Baby Paraphernalia 4,000,000 Harbin Brewery (China) (b) 1,610,047 China Brewery 890,000 Ports Design (China) (b) 1,599,163 High-End Chinese Fashion Design & Retail 1,185,000 Lianhua Supermarket (China) (b) 1,251,586 Chinese Supermarket Chain 321,100 Clear Media (China) (b) 206,794 China's Largest Outdoor Advertiser - ---------------------------------------------------------------------- 31,206,234 - ---------------------------------------------------------------------- JAPAN-6.1% 46,000 Sugi Pharmacy 3,181,593 Drugstores 45,000 ARRK 2,910,813 Prototypes & Molds for New Product Development 625,000 OMC Card (b) 2,537,686 Credit Card Issuer 180,000 NIFCO 2,259,766 Molded Plastic Components 55,000 Eneserve 2,207,495 In-House Power Generators 197,800 Toyo Technica 2,187,828 Value Added Reseller of Imported Instrumentation 82,800 Park 24 1,897,363 Parking Lot Operator 60,000 Drake Beam Morin 1,545,713 Employment Outplacement Services 60,000 Taisei Lamick 1,310,496 Packaging Materials & Machinery 55,000 Nissin Healthcare Food Service 1,119,149 Meal Preparation 77,000 Daiseki 1,051,486 Waste Disposal & Recycling 4,000 Bellsystem 24 817,660 Call Centers - ---------------------------------------------------------------------- Number of Value Shares - ---------------------------------------------------------------------- JAPAN-6.1% (CONT) 2,000 Kappa Create $168,946 Sushi Chain Restaurant Operator - ---------------------------------------------------------------------- 23,195,994 - ---------------------------------------------------------------------- TAIWAN-1.6% 303,000 ASE Test (b) 4,535,910 Semiconductor Packaging & Test Services 1,467,300 Phoenixtec Power 1,720,134 Uninterruptable Power Supplies - ---------------------------------------------------------------------- 6,256,044 - ---------------------------------------------------------------------- SOUTH KOREA-1.5% 55,130 Yuhan 3,137,066 Ethical Drug Producer 320,000 Samyoung Heat Exchange 2,562,149 Power Plant Related Machinery - ---------------------------------------------------------------------- 5,699,215 - ---------------------------------------------------------------------- INDONESIA-0.3% 7,000,000 PT Perusahaan Gas Negara (b) 1,288,216 Gas Pipeline Operator - ---------------------------------------------------------------------- SINGAPORE-1.1% 1,700,000 Sembcorp Logistics 2,002,002 Logistic Services for Marine Transport 4,161,427 Comfort Group (b) 1,997,034 Taxi Service - ---------------------------------------------------------------------- 3,999,036 - ---------------------------------------------------------------------- THAILAND-0.6% 2,559,600 Thai Union Frozen Products 2,067,189 Canned Tuna Fish - ---------------------------------------------------------------------- ASIA-TOTAL 73,711,928 See accompanying notes to financial statements. 21 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER INTERNATIONAL SMALL CAP STATEMENT OF INVESTMENTS DECEMBER 31, 2003 - ---------------------------------------------------------------------- Number of Value Shares LATIN AMERICA-1.7% - ---------------------------------------------------------------------- MEXICO-1.4% 150,000 Grupo Aeroportuario $2,640,000 Mexican Airport Authority 1,000,000 Consorcio ARA (b) 2,482,869 Low/Medium Income House Builder - ---------------------------------------------------------------------- 5,122,869 - ---------------------------------------------------------------------- CHILE-0.3% 46,400 CorpBanca (b) 1,209,648 Chile's 3rd Largest Local Bank - ---------------------------------------------------------------------- LATIN AMERICA-TOTAL 6,332,517 OTHER COUNTRIES-6.6% - ---------------------------------------------------------------------- AUSTRALIA/NEW ZEALAND-2.3% 600,000 Billabong International 3,221,121 Surfwear Apparel Manufacturer 70,000 Perpetual Trustees 2,245,298 Investment Management 600,000 Sky City Entertainment 1,812,283 Casino/Entertainment Complex 500,000 The Warehouse Group (New Zealand) 1,677,311 Warehouse Club - ---------------------------------------------------------------------- 8,956,013 - ---------------------------------------------------------------------- CANADA-4.3% 343,400 Patheon (b) 3,092,952 Pharmaceuticals 135,000 Corus Entertainment (b) 2,872,674 CATV Programming & Radio Stations 600,000 Fairborne Energy 2,553,488 Oil & Gas Producer 1,000,000 Esprit Exploration (b) 2,151,120 Natural Gas Producer 261,000 VFC 1,985,244 Auto Finance Company 120,200 Enerflex Systems 1,878,779 Natural Gas Compressor - ---------------------------------------------------------------------- Number of Shares or Value Principal Amount - ---------------------------------------------------------------------- CANADA-4.3% (CONT) 140,000 Shawcor $1,688,861 Oil & Gas Pipeline Products - ---------------------------------------------------------------------- 16,223,118 - ---------------------------------------------------------------------- OTHER-TOTAL 25,179,131 TOTAL COMMON STOCKS (COST: $273,704,897)-94.8% 360,783,452 - ---------------------------------------------------------------------- SHORT-TERM OBLIGATIONS-4.7% - ---------------------------------------------------------------------- $18,149,000 Repurchase agreement with State Street Bank & Trust Co., dated 12/31/03, due 01/02/04 at 0.85%, collateralized by Federal National Mortgage Association Notes, maturing 08/15/05, market value $18,514,895 (repurchase proceeds $18,149,857) 18,149,000 - ---------------------------------------------------------------------- (AMORTIZED COST: $18,149,000) 18,149,000 TOTAL INVESTMENTS (COST: $291,853,897)-99.5% (a)(c) 378,932,452 - ---------------------------------------------------------------------- CASH AND OTHER ASSETS LESS LIABILITIES-0.5% 1,793,270 - ---------------------------------------------------------------------- TOTAL NET ASSETS-100% $380,725,722 ====================================================================== NOTES TO STATEMENT OF INVESTMENTS: (a) At December 31, 2003, cost for federal income tax purposes is $293,290,437. The net unrealized appreciation was $85,642,015 consisting of gross unrealized appreciation of $96,393,965 and gross unrealized depreciation of $10,751,950. (b) Non-income producing security. (c) On December 31, 2003, The Fund's total investments were denominated in currencies as follows: % of Net Currency Value Assets --------------------------------------------------------------- Euro $156,904,520 41.2% British Pounds 59,642,035 15.7 U.S. Dollars 31,348,818 8.2 Hong Kong Dollars 31,206,234 8.2 Japanese Yen 23,195,996 6.1 Other currencies less than 5% of total net assets 76,634,849 20.1 ------------ ---- $378,932,452 99.5% See accompanying notes to financial statements. 22 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER INTERNATIONAL SMALL CAP PORTFOLIO DIVERSIFICATION DECEMBER 31, 2003 AT DECEMBER 31, 2003, THE FUND'S PORTFOLIO INVESTMENTS AS A PERCENT OF NET ASSETS WAS DIVERSIFIED AS FOLLOWS: Value Percent - -------------------------------------------------- INFORMATION TECHNOLOGY Business Information & Marketing Services $10,329,991 2.7% Television Programming 6,815,406 1.8 Publishing 5,287,679 1.4 Instrumentation 4,574,183 1.2 Semiconductors and Related Equipment 4,535,910 1.2 Contract Manufacturing 3,482,853 0.9 Computer Hardware and Related Equipment 1,720,134 0.4 Satellite Broadcasting and Services 1,464,566 0.4 Advertising 206,794 0.1 - -------------------------------------------------- 38,417,516 10.1 - -------------------------------------------------- HEALTHCARE Services 13,546,175 3.6 Pharmaceuticals 7,728,099 2.0 Hospital Management 3,874,348 1.0 Medical Equipment 108,171 0.0 - -------------------------------------------------- 25,256,793 6.6 - -------------------------------------------------- CONSUMER GOODS/SERVICES Retail 28,128,217 7.4 Food 21,061,025 5.5 Furniture and Textiles 10,070,630 2.6 Apparels 9,236,396 2.4 Durable Goods 6,862,577 1.8 Non Durable Goods 6,033,742 1.6 Goods Distribution 4,814,260 1.3 Gaming 4,251,879 1.1 Beverage 4,035,452 1.1 Consumer Services 3,829,419 1.0 Leisure Products 3,159,389 0.8 Travel 2,199,874 0.6 Other Entertainment 2,169,257 0.6 Casinos 1,812,283 0.5 Restaurants 168,946 0.0 - -------------------------------------------------- 107,833,346 28.3 Value Percent - -------------------------------------------------- FINANCE Banks $12,086,170 3.2% Finance Companies 9,038,282 2.4 Insurance 8,171,850 2.1 Money Management 4,969,311 1.3 Credit Cards 2,537,686 0.7 Savings & Loans 2,306,875 0.6 - -------------------------------------------------- 39,110,174 10.3 - -------------------------------------------------- INDUSTRIAL GOODS/SERVICES Other Industrial Services 25,474,125 6.7 Industrial Materials 19,038,074 5.0 Outsourcing & Training Services 11,778,901 3.1 Machinery 11,585,507 3.0 Conglomerates 10,464,636 2.7 Construction 8,506,958 2.2 Electrical Components 6,324,033 1.7 Industrial Distribution 5,513,543 1.4 Steel 2,494,702 0.7 Specialty Chemicals 2,157,925 0.6 - -------------------------------------------------- 103,338,404 27.1 - -------------------------------------------------- ENERGY/MINERALS Oil Services 11,105,043 2.9 Oil/Gas Producers 7,459,835 2.0 Oil Refining/Marketing/ Distribution 5,511,192 1.4 Independent Power 2,207,495 0.6 - -------------------------------------------------- 26,283,565 6.9 - -------------------------------------------------- OTHER Transportation 10,828,891 2.9 Real Estate 4,979,761 1.3 Regulated Utilities 4,735,002 1.3 - -------------------------------------------------- 20,543,654 5.5 - -------------------------------------------------- TOTAL COMMON STOCKS 360,783,452 94.8 - -------------------------------------------------- SHORT-TERM OBLIGATIONS 18,149,000 4.7 - -------------------------------------------------- TOTAL INVESTMENTS 378,932,452 99.5 - -------------------------------------------------- CASH AND OTHER ASSETS LESS LIABILITIES 1,793,270 0.5 - -------------------------------------------------- NET ASSETS $380,725,722 100.0% ================================================== See accompanying notes to financial statements. 23 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER TWENTY STATEMENT OF INVESTMENTS DECEMBER 31, 2003 - ---------------------------------------------------------------------- Number of Value Shares COMMON STOCKS-92.6% INFORMATION-29.2% - ---------------------------------------------------------------------- BUSINESS INFORMATION/ADVERTISING-9.3% 190,000 Interpublic Group (b) $2,964,000 Advertising 31,000 Moody's (b) 1,877,050 Ratings Service for Credit Obligations - ---------------------------------------------------------------------- 4,841,050 - ---------------------------------------------------------------------- BUSINESS/CONSUMER SOFTWARE-12.2% 74,000 Synopsys (b) 2,498,240 Software for Designing Semiconductor Chips 85,000 PeopleSoft (b) 1,938,000 HR, ERP, CRM & Supply Chain Software 40,000 Electronic Arts (b) 1,911,200 Entertainment Software - ---------------------------------------------------------------------- 6,347,440 - ---------------------------------------------------------------------- GAMING EQUIPMENT-4.4% 64,000 International Game Technology (b) 2,284,800 Slot Machines & Progressive Jackpots - ---------------------------------------------------------------------- INSTRUMENTATION-3.3% 55,000 Tektronix (b) 1,738,000 Analytical Instruments - ---------------------------------------------------------------------- INFORMATION-TOTAL 15,211,290 CONSUMER GOODS/SERVICES-27.6% - ---------------------------------------------------------------------- ENTERTAINMENT-2.1% 24,000 International Speedway Motors 1,071,840 Largest Motorsport Racetrack Owner & Operator - ---------------------------------------------------------------------- RETAIL-8.3% 45,000 Costco (b) 1,673,100 Warehouse Superstores 71,000 Safeway (b) 1,555,610 Retail Food & Drug Stores 45,000 Abercrombie & Fitch (b) 1,111,950 Teen Apparel Retailer - ---------------------------------------------------------------------- 4,340,660 - ---------------------------------------------------------------------- Number of Value Shares - ---------------------------------------------------------------------- CONSUMER SERVICES-3.7% 50,000 Weight Watchers (b) $1,918,500 Weight Loss Program - ---------------------------------------------------------------------- APPAREL-3.3% 46,000 Coach (b) 1,736,500 Designer & Retailer of Branded Leather Accessories - ---------------------------------------------------------------------- FURNITURE/TEXTILES-6.7% 78,000 Herman Miller 1,893,060 Office Furniture 23,000 Mohawk Industries (b) 1,622,420 Carpet & Flooring - ---------------------------------------------------------------------- 3,515,480 - ---------------------------------------------------------------------- LEISURE VEHICLES-3.5% 38,000 Harley Davidson 1,806,140 Motorcycles & Related Merchandise - ---------------------------------------------------------------------- CONSUMER GOODS/SERVICES-TOTAL 14,389,120 HEALTH CARE-19.1% - ---------------------------------------------------------------------- HOSPITAL/LABORATORY SUPPLIES-2.1% 29,000 Techne (b) 1,095,620 Cytokines, Antibodies, Other Reagents For Life Sciences - ---------------------------------------------------------------------- MEDICAL EQUIPMENT-8.5% 74,000 Guidant (b) 4,454,800 Stents, Defibrillators & Other Cardiac Medical Devices - ---------------------------------------------------------------------- SERVICES-8.5% 175,000 First Health Group (b) 3,405,500 PPO Network 34,000 Lincare Holdings (b) 1,021,020 Home Health Care Services - ---------------------------------------------------------------------- 4,426,520 - ---------------------------------------------------------------------- HEALTH CARE-TOTAL 9,976,940 See accompanying notes to financial statements. 24 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER TWENTY STATEMENT OF INVESTMENTS DECEMBER 31, 2003 - ---------------------------------------------------------------------- Number of Value Shares FINANCE-12.9% - ---------------------------------------------------------------------- MONEY MANAGEMENT-2.0% 34,000 SEI Investments $1,035,980 Mutual Fund Administration - ---------------------------------------------------------------------- INSURANCE-3.5% 7,100 Markel (b) 1,799,921 Specialty Insurance - ---------------------------------------------------------------------- BANKS-7.4% 44,000 TCF Financial 2,259,400 Great Lakes Bank 38,000 Associated Banc-Corp 1,620,700 Midwest Bank - ---------------------------------------------------------------------- 3,880,100 - ---------------------------------------------------------------------- FINANCE-TOTAL 6,716,001 INDUSTRIAL GOODS/SERVICES-3.8% - ---------------------------------------------------------------------- LOGISTICS-3.8% 52,000 Expeditors International of Washington 1,958,320 International Freight Forwarder - ---------------------------------------------------------------------- TOTAL COMMON STOCKS (COST: $36,679,841)-92.6% 48,251,671 - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Principal Value Amount SHORT-TERM OBLIGATIONS-7.1% - ---------------------------------------------------------------------- $3,700,000 Repurchase agreement with State Street Bank & Trust Co., dated 12/31/03 due 01/02/04 at 0.85%, collateralized by Federal National Mortgage Association Notes, maturing 08/15/04, market value $3,774,575 (repurchase proceeds $3,700,175) $3,700,000 - ---------------------------------------------------------------------- (AMORTIZED COST: $3,700,000) 3,700,000 TOTAL INVESTMENTS (COST: $40,379,841)-99.7% (a) 51,951,671 - ---------------------------------------------------------------------- CASH AND OTHER ASSETS LESS LIABILITIES-0.3% 160,274 - ---------------------------------------------------------------------- TOTAL NET ASSETS-100% $52,111,945 ====================================================================== NOTES TO STATEMENT OF INVESTMENTS: (a) At December 31, 2003, cost for federal income tax purposes is $40,379,843. The net unrealized appreciation was $11,571,828 consisting of gross unrealized appreciation of $12,580,149 and gross unrealized depreciation of $1,008,321. (b) Non-income producing security. See accompanying notes to financial statements. 25 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER FOREIGN FORTY STATEMENT OF INVESTMENTS DECEMBER 31, 2003 - ---------------------------------------------------------------------- Number of Value Shares COMMON STOCKS-96.4% EUROPE-72.9% - ---------------------------------------------------------------------- GERMANY-5.7% 20,000 Rhoen-Klinikum $1,121,354 Hospital Management 7,400 Deutsche Boerse 404,180 Trading, Clearing & Settlement Services for Financial Markets - ---------------------------------------------------------------------- 1,525,534 - ---------------------------------------------------------------------- NORWAY-5.7% 142,300 DNB Holding 947,813 Bank 26,000 Orkla 581,158 Beverages, Packaged Foods and Newspapers - ---------------------------------------------------------------------- 1,528,971 - ---------------------------------------------------------------------- SWEDEN-1.0% 32,000 Gambro 264,709 Products & Services for Renal Care - ---------------------------------------------------------------------- FRANCE-8.8% 16,000 Neopost 806,368 Postage Meter Machines 14,100 Essilor International 728,377 Eyeglass Lenses 23,000 Euronext 581,606 Trading, Clearing & Settlement Services for Financial Markets 1,200 Imerys 252,343 Industrial Minerals Producer - ---------------------------------------------------------------------- 2,368,694 - ---------------------------------------------------------------------- UNITED KINGDOM/IRELAND-36.0% 100,000 Anglo Irish Bank (Ireland) 1,576,198 Corporate Lending & Private Banking 60,000 Kerry Group (Ireland) 1,126,396 Specialty Food Ingredient Company 181,000 BG Group 926,473 Oil & Gas Producer 6,500 Depfa Bank (Ireland) 819,787 International Public Sector Finance 50,000 Irish Life & Permanent (Ireland) 806,368 Savings Products - ---------------------------------------------------------------------- Number of Value Shares - ---------------------------------------------------------------------- UNITED KINGDOM/IRELAND-36.0% (CONT) 110,000 Grafton Group (Ireland) $758,112 Builders, Wholesalers & DIY Retailing 110,000 Compass Group 746,151 International Concession & Contract Caterer 25,000 Cobham 520,789 Aerospace 67,000 Bunzl 510,386 Supplier of Business to Business Consumables 40,000 British Sky Broadcasting (b) 501,956 Digital Satelite Broadcasting 50,000 Smith & Nephew 418,818 Medical Equipment & Supplies 25,000 Exel 329,565 Global Freight Forwarding 50,000 Hit Entertainment 262,849 Children's Television Shows 25,000 Jardine Lloyd Thompson 235,404 Business Insurance Broker 24,000 Burberry 156,585 Apparel Retailer - ---------------------------------------------------------------------- 9,695,837 - ---------------------------------------------------------------------- SWITZERLAND-9.0% 5,600 Swatch Group (b) 672,109 Watch & Electronics Manufacturer 2,500 Schindler (b) 610,200 Elevator Manufacturer & Maintenance 610 Synthes-Startec 603,443 Products for Orthopedic Surgery 1,050 Givaudan 544,815 Industrial Fragrances & Flavors - ---------------------------------------------------------------------- 2,430,567 - ---------------------------------------------------------------------- ITALY-2.2% 41,600 Autogrill (b) 594,374 Restaurants & Catering for Travelers - ---------------------------------------------------------------------- SPAIN-2.3% 37,000 Red Electrica 606,036 Spanish Power Grid See accompanying notes to financial statements. 26 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER FOREIGN FORTY STATEMENT OF INVESTMENTS DECEMBER 31, 2003 - ---------------------------------------------------------------------- Number of Value Shares - ---------------------------------------------------------------------- LUXEMBOURG-2.2% 18,000 Tenaris (b) $599,760 Steel Pipe for Oil Wells & Pipelines - ---------------------------------------------------------------------- EUROPE-TOTAL 19,614,482 ASIA-13.6% - ---------------------------------------------------------------------- HONG KONG-1.8% 100,000 Esprit Holdings 332,314 Global Apparel Brand Manager 30,000 TVB 151,473 Television Programming & Broadcasting - ---------------------------------------------------------------------- 483,787 - ---------------------------------------------------------------------- JAPAN-9.2% 6,200 Hoyo 569,450 Opto-Electrical Components & Eyeglass Lenses 5,300 Nidec 506,081 Hard Disk Drive Spindle Motor Manufacturer 24,100 Shimano 499,389 Bicycle Components & Fishing Tackle 5,000 USS 353,759 Used Car Auctioneer 9,900 Daito Trust Construction 293,854 Apartment Builder 16,000 Ushio 265,683 Industrial Light Sources - ---------------------------------------------------------------------- 2,488,216 - ---------------------------------------------------------------------- SINGAPORE-2.6% 59,400 Venture 699,523 Electronic Contract Manufacturer - ---------------------------------------------------------------------- ASIA-TOTAL 3,671,526 OTHER COUNTRIES-9.9% - ---------------------------------------------------------------------- AUSTRALIA-3.4% 200,000 Lion Nathan 909,564 Beer Brewer/Distributor - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Number of Shares Value or Principal Amount - ---------------------------------------------------------------------- CANADA-6.5% 13,300 Talisman Energy $756,619 Oil & Gas Producer 25,000 Corus Entertainment (b) 531,977 CATV Programming & Radio Stations 12,500 Power Financial 479,069 Life Insurance & Mutual Funds - ---------------------------------------------------------------------- 1,767,665 - ---------------------------------------------------------------------- OTHER-TOTAL 2,677,229 TOTAL COMMON STOCKS (COST: $19,294,992)-96.4% 25,963,237 - ---------------------------------------------------------------------- SHORT-TERM OBLIGATIONS-4.2% - ---------------------------------------------------------------------- $1,126,000 Repurchase agreement with State Street Bank & Trust Co., dated 12/31/03 due 01/02/04 at 0.85% collateralized by Federal National Mortgage Association Notes, maturing 08/15/04, market value $1,152,904 (repurchase proceeds $1,126,053) 1,126,000 - ---------------------------------------------------------------------- (AMORTIZED COST: $1,126,000) 1,126,000 TOTAL INVESTMENTS (COST: $20,420,992)-100.6% (a)(c) 27,089,237 - ---------------------------------------------------------------------- CASH AND OTHER ASSETS LESS LIABILITIES-(0.6%) (161,648) - ---------------------------------------------------------------------- TOTAL NET ASSETS-100% $26,927,589 ====================================================================== NOTES TO STATEMENT OF INVESTMENTS: (a) At December 31, 2003, cost for federal income tax purposes is $20,454,420. The net unrealized appreciation was $6,634,817 consisting of gross unrealized appreciation of $6,649,461 and gross unrealized depreciation of $14,644. (b) Non-income producing security. (c) On December 31, 2003, The Fund's total investments were denominated in currencies as follows: % of Net Currency Value Assets --------------------------------------------------------- Euros $10,181,501 37.8% British Pounds 4,608,976 17.1 Japanese Yen 2,488,216 9.2 Swiss Francs 2,430,567 9.0 Canadian Dollars 1,767,664 6.6 U.S. Dollars 1,725,760 6.4 Norwegian Krones 1,528,971 5.7 Other currencies less than 5% of total net assets 2,357,582 8.8 ----------- ----- $27,089,237 100.6% See accompanying notes to financial statements. 27 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER FOREIGN FORTY PORTFOLIO DIVERSIFICATION DECEMBER 31, 2003 AT DECEMBER 31, 2003, THE FUND'S PORTFOLIO INVESTMENTS AS A PERCENT OF NET ASSETS WAS DIVERSIFIED AS FOLLOWS: Value Percent - -------------------------------------------------- INFORMATION TECHNOLOGY Computer Related Hardware Contract Manufacturing $699,523 2.6% Semiconductors & Related Equipment 569,450 2.1 Computer Hardware 506,081 1.9 - -------------------------------------------------- 1,775,054 6.6 Media TV Programming 794,826 3.0 TV Broadcasting 653,429 2.4 - -------------------------------------------------- 1,448,255 5.4 Software and Services Financial Processors 985,786 3.6 - -------------------------------------------------- 985,786 3.6 - -------------------------------------------------- 4,209,095 15.6 - -------------------------------------------------- HEALTHCARE Medical Equipment 1,750,638 6.5 Hospital Management 1,121,356 4.1 Services 264,709 1.0 - -------------------------------------------------- 3,136,703 11.6 - -------------------------------------------------- CONSUMER GOODS/SERVICES Food 1,707,554 6.3 Restaurants 1,340,525 5.0 Durable Goods 1,171,498 4.3 Beverage 909,564 3.4 Retail 488,899 1.8 Consumer Goods Distribution 353,759 1.3 - -------------------------------------------------- 5,971,799 22.1 Value Percent - -------------------------------------------------- FINANCE Banks $3,343,798 12.4% Insurance 1,041,772 3.9 Money Management 479,069 1.8 - -------------------------------------------------- 4,864,639 18.1 - -------------------------------------------------- INDUSTRIAL GOODS/SERVICES Industrial Services 939,763 3.6 Machinery 806,368 3.0 Electrical Components 786,472 2.9 Industrial Distribution 758,112 2.8 Steel 599,760 2.2 Speciality Chemicals 544,815 2.0 Outsourcing & Training Services 510,386 1.9 Industrial Materials 252,343 0.9 - -------------------------------------------------- 5,198,019 19.3 - -------------------------------------------------- ENERGY/MINERALS Oil/Gas Producers 1,683,092 6.3 - -------------------------------------------------- 1,683,092 6.3 - -------------------------------------------------- OTHER Regulated Utilities 606,036 2.3 Real Estate 293,854 1.1 - -------------------------------------------------- 899,890 3.4 - -------------------------------------------------- TOTAL COMMON STOCKS 25,963,237 96.4 - -------------------------------------------------- SHORT-TERM OBLIGATIONS 1,126,000 4.2 - -------------------------------------------------- TOTAL INVESTMENTS 27,089,237 100.6 - -------------------------------------------------- CASH AND OTHER ASSETS LESS LIABILITIES (161,648) (0.6) - -------------------------------------------------- NET ASSETS $26,927,589 100.0% ================================================== See accompanying notes to financial statements. 28 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER ADVISORS FUNDS > STATEMENTS OF ASSETS AND LIABILITIES > STATEMENTS OF OPERATIONS > STATEMENTS OF CHANGES IN NET ASSETS > FINANCIAL HIGHLIGHTS > NOTES TO FINANCIAL STATEMENTS 29 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003
WANGER WANGER WANGER WANGER U.S. SMALLER INTERNATIONAL TWENTY FOREIGN COMPANIES SMALL CAP FORTY ============================================================================================================ ASSETS Investments, at cost $562,788,244 $291,853,897 $40,379,841 $20,420,992 - ------------------------------------------------------------------------------------------------------------ Investments, at value $823,399,275 $378,932,452 $51,951,671 $27,089,237 Cash 138 908 135 816 Foreign currency (cost: Wanger International Small Cap $3,459,646; Wanger Foreign Forty $4,180) -- 3,487,153 -- 4,219 Receivable for: Investments sold 408,364 -- -- -- Fund shares sold 536,992 202,158 186,627 -- Dividends and interest 88,370 460,597 2,915 61,833 Other assets 12,243 4,612 755 7,274 - ------------------------------------------------------------------------------------------------------------ Total Assets 824,445,382 383,087,880 52,142,103 27,163,379 LIABILITIES Payable for: Investments purchased 161,998 1,477,866 -- 20,532 Fund shares repurchased 1,539,845 814,423 5,284 194,592 Transfer agent fee 1,926 1,750 1,559 1,553 Custody fee 816 13,481 639 859 Reports to shareholders 31,276 22,606 4,178 3,715 Legal and audit fee 41,543 27,524 13,744 13,095 Other liabilities 9,483 4,508 4,754 1,444 - ------------------------------------------------------------------------------------------------------------ Total Liabilities 1,786,887 2,362,158 30,158 235,790 - ------------------------------------------------------------------------------------------------------------ Net Assets $822,658,495 $380,725,722 $52,111,945 $26,927,589 ============================================================================================================ COMPOSITION OF NET ASSETS Paid in capital $597,667,491 $386,980,882 $40,491,855 $27,995,297 Undistributed net investment income 163,258 2,935,123 -- 82,012 Accumulated net realized gain (loss) (35,783,285) (95,693,607) 48,260 (7,821,946) Net unrealized appreciation on: Investments (net of unrealized PFIC gains of $614,129 for Wanger International Small Cap) 260,611,031 86,464,427 11,571,830 6,668,245 Foreign currency transactions -- 38,897 -- 3,981 - ------------------------------------------------------------------------------------------------------------ Net Assets $822,658,495 $380,725,722 $52,111,945 $26,927,589 ============================================================================================================ Fund shares outstanding 31,035,965 19,348,798 2,808,670 1,941,981 ============================================================================================================ Net asset value, offering price and redemption price per share $26.51 $19.68 $18.55 $13.87 ============================================================================================================
See accompanying notes to financial statements. 30 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003
WANGER WANGER WANGER WANGER U.S. SMALLER INTERNATIONAL TWENTY FOREIGN COMPANIES SMALL CAP FORTY ============================================================================================================ INVESTMENT INCOME: Dividend income (net of foreign taxes of $2,521,250 $5,935,367 $162,055 $305,500 $618,933 for Wanger International Small Cap and $27,563 for Wanger Foreign Forty) Interest income 543,276 117,282 22,363 11,658 - ------------------------------------------------------------------------------------------------------------ Total investment income 3,064,526 6,052,649 184,418 317,158 EXPENSES: Investment advisory fees 5,627,621 3,279,805 355,065 172,540 Custody fees 24,018 276,825 4,836 34,713 Legal and audit fees 178,732 95,299 30,422 25,556 Transfer agent fees 22,271 21,697 18,955 18,917 Trustees' fees 83,937 40,996 4,803 1,743 Other expenses 44,956 56,468 14,942 12,818 - ------------------------------------------------------------------------------------------------------------ Total Expenses 5,981,535 3,771,090 429,023 266,287 Less custody fees paid indirectly (310) (97) (1) (1) Less expenses reimbursed by Advisor -- -- -- (16,227) - ------------------------------------------------------------------------------------------------------------ Net Expenses 5,981,225 3,770,993 429,022 250,059 - ------------------------------------------------------------------------------------------------------------ Net Investment Income (Loss) (2,916,699) 2,281,656 (244,604) 67,099 NET REALIZED AND UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS: Net realized gain (loss) on: Investments 16,030,419 (3,558,065) 562,443 (490,216) Foreign currency transactions -- 43,058 -- 15,233 - ------------------------------------------------------------------------------------------------------------ Net realized gain (loss) 16,030,419 (3,515,007) 562,443 (474,983) ============================================================================================================ Net change in unrealized appreciation (depreciation) on: Investments 208,755,524 115,859,238 9,417,172 7,045,112 Foreign currency transactions -- 8,112 -- 1,302 - ------------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation (depreciation) 208,755,524 115,867,350 9,417,172 7,046,414 - ------------------------------------------------------------------------------------------------------------ Net Gain 224,785,943 112,352,343 9,979,615 6,571,431 - ------------------------------------------------------------------------------------------------------------ Net Increase in Net Assets from Operations $221,869,244 $114,633,999 $9,735,011 $6,638,530 ============================================================================================================
See accompanying notes to financial statements. 31 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
WANGER U.S. SMALLER COMPANIES WANGER INTERNATIONAL SMALL CAP Year ended Year ended Year ended Year ended INCREASE (DECREASE) IN NET ASSETS December 31, 2003 December 31, 2002 December 31, 2003 December 31, 2002 ================================================================================================================================== FROM OPERATIONS: Net investment income (loss) $(2,916,699) $(2,320,011) $2,281,656 $1,068,839 Net realized gain (loss) on investments and foreign currency transactions 16,030,419 (17,795,068) (3,515,007) (29,381,289) Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions 208,755,524 (74,506,422) 115,867,350 (3,856,903) - ---------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 221,869,244 (94,621,501) 114,633,999 (32,169,353) DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income -- -- (778,511) -- - ---------------------------------------------------------------------------------------------------------------------------------- Total distributions to shareholders -- -- (778,511) -- SHARE TRANSACTIONS: Subscriptions 218,524,438 140,977,765 152,933,800 334,085,769 Distributions reinvested -- -- 778,511 -- Redemptions (89,461,181) (72,816,413) (102,925,641) (316,459,265) - ---------------------------------------------------------------------------------------------------------------------------------- Net Increase from Share Transactions 129,063,257 68,161,352 50,786,670 17,626,504 - ---------------------------------------------------------------------------------------------------------------------------------- Total Increase (Decrease) in Net Assets 350,932,501 (26,460,149) 164,642,158 (14,542,849) NET ASSETS: Beginning of period 471,725,994 498,186,143 216,083,564 230,626,413 - ---------------------------------------------------------------------------------------------------------------------------------- End of period $822,658,495 $471,725,994 $380,725,722 $216,083,564 - ---------------------------------------------------------------------------------------------------------------------------------- UNDISTRIBUTED NET INVESTMENT INCOME $163,258 $13,289 $2,935,123 $774,792 ================================================================================================================================== See accompanying notes to financial statements. 32 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS WANGER TWENTY WANGER FOREIGN FORTY Year ended Year ended Year ended Year ended INCREASE (DECREASE) IN NET ASSETS December 31, 2003 December 31, 2002 December 31, 2003 December 31, 2002 =================================================================================================================================== FROM OPERATIONS: Net investment income (loss) $(244,604) $(148,168) $67,099 $51,954 Net realized gain (loss) on investments and foreign currency transactions 562,443 726,558 (474,983) (2,982,769) Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions 9,417,172 (2,604,955) 7,046,414 635,281 - ----------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 9,735,011 (2,026,565) 6,638,530 (2,295,534) DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income -- -- (50,019) -- - ----------------------------------------------------------------------------------------------------------------------------------- Total distributions to shareholders -- -- (50,019) -- SHARE TRANSACTIONS: Subscriptions 20,698,376 12,257,973 14,037,658 32,503,614 Distributions reinvested -- -- 50,019 -- Redemptions (4,445,362) (5,536,933) (7,831,407) (31,556,395) - ----------------------------------------------------------------------------------------------------------------------------------- Net Increase from Share Transactions 16,253,014 6,721,040 6,256,270 947,219 - ----------------------------------------------------------------------------------------------------------------------------------- Total Increase (Decrease) in Net Assets 25,988,025 4,694,475 12,844,781 (1,348,315) NET ASSETS: Beginning of period 26,123,920 21,429,445 14,082,808 15,431,123 - ----------------------------------------------------------------------------------------------------------------------------------- End of period $52,111,945 $26,123,920 $26,927,589 $14,082,808 - ----------------------------------------------------------------------------------------------------------------------------------- UNDISTRIBUTED NET INVESTMENT INCOME -- -- $82,012 $49,697 ===================================================================================================================================
33 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER U.S. SMALLER COMPANIES FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING Year Ended December 31, THROUGHOUT EACH PERIOD 2003 2002 2001 2000 1999 ====================================================================================================================== NET ASSET VALUE, BEGINNING OF PERIOD $18.51 $22.25 $19.99 $24.88 $22.18 - ---------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (a) (0.11) (0.10) (0.04) 0.02 0.03 Net realized and unrealized gain (loss) on investments 8.11 (3.64) 2.31 (1.82) 4.79 - ---------------------------------------------------------------------------------------------------------------------- Total from Investment Operations 8.00 (3.74) 2.27 (1.80) 4.82 - ---------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income -- -- (0.01) (0.03) -- From net realized capital gains -- -- -- (3.06) (2.12) - ---------------------------------------------------------------------------------------------------------------------- Total Distributions Declared to Shareholders -- -- (0.01) (3.09) (2.12) - ---------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $26.51 $18.51 $22.25 $19.99 $24.88 ====================================================================================================================== Total Return (b) 43.22% (16.81)% 11.39% (8.16)% 25.06% - ---------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses 0.99%(c) 1.05%(c) 0.99% 1.00%(c) 1.02%(c) Net investment income (loss) (0.48)%(c) (0.47)%(c) (0.20)% 0.07%(c) 0.14%(c) Portfolio turnover rate 10% 16% 18% 36% 35% Net assets, end of period (000's) $822,658 $471,726 $498,186 $403,306 $390,709
- -------------------------------------------------------------------------------- (a) Net investment income (loss) per share was based upon the average shares outstanding during the period. (b) Total return at net asset value assuming all distributions are reinvested. (c) The benefits derived from custody fees paid indirectly had no impact. See accompanying notes to financial statements. 34 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER INTERNATIONAL SMALL CAP FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING Year Ended December 31, THROUGHOUT EACH PERIOD 2003 2002 2001 2000 1999 ====================================================================================================================== NET ASSET VALUE, BEGINNING OF PERIOD $13.27 $15.40 $28.53 $43.67 $19.62 - ---------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (a) 0.13 0.07 0.02 (0.26) (0.13) Net realized and unrealized gain (loss) on investments and foreign currency transactions 6.33 (2.20) (5.12) (9.75) 24.52 - ---------------------------------------------------------------------------------------------------------------------- Total from Investment Operations 6.46 (2.13) (5.10) (10.01) 24.39 - ---------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.05) -- -- -- (0.34) From net realized gain and unrealized gain reportable for federal income taxes -- -- (8.03) (5.13) -- - ---------------------------------------------------------------------------------------------------------------------- Total Distributions Declared to Shareholders (0.05) -- (8.03) (5.13) (0.34) - ---------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $19.68 $13.27 $15.40 $28.53 $43.67 ====================================================================================================================== Total Return (b) 48.86% (13.83)% (21.27)% (27.84)% 126.37% - ---------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses (c) 1.41% 1.47% 1.43% 1.41% 1.49% Net investment income (loss) (c) 0.85% 0.46% 0.10% (0.68)% (0.49)% Portfolio turnover rate 45% 54% 56% 67% 75% Net assets, end of period (000's) $380,726 $216,084 $230,626 $271,675 $311,331
- -------------------------------------------------------------------------------- (a) Net investment income (loss) per share was based upon the average shares outstanding during the period. (b) Total return at net asset value assuming all distributions are reinvested. (c) The benefits derived from custody fees paid indirectly had no impact. See accompanying notes to financial statements. 35 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER TWENTY FINANCIAL HIGHLIGHTS
February 1, 1999 through SELECTED DATA FOR A SHARE OUTSTANDING Year Ended December 31, December 31, THROUGHOUT EACH PERIOD 2003 2002 2001 2000 1999 ============================================================================================================================= NET ASSET VALUE, BEGINNING OF PERIOD $14.19 $15.36 $14.08 $13.43 $10.00 - ----------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment loss (a) (0.11) (0.09) (0.05) (0.03) (0.08) Net realized and unrealized gain (loss) on investments 4.47 (1.08) 1.33 1.23 3.51 - ----------------------------------------------------------------------------------------------------------------------------- Total from Investment Operations 4.36 (1.17) 1.28 1.20 3.43 - ----------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net realized capital gains -- -- -- (0.55) -- - ----------------------------------------------------------------------------------------------------------------------------- Total Distributions Declared to Shareholders -- -- -- (0.55) -- - ----------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $18.55 $14.19 $15.36 $14.08 $13.43 ============================================================================================================================= Total Return (b) 30.73% (7.62)% 9.09% 9.45%(c) 34.30%(c)(d) - ----------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses 1.15%(e) 1.18%(e) 1.33%(e) 1.39%(f) 1.41%(f)(g) Net investment loss (0.65)%(e) (0.62)%(e) (0.34)%(e) (0.24)%(f) (0.77)%(f)(g) Reimbursement -- -- -- 0.21% 0.71%(g) Portfolio turnover rate 21% 45% 76% 86% 113%(g) Net assets, end of period (000's) $52,112 $26,124 $21,429 $12,129 $6,570
- -------------------------------------------------------------------------------- (a) Net investment loss per share was based upon the average shares outstanding during the period. (b) Total return at net asset value assuming all distributions reinvested. (c) Had the Advisor not reimbursed a portion of its expenses, total return would have been reduced. (d) Not annualized. (e) The benefits derived from custody fees paid indirectly had no impact. (f) In accordance with a requirement of the Securities and Exchange Commission, this ratio reflects total expenses prior to the reduction of custody fees for cash balances it maintains with the custodian ("custody fees paid indirectly"). The ratios of expenses to average daily net assets and net investment income to average daily net assets net of custody fees paid indirectly would have been 1.35% and (0.20%), respectively, for the year ended December 31, 2000 and 1.35% and (0.71%), respectively, for the period ended December 31, 1999. (g) Annualized. See accompanying notes to financial statements. 36 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- WANGER FOREIGN FORTY FINANCIAL HIGHLIGHTS
February 1, 1999 through SELECTED DATA FOR A SHARE OUTSTANDING Year Ended December 31, December 31, THROUGHOUT EACH PERIOD 2003 2002 2001 2000 1999 ============================================================================================================================= NET ASSET VALUE, BEGINNING OF PERIOD $9.86 $11.64 $17.29 $18.39 $10.00 - ----------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (a) 0.04 0.04 (0.03) (0.04) (0.01) Net realized and unrealized gain (loss) on investments and foreign currency transactions 4.01 (1.82) (4.46) (0.10) 8.40 - ----------------------------------------------------------------------------------------------------------------------------- Total from Investment Operations 4.05 (1.78) (4.49) (0.14) 8.39 - ----------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.04) -- (0.02) (0.01) -- From net realized capital gains -- -- (1.14) (0.95) -- - ----------------------------------------------------------------------------------------------------------------------------- Total Distributions Declared to Shareholders (0.04) -- (1.16) (0.96) -- - ----------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $13.87 $9.86 $11.64 $17.29 $18.39 ============================================================================================================================= Total Return (b) 41.24%(c) (15.29)%(c) (26.61)% (1.58)%(c) 83.90%(c)(d) - ----------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses 1.45%(e) 1.45%(e) 1.45%(e) 1.45%(e) 1.59%(f)(g) Net investment income (loss) 0.39%(e) 0.35%(e) (0.20)%(e) (0.20)%(e) (0.10)%(f)(g) Reimbursement 0.09% 0.10% -- 0.23% 1.86%(g) Portfolio turnover rate 59% 113% 72% 96% 91%(g) Net assets, end of period (000's) $26,928 $14,083 $15,431 $15,496 $5,826
- -------------------------------------------------------------------------------- (a) Net investment income (loss) per share was based upon the average shares outstanding during the period. (b) Total return at net asset value assuming all distributions reinvested. (c) Had the Advisor not reimbursed a portion of expenses, total return would be reduced. (d) Not annualized. (e) The benefits derived from custody fees paid indirectly had no impact. (f) In accordance with a requirement of the Securities and Exchange Commission, this ratio reflects total expenses prior to the reduction of custody fees for cash balances it maintains with the custodian ("custody fees paid indirectly"). The ratios of expenses to average daily net assets and net investment income to average daily net assets net of custody fees paid indirectly would have been 1.45% and 0.04%, respectively, for the period ended December 31, 1999. (g) Annualized. See accompanying notes to financial statements. 37 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 1. NATURE OF OPERATIONS Wanger U.S. Smaller Companies, 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 fair 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. If a security is traded principally on the Nasdaq Stock Market Inc., the SEC-approved Nasdaq Official Closing Price will be applied. Securities for which there are no reported sales on the valuation date are valued at the latest bid quotation. Money market instruments having a maturity of 60 days or less from the valuation date are valued on an amortized cost basis, which approximates fair value. Securities for which quotations are not readily available and any other assets are valued as determined in good faith by the Board of Trustees. REPURCHASE AGREEMENTS The Funds may engage in repurchase agreement transactions. The Funds, through its custodians, receive delivery of underlying securities collateralizing each repurchase agreement. The Funds' investment advisor determines that the value of the underlying securities is at all times at least equal to the resale price. In the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings. 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. Money market instruments having a maturity of 60 days or less from the valuation date are valued on an amortized cost basis, which approximates fair value. Realized gains and losses from security transactions are reported on an identified cost basis. The Funds estimate components of distributions from Real Estate Investment Trusts ("REITS"). Distributions received in excess of income are recorded as a reduction of the cost of the related investments. Results of operations for the year reflect a change in estimate of these components using more current tax reporting received from REIT investments. The change in estimate had no impact on each of the Fund's net assets. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. CUSTODY FEES Custody 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 Statement of Operations. FEDERAL INCOME TAXES 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 their taxable income, as well as any net realized gain on sales of investments and foreign currency transactions reportable for federal income tax purposes. Accordingly, the Funds paid no federal income taxes and no federal income tax provision was required. DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded on the ex-date. 38 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 3. FEDERAL TAX INFORMATION Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended December 31, 2003, permanent differences resulting primarily from differing treatments for net operating losses, foreign currency transactions, treatment of passive foreign investment company ("PFIC") gains, REIT adjustments and utilized capital loss carryforwards were identified and reclassified among the components of the Funds' net assets as follows: UNDISTRIBUTED/ (OVERDISTRIBUTED) OR (ACCUMULATED) ACCUMULATED NET INVESTMENT NET REALIZED PAID-IN UNREALIZED INCOME (LOSS) GAIN/LOSS CAPITAL APPRECIATION ----------------- -------------- ------------ -------------- Wanger U.S. Smaller Companies $3,066,668 $23,261 $(3,089,929) $ -- Wanger International Small Cap 657,186 (43,057) -- (614,129) Wanger Twenty 244,604 (1,964) (242,640) -- Wanger Foreign Forty 15,235 (15,235) -- -- Net investment income and net realized gains (losses), as disclosed on the Statement of Operations, and net assets were not affected by these reclassifications. The tax character of distributions paid during 2003 and 2002 was as follows: YEARS ENDED DECEMBER 31, 2003 2002 ---------------------------------------------------- ORDINARY LONG-TERM ORDINARY LONG-TERM INCOME* CAPITAL GAIN INCOME* CAPITAL GAIN ------------------------ ------------------------ Wanger U.S. Smaller Companies $ -- $-- $-- $-- Wanger International Small Cap 778,511 -- -- -- Wanger Twenty -- -- -- -- Wanger Foreign Forty 50,019 -- -- -- * For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. As of December 31, 2003, the components of distributable earnings on a tax basis were as follows: UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM NET UNREALIZED INCOME CAPITAL GAINS APPRECIATION --------------- --------------- ---------------- Wanger U.S. Smaller Companies $ -- $ -- $260,378,877 Wanger International Small Cap 2,936,025 -- 86,680,011 Wanger Twenty -- 48,262 11,571,828 Wanger Foreign Forty 81,951 -- 6,638,860 The differences between book-basis and tax-basis net unrealized appreciation/depreciation are primarily due to REITadjustments and deferral of losses from wash sales. The following capital loss carryforwards, determined as of December 31, 2003, are available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code: WANGER WANGER U.S. SMALLER INTERNATIONAL YEAR OF EXPIRATION COMPANIES SMALL CAP ----------- ----------- 2009 $23,353,860 $55,963,354 2010 12,034,012 36,103,588 2011 -- 2,734,494 ----------- ----------- Total $35,387,872 $94,801,436 WANGER WANGER FOREIGN YEAR OF EXPIRATION TWENTY FORTY ----------- ---------- 2009 $-- $3,168,366 2010 -- 3,638,146 2011 -- 982,004 ----------- ---------- Total $-- $7,788,516 Capital loss carryforwards of $7,876,522 and $512,219 were utilized during the year ended December 31, 2003 for Wanger U.S. Small Companies and Wanger Twenty, respectively. Expired capital loss carryforwards, if any, are recorded as a reduction of paid-in capital. Under current tax rules, certain capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As of December 31, 2003 for federal income tax purposes, post-October losses were deferred to January 1, 2004 were follows: Wanger U.S. Smaller Companies $ -- Wanger International Small Cap 69,759 Wanger Twenty -- Wanger Foreign Forty -- 39 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS Wanger International Small Cap has elected to mark-to-market its investments in PFIC's for federal income tax purposes. Gains and losses relating to PFIC's are treated as ordinary income for federal income tax purposes. A summary of transactions relating to PFIC's is as follows: WANGER INTERNATIONAL SMALL CAP ------------- Cumulative unrealized appreciation on PFIC's recognized in prior years at December 31, 2002 $ -- Unrealized appreciation on PFIC's recognized for federal income tax purposes during 2003 614,129 Unrealized appreciation recognized in prior years on PFIC's sold during 2003 -- -------- Cumulative unrealized appreciation on PFIC's carried forward at December 31, 2003 $614,129 ======== 4. TRANSACTIONS WITH AFFILIATES Effective October 13, 2003, the Funds' investment advisor changed its name from Liberty Wanger Asset Management, L.P. to Columbia Wanger Asset Management, L.P., ("Columbia WAM") is a wholly-owned subsidiary of Columbia Management Group, Inc., ("Columbia"), which in turn, is a wholly-owned subsidiary of Fleet National Bank, which in turn, is a wholly-owned subsidiary of FleetBoston Financial Corporation, furnishes continuing investment supervision to each Fund and is responsible for overall management of each Fund's business affairs. Each Fund pays Columbia WAM a monthly advisory fee based upon average daily net assets at the following annual rates: WANGER U.S. SMALLER COMPANIES Average Daily Net Assets For the first $100 million 1.00% Next $150 million .95% In excess of $250 million .90% 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 Columbia WAM will reimburse the Funds to the extent that ordinary operating expenses (computed based on net custodian fees) exceed an annual percentage of average daily net assets. Year Ended December 31, 2003 Wanger U.S. Smaller Companies 2.00% Wanger International Small Cap 2.00% Wanger Twenty 1.35% Wanger Foreign Forty 1.45% Certain officers and trustees of the Trust are also officers of Columbia WAM. The Trust makes no direct payments to its officers and trustees who are affiliated with Columbia WAM. The Fund paid the following trustees' fees and expenses to trustees not affiliated with Columbia WAM: Year Ended December 31, 2003 Wanger U.S. Smaller Companies $83,937 Wanger International Small Cap 40,996 Wanger Twenty 4,803 Wanger Foreign Forty 1,743 Effective October 13, 2003, Liberty Funds Distributor, Inc. changed its name to Columbia Funds Distributor, Inc. ("CFD"), a subsidiary of Columbia, serves as the principal underwriter of the Trust and receives no compensation for its services. Effective October 13, 2003, Liberty Funds Services, Inc., changed its name to Columbia Funds Services, Inc. The Transfer Agent is an affiliate of the investment advisor and provides shareholder services to the Fund and receives reimbursement for out-of-pocket expenses. During the year ended December 31, 2003, the Funds engaged in purchases and sales transactions with funds that have a common investment advisor (or affiliated investment advisors), common Directors/Trustees, and/or common Officers. These purchase and sale transactions complied with the provisions of Rule 17a-7 under the Investment Company Act of 1940 and were as follows: PURCHASES SALES - -------------------------------------------------------- Wanger U.S. Smaller Companies $2,838,000 $ -- Wanger International Small Cap 6,278,157 598,691 Wanger Twenty -- 39,564 Wanger Foreign Forty -- 67,545 5. BORROWING ARRANGEMENTS The Trust participates in a $150,000,000 credit facility, which was entered into to facilitate portfolio liquidity. No amounts were borrowed under this facility for the year ended December 31, 2003. 6. FUND SHARE TRANSACTIONS Proceeds and payments on Fund shares as shown in the statement of changes in net assets are in respect of the following numbers of shares: WANGER U.S. SMALLER Year ended Year ended COMPANIES December 31, 2003 December 31, 2002 Shares sold 9,675,283 6,859,016 - ------------------------------------------------------------------- Less shares redeemed 4,118,462 3,775,228 - ------------------------------------------------------------------- Net increase in shares outstanding 5,556,821 3,083,788 40 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS WANGER INTERNATIONAL Year ended Year ended SMALL CAP December 31, 2003 December 31, 2002 Shares sold 10,174,171 22,143,427 Shares issued in reinvestment of dividend distributions 61,737 -- - ------------------------------------------------------------------- 10,235,908 22,143,427 Less shares redeemed 7,169,275 20,832,143 - ------------------------------------------------------------------- Net increase in shares outstanding 3,066,633 1,311,284 WANGER TWENTY Year ended Year ended December 31, 2003 December 31, 2002 Shares sold 1,249,090 842,336 - ------------------------------------------------------------------- Less shares redeemed 281,941 395,508 - ------------------------------------------------------------------- Net increase in shares outstanding 967,149 446,828 WANGER FOREIGN FORTY Year ended Year ended December 31, 2003 December 31, 2002 Shares sold 1,237,004 3,006,672 Shares issued in reinvestment of dividend distributions 5,607 -- - ------------------------------------------------------------------- 1,242,611 3,006,672 Less shares redeemed 728,804 2,904,415 - ------------------------------------------------------------------- Net increase in shares outstanding 513,807 102,257 7. INVESTMENT TRANSACTIONS The aggregate cost of purchases and proceeds from sales other than short-term obligations for the year ended December 31, 2003 were: ---------------------------------------------------------- WANGER WANGER WANGER WANGER U.S. SMALLER INTERNATIONAL TWENTY FOREIGN FORTY COMPANIES SMALL CAP PURCHASES $163,890,258 $157,193,818 $20,706,950 $16,400,250 SALES 54,800,521 114,468,289 7,289,445 9,581,550 8. LEGAL PROCEEDINGS The Securities and Exchange Commission (the "SEC"), the New York Attorney General and various other regulatory authorities are investigating late trading and market timing in mutual fund shares, and have sent information requests and subpoenas to certain affiliates of Columbia Management Group, Inc. ("CMG") (collectively, "Columbia"). These affiliates include Columbia Funds Distributor, Inc. ("CFD"), the distributor of the Funds' shares, Columbia Management Advisors, Inc. ("CMA"), and Columbia Wanger Asset Management, L.P. ("Columbia WAM"). CMA is the adviser to the Columbia Family of Funds but is not the adviser to the Wanger Advisors Trust Family of Funds. Columbia has not uncovered any instances where Columbia entities were knowingly involved in late trading of mutual fund shares. Columbia has identified a limited number of investors who had informal arrangements for trading of various funds managed by subsidiaries of CMG between 1998 and 2003. A majority of the transactions in connection with these arrangements occurred in one international fund and two domestic funds in the Columbia Family of Funds. The majority of the trading under these arrangements was made by three entities. A substantial majority of the trading had ended by October 2002. None of these arrangements exists today. Information relating to those trading arrangements has been supplied to various regulatory authorities. The SEC staff has issued notices to the effect that it has made a preliminary determination to recommend that the SEC bring civil enforcement actions, including injunctive proceedings, against CFD and CMA, alleging that they have violated certain provisions of the federal securities laws. Columbia believes that those allegations are based principally on the trading arrangements referred to above. Columbia WAM has not been named in these notices. CFD and CMA are engaged in discussions with the SEC staff in an effort to reach a satisfactory resolution of these matters. However, there can be no assurance that such a resolution will be reached. Any potential resolution of these matters may include, but not be limited to, sanctions, financial penalties, damages or injunctions regarding CFD or CMA, and structural changes in the conduct of their business. Although Columbia does not believe that these regulatory developments, or their resolution, will have a material adverse effect on the Funds, or on the ability of CFD or Columbia WAM to provide services to the Funds, there can be no assurance that these matters or any publicity relating to these matters or other developments resulting from them will not adversely effect sales or redemptions of Fund shares or otherwise effect the Funds. Columbia WAM and Columbia Acorn Trust (the "CAT Trust"), another mutual fund family advised by Columbia WAM, are defendants in a lawsuit that seeks certification of a plaintiff class consisting of all persons in the United States who held shares in the series of the CAT Trust designated Columbia Acorn International Fund ("International Fund") for a period of more than 14 days during the five years prior to the filing of the lawsuit. The suit seeks compensatory and punitive damages, as well as interest, costs and attorney's fees. The lawsuit alleges, in summary, that the CAT Trust and Columbia WAM exposed International Fund shareholders to trading by market timers by allegedly (a) failing to properly evaluate daily whether a significant event affecting the value of International Fund's securities had occurred after foreign markets had closed but before the calculation of the Fund's net asset value ("NAV"); (b) failing to implement International Fund's portfolio valuation and share pricing policies and procedures; (c) allowing portfolio valuation and share policies and procedures that benefited market timers at the expense of long-term shareholders; and (d) failing to know and implement applicable rules and regulations concerning the calculation of NAV. Columbia WAM and the CAT Trust also are defendants in a lawsuit that seeks certification of a plaintiff class consisting of all persons in the United States who held shares in International Fund for a period of more than 14 days, without any stated limitation on the duration of the class period. The suit seeks compensatory and punitive damages, as well as interest, costs and attorney's fees. This suit contains allegations and counts similar to those described above, and also includes an additional count under Section 36(a) of the Investment Company Act of 1940. Columbia WAM and the CAT Trust, on behalf of International Fund, intend to defend both suits vigorously. Columbia WAM does not believe that the pending actions will have a material adverse affect on its ability to perform under its contracts with the Funds. 41 Wanger Advisors Trust 2003 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 statements of invest ments of Wanger U.S. Smaller Companies, Wanger International Small Cap, Wanger Twenty and the Wanger Foreign Forty portfolios, comprising the Wanger Advisors Trust, as of December 31, 2003, 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 respon sibility 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 and financial highlights. Our procedures included confirmation of investments owned as of December 31, 2003, by cor respon dence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presen tation. 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, 2003, 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. /s/ Ernst & Young LLP Chicago, Illinois February 6, 2004 42 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- FEDERAL INCOME TAX INFORMATION (Unaudited) For the fiscal year ended December 31, 2003, the Wanger Twenty Fund designates long-term capital gains of $48,262. 43 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND MANAGEMENT OF WANGER ADVISORS TRUST The board of trustees serve indefinite terms of unlimited duration provided that a majority of trustees always has been elected by shareholders. The trustees appoint their own successors, provided that at least two-thirds of the trustees, after such appointment, have been elected by shareholders. Shareholders may remove a trustee, with or without cause, upon the vote of two-thirds of the Trust's outstanding shares at any meeting called for that purpose. A trustee may be removed, with or without cause, upon the vote of a majority of the trustees. The names of the trustees and officers of the Trust, the date each was first elected or appointed to office, their principal business occupations and other directorships they have held during at least the last five years, are shown below. Each trustee serves in such capacity for each of the four series of the Trust. Mr. Wanger also serves as a trustee for each of the six series of Columbia Acorn Trust.
NAME, POSITION(S) WITH YEAR FIRST WANGER ADVISORS TRUST ELECTED OR AND AGE AT APPOINTED TO PRINCIPAL OCCUPATION(S) DURING OTHER JANUARY 1, 2004 OFFICE PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------------ TRUSTEES WHO ARE NOT INTERESTED PERSONS OF WANGER ADVISORS TRUST: Jerome L. Duffy, 67, 2003 Retired since December 31, 1997; prior there to, senior vice None. Trustee president, Kemper Financial Services and treasurer, Kemper Funds. Fred D. Hasselbring, 62, Retail industry, general project development and business None. Trustee 1994 computer systems consultant; voice over specialist for Lead Independent Trustee 2003 industrial and institutional applications. Dr. Kathryn A. Krueger, M.D., 46, 2003 Medical Advisor, Cardiovascular Therapeutic Area, Lilly None Trustee Research Nominee Laboratories (January 2003 to present); Medical Director, Cardiovascular Therapeutic Area, Lilly Research Laboratories (October 2002 to December 2002); Medical Director, Neptune Product Team, Lilly Research Laboratories (October 2001 to October 2002); Acting Director and Senior Clinical Research Physician, Lilly Research Laboratories (April 2001 to September 2001); Senior Clinical Research Physician, Lilly Research Laboratories (January 2000 to March 2001); Clinical Research Physician, Lilly Research Laboratories (June 1996 to December 1999). Patricia H. Werhane, 68, 1998 Ruffin Professor of Business Ethics, Darden Graduate School None. Trustee of Business Administration, University of Virginia, since 1993; Co-Director of the Olsson Center for Applied Ethics, Darden Graduate School of Business Administration, University of Virginia, since September 2001; and Wicklander Chair of Business Ethics and Director of the Institute for Business and Professional Ethics, DePaul University (since September 2003). TRUSTEES WHO ARE AN INTERESTED PERSON OF WANGER ADVISORS TRUST: Ralph Wanger, 69, 1994 Former president, chief investment officer and portfolio Columbia Trustee manager, Columbia WAM from July 1992 until September 29, Acorn 2003; president, Columbia Acorn Trust (April 1992 through Trust. Sept. 30, 2003); president, Wanger Advisors Trust (1994 through Sept. 30, 2003); principal, WAM from July 1992 until September 29, 2000; president, WAM Ltd. from July 1992 to September 29, 2000; president and director, WAM Acquisition GP, Inc. since September 29, 2000; director, Wanger Investment Company plc. OFFICERS OF WANGER ADVISORS TRUST: J. Kevin Connaughton, 39, 2001 Treasurer of the Columbia Funds and of the Columbia All-Star None. Assistant Treasurer Funds since December 2000; vice president of Columbia WAM since April 2003 (formerly controller of the Columbia Funds and of the Columbia All-Star Funds from February 1998 to October 2000); treasurer of the Galaxy Funds since September 2002; treasurer, Columbia Management Multi-Strategy Hedge Fund, LLC since December, 2002 (formerly vice president of Colonial Management Associates from February 1998 to October 2000 and senior tax manager, Coopers & Lybrand, LLP from April 1996 to January 1998).
44 Wanger Advisors Trust 2003 Annual Report - --------------------------------------------------------------------------------
NAME, POSITION(S) WITH YEAR FIRST WANGER ADVISORS TRUST ELECTED OR AND AGE AT APPOINTED TO PRINCIPAL OCCUPATION(S) DURING OTHER JANUARY 1, 2004 OFFICE PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS OF WANGER ADVISORS TRUST (CONTINUED): Kenneth A. Kalina, 44, 1995 Chief financial officer, Columbia WAM since April 2000; None. Assistant Treasurer assistant treasurer, Columbia Acorn Trust; fund controller, Columbia WAM since September 1995; director, New Americas Small Cap Fund. Bruce H. Lauer, 46, 1995 Chief operating officer, Columbia WAM since April 1995; None. Vice President, Secretary principal, WAM from January 2000 to September 29, 2000; and Treasurer vice president, treasurer and secretary, Columbia Acorn Trust; director, Wanger Investment Company plc and New Americas Small Cap Fund. Charles P. McQuaid, 50, 1994 Chief investment officer of Columbia WAM since September 30, Columbia President 2003; senior vice president of the Trust from 1994 through Acorn September 2003; director of research, Columbia WAM from Trust. July 1992 through December 2003; principal, WAM from July 1995 to September 29, 2000; trustee and president, Columbia Acorn Trust. Robert A. Mohn, 42, 1997 Analyst and portfolio manager, Columbia WAM since August None. Vice President 1992; principal, WAM from 1995 to September 29, 2000; vice president, Columbia Acorn Trust. Todd Narter, 39, 2001 Analyst and portfolio manager, Columbia WAM since June 1997; None. Vice President vice president, Columbia Acorn Trust. Christopher Olson, 39, 2001 Analyst and portfolio manager, Columbia WAM since January None. Vice President 2001; vice president, Columbia Acorn Trust; prior thereto, director and portfolio strategy analyst with UBS Asset Management/Brinson Partners. John H. Park, 36, 1998 Director of domestic research since December 2003; analyst None. Vice President and portfolio manager, Columbia WAM since July 1993; principal, WAM from 1998 to September 29, 2000; vice president, Columbia Acorn Trust. Vincent P. Pietropaolo, 38, 2001 Vice president and counsel, Columbia Funds Group since None. Assistant Secretary December 1999; Associate, Morgan Lewis & Bockius, October 1998 to December 1999. David A. Rozenson, 49, 2003 Secretary of the Columbia Funds and of the Columbia All-Star None. Chief Legal Officer Funds since December 2003; senior counsel, Fleet Boston Financial Corporation since January 1996; associate general counsel, Columbia Management Group since November 2002.
The address for the trustees and officers of the Trust is Columbia Wanger Asset Management, L.P., 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606. Wanger's Statement of Additional Information includes additional information about Wanger's trustees and officers. You may obtain a free copy of the Statement of Additional Information, or request any other information and discuss your questions about us, by writing or calling toll-free: Columbia Wanger Asset Management, L.P. Shareholder Services Group 227 West Monroe, Suite 3000 Chicago, IL 60606 (800) 4-WANGER (800-492-6437) www.wanger.com 45 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- SPECIAL NOTICE At a special meeting on November 24, 2003, shareholders of each of the Funds voted to elect trustees to the Wanger Advisors Trust board of trustees. The record date share position of each Fund and the total share position voted of each Fund were respectively: Wanger U.S. Smaller Companies 28,764,581.221 and 28,763,925.742; Wanger International Small Cap 17,734,379.641 and 17,733,328.959; Wanger Twenty 2,516,933.843 and 2,516,933.842; and Wanger Foreign Forty 1,578,321.547 and 1,578,321.547. The outcome of the votes were as follows: The shareholders of the Funds elected the following individuals to serve on the Board of Trustees: TRUSTEE FOR WITHHELD PERCENTAGE FOR - -------------------------------------------------------------------------------- Jerome L. Duffy 49,143,047.327 1,449,462.763 97.135 - -------------------------------------------------------------------------------- Fred D. Hasselbring 49,140,228.492 1,452,281.598 97.129 - -------------------------------------------------------------------------------- Dr. Kathryn A. Krueger 49,149,175.293 1,443,334.797 97.147 - -------------------------------------------------------------------------------- Ralph Wanger 49,113,156.030 1,479,354.060 97.076 - -------------------------------------------------------------------------------- Patricia H. Werhane 49,162,145.966 1,430,364.124 97.173 - -------------------------------------------------------------------------------- 46 Wanger Advisors Trust 2003 Annual Report - -------------------------------------------------------------------------------- This page intentionally left blank. 47 - -------------------------------------------------------------------------------- Logo: Squirrel WANGER ADVISORS TRUST TRANSFER AGENT, DIVIDEND DISBURSING AGENT Columbia Funds Services, Inc. P.O. Box 8081 Boston, Massachusetts 02266-8081 DISTRIBUTOR Columbia Funds Distributor, Inc. One Financial Center Boston, Massachusetts 02111-2621 INVESTMENT ADVISOR Columbia Wanger Asset Management, L.P. 227 West Monroe Street Suite 3000 Chicago, Illinois 60606 1-800-4-WANGER (1-800-492-6437) LEGAL COUNSEL Bell, Boyd & Lloyd LLC Chicago, Illinois INDEPENDENT AUDITORS Ernst & Young LLP Chicago, Illinois This report, including the 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. 48 WANGER ADVISORS TRUST ANN-02/7309-1203 04/0222 ITEM 2. CODE OF ETHICS. (a) The registrant has, as of the end of the period covered by this report, adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (b) During the period covered by this report, there were not any amendments to a provision of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, there were not any waivers or implicit waivers to a provision of the code of ethics adopted in 2(a) above. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The registrant's Board of Trustees has determined that Jerome L. Duffy, who is a member of the registrant's Board of Trustees and Audit Committee, qualifies as an audit committee financial expert. Mr. Duffy is an independent trustee, as defined in paragraph (a)(2) of this item's instructions. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. 4(a) Aggregate Audit Fees billed to the registrant by the principal accountant for professional services rendered during the fiscal years ended December 31, 2003 and December 31, 2002 are as follows: 2003 2002 $78,800 $75,300 Audit Fees include amounts related to the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. (b) Aggregate Audit-Related Fees billed to the registrant by the principal accountant for professional services rendered during the fiscal years ended December 31, 2003 and December 31, 2002 are as follows: 2003 2002 $16,000 $8,000 Audit-Related Fees include amounts for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported in Audit Fees above. In fiscal year 2003, Audit-Related Fees relate to certain agreed-upon procedures performed for semi-annual shareholder reports. Audit-Related Fees in fiscal year 2002 relate to certain agreed-upon procedures conducted during the conversion of the registrant's accounting system. The "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X became effective on May 6, 2003. The percentage of Audit-Related services to the registrant that were approved under the "de minimis" exception during the fiscal years ended December 31, 2003 and December 31, 2002 are as follows: 2003 2002 0% N/A The pre-approval requirements for services to the investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X became effective on May 6, 2003. During the fiscal year ended December 31, 2003, there were no Audit-Related Fees that were approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The percentage of Audit-Related fees required to be approved under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X that were approved under the "de minimis" exception during the fiscal years ended December 31, 2003 and December 31, 2002 are as follows: 2003 2002 0% N/A (c) Aggregate Tax Fees billed to the registrant by the principal accountant for professional services rendered during the fiscal years ended December 31, 2003 and December 31, 2002 are as follows: 2003 2002 $12,100 $10,500 Tax Fees include amounts for professional services by the principal accountant for tax compliance, tax advice and tax planning. Tax Fees in both fiscal years 2003 and 2002 relate to the review of annual tax returns. The "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X became effective on May 6, 2003. The percentage of Tax Fees billed to the registrant that were approved under the "de minimis" exception during the fiscal years ended December 31, 2003 and December 31, 2002 are as follows: 2003 2002 0% N/A The pre-approval requirements for services to the investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X became effective on May 6, 2003. During the fiscal year ended December 31, 2003, there were no Tax Fees that were approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The percentage of Tax Fees required to be approved under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X that were approved under the "de minimis" exception during the fiscal years ended December 31, 2003 and December 31, 2002 are as follows: 2003 2002 0% N/A (d) Aggregate All Other Fees billed to the registrant by the principal accountant for professional services rendered during the fiscal years ended December 31, 2003 and December 31, 2002 are as follows: 2003 2002 $0 $0 All Other Fees include amounts for products and services provided by the principal accountant, other than the services reported in (a)-(c) above. The "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X became effective on May 6, 2003. The percentage of All Other Fees billed to the registrant that were approved under the "de minimis" exception during the fiscal years ended December 31, 2003 and December 31, 2002 are as follows: 2003 2002 0% N/A The pre-approval requirements for services to the investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X became effective on May 6, 2003. During the fiscal year ended December 31, 2003, there were no All Other Fees that were approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The percentage of All Other Fees required to be approved under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X that were approved under the "de minimis" exception during the fiscal years ended December 31, 2003 and December 31, 2002 are as follows: 2003 2002 0% N/A (e)(1) Audit Committee Pre-Approval Policies and Procedures The policy of the registrant's Audit Committee is to specifically pre-approve (i) all audit and non-audit (including audit related, tax and all other) services provided by the registrant's independent auditor to the registrant and individual funds (collectively "Fund Services") and (ii) all non-audit services provided by the registrant's independent auditor to the funds' adviser or a control affiliate of the adviser, that relate directly to the funds' operations and financial reporting (collectively "Fund-related Adviser Services"). A "control affiliate" is an entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the funds, and the term "adviser" is deemed to exclude any unaffiliated sub-adviser whose role is primarily portfolio management and is sub-contracted or overseen by another investment adviser. If such Fund Services or Fund-related Adviser Services are required during the period between the Audit Committee's regularly scheduled meetings, the Chairman of the Audit Committee has the authority to pre-approve the service, with reporting to the full Audit Committee at the next regularly scheduled meeting. The Audit Committee will waive pre-approval of Fund Services or Fund-related Adviser Services provided that the requirements under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are met. (f) Not applicable. (g) All non-audit fees billed by the registrant's accountant for services rendered to the registrant for the fiscal years ended December 31, 2003 and December 31, 2002 are disclosed in 4(b)-(d) above. All non-audit fees billed by the registrant's accountant for services rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for the fiscal years ended December 31, 2003 and December 31, 2002 are also disclosed in 4(b)-(d) above. There were no such fees during the last two fiscal years. (h) The registrant's Audit Committee of the Board of Directors has considered whether the provision of non-audit services that were rendered to the registrant's adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, is compatible with maintaining the principal accountant's independence. The Audit Committee determined that the provision of such services is compatible with maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. RESERVED. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable at this time. ITEM 10. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officer, based on their evaluation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing of this report, have concluded that such controls and procedures are adequately designed to ensure that information required to be disclosed by the registrant in Form N-CSR is accumulated and communicated to the registrant's management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 11. EXHIBITS. (a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR attached hereto as Exhibit 99.CODE ETH (a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT. (a)(3) Not applicable. (b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) Wanger Advisors Trust ------------------------------------------------------------------- By (Signature and Title) /s/ Charles P. McQuaid ------------------------------------------------------- Charles P. McQuaid, President Date March 4, 2004 --------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title) /s/ Charles P. McQuaid ------------------------------------------------------- Charles P. McQuaid, President Date March 4, 2004 --------------------------------------------------------------------------- By (Signature and Title) /s/ Bruce H. Lauer ------------------------------------------------------- Bruce H. Lauer, Treasurer Date March 4, 2004 --------------------------------------------------------------------------- EX-99.CODE ETH 3 file002.txt CODE OF ETHICS COLUMBIA MANAGEMENT GROUP FAMILY OF FUNDS CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS EFFECTIVE DATE: JULY 30, 2003 I. COVERED OFFICERS/PURPOSE OF THE CODE This Code of Ethics (the "Code") for the investment companies within the Columbia Management Group fund complex (collectively the "Funds" and each, a "Fund") applies to the Funds' Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, and Director of Trustee Administration, if any (the "Covered Officers") for the purpose of promoting: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely and understandable disclosure in reports and documents that a Fund files with, or submits to, the Securities and Exchange Commission ("SEC"), and in other public communications made by a Fund; o compliance with applicable laws and governmental rules and regulations; o the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o accountability for adherence to the Code. Each Covered Officer shall adhere to a high standard of business ethics and shall be sensitive to situations that may give rise to actual or apparent conflicts of interest. II. ADMINISTRATION OF THE CODE ADMINISTRATION. The Boards of Trustees and Boards of Directors of the Funds (collectively, the "Board") shall designate an individual to be primarily responsible for the administration of the Code (the "Code Officer"). The administration of the Code shall be supervised by the Columbia Management Group Compliance Department. In the absence of the Code Officer, his or her designee shall serve as the Code Officer, but only on a temporary basis. Each Fund has designated a chief legal officer (the "Chief Legal Officer") for purposes of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder. The Chief Legal Officer of a Fund shall assist the Fund's Code Officer in administration of this Code. The Chief Legal Officer shall be responsible for applying this Code to specific situations in which questions are presented under it (in consultation with Fund counsel, where appropriate) and has the authority to interpret this Code in any particular situation. However, any waivers sought by a Covered Officer must be approved by each Audit Committee of the Funds (collectively, the "Audit Committee"). III. MANAGING CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's personal economic interests interferes with the interests of, or his/her service to, a Fund. For example, a conflict of interest would arise if a Covered Officer, or a family member, receives improper personal benefits as a result of the Covered Officer's position with a Fund. Certain conflicts of interest arise out of the relationships between Covered Officers and a Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940 (the "Company Act") and the Investment Advisers Act of 1940 (the "Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with a Fund because of their status as "affiliated persons" of the Fund. A Fund's and its investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of those provisions. This Code does not, and is not intended to, repeat or replace those programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between a Fund and its investment adviser, administrator, principal underwriter, pricing and bookkeeping agent and/or transfer agent (each, a "Service Provider") of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for a Fund or for a Service Provider, or for both), be involved in establishing policies and implementing decisions that will have different effects on the Service Provider and a Fund. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the Service Provider and is consistent with the performance by the Covered Officers of their duties as officers of a Fund. In addition, it is recognized by the Board that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions of the Company Act and the Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of a Fund. Each Covered Officer must: o not use personal influence or personal relationships to influence investment decisions or financial reporting by a Fund whereby the Covered Officer or an immediate family member would benefit personally to the detriment of a Fund; and o not cause a Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer or an immediate family member rather than the benefit of the Fund. 1 There are some conflict of interest situations that must be approved by the Code Officer, after consultation with the Chief Legal Officer. Those situations include, but are not limited to,: o service as director on the board of any public or private company; o the receipt of any gifts in excess of $100 in the aggregate from a third party that does or seeks to do business with the Funds during any 12-month period; o the receipt of any entertainment from any company with which a Fund has current or prospective business dealings, unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; o any material ownership interest in, or any consulting or employment relationship with, any Fund service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof; o a direct or indirect material financial interest in commissions, transaction charges or spreads paid by a Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. IV. DISCLOSURE AND COMPLIANCE Each Covered Officer shall: o be familiar with the disclosure requirements generally applicable to the Funds; o not knowingly misrepresent, or cause others to misrepresent, facts about any Fund to others, whether within or outside the Fund, - ----------------------- 1 For purposes of this Code, personal trading activity of the Covered Officers shall be monitored in accordance with the Columbia Management Group Code of Ethics. Each Covered Officer shall be considered an "Access Person" under such Code. The term "immediate family" shall have the same meaning as provided in such Code. including to the Fund's trustees and auditors, and to governmental regulators and self-regulatory organizations; o to the extent appropriate within his/her area of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and o promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. V. REPORTING AND ACCOUNTABILITY Each Covered Officer must: o upon adoption of the Code (or after becoming a Covered Officer), affirm in writing to the Board that he/she has received, read and understands the Code; o annually affirm to the Board compliance with the requirements of the Code; o not retaliate against any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; o notify the Chief Legal Officer and the Code Officer promptly if he/she knows of any violation of this Code; and o respond to questionnaires circulated periodically in connection with the preparation of disclosure documents for the Funds. The Code Officer shall maintain records of all activities related to this Code. The Funds will follow the procedures set forth below in investigating and enforcing this Code: o The Chief Legal Officer and/or the Code Officer will take all appropriate action to investigate any potential violation reported to him/her; o If, after such investigation, the Chief Legal Officer and the Code Officer believes that no violation has occurred, the Code Officer will notify the person(s) reporting the potential violation, and no further action is required; o Any matter that the Chief Legal Officer and/or the Code Officer determines may be a violation will be reported to the Audit Committee; o If the Audit Committee determines that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to the Chief Executive Officer of Columbia Management Group; or a recommendation to sanction or dismiss the Covered Officer; o The Audit Committee will be responsible for granting waivers in its sole discretion; o Any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. The Chief Legal Officer shall: o report to the Audit Committee quarterly any approvals provided in accordance with Section III of this Code; and o report to the Audit Committee quarterly any violations of, or material issues arising under, this Code. VI. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for the purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other polices or procedures of the Funds or the Funds' Service Providers govern or purport to govern the behavior or activities (including, but not limited to, personal trading activities) of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds' and their investment advisers' and principal underwriter's codes of ethics under Rule 17j-1 under the Company Act and any policies and procedures of the Service Providers are separate requirements applicable to the Covered Officers and are not part of this Code. VII. AMENDMENTS All material amendments to this Code must be approved or ratified by the Board, including a majority of independent directors. VIII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Board, the Covered Officers, the Chief Legal Officer, the Code Officer, outside audit firms and legal counsel to the Funds, and senior management of Columbia Management Group. IX. INTERNAL USE The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion. EX-99.CERT 4 file003.txt CERTIFICATIONS I, Charles P. McQuaid, certify that: 1. I have reviewed this report on Form N-CSR of Wanger Advisors Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 4, 2004 /s/ Charles P. McQuaid ----------------------------- Charles P. McQuaid, President I, Bruce H. Lauer, certify that: 1. I have reviewed this report on Form N-CSR of Wanger Advisors Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 4, 2004 /s/ Bruce H. Lauer ------------------------- Bruce H. Lauer, Treasurer EX-99.906CERT 5 file004.txt CERTIFICATIONS CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Certified Shareholder Report of Wanger Advisors Trust (the "Trust") on Form N-CSR for the period ending December 31, 2003, as filed with the Securities and Exchange Commission on the date hereof ("the Report"), each of the undersigned hereby certifies that, to his knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust. Date: March 4, 2004 /s/ Charles P. McQuaid ----------------------------------- Charles P. McQuaid, President Date: March 4, 2004 /s/ Bruce H. Lauer ----------------------------------- Bruce H. Lauer, Treasurer A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission (the "Commission") or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. ss.1350 and is not being filed as part of the Form N-CSR with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----