-----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, N2CoKkHqdj8t2fomfuh41k3na98eWaVzJQ5tcyz3K7mFBocCTiVYlWRRmrV6xoSo PSvsYs9Dmu1ocw/E6uvOwQ== 0001104659-07-028616.txt : 20070416 0001104659-07-028616.hdr.sgml : 20070416 20070416171145 ACCESSION NUMBER: 0001104659-07-028616 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 29 FILED AS OF DATE: 20070416 DATE AS OF CHANGE: 20070416 EFFECTIVENESS DATE: 20070501 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: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-08748 FILM NUMBER: 07768800 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 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: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-83548 FILM NUMBER: 07768801 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 0000929521 S000008981 Wanger U.S. Smaller Companies C000024403 Wanger U.S. Smaller Companies WUSAX 0000929521 S000008982 Wanger International Small Cap C000024404 Wanger International Small Cap WSCAX 0000929521 S000008983 Wanger Select C000024405 Wanger Select WATWX 0000929521 S000008984 Wanger International Select C000024406 Wanger International Select WAFFX 485BPOS 1 a07-7397_5485bpos.htm 485BPOS

 As filed with the Securities and Exchange Commission on April 16, 2007

Securities Act Registration No. 33-83548

Investment Company Act File No. 811-08748

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Post-Effective Amendment No. 20

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 21


WANGER ADVISORS TRUST

(Registrant)

227 West Monroe Street, Suite 3000
Chicago, Illinois  60606

Telephone number:  312/634-9200

Charles P. McQuaid

 

Peter T. Fariel

 

Stacy H. Winick

Wanger Advisors Trust

 

Columbia Management Group, LLC

 

Bell, Boyd & Lloyd LLP

227 West Monroe Street, Suite 3000

 

One Financial Center

 

1615 L Street, N.W., Suite 1200

Chicago, Illinois 60606

 

Boston, Massachusetts 02111

 

Washington, D.C. 20036

 

 

(Agents for service)

 

 

 


Amending Parts A, B and C, and filing exhibits


It is proposed that this filing will become effective:

o immediately upon filing pursuant to rule 485(b)

x on May 1, 2007 pursuant to rule 485(b)

o 60 days after filing pursuant to rule 485(a)(1)

o on                  pursuant to rule 485(a)(1)

o 75 days after filing pursuant to rule 485(a)(2)

o on                  pursuant to rule 485(a)(2)

 

 




WANGER U.S. SMALLER COMPANIES

PROSPECTUS

MAY 1, 2007

* * * *

Fund shares are available only through variable annuity contracts and variable life insurance policies of participating insurance companies, and through certain retirement plans. This prospectus must be accompanied by a prospectus for your variable annuity contract or variable life insurance policy. Retain both prospectuses for future reference.

* * * *

Although Fund shares have been registered with the Securities and Exchange Commission (SEC), the SEC has not approved or disapproved any shares offered in this prospectus or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.



TABLE OF CONTENTS

THE TRUST     3    
THE FUND     4    
OTHER INVESTMENT STRATEGIES AND RISKS     7    
TRUST MANAGEMENT ORGANIZATIONS     9    
The Trustees     9    
The Adviser: Columbia Wanger Asset Management, L.P.     9    
Portfolio Manager     10    
Legal Proceedings     10    
Mixed and Shared Funding     11    
Additional Expenses     12    
Additional Intermediary Compensation     12    
FINANCIAL HIGHLIGHTS     14    
SHAREHOLDER INFORMATION     15    
APPENDIX     20    

 


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THE TRUST

Wanger Advisors Trust (Trust) includes four separate mutual funds (Funds), each with its own investment goal and strategies. This prospectus contains information about Wanger U.S. Smaller Companies, formerly named Wanger U.S. Small Cap (Fund).

The Fund is an investment option under variable annuity contracts (VA contracts) and variable life insurance policies (VLI policies) issued by life insurance companies (Participating Insurance Companies). Participating Insurance Companies invest in the Fund through separate accounts that they set up for that purpose. Owners of VA contracts and VLI policies invest in subaccounts of those separate accounts through instructions they give to their insurance company.

Shares of the Fund also may be offered directly to certain pension plans and retirement arrangements and accounts permitting accumulation of funds on a tax-deferred basis (Retirement Plans).

The prospectuses of the Participating Insurance Companies' separate accounts describe which Funds are available to the purchasers of their own VA contracts and VLI policies. The Trust assumes no responsibility for the accuracy or adequacy of those prospectuses. A Retirement Plan's disclosure documents describe which Funds are available to participants in the plan.


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THE FUND

INVESTMENT GOAL—WANGER U.S. SMALLER COMPANIES

Wanger U.S. Smaller Companies seeks long-term growth of capital.

PRINCIPAL INVESTMENT STRATEGY

The Fund invests primarily in the stocks of small- and medium-sized U.S. companies. Wanger U.S. Smaller Companies generally invests in stocks of companies with market capitalizations of less than $5 billion at the time of initial purchase. As long as a stock continues to meet the Fund's other investment criteria, the Fund may choose to hold the stock even if it grows beyond a capitalization limit. Wanger U.S. Smaller Companies believes that these smaller companies, which are not as well known by financial analysts, may offer higher return potential than the stocks of larger companies.

Wanger U.S. Smaller Companies typically looks for companies with:

•  A strong business franchise that offers growth potential.

•  Products and services that give the company a competitive advantage.

•  A stock price that the Fund's adviser believes is reasonable relative to the assets and earning power of the company.

Under normal circumstances, Wanger U.S. Smaller Companies invests at least 80% of its net assets (plus any borrowings for investment purposes), at market value at the time of investment, in companies with total stock market capitalizations of $5 billion or less at the time of initial purchase. Likewise, under normal market conditions, Wanger U.S. Smaller Companies invests at least 80% of its net assets (plus any borrowings for investment purposes) in domestic securities.

The Fund's adviser may sell a portfolio holding if the security reaches the adviser's price target or if the company has a deterioration of fundamentals, such as failing to meet key operating benchmarks. The adviser also may sell a portfolio holding to fund redemptions.

Additional strategies that are not principal investment strategies and the risks associated with them are described later in this prospectus under "Other Investment Strategies and Risks."

PRINCIPAL INVESTMENT RISKS

There are two basic risks for all mutual funds that invest in stocks: management risk and market risk. You may lose money by investing in the Fund.

Management risk means that the investment decisions of Columbia Wanger Asset Management, L.P. (CWAM), the Fund's investment adviser, might produce losses or cause the Fund to underperform when compared to other funds with similar investment goals. Market risk means that security prices in a market, sector or industry may fall, reducing the value of your investment. Because of management and market risk, there is no guarantee that the Fund will achieve its investment goal or perform favorably among comparable funds.

Since the Fund purchases equity securities, it is subject to equity risk. This is the risk that stock prices will fall over short or extended periods of time. Although the stock market historically has outperformed other asset classes over the long term, the stock market tends to move in cycles. Individual stock prices may fluctuate drastically from day-to-day and may underperform other asset classes over an extended period of time. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These price movements may result from factors affecting


4



individual companies, industries or the securities market as a whole. Because the Fund invests in stocks, the price of its shares—its net asset value (NAV) per share—fluctuates daily in response to changes in the market value of the stocks.

Small- or Mid-Cap Companies

Small- or mid-cap companies may be more susceptible to market downturns, and their prices could be more volatile than large-cap companies. These companies are more likely than larger companies to have limited product lines, operating histories, markets or financial resources. They may depend heavily on a small management team and may trade less frequently, may trade in smaller volumes and may fluctuate more sharply in price than stocks of larger companies. In addition, such companies may not be widely followed by the investment community, which can lower the demand for their stocks.

Sector Risk

Sector risk may sometimes be present in the Fund's investments. Companies that are in different but closely related industries are sometimes described as being in the same broad economic sector. The values of stocks of different companies in a market sector may be similarly affected by particular economic or market events. Although the Fund does not intend to focus on any particular sector, at times the Fund may have a large portion of its assets invested in a particular sector.

An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

The Statement of Additional Information (SAI) includes a description of the Fund's policies with respect to the disclosure of portfolio holdings.

PERFORMANCE HISTORY

The bar chart that follows shows the Fund's calendar-year total returns. The performance table following the bar chart shows how the Fund's average annual returns compare with those of broad measures of market performance for one year, five years and ten years. We compare the Fund to the Russell 2000 Index (Russell 2000), the Standard & Poor's MidCap 400 Index (S&P MidCap 400) and the Standard & Poor's 500 Index (S&P 500), which are broad-based measures of market performance. The Russell 2000 Index is the Fund's primary benchmark. The chart and table are intended to illustrate some of the risks of investing in the Fund by showing changes in the Fund's performance from year to year. All returns include the reinvestment of dividends and distributions. As with all mutual funds, past performance does not predict the Fund's future performance. The Fund's performance results do not reflect the cost of insurance and separate account charges that are imposed under your VA contract or VLI policy, or any charges imposed by your Retirement Plan. Returns and value of an investment will vary, resulting in a gain or a loss on sale.


5



Calendar-Year Total Returns

YEAR-BY-YEAR TOTAL RETURN

Best quarter: 2nd quarter 2003, 20.46%
Worst quarter: 3rd quarter 2002, –19.23%

Average Annual Total Returns   1 Year   5 Years   10 Years  
Wanger U.S. Smaller Companies     7.87 %     11.09 %     11.78 %  
Russell 2000*     18.37 %     11.39 %     9.44 %  
S&P MidCap 400*     10.32 %     10.89 %     13.47 %  
S&P 500*     15.79 %     6.19 %     8.42 %  

 

*  The Russell 2000, the Fund's primary benchmark, is a market-weighted index of the 2000 smallest companies of the 3000 largest U.S. companies based on market capitalization. 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 500 widely-held, large capitalization U.S. stocks. The indices are unmanaged and differ from the Fund's composition; they are not available for direct investment.

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund, not including fees and expenses imposed under your VA contract, VLI policy or Retirement Plan.

Shareholder Transaction Expenses
Fees paid directly from your investment:

Maximum sales charge     None    
Deferred sales charge     None    

 

Annual Fund Operating Expenses
Expenses that are deducted from Fund assets:

Management fees(1)     0.90 %  
12b-1 fee     None    
Other expenses     0.05 %  
Total annual Fund operating expenses     0.95 %  

 

(1)  The Fund pays an investment advisory fee of 0.90%. The Fund's adviser has implemented a breakpoint schedule for the Fund's investment advisory fees. The investment advisory fees charged to the Fund will decline as Fund assets grow and will continue to be based on a percentage of the Fund's average daily net assets. The breakpoint schedule for the Fund is as follows: 0.99% for assets up to $100 million; 0.94% for assets in excess of $100 million and up to $250 million; and 0.89% for assets in excess of $250 million.


6



Example

This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. It assumes a $10,000 investment in Wanger U.S. Smaller Companies for the time periods indicated, a 5% total return each year, reinvestment of all dividends and distributions, and that operating expenses remain the same. Your actual returns and costs may be higher or lower.

1 Year   $ 97    
3 Years   $ 303    
5 Years   $ 525    
10 Years   $ 1,166    

 

OTHER INVESTMENT STRATEGIES AND RISKS

The Fund's principal investment strategies and their associated risks are described above. This section provides more detail about the Fund's investment strategies, and describes other investments the Fund may make and the risks associated with them. In seeking to achieve its investment goal, the Fund may invest in various types of securities and engage in various investment techniques, which are not the principal focus of the Fund and therefore are not described in this prospectus. These types of securities and investment practices are identified and discussed in the Fund's SAI, which you may obtain free of charge (see back cover). Except as otherwise noted, approval by the Fund's shareholders is not required to modify or change the Fund's investment goal or any of its investment strategies.

The Information Edge

CWAM invests in entrepreneurially managed smaller- and mid-sized companies that it believes are not as well known by financial analysts and whose position in a niche creates the opportunity for superior earnings-growth potential. CWAM may identify what it believes are important economic, social or technological trends (for example, the growth of outsourcing as a business strategy or the productivity gains from the increasing use of technology) and try to identify companies it thinks will benefit from those trends.

In making investments for the Fund, CWAM relies primarily on its independent, internally generated research to uncover companies that may be less well known than the more popular names. To find these companies, CWAM compares growth potential, financial strength and fundamental value among companies.


7



Growth Potential   Financial Strength   Fundamental Value  
• superior technology
• innovative marketing
• managerial skill
• market niche
• good earnings prospects
• strong demand for product
  • low debt
• adequate working capital
• conservative accounting practices
• adequate profit margin
  • reasonable stock price relative to growth potential
• valuable assets
 
The realization of this growth potential would likely produce superior performance that is sustainable over time.   A strong balance sheet gives management greater flexibility to pursue strategic objectives and is important to maintaining a competitive advantage.   Once CWAM uncovers an attractive company, it identifies a price that it believes would also make the stock a good value.  

 

Long-Term Investing

CWAM's analysts continually screen companies and contact more than 1,000 companies around the globe each year. To accomplish this, CWAM analysts often talk directly to top management, vendors, suppliers and competitors.

In managing the Fund, CWAM tries to maintain lower transaction costs by investing with a long-term time horizon (at least two to five years). However, securities purchased on a long-term basis may be sold within 12 months after purchase due to changes in the circumstances of a particular company or industry, or changes in general market or economic conditions.

State Insurance Restrictions

The Fund is sold to Participating Insurance Companies in connection with VA contracts and VLI policies, and will seek to be available under VA contracts and VLI policies sold in a number of jurisdictions. Certain states have regulations or guidelines concerning concentration of investments and other investment techniques that could limit the Fund's ability to engage in certain techniques and to manage its portfolio with the flexibility provided herein. In order to permit the Fund to be available under VA contracts and VLI policies sold in certain states, the Fund may make commitments that are more restrictive than the investment policies and limitations described herein and in the SAI. If the Fund determines that such a commitment is no longer in the Fund's best interest, the commitment may be revoked by terminating the availability of the Fund to VA contract owners and VLI policyholders residing in such states.

Temporary Defensive Positions

At times, CWAM may determine that adverse market conditions make it desirable to temporarily suspend the Fund's normal investment activities. During such times, the Fund may, but is not required to, invest in cash or high-quality, short-term debt securities, without limit. Taking a temporary defensive position may prevent the Fund from achieving its investment goal.

Derivative Strategies

The Fund may enter into a number of derivative strategies, including those that employ futures, options and swap contracts, to gain or reduce exposure to particular securities or markets. These strategies, commonly referred to as derivatives, involve the use of financial instruments whose values depend on, or are derived from, the value of an underlying security, index or currency. The Fund may use these


8



strategies to adjust for both hedging and non-hedging purposes, such as to adjust the Fund's sensitivity to changes in interest rates or to offset a potential loss in one position by establishing an interest in an opposite position. Derivative strategies involve the risk that they may exaggerate a loss, potentially losing more money than the actual cost of the underlying security, or limit a potential gain. Also, with some derivative strategies, there is the risk that the other party to the transaction may fail to honor its contract terms, causing a loss to the Fund. The Fund also may not be able to find a suitable derivative transaction counterparty, and thus may be unable to invest in derivatives altogether.

Portfolio Turnover

The Fund does not have limits on portfolio turnover. Turnover may vary significantly from year to year. CWAM does not expect the Fund's turnover to exceed 65% under normal conditions. Portfolio turnover increases transaction expenses, which reduce the Fund's return.

TRUST MANAGEMENT ORGANIZATIONS

The Trustees

The business of the Trust and the Fund is supervised by the Trust's Board of Trustees. The SAI contains names of and biographical information on the Trustees.

More than 75% of the Fund's Trustees are independent, meaning that they have no affiliation with the adviser or the Funds, apart from their positions as Trustees and the personal investments they may have made as private individuals.

The independent Trustees bring backgrounds in business and their professions, academia, and public service to their task of working with the Funds' officers to establish the policies and oversee the activities of the Funds. Among the Trustees' responsibilities are selecting the investment adviser for the Funds; negotiating the advisory agreement; approving investment policies; monitoring Fund operations, performance, and costs; reviewing other contracts; and nominating or selecting new Trustees.

Each Trustee serves until his or her retirement, resignation, death or removal; otherwise as specified in the Trust's organizational documents; or as otherwise agreed upon. It is expected that every five years the Trustees will call a meeting of shareholders to elect Trustees. A Trustee must retire at the end of the year in which he or she attains the age of 75. Any Trustee may be removed at a shareholders' meeting by a vote representing two-thirds of all shares of the Funds of the Trust. The mailing address for the Trustees and officers is 227 W. Monroe, Suite 3000, Chicago, Illinois 60606.

The Adviser: Columbia Wanger Asset Management, L.P.

Columbia Wanger Asset Management, L.P. (CWAM), 227 West Monroe Street, Suite 3000, Chicago, IL 60606, is the Fund's investment adviser. CWAM is responsible for the Fund's management, subject to oversight by the Fund's Board of Trustees. CWAM and its predecessor have managed mutual funds, including Wanger U.S. Smaller Companies, since 1992. In its duties as investment adviser, CWAM runs the Fund's day-to-day business, including making investment decisions and placing all orders for the purchase and sale of the Fund's portfolio securities. As of December 31, 2006, CWAM managed more than $32.9 billion in assets. CWAM is an indirect wholly owned subsidiary of Columbia Management Group, LLC (Columbia Management), which is an indirect wholly owned subsidiary of Bank of America Corporation.


9



For the fiscal year 2006, the Fund paid CWAM management fees at 0.90% of the Fund's average daily net assets. A discussion of the factors considered by the Fund's Board of Trustees in approving the Fund's investment advisory contract is included in the Fund's annual report to shareholders for the period ended December 31, 2006.

Portfolio Manager

CWAM uses a team to assist the lead portfolio manager in managing the Fund. Team members share responsibility for providing ideas, information and knowledge in managing the Fund, and each team member has one or more particular areas of expertise. The lead portfolio manager is responsible for making daily investment decisions and utilizing the management team's input and advice when making buy and sell determinations.

Robert Mohn is a vice president of the Trust and the lead portfolio manager of Wanger U.S. Smaller Companies. He has been a member of the domestic analytical team at CWAM and its predecessor since August 1992. He has managed Columbia Acorn USA since its inception in 1996, co-managed Columbia Acorn Fund since May 2003 and also manages the U.S. fund of an investment company whose shares are offered only to non-U.S. investors. Mr. Mohn also is a vice president of Columbia Acorn Trust and the director of domestic research for CWAM.

The SAI provides additional information about the portfolio manager's compensation, other accounts managed and ownership of securities in the Fund.

Legal Proceedings

CWAM, Columbia Acorn Trust, another mutual fund family advised by CWAM, and the trustees of Columbia Acorn Trust (collectively, the "Columbia defendants") are named as defendants in class and derivative complaints, which were consolidated in a Multi-District Action in the federal district court for the District of Maryland on February 20, 2004 (the "MDL Action"). These lawsuits contend that defendants permitted certain investors to market time their trades in certain Columbia Acorn Funds. All claims against Columbia Acorn Trust and its independent trustees have been dismissed; however, the interested trustees of Columbia Acorn Trust are still parties to the MDL Action.

On March 21, 2005, a class action complaint was filed against Columbia Acorn Trust in the Superior Court of the Commonwealth of Massachusetts seeking to rescind the contingent deferred sales charges assessed upon redemption of Class B shares of Columbia Acorn Funds due to the alleged market timing of the Columbia Acorn Funds. In addition to the rescission of sales charges, plaintiffs seek recovery of actual damages, attorneys' fees and costs. The case has been transferred to the MDL Action in the federal district court of Maryland.

Columbia Acorn Trust and CWAM are also defendants in a class action lawsuit, filed on November 13, 2003 in the Circuit Court of the Third Judicial Circuit, Madison County, Illinois, that alleges, in summary, that Columbia Acorn Trust and CWAM exposed shareholders of Columbia Acorn International to trading by market timers by allegedly (a) failing to properly evaluate daily whether a significant event affecting the value of that fund's securities had occurred after foreign markets had closed but before the calculation of the fund's NAV; (b) failing to implement the fund's portfolio valuation and share pricing policies and procedures; and (c) failing to know and implement applicable rules and regulations concerning the calculation of NAV (the "Fair Valuation Lawsuit"). On April 5, 2005, the United States Court of Appeals for the Seventh Circuit ruled that the plaintiffs' state law claims were preempted under federal law resulting in the dismis sal of plaintiffs' complaint. Plaintiffs appealed the Seventh Circuit's ruling to the United States Supreme Court. On June 15, 2006, the


10



Supreme Court reversed the Seventh Circuit's ruling on jurisdictional grounds, and the case ultimately was remanded to the state court. The state court has entered a stay of all proceedings given the settlement, as discussed below.

On April 4, 2006, the plaintiffs and the Columbia defendants named in the MDL Action executed an agreement in principle intended to fully resolve all of the lawsuits consolidated in the MDL Action as well as the Fair Valuation Lawsuit. The court entered a stay after the parties executed the agreement in principle. The settlement is subject to court approval.

In 2004, CWAM and the trustees of the Columbia Acorn Trust were named as defendants in certain purported shareholder class and derivative actions making claims, including claims under the Investment Company and the Investment Advisers Acts of 1940 and state law. Certain Columbia Acorn Funds were named as nominal defendants. The suits allege, inter alia, that the fees and expenses paid by the funds are excessive and that the funds' advisers and their affiliates inappropriately used fund assets to distribute the funds and for other improper purposes. On March 2, 2005, the actions were consolidated in the Massachusetts federal court as In re Columbia Entities Litigation. The plaintiffs filed a consolidated amended complaint on June 9, 2005. On November 30, 2005, the judge dismissed all claims by plaintiffs and entered final judgment in favor of the defendants. The plaintiffs appealed to the United States Court of Appeals for the First Circuit on December 30, 2005. A stipulation and settlement agreement dated January 19, 2007 was filed in the First Circuit on February 14, 2007, with a joint stipulation of dismissal and motion for remand to obtain district court approval of the settlement. That joint motion was granted and the appeal was dismissed. On March 6, 2007, the case was remanded to the District Court, where the parties will seek court approval of the settlement. The terms of the proposed settlement, if approved, will require payments by the funds' adviser and/or its affiliates, including payment of plaintiffs' attorneys' fees and notice to class members. In the event that the settlement is not approved, the plaintiffs may elect to go forward wi th their appeal and no opinion is expressed regarding the likely outcome or financial impact of such an appeal on any fund.

On or about January 11, 2005, a putative class action lawsuit was filed in federal district court in Massachusetts against Columbia Acorn Trust and its trustees, along with Columbia Management Advisors, LLC, the sub-administrator of the Wanger Advisors Funds and the Columbia Acorn Funds. The plaintiffs allege that the defendants failed to submit Proof of Claims in connection with settlements of securities class action lawsuits filed against companies in which the Columbia Acorn Funds held positions. The complaint seeks compensatory and punitive damages, and the disgorgement of all fees paid to Columbia Management Advisors, LLC. Plaintiffs have voluntarily dismissed Columbia Acorn Trust and its independent trustees.

Columbia Acorn Trust and CWAM intend to defend these suits vigorously.

As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of Fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the Fund.

However, based on currently available information, CWAM believes that the lawsuits are not likely to materially affect its ability to provide investment management services to the Fund.

Mixed and Shared Funding

As described previously, the Trust serves as a funding medium for VA contracts and VLI policies of Participating Insurance Companies and for certain Retirement Plans, so-called mixed and shared funding. As of the date of this prospectus, the Participating Insurance Companies are Keyport Life Insurance Company (Keyport), Keyport Benefit Life Insurance Company (Keyport Benefit), Aegon


11



Financial Services Group, Inc., Symetra Life Insurance Company, PHL Variable Life Insurance Company, Phoenix Home Life Mutual Insurance Company, RiverSource Life Insurance Company, RiverSource Life Insurance Co. of New York, Sun Life Assurance Company of Canada (U.S.), Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company, ING Insurance Company of America, ING Life Insurance and Annuity Company, Reliastar Life Insurance Company, Sun Life Insurance & Annuity Company of New York, Merrill Lynch Life Insurance Company, ML Life Insurance Company of New York and TIAA–CREF Life Insurance Company. The Fund is or may become a funding vehicle for VA contracts or VLI policies of the Participating Insurance Companies or may become a funding vehicle for VA contracts or VLI policies of other Participating Insurance Companies.

The interests in shares of the Fund of owners of VA contracts and VLI policies could diverge based on differences in state regulatory requirements, changes in the tax laws or other unanticipated developments. The Trust does not foresee any such differences or disadvantages at this time. However, the Trustees will monitor for such developments to identify any material irreconcilable conflicts and to determine what action, if any, should be taken in response to any such conflicts. If such a conflict were to occur, one or more separate accounts might be required to withdraw their investments in the Fund or shares of another fund may be substituted. This might force the Fund to sell securities at disadvantageous prices.

Additional Expenses

Owners of VA contracts and VLI policies and the Retirement Plan participants incur additional expenses that are not described in this prospectus. They should consult the contract or policy disclosure documents or Retirement Plan information regarding these expenses.

Additional Intermediary Compensation

From time to time, CWAM or its affiliates may pay amounts from its past profits to Participating Insurance Companies or other organizations that provide administrative services for the Fund or that provide other services relating to the Fund to owners of VA contracts, VLI policies and/or participants in Retirement Plans. These services include, among other things: subaccounting services; answering inquiries regarding the Fund; transmitting, on behalf of the Fund, proxy statements, shareholder reports, updated prospectuses and other communications regarding the Fund; and such other related services as the Fund, owners of VA contracts, VLI policies and/or participants in Retirement Plans may request. Payment of such amounts by CWAM will not increase the fees paid by the Fund or its shareholders.

The Fund's distributor, investment adviser or their affiliates may make payments, from their own resources, to certain financial intermediaries for marketing support services. For purposes of this section the term "financial intermediary" includes any Participating Insurance Company, broker, dealer, bank, bank trust department, registered investment adviser, financial planner, Retirement Plan or other third party administrator and any other institution having a selling, services or any similar agreement with the Fund's distributor, investment adviser or one of their affiliates. These payments are generally based upon one or more of the following factors: average net assets of the mutual funds distributed by the Fund's distributor attributable to that financial intermediary, gross sales of the mutual funds distributed by the Fund's distributor attributable to that financial intermediary, reimbursement of ticket charges (fees that a financial intermediary firm charges its representatives for effecting transactions in fund shares) or a negotiated lump sum payment.


12



While the financial arrangements may vary for each financial intermediary, the payments to any one financial intermediary are generally expected to be between 0.20% and 0.50% on an annual basis for payments based on average net assets of the Funds attributable to the financial intermediary.

The Fund's distributor, investment adviser, or their affiliates may make other payments or allow promotional incentives to financial intermediaries to the extent permitted by SEC and NASD rules and by other applicable laws and regulations.

Amounts paid by the Fund's distributor, investment adviser or their affiliates are paid out of the distributor's, investment adviser's or its affiliates' own resources and do not increase the amount paid by you or the Fund. You can find further details about the payments made by the Fund's distributor, investment adviser or their affiliates and the services provided by financial intermediaries as well as a list of the financial intermediaries to which the Fund's distributor, investment adviser or its affiliates has agreed to make marketing support payments in the Fund's SAI. Your financial intermediary may charge you fees or commissions in addition to those disclosed in this prospectus. You can ask your financial intermediary for information about any payments it receives from the Fund's distributor, investment adviser and their affiliates and any services your financial intermediary provides, as well as fees and/or commissions it charges. I n addition, depending on the financial arrangement in place at any particular time, a financial intermediary and its financial consultants also may have a financial incentive for recommending a particular fund or share class over others. You should consult with your financial adviser and review carefully any disclosure by the financial intermediary as to compensation received by your financial adviser.


13



FINANCIAL HIGHLIGHTS

The financial highlights table that follows is intended to help you understand the Fund's financial performance. Information is shown for the Fund's last five fiscal years, which run from January 1 to December 31. Certain information in the table reflects the financial results for a single Fund share. The total returns in the table represent the return that you would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information is included in the Fund's financial statements, which have been audited for the years ended December 31, 2004, 2005 and 2006 by PricewaterhouseCoopers LLP, an independent registered public accounting firm, whose report, along with the Fund's audited financial statements, is included in the Fund's annual report. The information for the years ended December 31, 2002 and 2003 is included in the Fund's financial statements, which have been audited by anoth er independent registered public accounting firm, whose report expressed an unqualified opinion on those financial statements. You can request a free annual report by calling 1-888-4-WANGER (1-888-492-6437). The Fund's total returns presented below do not reflect the cost of insurance and other separate account charges which vary among the VA contracts, VLI policies and Retirement Plans.

Wanger U.S. Smaller Companies

    Year Ended December 31,  
Selected data for a share outstanding throughout each period   2006   2005   2004   2003   2002  
Net Asset Value, Beginning of Period   $ 34.90     $ 31.37     $ 26.51     $ 18.51     $ 22.25    
Income From Investment Operations:  
Net investment income (loss)(a)     (0.02 )     0.09       (0.14 )     (0.11 )     (0.10 )  
Net realized and unrealized gain (loss) on investments     2.71       3.44       5.00       8.11       (3.64 )  
Total from Investment Operations     2.69       3.53       4.86       8.00       (3.74 )  
Less Distributions Declared to Shareholders:  
From net investment income     (0.08 )                          
From net realized capital gains     (1.15 )                          
Total Distributions Declared to Shareholders     (1.23 )                          
Net Asset Value, End of Period   $ 36.36     $ 34.90     $ 31.37     $ 26.51     $ 18.51    
Total Return(b)     7.87 %     11.25 %(c)     18.33 %     43.22 %     (16.81 )%  
Ratios to Average Net Asset/Supplemental Data:  
Net operating expenses(d)     0.95 %     0.95 %     1.00 %     0.99 %     1.05 %  
Interest expense     0.00 %(e)                          
Total net expenses(d)     0.95 %     0.95 %     1.00 %     0.99 %     1.05 %  
Net investment income (loss)(d)     (0.07 )%     0.29 %     (0.49 )%     (0.48 )%     (0.47 )%  
Waiver           0.00 %(e)                    
Portfolio turnover rate     19 %     11 %     15 %     10 %     16 %  
Net assets, end of period (000's)   $ 1,608,340     $ 1,493,695     $ 1,153,553     $ 822,658     $ 471,726    

 

(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)  Had the investment adviser not waived a portion of expenses, total return would have been reduced.

(d)  The benefits derived from custody fees paid indirectly had no impact.

(e)  Rounds to less then 0.01%.


14



SHAREHOLDER INFORMATION

Shareholder and Account Policies

Participating Insurance Companies and Retirement Plans may obtain information about the Fund Monday through Friday (except holidays) from 8:00 a.m. to 4:30 p.m. Central time. For information, prices, literature, or to obtain information regarding the availability of Fund shares or how Fund shares are redeemed, call CWAM at 1-888-4-WANGER (1-888-492-6437).

Shares of the Fund are issued and redeemed in connection with investments in and payments under certain qualified and non-qualified VA contracts and VLI policies issued through separate accounts of Participating Insurance Companies. Shares of the Fund are also offered directly to certain of the following types of qualified plans and retirement arrangements and accounts, collectively called Retirement Plans:

•  a plan described in section 401(a) of the Internal Revenue Code that includes a trust exempt from tax under section 501(a);

•  an annuity plan described in section 403(a);

•  an annuity contract described in section 403(b), including a 403(b)(7) custodial account;

•  a governmental plan under section 414(d) or an eligible deferred compensation plan under section 457(b); and

•  a plan described in section 501(c)(18).

The retirement trust or plan must be established before shares of the Fund can be purchased by the plan. Neither the Fund nor CWAM offers prototypes of these plans. The Fund has imposed certain additional restrictions on sales to Retirement Plans to reduce Fund expenses. To be eligible to invest in the Fund, a Retirement Plan must be domiciled in a state in which Fund shares may be sold without payment of a fee to the state. In most states, this policy will require that a Retirement Plan investing in the Fund have at least $5 million in assets and that its investment decisions are made by a plan fiduciary rather than plan participants. A Retirement Plan may call CWAM at 1-888-4-WANGER (1-888-492-6437) to determine if it is eligible to invest.

How to Invest and Redeem

Shares of the Fund may not be purchased or redeemed directly by individual VA contract owners, VLI policyholders or individual Retirement Plan participants. VA contract owners, VLI policyholders or Retirement Plan participants should consult the disclosure documents for their VA contract, VLI policy or the plan documents for their Retirement Plan, for information on the availability of the Fund as an investment vehicle for allocations under their VA contract, VLI policy or Retirement Plan. In the case of a Participating Insurance Company purchaser, particular purchase and redemption procedures typically are included in an agreement between the Fund and the Participating Insurance Company. The Fund may enter into similar agreements with Retirement Plans.

The Participating Insurance Companies and Retirement Plans place daily orders to purchase and redeem shares of the Fund. These orders generally reflect the net effect of instructions they receive from holders of their VA contracts, VLI policies or Retirement Plan participants and certain other terms of those contracts, policies or Retirement Plans. The Trust issues and redeems shares at NAV without imposing any selling commission, sales load or redemption charge. However, each VA contract and VLI policy imposes its own charges and fees on owners of the VA contract or VLI policy and each


15



Retirement Plan may impose such charges on participants in the Retirement Plan. Shares generally are sold and redeemed at their NAV next determined after Participating Insurance Companies and Retirement Plans receive purchase or redemption requests. The right of redemption may be suspended or payment postponed whenever permitted by applicable law and regulations.

Fund Policy on Trading of Fund Shares

The interests of the Fund's long-term shareholders may be adversely affected by certain short-term trading activity by Fund shareholders. Such short-term trading activity, when excessive, has the potential to interfere with efficient portfolio management, generate transaction and other costs, dilute the value of Fund shares held by long-term shareholders and have other adverse effects on the Fund. This type of excessive short-term trading activity is referred to herein as "market timing." For purposes of this section, the "Columbia Funds" are the Columbia, Columbia Acorn Trust and Wanger Advisors Trust family of mutual funds. The Columbia Funds are not intended as vehicles for market timing. The board of trustees of the Fund has adopted the policies and procedures set forth below with respect to frequent trading of the Fund's shares.

The Fund, directly and through its agents, takes various steps designed to deter and curtail market timing. For example, if the Fund detects that any shareholder has conducted two "round trips" (as defined below) in the Fund in any 28-day period, except as noted below with respect to orders received through omnibus accounts, the Fund will reject the shareholder's future purchase orders, including exchange purchase orders, involving any Columbia Fund (other than a money market fund). In addition, if the Fund determines that any person, group or account has engaged in any type of market timing activity (independent of the two-round-trip limit), the Fund may, in its discretion, reject future purchase orders by the person, group or account, including exchange purchase orders, involving the same or any other Columbia Fund, and also retains the right to modify these market timing policies at any time without prior notice.

The rights of shareholders to redeem shares of the Fund are not affected by any of the limits mentioned above. However, certain funds impose a redemption fee on the proceeds of fund shares that are redeemed or exchanged within 60 days of their purchase.

For these purposes, a "round trip" is a purchase by any means into a Columbia Fund followed by a redemption, of any amount, by any means out of the same Columbia Fund. Under this definition, an exchange into the Fund followed by an exchange out of the Fund is treated as a single round trip. Also for these purposes, where known, accounts under common ownership or control generally will be counted together. Accounts maintained or managed by a common intermediary, such as an adviser, selling agent or trust department, generally will not be considered to be under common ownership or control.

Purchases, redemptions and exchanges made through the Columbia Funds' Automatic Investment Plan, Systematic Withdrawal Plan or similar automated plans are not subject to the two-round-trip limit. The two-round-trip limit may be modified for, or may not be applied to, accounts held by certain retirement plans to conform to plan limits, considerations relating to the Employee Retirement Income Security Act of 1974 or regulations of the Department of Labor, and for certain asset allocation or wrap programs.

The practices and policies described above are intended to deter and curtail market timing in the Fund. However, there can be no assurance that these policies, individually or collectively, will be totally effective in this regard because of various factors. In particular, all Fund purchase, redemption and exchange orders are received through omnibus accounts. Omnibus accounts, in which shares are


16



held in the name of an intermediary on behalf of multiple beneficial owners, are a common form of holding shares among financial intermediaries, retirement plans and variable insurance products. The Fund typically is not able to identify trading by a particular beneficial owner through an omnibus account, which may make it difficult or impossible to determine if a particular account is engaged in market timing. Consequently, there is the risk that the Fund may not be able to identify, deter or curtail certain market timing that occurs in the Fund, which may result in certain shareholders being able to market time the Fund while the shareholders in the Fund bear the burden of such activities.

Certain financial intermediaries have different policies regarding monitoring and restricting market timing in the underlying beneficial owner accounts that they maintain through an omnibus account that may be more or less restrictive than the Fund practices discussed above. If an intermediary does not enforce the Fund's policy, the intermediary must either provide data transparency to Columbia Management or Columbia Management must determine that the intermediary's policy taken in its entirety provides protections to Fund shareholders that are generally commensurate with the Fund's policy.

In addition, the terms and conditions of a particular insurance contract may limit the ability of the Participating Insurance Company to address frequent trading activity by a VA contract owner or VLI policyholder.

The Fund seeks to act in a manner that it believes is consistent with the best interests of Fund shareholders in making any judgments regarding market timing. Neither the Fund nor its agents shall be held liable for any loss resulting from rejected purchase orders or exchanges.

Purchases and Redemptions

To the extent not otherwise provided in any agreement between the Trust and a Participating Insurance Company or Retirement Plan, shares of the Fund may be purchased by check or by wire transfer of funds. To be effective, a purchase order must consist of the money to purchase the shares and (i) information identifying the purchaser, in the case of a Participating Insurance Company or Retirement Plan with which the Fund has entered into an agreement, or a subsequent purchase by a Participating Insurance Company or Retirement Plan that is already a Fund shareholder, or (ii) a completed purchase application, in the case of the initial investment by a Retirement Plan with which the Fund does not have an agreement.

The Participating Insurance Companies and Retirement Plans place daily orders to purchase and redeem shares of the Funds. These orders generally reflect the net effect of instructions they receive from holders of their VA contracts and VLI policies and certain other terms of those contracts and policies. The Fund issues and redeems shares at NAV without imposing any selling commissions, sales charge or redemption charge. Shares generally are sold and redeemed at their NAV next determined after the Participating Insurance Company or Retirement Plan receives a purchase or redemption request. The right of redemption may be suspended or payment postponed to the extent permitted by applicable law and regulations.

Normally, redemption proceeds will be paid within seven days after the Fund or its agent receives a request for redemption. Redemptions may be suspended or the payment date postponed on days when the New York Stock Exchange (NYSE) is closed (other than weekends or holidays), when trading on the NYSE is restricted, or as permitted by the SEC.

During any 90-day period for any one shareholder, the Fund is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the Fund's net assets. Redemptions in excess of these limits will normally be paid in cash, but may be paid wholly or partly by an in-kind distribution of securities.


17



How the Fund's Share Price is Determined

The Fund's share price is its NAV per share next determined. NAV is the difference between the values of the Fund's assets and liabilities divided by the number of shares outstanding. The Fund determines NAV at the close of regular trading on the New York Stock Exchange (NYSE), normally 4 p.m. Eastern time.

To calculate the NAV on a given day, the Fund values each stock listed or traded on a stock exchange at its latest sale price on that day. If there are no sales that day, the Fund values the security at the most recently quoted bid price. The Fund values each over-the-counter security as of the last sale price for that day. If a security is traded principally on the NASDAQ Stock Market Inc. (NASDAQ), the SEC-approved NASDAQ Official Closing Price is applied.

When the market price of a security is not readily available, including on days when the Fund determines that the last sale or bid price of the security does not reflect that security's market value, the Fund values the security at a fair value determined in good faith under procedures established by the Board of Trustees.

The Fund also values a security at fair value when events have occurred after the last available market price and before the close of the NYSE that is expected to materially affect the security's price. In the case of foreign securities, this could include events occurring after the close of the foreign market where the securities trade and before the close of the NYSE. When the Fund uses fair value to price securities, it may value those securities higher or lower than another fund that uses market quotations to price the same securities. The Trust has retained an independent statistical fair value pricing service to assist in the fair valuation process for securities principally traded in a foreign market in order to adjust for possible changes in value that may occur between the close of the foreign exchange and the time at which Fund shares are priced. The use of an independent fair value pricing service is intended to and may decrease t he opportunities for time zone arbitrage transactions. There can be no assurance that the use of an independent fair value pricing service will successfully decrease arbitrage opportunities. If a security is valued at a "fair value," that value may be different from the last quoted market price for the security. The Fund's foreign securities may trade on days when the NYSE is closed. The Fund will not determine NAV and Participating Insurance Companies and Retirement Plans may not purchase or redeem shares on days on which the NYSE is closed for trading.

Dividends and Distributions

The Fund intends to declare and distribute, as dividends or capital gains distributions, at least annually, substantially all of its net investment income and net profits realized from the sale of portfolio securities, if any, to its shareholders (Participating Insurance Companies' separate accounts and Retirement Plan participants). The Fund's net investment income consists of all dividends and interest received by the Fund, less expenses (including the investment advisory fees). Income dividends will be declared and distributed annually by the Fund. All dividends and distributions are reinvested in additional shares of the Fund at NAV, as of the record date for the distributions.

Taxes

The Fund intends to qualify every year as a regulated investment company under the Internal Revenue Code. By so qualifying, the Fund will not be subject to federal income taxes to the extent that its net investment income and net realized capital gains are distributed to its shareholders. The Fund also intends to meet certain diversification requirements applicable to mutual funds underlying variable insurance products. For more information about the Fund's tax status, see Taxes in the SAI.


18



For information concerning the federal tax consequences to VA contract owners, VLI policyholders or Retirement Plan participants, see the disclosure documents from the VA contract, VLI policy or your Retirement Plan administrator. You should consult your tax advisor about the tax consequences of any investment.


19



APPENDIX

Hypothetical Investment and Expense Information

The following supplemental hypothetical investment information provides additional information about the effect of the expenses of the Fund, including investment advisory fees and other Fund costs, on the Fund's returns over a 10-year period. The chart shows the estimated expenses that would be charged on a hypothetical investment of $10,000 in the Fund assuming a 5% return each year, the cumulative return after fees and expenses, and the hypothetical year-end balance after fees and expenses. The chart also assumes that all dividends and distributions are reinvested. The annual expense ratios used for the Fund, which are the same as those stated in the Annual Fund Operating Expenses table, are presented in the chart, and are net of any contractual fee waivers or expense reimbursements for the period of the contractual commitment. Your actual costs may be higher or lower.

Wanger U.S. Smaller Companies

Maximum Sales Charge
0.00%
  Initial Hypothetical Investment Amount
$10,000.00
  Assumed Rate of Return
5%
 
Year   Cumulative
Return Before
Fees & Expenses
  Annual Expense
Ratio
  Cumulative
Return After
Fees & Expenses
  Hypothetical
Year-End
Balance After
Fees & Expenses
  Annual
Fees &
Expenses(1)
 
  1       5.00 %     0.95 %     4.05 %   $ 10,405.00     $ 96.92    
  2       10.25 %     0.95 %     8.26 %   $ 10,826.40     $ 100.85    
  3       15.76 %     0.95 %     12.65 %   $ 11,264.87     $ 104.93    
  4       21.55 %     0.95 %     17.21 %   $ 11,721.10     $ 109.18    
  5       27.63 %     0.95 %     21.96 %   $ 12,195.80     $ 113.61    
  6       34.01 %     0.95 %     26.90 %   $ 12,689.73     $ 118.21    
  7       40.71 %     0.95 %     32.04 %   $ 13,203.67     $ 122.99    
  8       47.75 %     0.95 %     37.38 %   $ 13,738.42     $ 127.97    
  9       55.13 %     0.95 %     42.95 %   $ 14,294.82     $ 133.16    
  10       62.89 %     0.95 %     48.74 %   $ 14,873.76     $ 138.55    
Total Gain After Fees and Expenses   $ 4,873.76    
Total Annual Fees and Expenses   $ 1,166.37    

 

(1)  Annual Fees and Expenses are calculated based on the average between the beginning and ending balance for each year. All information is calculated on an annual compounding basis.


20



Notes


21



Notes


22



Notes


23



FOR MORE INFORMATION

Adviser:  Columbia Wanger Asset Management, L.P.

Additional information about the Fund's investments is available in the Fund's semiannual and annual reports to shareholders. The annual report contains a discussion of the market conditions and investment strategies that significantly affected the Fund's performance over the last fiscal year.

You may wish to read the Fund's SAI for more information on the Fund and the securities in which it invests. The SAI is incorporated into this prospectus by reference, which means that it is considered to be part of this prospectus.

You can get free copies of the annual and semiannual reports and the SAI, request other information and discuss your questions about the Fund by writing or calling the Fund's adviser at:

Columbia Wanger Asset Management, L.P.
Shareholder Services Group
227 West Monroe, Suite 3000
Chicago, IL 60606
1 (888) 4-WANGER (1-888-492-6437)

or by calling or writing the Participating Insurance Company that issued your VA contract or VLI policy or the Retirement Plan in which you participate. The annual and semiannual reports and the SAI are not available on an internet website because Columbia Management does not maintain an internet website for these Funds, which are available for purchase only through Participating Insurance Companies' VA contracts and VLI policies and through qualified Retirement Plans.

Information about the Fund (including the SAI) can be reviewed and copied at the Public Reference Room of the SEC in Washington, D.C. Information on the Public Reference Room may be obtained by calling the SEC at 202-942-8090. Reports and other information about the Fund are available on the EDGAR database on the SEC's Internet site at http://www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the SEC's Public Reference Section, Washington, D.C. 20549-0102.

©2007 Columbia Management Distributors, Inc.
One Financial Center, Boston, MA 02111-2621
800.426.3750

Investment Company Act file number: 811-08748




WANGER INTERNATIONAL SMALL CAP

PROSPECTUS

MAY 1, 2007

* * * *

Fund shares are available only through variable annuity contracts and variable life insurance policies of participating insurance companies, and through certain retirement plans. This prospectus must be accompanied by a prospectus for your variable annuity contract or variable life insurance policy. Retain both prospectuses for future reference.

* * * *

Although Fund shares have been registered with the Securities and Exchange Commission (SEC), the SEC has not approved or disapproved any shares offered in this prospectus or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.



TABLE OF CONTENTS

THE TRUST     3    
THE FUND     4    
OTHER INVESTMENT STRATEGIES AND RISKS     9    
TRUST MANAGEMENT ORGANIZATIONS     11    
The Trustees     11    
The Adviser: Columbia Wanger Asset Management, L.P.     11    
Portfolio Managers     11    
Legal Proceedings     12    
Mixed and Shared Funding     13    
Additional Expenses     14    
Additional Intermediary Compensation     14    
FINANCIAL HIGHLIGHTS     15    
SHAREHOLDER INFORMATION     16    
APPENDIX     21    

 


2



THE TRUST

Wanger Advisors Trust (Trust) includes four separate mutual funds (Funds), each with its own investment goal and strategies. This prospectus contains information about Wanger International Small Cap (Fund).

The Fund is an investment option under variable annuity contracts (VA contracts) and variable life insurance policies (VLI policies) issued by life insurance companies (Participating Insurance Companies). Participating Insurance Companies invest in the Fund through separate accounts that they set up for that purpose. Owners of VA contracts and VLI policies invest in subaccounts of those separate accounts through instructions they give to their insurance company.

Shares of the Fund also may be offered directly to certain pension plans and retirement arrangements and accounts permitting accumulation of funds on a tax-deferred basis (Retirement Plans).

The prospectuses of the Participating Insurance Companies' separate accounts describe which Funds are available to the purchasers of their own VA contracts and VLI policies. The Trust assumes no responsibility for the accuracy or adequacy of those prospectuses. A Retirement Plan's disclosure documents describe which Funds are available to participants in the plan.


3



THE FUND

INVESTMENT GOAL—WANGER INTERNATIONAL SMALL CAP

Wanger International Small Cap seeks long-term growth of capital.

PRINCIPAL INVESTMENT STRATEGY

Wanger International Small Cap invests primarily in the stocks of companies based outside the United States with market capitalizations of less than $5 billion at the time of initial purchase. As long as a stock continues to meet the Fund's other investment criteria, the Fund may choose to hold the stock even if it grows beyond a capitalization limit. Wanger International Small Cap believes that these smaller companies—particularly outside the United States—which are not as well known by financial analysts may offer higher return potential than the stocks of larger companies.

Wanger International Small Cap typically looks for companies with:

•  A strong business franchise that offers growth potential.

•  Products and services that give the company a competitive advantage.

•  A stock price that the Fund's adviser believes is reasonable relative to the assets and earning power of the company.

Under normal circumstances, Wanger International Small Cap invests at least 80% of its net assets (plus any borrowings for investment purposes), at market value at the time of investment, in companies with total stock market capitalizations of $5 billion or less at the time of initial purchase. Likewise, under normal market conditions, Wanger International Small Cap will generally invest at least 65% of its total assets in foreign securities in developed markets (for example, Japan, Canada and the United Kingdom) and emerging markets (for example, Mexico, Brazil and Korea).

The Fund's adviser may sell a portfolio holding if the security reaches the adviser's price target or if the company has a deterioration of fundamentals, such as failing to meet key operating benchmarks. The adviser also may sell a portfolio holding to fund redemptions.

Additional strategies that are not principal investment strategies and the risks associated with them are described later in this prospectus under "Other Investment Strategies and Risks."

PRINCIPAL INVESTMENT RISKS

There are two basic risks for all mutual funds that invest in stocks: management risk and market risk. You may lose money by investing in the Fund.

Management risk means that the investment decisions of Columbia Wanger Asset Management, L.P. (CWAM), the Fund's investment adviser, might produce losses or cause the Fund to underperform when compared to other funds with similar investment goals. Market risk means that security prices in a market, sector or industry may fall, reducing the value of your investment. Because of management and market risk, there is no guarantee that the Fund will achieve its investment goal or perform favorably among comparable funds.

Since the Fund purchases equity securities, it is subject to equity risk. This is the risk that stock prices will fall over short or extended periods of time. Although the stock market historically has outperformed other asset classes over the long term, the stock market tends to move in cycles. Individual stock prices may fluctuate drastically from day to day and may underperform other asset classes over an extended period of time. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such


4



companies may suffer a decline in response. These price movements may result from factors affecting individual companies, industries or the securities market as a whole.

Because the Fund invests in stocks, the price of its shares—its net asset value (NAV) per share—fluctuates daily in response to changes in the market value of the stocks.

Foreign Securities

Foreign securities are subject to special risks. Foreign markets can be extremely volatile. Fluctuations in currency exchange rates may impact the value of foreign securities denominated in foreign currencies and U.S. dollars, without a change in the intrinsic value of those securities. The liquidity of foreign securities may be more limited than that of domestic securities, which means that the Fund may, at times, be unable to sell foreign securities at desirable prices. Brokerage commissions, custodial fees and other fees are generally higher for foreign investments. In addition, foreign governments may impose withholding taxes that would reduce the amount of income and capital gains available to distribute to shareholders. Other risks include possible delays in the settlement of transactions or in the notification of income; less publicly available information about companies; the impact of political, social or diplomatic events; possible seizure, expropriation or nationalization of the company or its assets; and possible imposition of currency exchange controls.

Emerging Markets

Investments in emerging markets are subject to additional risk. The risks of foreign investments are typically increased in less developed countries, which are sometimes referred to as emerging markets. For example, political and economic structures in these countries may be new and developing rapidly, which may cause instability. These countries are also more likely to experience high levels of inflation, deflation or currency devaluations, which could hurt their economies and securities markets.

Small- or Mid-Cap Companies

Small- or mid-cap companies may be more susceptible to market downturns, and their prices could be more volatile than large-cap companies. These companies are more likely than larger companies to have limited product lines, operating histories, markets or financial resources. They may depend heavily on a small management team and may trade less frequently, may trade in smaller volumes and may fluctuate more sharply in price than stocks of larger companies. In addition, such companies may not be widely followed by the investment community, which can lower the demand for their stocks.

Sector Risk

Sector risk may sometimes be present in the Fund's investments. Companies that are in different but closely related industries are sometimes described as being in the same broad economic sector. The values of stocks of different companies in a market sector may be similarly affected by particular economic or market events. Although the Fund does not intend to focus on any particular sector, at times the Fund may have a large portion of its assets invested in a particular sector.


5



Market Timers

Because the Fund invests predominantly in foreign securities, the Fund may be particularly susceptible to market timers. Market timers generally attempt to take advantage of the way the Fund prices its shares by trading based on market information they expect will lead to a change in the Fund's net asset value on the next pricing day. Market timing activity may be disruptive to Fund management and, since a market timer's profits are effectively paid directly out of the Fund's assets, may negatively impact the investment returns of shareholders. Although the Fund has adopted certain policies and methods intended to identify and discourage frequent trading based on this strategy, it cannot ensure that all such activity can be identified or terminated.

An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

The Statement of Additional Information (SAI) includes a description of the Fund's policies with respect to the disclosure of portfolio holdings.

PERFORMANCE HISTORY

The bar chart that follows shows the Fund's calendar-year total returns. The performance table following the bar chart shows how the Fund's average annual returns compare with those of broad measures of market performance for one year, five years and ten years. We compare the Fund to the S&P/Citigroup EMI Global ex-US Index (S&P/Citigroup EMI Global ex-US), the Morgan Stanley Europe, Australasia and Far East Index (MSCI EAFE) and the Lipper Variable Underlying International Core Funds Index (Lipper VUF International Core Funds), which are broad-based measures of market performance. The S&P/Citigroup EMI Global ex-US is the Fund's primary benchmark. The chart and table are intended to illustrate some of the risks of investing in the Fund by showing changes in the Fund's performance from year to year. All returns include the reinvestment of dividends and distributions. As with all mutual funds, past performance does not predict the Fund's future performance. The Fund's performance results do not reflect the cost of insurance and separate account charges that are imposed under your VA contract or VLI policy, or any charges imposed by your Retirement Plan. Returns and value of an investment will vary, resulting in a gain or a loss on sale.

The Fund's performance during 1999 was achieved during extraordinary market conditions.


6



Calendar-Year Total Returns

YEAR-BY-YEAR TOTAL RETURNS

Best Quarter: 4th quarter 1999, 57.43%
Worst Quarter: 3rd quarter 2002, –23.49%

Average Annual Total Returns   1 Year   5 Years   10 Years  
Wanger International Small Cap     37.16 %     22.74 %     15.17 %  
S&P/Citigroup EMI Global ex-US*     30.83 %     24.39 %     10.65 %  
MSCI EAFE*     26.34 %     14.98 %     7.71 %  
Lipper VUF International Core Funds*     24.36 %     12.78 %     7.08 %  

 

*  The S&P/Citigroup EMI Global ex-U.S., the Fund's primary benchmark, 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. The MSCI EAFE is an index of companies throughout the world in proportion to world stock market capitalizations, excluding the U.S. and Canada. Lipper Indexes include the largest funds tracked by Lipper, Inc. in the named category. The Lipper VUF International Core Funds is made up of the 10 largest non-U.S. funds. The indexes are unmanaged and differ from the Fund's composition; they are not available for direct investment.


7



FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund, not including fees and expenses imposed under your VA contract, VLI policy or Retirement Plan.

Shareholder Transaction Expenses
Fees paid directly from your investment:

Maximum sales charge   None  
Deferred sales charge   None  

 

Annual Fund Operating Expenses
Expenses that are deducted from Fund assets:

Management fees(1)     0.91 %  
12b-1 fee     None    
Other expenses     0.10 %  
Total annual Fund operating expenses     1.01 %  

 

(1)  The Fund pays an investment advisory fee of 0.91%. The Fund's adviser has implemented a breakpoint schedule for the Fund's investment advisory fees. The investment advisory fees charged to the Fund will decline as Fund assets grow and will continue to be based on a percentage of the Fund's average daily net assets. The breakpoint schedule for the Fund is as follows: 1.15% for assets up to $100 million; 1.00% for assets in excess of $100 million and up to $250 million; 0.95% for assets in excess of $250 million and up to $500 million; and 0.85% for assets in excess of $500 million.

Example

This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. It assumes a $10,000 investment in Wanger International Small Cap for the time periods indicated, a 5% total return each year, reinvestment of all dividends and distributions, and that operating expenses remain the same. Your actual returns and costs may be higher or lower.

1 Year   $ 103    
3 Years   $ 322    
5 Years   $ 558    
10 Years   $ 1,236    

 


8



OTHER INVESTMENT STRATEGIES AND RISKS

The Fund's principal investment strategies and their associated risks are described above. This section provides more detail about the Fund's investment strategies, and describes other investments the Fund may make and the risks associated with them. In seeking to achieve its investment goal, the Fund may invest in various types of securities and engage in various investment techniques, which are not the principal focus of the Fund and therefore are not described in this prospectus. These types of securities and investment practices are identified and discussed in the Fund's SAI, which you may obtain free of charge (see back cover). Except as otherwise noted, approval by the Fund's shareholders is not required to modify or change the Fund's investment goal or investment strategies.

The Information Edge

CWAM invests in entrepreneurially managed smaller- and mid-sized companies that it believes are not as well known by financial analysts and whose position in a niche creates the opportunity for superior earnings-growth potential. CWAM may identify what it believes are important economic, social or technological trends (for example, the growth of outsourcing as a business strategy or the productivity gains from the increasing use of technology) and try to identify companies it thinks will benefit from those trends.

In making investments for the Fund, CWAM relies primarily on its independent, internally generated research to uncover companies that may be less well known than the more popular names. To find these companies, CWAM compares growth potential, financial strength and fundamental value among companies.

Growth Potential   Financial Strength   Fundamental Value  
• superior technology
• innovative marketing
• managerial skill
• market niche
• good earnings prospects
• strong demand for product
  • low debt
• adequate working capital
• conservative accounting practices
• adequate profit margin
  • reasonable stock price relative to growth potential
• valuable assets
 
The realization of this growth potential would likely produce superior performance that is sustainable over time.   A strong balance sheet gives management greater flexibility to pursue strategic objectives and is important to maintaining a competitive advantage.   Once CWAM uncovers an attractive company, it identifies a price that it believes would also make the stock a good value.  

 

Long-Term Investing

CWAM's analysts continually screen companies and contact more than 1,000 companies around the globe each year. To accomplish this, CWAM analysts often talk directly to top management, vendors, suppliers and competitors.

In managing the Fund, CWAM tries to maintain lower transaction costs by investing with a long-term time horizon (at least two to five years). However, securities purchased on a long-term basis may be sold within 12 months after purchase due to changes in the circumstances of a particular company or industry, or changes in general market or economic conditions.


9



State Insurance Restrictions

The Fund is sold to Participating Insurance Companies in connection with VA contracts and VLI policies, and will seek to be available under VA contracts and VLI policies sold in a number of jurisdictions. Certain states have regulations or guidelines concerning concentration of investments and other investment techniques that could limit the Fund's ability to engage in certain techniques and to manage its portfolio with the flexibility provided herein. In order to permit the Fund to be available under VA contracts and VLI policies sold in certain states, the Fund may make commitments that are more restrictive than the investment policies and limitations described herein and in the SAI. If the Fund determines that such a commitment is no longer in the Fund's best interest, the commitment may be revoked by terminating the availability of the Fund to VA contract owners and VLI policyholders residing in such states.

Temporary Defensive Positions

At times, CWAM may determine that adverse market conditions make it desirable to temporarily suspend the Fund's normal investment activities. During such times, the Fund may, but is not required to, invest in cash or high-quality, short-term debt securities, without limit. Taking a temporary defensive position may prevent the Fund from achieving its investment goal.

Derivative Strategies

The Fund may enter into a number of derivative strategies, including those that employ futures, options and swap contracts, to gain or reduce exposure to particular securities or markets. These strategies, commonly referred to as derivatives, involve the use of financial instruments whose values depend on, or are derived from, the value of an underlying security, index or currency. The Fund may use these strategies to adjust for both hedging and non-hedging purposes, such as to adjust the Fund's sensitivity to changes in interest rates or to offset a potential loss in one position by establishing an interest in an opposite position. Derivative strategies involve the risk that they may exaggerate a loss, potentially losing more money than the actual cost of the underlying security, or limit a potential gain. Also, with some derivative strategies, there is the risk that the other party to the transaction may fail to honor its contract terms, c ausing a loss to the Fund. The Fund also may not be able to find a suitable derivative transaction counterparty, and thus may be unable to invest in derivatives altogether.

Portfolio Turnover

The Fund does not have limits on portfolio turnover. Turnover may vary significantly from year to year. CWAM does not expect the Fund's turnover to exceed 100% under normal conditions. Portfolio turnover increases transaction expenses, which reduce the Fund's return.


10



TRUST MANAGEMENT ORGANIZATIONS

The Trustees

The business of the Trust and the Fund is supervised by the Trust's Board of Trustees. The SAI contains names of and biographical information on the Trustees.

More than 75% of the Fund's Trustees are independent, meaning that they have no affiliation with the adviser or the Funds, apart from their positions as Trustees and the personal investments they may have made as private individuals.

The independent Trustees bring backgrounds in business and their professions, academia, and public service to their task of working with the Funds' officers to establish the policies and oversee the activities of the Funds. Among the Trustees' responsibilities are selecting the investment adviser for the Funds; negotiating the advisory agreement; approving investment policies; monitoring Fund operations, performance, and costs; reviewing other contracts; and nominating or selecting new Trustees.

Each Trustee serves until his or her retirement, resignation, death or removal; otherwise as specified in the Trust's organizational documents; or as otherwise agreed upon. It is expected that every five years the Trustees will call a meeting of shareholders to elect Trustees. A Trustee must retire at the end of the year in which he or she attains the age of 75. Any Trustee may be removed at a shareholders' meeting by a vote representing two-thirds of all shares of the Funds of the Trust. The mailing address for the Trustees and officers is 227 W. Monroe, Suite 3000, Chicago, Illinois 60606.

The Adviser: Columbia Wanger Asset Management, L.P.

Columbia Wanger Asset Management, L.P. (CWAM), 227 West Monroe Street, Suite 3000, Chicago, IL 60606, is the Fund's investment adviser. CWAM is responsible for the Fund's management, subject to oversight by the Fund's Board of Trustees. CWAM and its predecessor have managed mutual funds, including Wanger International Small Cap, since 1992. In its duties as investment adviser, CWAM runs the Fund's day-to-day business, including making investment decisions and placing all orders for the purchase and sale of the Fund's portfolio securities. As of December 31, 2006, CWAM managed more than $32.9 billion in assets. CWAM is an indirect wholly owned subsidiary of Columbia Management Group, LLC (Columbia Management), which is an indirect wholly owned subsidiary of Bank of America Corporation.

For the fiscal year 2006, the Fund paid CWAM management fees at 0.91% of the Fund's average daily net assets. A discussion of the factors considered by the Fund's Board of Trustees in approving the Fund's investment advisory contract is included in the Fund's annual report to shareholders for the period ended December 31, 2006.

Portfolio Managers

CWAM uses a team to assist the portfolio managers in managing the Fund. Team members share responsibility for providing ideas, information and knowledge in managing the Fund, and each team member has one or more particular areas of expertise. The co-portfolio managers are responsible for making daily investment decisions and utilizing the management team's input and advice when making buy and sell determinations. Louis J. Mendes and Chris Olson are co-portfolio managers of Wanger International Small Cap.


11



Mr. Mendes is a vice president of the Trust and a co-portfolio manager of Wanger International Small Cap since December 2005. He has been a member of the international team at CWAM since 2001. Mr. Mendes also is a vice president of Columbia Acorn Trust, and a co-portfolio manager of Columbia Acorn International.

Mr. Olson is a vice president of the Trust and has managed Wanger International Small Cap since September 2001. He has been a member of the international analytical team at CWAM since January 2001. Mr. Olson also is a vice president of Columbia Acorn Trust and lead portfolio manager of Columbia Acorn International Select and Wanger International Select.

The SAI provides additional information about the portfolio managers' compensation, other accounts managed and ownership of securities in the Fund.

Legal Proceedings

CWAM, Columbia Acorn Trust, another mutual fund family advised by CWAM, and the trustees of Columbia Acorn Trust (collectively, the "Columbia defendants") are named as defendants in class and derivative complaints, which were consolidated in a Multi-District Action in the federal district court for the District of Maryland on February 20, 2004 (the "MDL Action"). These lawsuits contend that defendants permitted certain investors to market time their trades in certain Columbia Acorn Funds. All claims against Columbia Acorn Trust and its independent trustees have been dismissed; however, the interested trustees of Columbia Acorn Trust are still parties to the MDL Action.

On March 21, 2005, a class action complaint was filed against Columbia Acorn Trust in the Superior Court of the Commonwealth of Massachusetts seeking to rescind the contingent deferred sales charges assessed upon redemption of Class B shares of Columbia Acorn Funds due to the alleged market timing of the Columbia Acorn Funds. In addition to the rescission of sales charges, plaintiffs seek recovery of actual damages, attorneys' fees and costs. The case has been transferred to the MDL Action in the federal district court of Maryland.

Columbia Acorn Trust and CWAM are also defendants in a class action lawsuit, filed on November 13, 2003 in the Circuit Court of the Third Judicial Circuit, Madison County, Illinois, that alleges, in summary, that Columbia Acorn Trust and CWAM exposed shareholders of Columbia Acorn International to trading by market timers by allegedly (a) failing to properly evaluate daily whether a significant event affecting the value of that fund's securities had occurred after foreign markets had closed but before the calculation of the fund's NAV; (b) failing to implement the fund's portfolio valuation and share pricing policies and procedures; and (c) failing to know and implement applicable rules and regulations concerning the calculation of NAV (the "Fair Valuation Lawsuit"). On April 5, 2005, the United States Court of Appeals for the Seventh Circuit ruled that the plaintiffs' state law claims were preempted under federal law resulting in the dismis sal of plaintiffs' complaint. Plaintiffs appealed the Seventh Circuit's ruling to the United States Supreme Court. On June 15, 2006, the Supreme Court reversed the Seventh Circuit's ruling on jurisdictional grounds, and the case ultimately was remanded to the state court. The state court has entered a stay of all proceedings given the settlement, as discussed below.

On April 4, 2006, the plaintiffs and the Columbia defendants named in the MDL Action executed an agreement in principle intended to fully resolve all of the lawsuits consolidated in the MDL Action as well as the Fair Valuation Lawsuit. The court entered a stay after the parties executed the agreement in principle. The settlement is subject to court approval.

In 2004, CWAM and the trustees of the Columbia Acorn Trust were named as defendants in certain purported shareholder class and derivative actions making claims, including claims under the Investment Company and the Investment Advisers Acts of 1940 and state law. Certain Columbia Acorn Funds were named as nominal defendants. The suits allege, inter alia, that the fees and expenses paid by the funds are excessive and that the funds' advisers and their affiliates inappropriately used


12



fund assets to distribute the funds and for other improper purposes. On March 2, 2005, the actions were consolidated in the Massachusetts federal court as In re Columbia Entities Litigation. The plaintiffs filed a consolidated amended complaint on June 9, 2005. On November 30, 2005, the judge dismissed all claims by plaintiffs and entered final judgment in favor of the defendants. The plaintiffs appealed to the United States Court of Appeals for the First Circuit on December 30, 2005. A stipulation and settlement agreement dated January 19, 2007 was filed in the First Circuit on February 14, 2007, with a joint stipulation of dismissal and motion for remand to obtain district court approval of the settlement. That joint motion was granted and the appeal was dismissed. On March 6, 2007, the case was remanded to the District Court, where the parties will seek court approval of the settlement. The terms of the proposed settlement, if approved, will require payments by the funds' adviser and/or its affiliates, including payment of plaintiffs' attorneys' fees and notice to class members. In the event that the settlement is not approved, the plaintiffs may elect to go forward with their appeal and no opinion is expressed regarding the likely outcome or financial impact of such an appeal on any fund.

On or about January 11, 2005, a putative class action lawsuit was filed in federal district court in Massachusetts against Columbia Acorn Trust and its trustees, along with Columbia Management Advisors, LLC, the sub-administrator of the Wanger Advisors Funds and the Columbia Acorn Funds. The plaintiffs allege that the defendants failed to submit Proof of Claims in connection with settlements of securities class action lawsuits filed against companies in which the Columbia Acorn Funds held positions. The complaint seeks compensatory and punitive damages, and the disgorgement of all fees paid to Columbia Management Advisors, LLC. Plaintiffs have voluntarily dismissed Columbia Acorn Trust and its independent trustees.

Columbia Acorn Trust and CWAM intend to defend these suits vigorously.

As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of Fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the Fund.

However, based on currently available information, CWAM believes that the lawsuits are not likely to materially affect its ability to provide investment management services to the Fund.

Mixed and Shared Funding

As described previously, the Trust serves as a funding medium for VA contracts and VLI policies of Participating Insurance Companies and for certain Retirement Plans, so-called mixed and shared funding. As of the date of this prospectus, the Participating Insurance Companies are Keyport Life Insurance Company (Keyport), Keyport Benefit Life Insurance Company (Keyport Benefit), Aegon Financial Services Group, Inc., Symetra Life Insurance Company, PHL Variable Life Insurance Company, Phoenix Home Life Mutual Insurance Company, RiverSource Life Insurance Company, RiverSource Life Insurance Co. of New York, Sun Life Assurance Company of Canada (U.S.), Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company, ING Insurance Company of America, ING Life Insurance and Annuity Company, Reliastar Life Insurance Company, Sun Life Insurance & Annuity Company of New York, Merrill Lynch Life Insurance Company, ML Life Insuran ce Company of New York and TIAA-CREF Life Insurance Company. The Fund is or may become a funding vehicle for VA contracts or VLI policies of the Participating Insurance Companies or may become a funding vehicle for VA contracts or VLI policies of other Participating Insurance Companies.

The interests in shares of the Fund of owners of VA contracts and VLI policies could diverge based on differences in state regulatory requirements, changes in the tax laws or other unanticipated developments. The Trust does not foresee any such differences or disadvantages at this time. However, the Trustees will monitor for such developments to identify any material irreconcilable conflicts and to determine what action, if any, should be taken in response to any such conflicts. If such a conflict were to occur, one or more separate accounts might be required to withdraw their investments in the


13



Fund or shares of another fund may be substituted. This might force the Fund to sell securities at disadvantageous prices.

Additional Expenses

Owners of VA contracts and VLI policies and the Retirement Plans participants incur additional expenses that are not described in this prospectus. They should consult the contract or policy disclosure documents or Retirement Plan information regarding these expenses.

Additional Intermediary Compensation

From time to time, CWAM or its affiliates may pay amounts from its past profits to Participating Insurance Companies or other organizations that provide administrative services for the Fund or that provide other services relating to the Fund to owners of VA contracts, VLI policies and/or participants in Retirement Plans. These services include, among other things: subaccounting services; answering inquiries regarding the Fund; transmitting, on behalf of the Fund, proxy statements, shareholder reports, updated prospectuses and other communications regarding the Fund; and such other related services as the Fund, owners of VA contracts, VLI policies and/or participants in Retirement Plans may request. Payment of such amounts by CWAM will not increase the fees paid by the Fund or its shareholders.

The Fund's distributor, investment adviser or their affiliates may make payments, from their own resources, to certain financial intermediaries for marketing support services. For purposes of this section the term "financial intermediary" includes any Participating Insurance Company, broker, dealer, bank, bank trust department, registered investment adviser, financial planner, Retirement Plan or other third party administrator and any other institution having a selling, services or any similar agreement with the Fund's distributor, investment adviser or one of their affiliates. These payments are generally based upon one or more of the following factors: average net assets of the mutual funds distributed by the Fund's distributor attributable to that financial intermediary, gross sales of the mutual funds distributed by the Fund's distributor attributable to that financial intermediary, reimbursement of ticket charges (fees that a financial intermediary firm charges its representatives for effecting transactions in fund shares) or a negotiated lump sum payment.

While the financial arrangements may vary for each financial intermediary, the payments to any one financial intermediary are generally expected to be between 0.20% and 0.50% on an annual basis for payments based on average net assets of the Funds attributable to the financial intermediary.

The Fund's distributor, investment adviser, or their affiliates may make other payments or allow promotional incentives to financial intermediaries to the extent permitted by SEC and NASD rules and by other applicable laws and regulations.

Amounts paid by the Fund's distributor, investment adviser or their affiliates are paid out of the distributor's, investment adviser's or its affiliates' own resources and do not increase the amount paid by you or the Fund. You can find further details about the payments made by the Fund's distributor, investment adviser or their affiliates and the services provided by financial intermediaries as well as a list of the financial intermediaries to which the Fund's distributor, investment adviser or its affiliates has agreed to make marketing support payments in the Fund's SAI. Your financial intermediary may charge you fees or commissions in addition to those disclosed in this prospectus. You can ask your financial intermediary for information about any payments it receives from the Fund's distributor, investment adviser and their affiliates and any services your financial intermediary provides, as well as fees and/or commissions it charges. I n addition, depending on the financial arrangement in place at any particular time, a financial intermediary and its financial consultants also may have a financial incentive for recommending a particular fund or share class over others. You should consult with your


14



financial adviser and review carefully any disclosure by the financial intermediary as to compensation received by your financial adviser.

FINANCIAL HIGHLIGHTS

The financial highlights table that follows is intended to help you understand the Fund's financial performance. Information is shown for the Fund's last five fiscal years, which run from January 1 to December 31. Certain information in the table reflects the financial results for a single Fund share. The total returns in the table represent the return that you would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information is included in the Fund's financial statements, which have been audited for the years ended December 31, 2004, 2005 and 2006 by PricewaterhouseCoopers LLP, an independent registered public accounting firm, whose report, along with the Fund's audited financial statements, is included in the Fund's annual report. The information for the years ended December 31, 2002 and 2003 is included in the Fund's financial statements, which have been audited by anothe r independent registered public accounting firm, whose report expressed an unqualified opinion on those financial statements. You can request a free annual report by calling 1-888-4-WANGER (1-888-492-6437). The Fund's total returns presented below do not reflect the cost of insurance and other separate account charges which vary among the VA contracts, VLI policies and Retirement Plans.

Wanger International Small Cap

    Year Ended December 31,  
Selected data for a share outstanding throughout each period   2006   2005   2004   2003   2002  
Net Asset Value, Beginning of Period   $ 30.63     $ 25.46     $ 19.68     $ 13.27     $ 15.40    
Income From Investment Operations:  
Net investment income(a)     0.29       0.25       0.13       0.13       0.07    
Net realized and unrealized gain (loss) on investments
and foreign currency transactions
    11.04       5.20       5.80       6.33       (2.20 )  
Total from Investment Operations     11.33       5.45       5.93       6.46       (2.13 )  
Less Distributions Declared to Shareholders:  
From net investment income     (0.19 )     (0.28 )     (0.15 )     (0.05 )        
From net realized gain and unrealized gain reportable
for federal income taxes
                               
Total Distributions Declared to Shareholders     (0.19 )     (0.28 )     (0.15 )     (0.05 )        
Net Asset Value, End of Period   $ 41.77     $ 30.63     $ 25.46     $ 19.68     $ 13.27    
Total Return(b)     37.16 %     21.53 %(c)     30.27 %     48.86 %     (13.83 )%  
Ratios to Average Net Assets/Supplemental Data:  
Net operating expenses(d)     1.01 %     1.13 %     1.36 %     1.41 %     1.47 %  
Interest expense     0.00 %(e)                          
Total net expenses(d)     1.01 %     1.13 %     1.36 %     1.41 %     1.47 %  
Net investment income(d)     0.81 %     0.92 %     0.59 %     0.85 %     0.46 %  
Waiver           0.02 %                    
Portfolio turnover rate     41 %     24 %     47 %     45 %     54 %  
Net assets, end of period (000's)   $ 1,480,123     $ 973,257     $ 606,773     $ 380,726     $ 216,084    

 

(a)  Net investment income 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)  Had the investment adviser not waived a portion of expenses, total return would have been reduced.

(d)  The benefits derived from custody fees paid indirectly had no impact.

(e)  Rounds to less than 0.01%.


15



SHAREHOLDER INFORMATION

Shareholder and Account Policies

Participating Insurance Companies and Retirement Plans may obtain information about the Fund Monday through Friday (except holidays) from 8:00 a.m. to 4:30 p.m. Central time. For information, prices, literature, or to obtain information regarding the availability of Fund shares or how Fund shares are redeemed, call CWAM at 1-888-4-WANGER (1-888-492-6437).

Shares of the Fund are issued and redeemed in connection with investments in and payments under certain qualified and non-qualified VA contracts and VLI policies issued through separate accounts of Participating Insurance Companies. Shares of the Fund are also offered directly to certain of the following types of qualified plans and retirement arrangements and accounts, collectively called Retirement Plans:

•  a plan described in section 401(a) of the Internal Revenue Code that includes a trust exempt from tax under section 501(a);

•  an annuity plan described in section 403(a);

•  an annuity contract described in section 403(b), including a 403(b)(7) custodial account;

•  a governmental plan under section 414(d) or an eligible deferred compensation plan under section 457(b); and

•  a plan described in section 501(c)(18).

The retirement trust or plan must be established before shares of the Fund can be purchased by the plan. Neither the Fund nor CWAM offers prototypes of these plans. The Fund has imposed certain additional restrictions on sales to Retirement Plans to reduce Fund expenses. To be eligible to invest in the Fund, a Retirement Plan must be domiciled in a state in which Fund shares may be sold without payment of a fee to the state. In most states, this policy will require that a Retirement Plan investing in the Fund have at least $5 million in assets and that its investment decisions are made by a plan fiduciary rather than plan participants. A Retirement Plan may call CWAM at 1-888-4-WANGER (1-888-492-6437) to determine if it is eligible to invest.

How to Invest and Redeem

Shares of the Fund may not be purchased or redeemed directly by individual VA contract owners, VLI policyholders or individual Retirement Plan participants. VA contract owners, VLI policyholders or Retirement Plan participants should consult the disclosure documents for their VA contract, VLI policy or the plan documents for their Retirement Plan, for information on the availability of the Fund as an investment vehicle for allocations under their VA contract, VLI policy or Retirement Plan. In the case of a Participating Insurance Company purchaser, particular purchase and redemption procedures typically are included in an agreement between the Fund and the Participating Insurance Company. The Fund may enter into similar agreements with Retirement Plans.

The Participating Insurance Companies and Retirement Plans place daily orders to purchase and redeem shares of the Fund. These orders generally reflect the net effect of instructions they receive from holders of their VA contracts, VLI policies or Retirement Plan participants and certain other terms of those contracts, policies or Retirement Plans. The Trust issues and redeems shares at NAV without imposing any selling commission, sales load or redemption charge. However, each VA contract and VLI policy imposes its own charges and fees on owners of the VA contract or VLI policy and each


16



Retirement Plan may impose such charges on participants in the Retirement Plan. Shares generally are sold and redeemed at their NAV next determined after Participating Insurance Companies and Retirement Plans receive purchase or redemption requests. The right of redemption may be suspended or payment postponed whenever permitted by applicable law and regulations.

Fund Policy on Trading of Fund Shares

The interests of the Fund's long-term shareholders may be adversely affected by certain short-term trading activity by Fund shareholders. Such short-term trading activity, when excessive, has the potential to interfere with efficient portfolio management, generate transaction and other costs, dilute the value of Fund shares held by long-term shareholders and have other adverse effects on the Fund. This type of excessive short-term trading activity is referred to herein as "market timing." For purposes of this section, the "Columbia Funds" are the Columbia, Columbia Acorn Trust and Wanger Advisors Trust family of mutual funds. The Columbia Funds are not intended as vehicles for market timing. The board of trustees of the Fund has adopted the policies and procedures set forth below with respect to frequent trading of the Fund's shares.

The Fund, directly and through its agents, takes various steps designed to deter and curtail market timing. For example, if the Fund detects that any shareholder has conducted two "round trips" (as defined below) in the Fund in any 28-day period, except as noted below with respect to orders received through omnibus accounts, the Fund will reject the shareholder's future purchase orders, including exchange purchase orders, involving any Columbia Fund (other than a money market fund). In addition, if the Fund determines that any person, group or account has engaged in any type of market timing activity (independent of the two-round-trip limit), the Fund may, in its discretion, reject future purchase orders by the person, group or account, including exchange purchase orders, involving the same or any other Columbia Fund, and also retains the right to modify these market timing policies at any time without prior notice.

The rights of shareholders to redeem shares of the Fund are not affected by any of the limits mentioned above. However, certain funds impose a redemption fee on the proceeds of fund shares that are redeemed or exchanged within 60 days of their purchase.

For these purposes, a "round trip" is a purchase by any means into a Columbia Fund followed by a redemption, of any amount, by any means out of the same Columbia Fund. Under this definition, an exchange into the Fund followed by an exchange out of the Fund is treated as a single round trip. Also for these purposes, where known, accounts under common ownership or control generally will be counted together. Accounts maintained or managed by a common intermediary, such as an adviser, selling agent or trust department, generally will not be considered to be under common ownership or control.

Purchases, redemptions and exchanges made through the Columbia Funds' Automatic Investment Plan, Systematic Withdrawal Plan or similar automated plans are not subject to the two-round-trip limit. The two-round-trip limit may be modified for, or may not be applied to, accounts held by certain retirement plans to conform to plan limits, considerations relating to the Employee Retirement Income Security Act of 1974 or regulations of the Department of Labor, and for certain asset allocation or wrap programs.

The practices and policies described above are intended to deter and curtail market timing in the Fund. However, there can be no assurance that these policies, individually or collectively, will be totally effective in this regard because of various factors. In particular, all Fund purchase, redemption


17



and exchange orders are received through omnibus accounts. Omnibus accounts, in which shares are held in the name of an intermediary on behalf of multiple beneficial owners, are a common form of holding shares among financial intermediaries, retirement plans and variable insurance products. The Fund typically is not able to identify trading by a particular beneficial owner through an omnibus account, which may make it difficult or impossible to determine if a particular account is engaged in market timing. Consequently, there is the risk that the Fund may not be able to identify, deter or curtail certain market timing that occurs in the Fund, which may result in certain shareholders being able to market time the Fund while the shareholders in the Fund bear the burden of such activities.

Certain financial intermediaries have different policies regarding monitoring and restricting market timing in the underlying beneficial owner accounts that they maintain through an omnibus account that may be more or less restrictive than the Fund practices discussed above. If an intermediary does not enforce the Fund's policy, the intermediary must either provide data transparency to Columbia Management or Columbia Management must determine that the intermediary's policy taken in its entirety provides protections to Fund shareholders that are generally commensurate with the Fund's policy.

In addition, the terms and conditions of a particular insurance contract may limit the ability of the Participating Insurance Company to address frequent trading activity by a VA contract owner or VLI policyholder.

The Fund seeks to act in a manner that it believes is consistent with the best interests of Fund shareholders in making any judgments regarding market timing. Neither the Fund nor its agents shall be held liable for any loss resulting from rejected purchase orders or exchanges.

Purchases and Redemptions

To the extent not otherwise provided in any agreement between the Trust and a Participating Insurance Company or Retirement Plan, shares of the Fund may be purchased by check or by wire transfer of funds. To be effective, a purchase order must consist of the money to purchase the shares and (i) information identifying the purchaser, in the case of a Participating Insurance Company or Retirement Plan with which the Fund has entered into an agreement, or a subsequent purchase by a Participating Insurance Company or Retirement Plan that is already a Fund shareholder, or (ii) a completed purchase application, in the case of the initial investment by a Retirement Plan with which the Fund does not have an agreement.

The Participating Insurance Companies and Retirement Plans place daily orders to purchase and redeem shares of the Funds. These orders generally reflect the net effect of instructions they receive from holders of their VA contracts and VLI policies and certain other terms of those contracts and policies. The Fund issues and redeems shares at NAV without imposing any selling commissions, sales charge or redemption charge. Shares generally are sold and redeemed at their NAV next determined after the Participating Insurance Company or Retirement Plan receives a purchase or redemption request. The right of redemption may be suspended or payment postponed to the extent permitted by applicable law and regulations.

Normally, redemption proceeds will be paid within seven days after the Fund or its agent receives a request for redemption. Redemptions may be suspended or the payment date postponed on days when the New York Stock Exchange (NYSE) is closed (other than weekends or holidays), when trading on the NYSE is restricted, or as permitted by the SEC.


18



During any 90-day period for any one shareholder, the Fund is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the Fund's net assets. Redemptions in excess of these limits will normally be paid in cash, but may be paid wholly or partly by an in-kind distribution of securities.

How the Fund's Share Price is Determined

The Fund's share price is its NAV per share next determined. NAV is the difference between the values of the Fund's assets and liabilities divided by the number of shares outstanding. The Fund determines NAV at the close of regular trading on the New York Stock Exchange (NYSE), normally 4 p.m. Eastern time.

To calculate the NAV on a given day, the Fund values each stock listed or traded on a stock exchange at its latest sale price on that day. If there are no sales that day, the Fund values the security at the most recently quoted bid price. The Fund values each over-the-counter security as of the last sale price for that day. If a security is traded principally on the NASDAQ Stock Market Inc. (NASDAQ), the SEC-approved NASDAQ Official Closing Price is applied.

When the market price of a security is not readily available, including on days when the Fund determines that the last sale or bid price of the security does not reflect that security's market value, the Fund values the security at a fair value determined in good faith under procedures established by the Board of Trustees.

The Fund also values a security at fair value when events have occurred after the last available market price and before the close of the NYSE that is expected to materially affect the security's price. In the case of foreign securities, this could include events occurring after the close of the foreign market where the securities trade and before the close of the NYSE. When the Fund uses fair value to price securities, it may value those securities higher or lower than another fund that uses market quotations to price the same securities. The Trust has retained an independent statistical fair value pricing service to assist in the fair valuation process for securities principally traded in a foreign market in order to adjust for possible changes in value that may occur between the close of the foreign exchange and the time at which Fund shares are priced. The use of an independent fair value pricing service is intended to and may decrease t he opportunities for time zone arbitrage transactions. There can be no assurance that the use of an independent fair value pricing service will successfully decrease arbitrage opportunities. If a security is valued at a "fair value," that value may be different from the last quoted market price for the security. The Fund's foreign securities may trade on days when the NYSE is closed. The Fund will not determine NAV and Participating Insurance Companies and Retirement Plans may not purchase or redeem shares on days on which the NYSE is closed for trading.

Dividends and Distributions

The Fund intends to declare and distribute, as dividends or capital gains distributions, at least annually, substantially all of its net investment income and net profits realized from the sale of portfolio securities, if any, to its shareholders (Participating Insurance Companies' separate accounts and Retirement Plan participants). The Fund's net investment income consists of all dividends and interest received by the Fund, less expenses (including the investment advisory fees). Income dividends will be declared and distributed annually by the Fund. All dividends and distributions are reinvested in additional shares of the Fund at NAV, as of the record date for the distributions.


19



Taxes

The Fund intends to qualify every year as a regulated investment company under the Internal Revenue Code. By so qualifying, the Fund will not be subject to federal income taxes to the extent that its net investment income and net realized capital gains are distributed to its shareholders. The Fund also intends to meet certain diversification requirements applicable to mutual funds underlying variable insurance products. For more information about the Fund's tax status, see Taxes in the SAI.

For information concerning the federal tax consequences to VA contract owners, VLI policyholders or Retirement Plan participants, see the disclosure documents from the VA contract, VLI policy or your Retirement Plan administrator. You should consult your tax advisor about the tax consequences of any investment.


20



APPENDIX

Hypothetical Investment and Expense Information

The following supplemental hypothetical investment information provides additional information about the effect of the expenses of the Fund, including investment advisory fees and other Fund costs, on the Fund's returns over a 10-year period. The chart shows the estimated expenses that would be charged on a hypothetical investment of $10,000 in the Fund assuming a 5% return each year, the cumulative return after fees and expenses, and the hypothetical year-end balance after fees and expenses. The chart also assumes that all dividends and distributions are reinvested. The annual expense ratios used for the Fund, which are the same as those stated in the Annual Fund Operating Expenses table, are presented in the chart, and are net of any contractual fee waivers or expense reimbursements for the period of the contractual commitment. Your actual costs may be higher or lower.

Wanger International Small Cap

Maximum Sales Charge
0.00%
  Initial Hypothetical Investment Amount
$10,000.00
  Assumed Rate of Return
5%
 
Year   Cumulative
Return Before
Fees & Expenses
  Annual Expense
Ratio
  Cumulative
Return After
Fees & Expenses
  Hypothetical
Year-End
Balance After
Fees & Expenses
  Annual
Fees &
Expenses(1)
 
  1       5.00 %     1.01 %     3.99 %   $ 10,399.00     $ 103.01    
  2       10.25 %     1.01 %     8.14 %   $ 10,813.92     $ 107.13    
  3       15.76 %     1.01 %     12.45 %   $ 11,245.40     $ 111.40    
  4       21.55 %     1.01 %     16.94 %   $ 11,694.09     $ 115.84    
  5       27.63 %     1.01 %     21.61 %   $ 12,160.68     $ 120.47    
  6       34.01 %     1.01 %     26.46 %   $ 12,645.89     $ 125.27    
  7       40.71 %     1.01 %     31.50 %   $ 13,150.46     $ 130.27    
  8       47.75 %     1.01 %     36.75 %   $ 13,675.17     $ 135.47    
  9       55.13 %     1.01 %     42.21 %   $ 14,220.81     $ 140.87    
  10       62.89 %     1.01 %     47.88 %   $ 14,788.22     $ 146.50    
Total Gain After Fees and Expenses   $ 4,788.22    
Total Annual Fees and Expenses   $ 1,236.23    

 

(1)  Annual Fees and Expenses are calculated based on the average between the beginning and ending balance for each year. All information is calculated on an annual compounding basis.


21



Notes


22



Notes


23



FOR MORE INFORMATION

Adviser:  Columbia Wanger Asset Management, L.P.

Additional information about the Fund's investments is available in the Fund's semiannual and annual reports to shareholders. The annual report contains a discussion of the market conditions and investment strategies that significantly affected the Fund's performance over the last fiscal year. You may wish to read the Fund's SAI for more information on the Fund and the securities in which it invests. The SAI is incorporated into this prospectus by reference, which means that it is considered to be part of this prospectus.

You can get free copies of the annual and semiannual reports and the SAI, request other information and discuss your questions about the Fund by writing or calling the Fund's adviser at:

Columbia Wanger Asset Management, L.P.
Shareholder Services Group
227 West Monroe, Suite 3000
Chicago, IL 60606
1 (888) 4-WANGER (1-888-492-6437)

or by calling or writing the Participating Insurance Company that issued your VA contract or VLI policy or the Retirement Plan in which you participate. The annual and semiannual reports and the SAI are not available on an internet website because Columbia Management does not maintain an internet website for these Funds, which are available for purchase only through Participating Insurance Companies' VA contracts and VLI policies and through qualified Retirement Plans.

Information about the Fund (including the SAI) can be reviewed and copied at the Public Reference Room of the SEC in Washington, D.C. Information on the Public Reference Room may be obtained by calling the SEC at 202-942-8090. Reports and other information about the Fund are available on the EDGAR database on the SEC's Internet site at http://www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the SEC's Public Reference Section, Washington, D.C. 20549-0102.

© 2007 Columbia Management Distributors, Inc.
One Financial Center, Boston, MA 02111-2621
800.426.3750

Investment Company Act file number: 811-08748




WANGER SELECT

PROSPECTUS

MAY 1, 2007

* * * *

Fund shares are available only through variable annuity contracts and variable life insurance policies of participating insurance companies, and through certain retirement plans. This prospectus must be accompanied by a prospectus for your variable annuity contract or variable life insurance policy. Retain both prospectuses for future reference.

* * * *

Although Fund shares have been registered with the Securities and Exchange Commission (SEC), the SEC has not approved or disapproved any shares offered in this prospectus or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.



TABLE OF CONTENTS

THE TRUST     3    
THE FUND     4    
OTHER INVESTMENT STRATEGIES AND RISKS     8    
TRUST MANAGEMENT ORGANIZATIONS     10    
The Trustees     10    
The Adviser: Columbia Wanger Asset Management, L.P.     10    
Portfolio Manager     10    
Legal Proceedings     11    
Mixed and Shared Funding     12    
Additional Expenses     13    
Additional Intermediary Compensation     13    
FINANCIAL HIGHLIGHTS     14    
SHAREHOLDER INFORMATION     15    
APPENDIX     20    

 


2



THE TRUST

Wanger Advisors Trust (Trust) includes four separate mutual funds (Funds), each with its own investment goal and strategies. This prospectus contains information about Wanger Select (Fund).

The Fund is an investment option under variable annuity contracts (VA contracts) and variable life insurance policies (VLI policies) issued by life insurance companies (Participating Insurance Companies). Participating Insurance Companies invest in the Fund through separate accounts that they set up for that purpose. Owners of VA contracts and VLI policies invest in subaccounts of those separate accounts through instructions they give to their insurance company.

Shares of the Fund also may be offered directly to certain pension plans and retirement arrangements and accounts permitting accumulation of funds on a tax-deferred basis (Retirement Plans).

The prospectuses of the Participating Insurance Companies' separate accounts describe which Funds are available to the purchasers of their own VA contracts and VLI policies. The Trust assumes no responsibility for the accuracy or adequacy of those prospectuses. A Retirement Plan's disclosure documents describe which Funds are available to participants in the plan.


3



THE FUND

INVESTMENT GOAL—WANGER SELECT

Wanger Select seeks long-term growth of capital.

PRINCIPAL INVESTMENT STRATEGY

Wanger Select generally invests in the stocks of U.S. companies. Wanger Select is a non-diversified fund that takes advantage of its adviser's research and stock-picking capabilities to invest in a limited number of companies (between 20-40) with market capitalizations under $20 billion at the time of initial purchase, offering the potential to provide above-average growth over time. Wanger Select believes that companies within this capitalization range, which are not as well known by financial analysts as the largest companies, may offer higher return potential than the stocks of companies with capitalizations above $20 billion. The Fund invests the majority of its assets in U.S. companies, but also may invest up to 25% of its assets, valued at the time of investment, in companies outside the United States in developed markets (for example, Japan, Canada and the United Kingdom) and emerging markets (for example, Mexico, Brazil and Korea).

Wanger Select typically looks for companies with:

•  A strong business franchise that offers growth potential.

•  Products and services that give the company a competitive advantage.

•  A stock price that the Fund's adviser believes is reasonable relative to the assets and earning power of the company.

The Fund's adviser may sell a portfolio holding if the security reaches the adviser's price target or if the company has a deterioration of fundamentals, such as failing to meet key operating benchmarks. The adviser also may sell a portfolio holding to fund redemptions.

Additional strategies that are not principal investment strategies and the risks associated with them are described later in this prospectus under "Other Investment Strategies and Risks."

PRINCIPAL INVESTMENT RISKS

There are two basic risks for all mutual funds that invest in stocks: management risk and market risk. You may lose money by investing in the Fund.

Management risk means that the investment decisions of Columbia Wanger Asset Management, L.P. (CWAM), the Fund's investment adviser, might produce losses or cause the Fund to underperform when compared to other funds with similar investment goals. Market risk means that security prices in a market, sector or industry may fall, reducing the value of your investment. Because of management and market risk, there is no guarantee that the Fund will achieve its investment goal or perform favorably among comparable funds.

Since the Fund purchases equity securities, it is subject to equity risk. This is the risk that stock prices will fall over short or extended periods of time. Although the stock market historically has outperformed other asset classes over the long term, the stock market tends to move in cycles. Individual stock prices may fluctuate drastically from day-to-day and may underperform other asset classes over an extended period of time. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These price movements may result from factors affecting individual companies, industries or the securities market as a whole.


4



Because the Fund invests in stocks, the price of its shares—its net asset value (NAV) per share—fluctuates daily in response to changes in the market value of the stocks.

Mid-Cap Companies

The securities issued by mid-cap companies may have more risk than those of larger companies. These securities may be more susceptible to market downturns, and their prices could be more volatile.

Sector Risk

Sector risk may sometimes be present in the Fund's investments. Companies that are in different but closely related industries are sometimes described as being in the same broad economic sector. The values of stocks of different companies in a market sector may be similarly affected by particular economic or market events. Although the Fund does not intend to focus on any particular sector, at times the Fund may have a large portion of its assets invested in a particular sector.

Non-diversified

Wanger Select is a non-diversified fund. As a non-diversified mutual fund, the Fund is allowed to invest a greater percentage of its total assets in the securities of fewer issuers than a "diversified" fund. The Fund may, therefore, have a greater risk of loss from a few issuers than a similar fund that invests more broadly.

Foreign Securities

Foreign securities are subject to special risks. Foreign markets can be extremely volatile. Fluctuations in currency exchange rates may impact the value of foreign securities denominated in foreign currencies and U.S. dollars, without a change in the intrinsic value of those securities. The liquidity of foreign securities may be more limited than that of domestic securities, which means that the Fund may, at times, be unable to sell foreign securities at desirable prices. Brokerage commissions, custodial fees and other fees are generally higher for foreign investments. In addition, foreign governments may impose withholding taxes that would reduce the amount of income and capital gains available to distribute to shareholders. Other risks include possible delays in the settlement of transactions or in the notification of income; less publicly available information about companies; the impact of political, social or diplomatic events; possible seizure, expropriation or nationalization of the company or its assets; and possible imposition of currency exchange controls.

Emerging Markets

Investments in emerging markets are subject to additional risk. The risks of foreign investments are typically increased in less developed countries, which are sometimes referred to as emerging markets. For example, political and economic structures in these countries may be new and developing rapidly, which may cause instability. These countries are also more likely to experience high levels of inflation, deflation or currency devaluations, which could hurt their economies and securities markets.

An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

The Statement of Additional Information (SAI) includes a description of the Fund's policies with respect to the disclosure of portfolio holdings information.


5



PERFORMANCE HISTORY

The bar chart that follows shows the Fund's calendar-year total returns. The performance table following the bar chart shows how the Fund's average annual returns compare with those of broad measures of market performance for one year, five years and the life of the Fund. We compare the Fund to the Standard and Poor's MidCap 400 Index (S&P MidCap 400), the Standard and Poor's 500 Index (S&P 500) and the Lipper Variable Underlying Mid-Cap Growth Funds Index (Lipper VUF Mid-Cap Growth Funds), which are broad-based measures of market performance. The S&P MidCap 400 is the Fund's primary benchmark. The chart and table are intended to illustrate some of the risks of investing in the Fund by showing changes in the Fund's performance from year to year. All returns include the reinvestment of dividends and distributions. As with all mutual funds, past performance does not predict the Fund's future performance. The Fund's performance resu lts do not reflect the cost of insurance and separate account charges that are imposed under your VA contract or VLI policy, or any charges imposed by your Retirement Plan. Returns and value of an investment will vary, resulting in a gain or a loss on sale.

Calendar-Year Total Returns

YEAR-BY-YEAR TOTAL RETURN

Best quarter: 4th quarter 2001, 17.97%
Worst quarter: 3rd quarter 2001, –10.70%

Average Annual Total Returns   1 Year   5 Years   Life
of Fund†
 
Wanger Select*     19.70 %     13.76 %     15.16 %  
S&P MidCap 400**     10.32 %     10.89 %     11.33 %  
S&P 500**     15.79 %     6.19 %     2.93 %  
Lipper VUF Mid-Cap Growth Funds***     8.51 %     6.19 %     5.12 %****  

 

†  Wanger Select's inception date was 2/1/1999.

*  Part of the performance shown is due to the Fund's purchase of securities in IPO's. The impact of IPO purchases declines as a Fund grows larger.

**  The S&P MidCap 400, the Fund's primary benchmark, is a broad market-weighted index of 400 stocks that are in the next tier down from the S&P 500 Index. The S&P 500 is a broad market-weighted average of 500 widely-held, large capitalization U.S. stocks. The indexes are unmanaged and differ from the Fund's composition; they are not available for direct investment.

***  The Lipper VUF Mid-Cap Growth Funds measures the performance of the 30 largest madcap growth funds tracked by Lipper. The indexes are unmanaged and differ from the Fund's composition; they are not available for direct investment.

****  Performance information is from 1/31/1999.


6



FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund, not including fees and expenses imposed under your VA contract, VLI policy or Retirement Plan.

Shareholder Transaction Expenses
Fees paid directly from your investment:

Maximum sales charge     None    
Deferred sales charge     None    

 

Annual Fund Operating Expenses
Expenses that are deducted from Fund assets:

Management fees(1)     0.85 %  
12b-1 fee     None    
Other expenses     0.09 %  
Total annual Fund operating expenses(2)     0.94 %  

 

(1)  The Fund pays an investment advisory fee of 0.85%.

(2)  CWAM has undertaken to limit Wanger Select's annual expenses to 1.35% of its average net assets. This expense limitation is contractual and will terminate on April 30, 2008.

Example

This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. It assumes a $10,000 investment in Wanger Select for the time periods indicated, a 5% total return each year, reinvestment of all dividends and distributions, and that operating expenses remain the same. Your actual returns and costs may be higher or lower. This example does not include the effect of CWAM's undertaking to limit the Fund's expenses.

1 Year   $ 96    
3 Years   $ 300    
5 Years   $ 520    
10 Years   $ 1,155    

 


7



OTHER INVESTMENT STRATEGIES AND RISKS

The Fund's principal investment strategies and their associated risks are described above. This section provides more detail about the Fund's investment strategies, and describes other investments the Fund may make and the risks associated with them. In seeking to achieve its investment goal, the Fund may invest in various types of securities and engage in various investment techniques, which are not the principal focus of the Fund and therefore are not described in this prospectus. These types of securities and investment practices are identified and discussed in the Fund's SAI, which you may obtain free of charge (see back cover). Except as otherwise noted, approval by the Fund's shareholders is not required to modify or change the Fund's investment goal or investment strategies.

The Information Edge

CWAM invests in entrepreneurially managed smaller- and mid-sized companies that it believes are not as well known by financial analysts and whose position in a niche creates the opportunity for superior earnings-growth potential. CWAM may identify what it believes are important economic, social or technological trends (for example, the growth of outsourcing as a business strategy or the productivity gains from the increasing use of technology) and try to identify companies it thinks will benefit from those trends.

In making investments for the Fund, CWAM relies primarily on its independent, internally generated research to uncover companies that may be less well known than the more popular names. To find these companies, CWAM compares growth potential, financial strength and fundamental value among companies.

Growth Potential   Financial Strength   Fundamental Value  
• superior technology
• innovative marketing
• managerial skill
• market niche
• good earnings prospects
• strong demand for product
  • low debt
• adequate working capital
• conservative accounting practices
• adequate profit margin
  • reasonable stock price relative to growth potential
• valuable assets
 
The realization of this growth potential would likely produce superior performance that is sustainable over time.   A strong balance sheet gives management greater flexibility to pursue strategic objectives and is important to maintaining a competitive advantage.   Once CWAM uncovers an attractive company, it identifies a price that it believes would also make the stock a good value.  

 

Long-Term Investing

CWAM's analysts continually screen companies and contact more than 1,000 companies around the globe each year. To accomplish this, CWAM analysts often talk directly to top management, vendors, suppliers and competitors.

In managing the Fund, CWAM tries to maintain lower transaction costs by investing with a long-term time horizon (at least two to five years). However, securities purchased on a long-term basis may be sold within 12 months after purchase due to changes in the circumstances of a particular company or industry, or changes in general market or economic conditions.


8



State Insurance Restrictions

The Fund is sold to Participating Insurance Companies in connection with VA contracts and VLI policies, and will seek to be available under VA contracts and VLI policies sold in a number of jurisdictions. Certain states have regulations or guidelines concerning concentration of investments and other investment techniques that could limit the Fund's ability to engage in certain techniques and to manage its portfolio with the flexibility provided herein. In order to permit the Fund to be available under VA contracts and VLI policies sold in certain states, the Fund may make commitments that are more restrictive than the investment policies and limitations described herein and in the SAI. If the Fund determines that such a commitment is no longer in the Fund's best interest, the commitment may be revoked by terminating the availability of the Fund to VA contract owners and VLI policyholders residing in such states.

Temporary Defensive Positions

At times, CWAM may determine that adverse market conditions make it desirable to temporarily suspend the Fund's normal investment activities. During such times, the Fund may, but is not required to, invest in cash or high-quality, short-term debt securities, without limit. Taking a temporary defensive position may prevent the Fund from achieving its investment goal.

Derivative Strategies

The Fund may enter into a number of derivative strategies, including those that employ futures, options and swap contracts, to gain or reduce exposure to particular securities or markets. These strategies, commonly referred to as derivatives, involve the use of financial instruments whose values depend on, or are derived from, the value of an underlying security, index or currency. The Fund may use these strategies to adjust for both hedging and non-hedging purposes, such as to adjust the Fund's sensitivity to changes in interest rates or to offset a potential loss in one position by establishing an interest in an opposite position. Derivative strategies involve the risk that they may exaggerate a loss, potentially losing more money than the actual cost of the underlying security, or limit a potential gain. Also, with some derivative strategies, there is the risk that the other party to the transaction may fail to honor its contract terms, c ausing a loss to the Fund. The Fund also may not be able to find a suitable derivative transaction counterparty, and thus may be unable to invest in derivatives altogether.

Portfolio Turnover

The Fund does not have limits on portfolio turnover. Turnover may vary significantly from year-to-year. CWAM does not expect the Fund's turnover to exceed 125% under normal conditions. Portfolio turnover increases transaction expenses, which reduce the Fund's return.


9



TRUST MANAGEMENT ORGANIZATIONS

The Trustees

The business of the Trust and the Fund is supervised by the Trust's Board of Trustees. The SAI contains names of and biographical information on the Trustees.

More than 75% of the Fund's Trustees are independent, meaning that they have no affiliation with the adviser or the Funds, apart from their positions as Trustees and the personal investments they may have made as private individuals.

The independent Trustees bring backgrounds in business and their professions, academia, and public service to their task of working with the Funds' officers to establish the policies and oversee the activities of the Funds. Among the Trustees' responsibilities are selecting the investment adviser for the Funds; negotiating the advisory agreement; approving investment policies; monitoring Fund operations, performance, and costs; reviewing other contracts; and nominating or selecting new Trustees.

Each Trustee serves until his or her retirement, resignation, death or removal; otherwise as specified in the Trust's organizational documents; or as otherwise agreed upon. It is expected that every five years the Trustees will call a meeting of shareholders to elect Trustees. A Trustee must retire at the end of the year in which he or she attains the age of 75. Any Trustee may be removed at a shareholders' meeting by a vote representing two-thirds of all shares of the Funds of the Trust. The mailing address for the Trustees and officers is 227 W. Monroe, Suite 3000, Chicago, Illinois 60606.

The Adviser: Columbia Wanger Asset Management, L.P.

Columbia Wanger Asset Management, L.P. (CWAM), 227 West Monroe Street, Suite 3000, Chicago, IL 60606, is the Fund's investment adviser. CWAM is responsible for the Fund's management, subject to oversight by the Fund's Board of Trustees. CWAM and its predecessor have managed mutual funds, including Wanger Select, since 1992. In its duties as investment adviser, CWAM runs the Fund's day-to-day business, including making investment decisions and placing all orders for the purchase and sale of the Fund's portfolio securities. As of December 31, 2006, CWAM managed more than $32.9 billion in assets. CWAM is an indirect wholly owned subsidiary of Columbia Management Group, LLC (Columbia Management), which is an indirect wholly owned subsidiary of Bank of America Corporation.

For the fiscal year 2006, the Fund paid CWAM management fees at 0.85% of the Fund's average daily net assets. A discussion of the factors considered by the Fund's Board of Trustees in approving the Fund's investment advisory contract is included in the Fund's annual report to shareholders for the period ended December 31, 2006.

Portfolio Manager

CWAM uses a team to assist the lead portfolio manager in managing the Fund. Team members share responsibility for providing ideas, information and knowledge in managing the Fund, and each team member has one or more particular areas of expertise. The lead portfolio manager is responsible for making daily investment decisions and utilizing the management team's input and advice when making buy and sell determinations.

Ben Andrews has been lead portfolio manager of Wanger Select since March 2004. He is a vice president of the Trust and has been part of the CWAM investment team since 1998, most recently as a senior technology analyst. His analytical experience includes covering a broad range of industries


10



and special situations. Mr. Andrews also is a vice president of Columbia Acorn Trust and the lead portfolio manager of Columbia Acorn Select.

The SAI provides additional information about the portfolio manager's compensation, other accounts managed and ownership of securities in the Fund.

Legal Proceedings

CWAM, Columbia Acorn Trust, another mutual fund family advised by CWAM, and the trustees of Columbia Acorn Trust (collectively, the "Columbia defendants") are named as defendants in class and derivative complaints, which were consolidated in a Multi-District Action in the federal district court for the District of Maryland on February 20, 2004 (the "MDL Action"). These lawsuits contend that defendants permitted certain investors to market time their trades in certain Columbia Acorn Funds. All claims against Columbia Acorn Trust and its independent trustees have been dismissed; however, the interested trustees of Columbia Acorn Trust are still parties to the MDL Action.

On March 21, 2005, a class action complaint was filed against Columbia Acorn Trust in the Superior Court of the Commonwealth of Massachusetts seeking to rescind the contingent deferred sales charges assessed upon redemption of Class B shares of Columbia Acorn Funds due to the alleged market timing of the Columbia Acorn Funds. In addition to the rescission of sales charges, plaintiffs seek recovery of actual damages, attorneys' fees and costs. The case has been transferred to the MDL Action in the federal district court of Maryland.

Columbia Acorn Trust and CWAM are also defendants in a class action lawsuit, filed on November 13, 2003 in the Circuit Court of the Third Judicial Circuit, Madison County, Illinois, that alleges, in summary, that Columbia Acorn Trust and CWAM exposed shareholders of Columbia Acorn International to trading by market timers by allegedly (a) failing to properly evaluate daily whether a significant event affecting the value of that fund's securities had occurred after foreign markets had closed but before the calculation of the fund's NAV; (b) failing to implement the fund's portfolio valuation and share pricing policies and procedures; and (c) failing to know and implement applicable rules and regulations concerning the calculation of NAV (the "Fair Valuation Lawsuit"). On April 5, 2005, the United States Court of Appeals for the Seventh Circuit ruled that the plaintiffs' state law claims were preempted under federal law resulting in the dismis sal of plaintiffs' complaint. Plaintiffs appealed the Seventh Circuit's ruling to the United States Supreme Court. On June 15, 2006, the Supreme Court reversed the Seventh Circuit's ruling on jurisdictional grounds, and the case ultimately was remanded to the state court. The state court has entered a stay of all proceedings given the settlement, as discussed below.

On April 4, 2006, the plaintiffs and the Columbia defendants named in the MDL Action executed an agreement in principle intended to fully resolve all of the lawsuits consolidated in the MDL Action as well as the Fair Valuation Lawsuit. The court entered a stay after the parties executed the agreement in principle. The settlement is subject to court approval.

In 2004, CWAM and the trustees of the Columbia Acorn Trust were named as defendants in certain purported shareholder class and derivative actions making claims, including claims under the Investment Company and the Investment Advisers Acts of 1940 and state law. Certain Columbia Acorn Funds were named as nominal defendants. The suits allege, inter alia, that the fees and expenses paid by the funds are excessive and that the funds' advisers and their affiliates inappropriately used fund assets to distribute the funds and for other improper purposes. On March 2, 2005, the actions were consolidated in the Massachusetts federal court as In re Columbia Entities Litigation. The plaintiffs filed a consolidated amended complaint on June 9, 2005. On November 30, 2005, the judge dismissed all claims by plaintiffs and entered final judgment in favor of the defendants. The plaintiffs appealed


11



to the United States Court of Appeals for the First Circuit on December 30, 2005. A stipulation and settlement agreement dated January 19, 2007 was filed in the First Circuit on February 14, 2007, with a joint stipulation of dismissal and motion for remand to obtain district court approval of the settlement. That joint motion was granted and the appeal was dismissed. On March 6, 2007, the case was remanded to the District Court, where the parties will seek court approval of the settlement. The terms of the proposed settlement, if approved, will require payments by the funds' adviser and/or its affiliates, including payment of plaintiffs' attorneys' fees and notice to class members. In the event that the settlement is not approved, the plaintiffs may elect to go forward with their appeal and no opinion is expressed regarding the likely outcome or financial impact of such an appeal on any fund.

On or about January 11, 2005, a putative class action lawsuit was filed in federal district court in Massachusetts against Columbia Acorn Trust and its trustees, along with Columbia Management Advisors, LLC, the sub-administrator of the Wanger Advisors Funds and the Columbia Acorn Funds. The plaintiffs allege that the defendants failed to submit Proof of Claims in connection with settlements of securities class action lawsuits filed against companies in which the Columbia Acorn Funds held positions. The complaint seeks compensatory and punitive damages, and the disgorgement of all fees paid to Columbia Management Advisors, LLC. Plaintiffs have voluntarily dismissed Columbia Acorn Trust and its independent trustees.

Columbia Acorn Trust and CWAM intend to defend these suits vigorously.

As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of Fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the Fund.

However, based on currently available information, CWAM believes that the lawsuits are not likely to materially affect its ability to provide investment management services to the Fund.

Mixed and Shared Funding

As described previously, the Trust serves as a funding medium for VA contracts and VLI policies of Participating Insurance Companies and for certain Retirement Plans, so-called mixed and shared funding. As of the date of this prospectus, the Participating Insurance Companies are Keyport Life Insurance Company (Keyport), Keyport Benefit Life Insurance Company (Keyport Benefit), Aegon Financial Services Group, Inc., Symetra Life Insurance Company, PHL Variable Life Insurance Company, Phoenix Home Life Mutual Insurance Company, RiverSource Life Insurance Company, RiverSource Life Insurance Co. of New York, Sun Life Assurance Company of Canada (U.S.), Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company, ING Insurance Company of America, ING Life Insurance and Annuity Company, Reliastar Life Insurance Company, Sun Life Insurance & Annuity Company of New York, Merrill Lynch Life Insurance Company, ML Life Insuran ce Company of New York and TIAA-CREF Life Insurance Company. The Fund is or may become a funding vehicle for VA contracts or VLI policies of the Participating Insurance Companies or may become a funding vehicle for VA contracts or VLI policies of other Participating Insurance Companies.

The interests in shares of the Fund of owners of VA contracts and VLI policies could diverge based on differences in state regulatory requirements, changes in the tax laws or other unanticipated developments. The Trust does not foresee any such differences or disadvantages at this time. However, the Trustees will monitor for such developments to identify any material irreconcilable conflicts and to determine what action, if any, should be taken in response to any such conflicts. If such a conflict were to occur, one or more separate accounts might be required to withdraw their investments in the Fund or shares of another Fund may be substituted. This might force the Fund to sell securities at disadvantageous prices.


12



Additional Expenses

Owners of VA contracts and VLI policies and the Retirement Plan participants incur additional expenses that are not described in this prospectus. They should consult the contract or policy disclosure documents or Retirement Plan information regarding these expenses.

Additional Intermediary Compensation

From time to time, CWAM or its affiliates may pay amounts from its past profits to Participating Insurance Companies or other organizations that provide administrative services for the Fund or that provide other services relating to the Fund to owners of VA contracts, VLI policies and/or participants in Retirement Plans. These services include, among other things: subaccounting services; answering inquiries regarding the Fund; transmitting, on behalf of the Fund, proxy statements, shareholder reports, updated prospectuses and other communications regarding the Fund; and such other related services as the Fund, owners of VA contracts, VLI policies and/or participants in Retirement Plans may request. Payment of such amounts by CWAM will not increase the fees paid by the Fund or its shareholders.

The Fund's distributor, investment adviser or their affiliates may make payments, from their own resources, to certain financial intermediaries for marketing support services. For purposes of this section the term "financial intermediary" includes any Participating Insurance Company, broker, dealer, bank, bank trust department, registered investment adviser, financial planner, Retirement Plan or other third party administrator and any other institution having a selling, services or any similar agreement with the Fund's distributor, investment adviser or one of their affiliates. These payments are generally based upon one or more of the following factors: average net assets of the mutual funds distributed by the Fund's distributor attributable to that financial intermediary, gross sales of the mutual funds distributed by the Fund's distributor attributable to that financial intermediary, reimbursement of ticket charges (fees that a financial intermediary firm charges its representatives for effecting transactions in fund shares) or a negotiated lump sum payment.

While the financial arrangements may vary for each financial intermediary, the payments to any one financial intermediary are generally expected to be between 0.20% and 0.50% on an annual basis for payments based on average net assets of the Funds attributable to the financial intermediary.

The Fund's distributor, investment adviser, or their affiliates may make other payments or allow promotional incentives to financial intermediaries to the extent permitted by SEC and NASD rules and by other applicable laws and regulations.

Amounts paid by the Fund's distributor, investment adviser or their affiliates are paid out of the distributor's, investment adviser's or its affiliates' own resources and do not increase the amount paid by you or the Fund. You can find further details about the payments made by the Fund's distributor, investment adviser or their affiliates and the services provided by financial intermediaries as well as a list of the financial intermediaries to which the Fund's distributor, investment adviser or its affiliates has agreed to make marketing support payments in the Fund's SAI. Your financial intermediary may charge you fees or commissions in addition to those disclosed in this prospectus. You can ask your financial intermediary for information about any payments it receives from the Fund's distributor, investment adviser and their affiliates and any services your financial intermediary provides, as well as fees and/or commissions it charges. I n addition, depending on the financial arrangement in place at any particular time, a financial intermediary and its financial consultants also may have a financial incentive for recommending a particular fund or share class over others. You should consult with your financial adviser and review carefully any disclosure by the financial intermediary as to compensation received by your financial adviser.


13



FINANCIAL HIGHLIGHTS

The financial highlights table that follows is intended to help you understand the Fund's financial performance. Information is shown since the Fund's inception and for the Fund's last five fiscal years, which run from January 1 to December 31. Certain information in the table reflects the financial results for a single Fund share. The total returns in the table represent the return that you would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information is included in the Fund's financial statements, which have been audited for the years ended December 31, 2004, 2005 and 2006 by PricewaterhouseCoopers LLP, an independent registered public accounting firm, whose report, along with the Fund's audited financial statements, is included in the Fund's annual report. The information for the years ended December 31, 2002 and 2003 is included in the Fund's financial statements, wh ich have been audited by another independent registered public accounting firm, whose report expressed an unqualified opinion on those financial statements. You can request a free annual report by calling 1-888-4-WANGER (1-888-492-6437). The Fund's total returns presented below do not reflect the cost of insurance and other separate account charges which vary among the VA contracts, VLI policies and Retirement Plans.

Wanger Select

    Year Ended December 31,  
Selected data for a share outstanding throughout each period   2006   2005   2004   2003   2002  
Net Asset Value, Beginning of Period   $ 22.66     $ 22.11     $ 18.55     $ 14.19     $ 15.36    
Income From Investment Operations:  
Net investment loss(a)     (0.05 )     (0.04 )     (0.10 )     (0.11 )     (0.09 )  
Net realized and unrealized gain (loss) on investments     4.38       2.12       3.68       4.47       (1.08 )  
Total from Investment Operations     4.33       2.08       3.58       4.36       (1.17 )  
Less Distributions Declared to Shareholders:  
From net investment income     (0.09 )                          
From net realized capital gains     (0.75 )     (1.53 )     (0.02 )              
Total Distributions Declared to Shareholders     (0.84 )     (1.53 )     (0.02 )              
Net Asset Value, End of Period   $ 26.15     $ 22.66     $ 22.11     $ 18.55     $ 14.19    
Total Return(b)     19.70 %     10.49 %(c)     19.31 %     30.73 %     (7.62 )%  
Ratios to Average Net Assets/Supplemental Data:  
Expenses(d)     0.94 %     0.96 %     1.10 %     1.15 %     1.18 %  
Net investment loss(d)     (0.20 )%     (0.20 )%     (0.49 )%     (0.65 )%     (0.62 )%  
Waiver/Reimbursement           0.02 %                    
Portfolio turnover rate     21 %     26 %     36 %     21 %     45 %  
Net assets, end of period (000's)   $ 175,346     $ 102,674     $ 82,465     $ 52,112     $ 26,124    

 

(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 investment adviser not waived a portion of expenses, total return would have been reduced.

(d)  The benefits derived from custody fees paid indirectly had no impact.


14



SHAREHOLDER INFORMATION

Shareholder and Account Policies

Participating Insurance Companies and Retirement Plans may obtain information about the Fund Monday through Friday (except holidays) from 8:00 a.m. to 4:30 p.m. Central time. For information, prices, literature, or to obtain information regarding the availability of Fund shares or how Fund shares are redeemed, call CWAM at 1-888-4-WANGER (1-888-492-6437).

Shares of the Fund are issued and redeemed in connection with investments in and payments under certain qualified and non-qualified VA contracts and VLI policies issued through separate accounts of Participating Insurance Companies. Shares of the Fund are also offered directly to certain of the following types of qualified plans and retirement arrangements and accounts, collectively called Retirement Plans:

•  a plan described in section 401(a) of the Internal Revenue Code that includes a trust exempt from tax under section 501(a);

•  an annuity plan described in section 403(a);

•  an annuity contract described in section 403(b), including a 403(b)(7) custodial account;

•  a governmental plan under section 414(d) or an eligible deferred compensation plan under section 457(b); and

•  a plan described in section 501(c)(18).

The retirement trust or plan must be established before shares of the Fund can be purchased by the plan. Neither the Fund nor CWAM offers prototypes of these plans. The Fund has imposed certain additional restrictions on sales to Retirement Plans to reduce Fund expenses. To be eligible to invest in the Fund, a Retirement Plan must be domiciled in a state in which Fund shares may be sold without payment of a fee to the state. In most states, this policy will require that a Retirement Plan investing in the Fund have at least $5 million in assets and that its investment decisions are made by a plan fiduciary rather than plan participants. A Retirement Plan may call CWAM at 1-888-4-WANGER (1-888-492-6437) to determine if it is eligible to invest.

How to Invest and Redeem

Shares of the Fund may not be purchased or redeemed directly by individual VA contract owners, VLI policyholders or individual Retirement Plan participants. VA contract owners, VLI policyholders or Retirement Plan participants should consult the disclosure documents for their VA contract, VLI policy or the plan documents for their Retirement Plan, for information on the availability of the Fund as an investment vehicle for allocations under their VA contract, VLI policy or Retirement Plan. In the case of a Participating Insurance Company purchaser, particular purchase and redemption procedures typically are included in an agreement between the Fund and the Participating Insurance Company. The Fund may enter into similar agreements with Retirement Plans.

The Participating Insurance Companies and Retirement Plans place daily orders to purchase and redeem shares of the Fund. These orders generally reflect the net effect of instructions they receive from holders of their VA contracts, VLI policies or Retirement Plan participants and certain other terms of those contracts, policies or Retirement Plans. The Trust issues and redeems shares at NAV without imposing any selling commission, sales load or redemption charge. However, each VA contract and VLI policy imposes its own charges and fees on owners of the VA contract or VLI policy and each


15



Retirement Plan may impose such charges on participants in the Retirement Plan. Shares generally are sold and redeemed at their NAV next determined after Participating Insurance Companies and Retirement Plans receive purchase or redemption requests. The right of redemption may be suspended or payment postponed whenever permitted by applicable law and regulations.

Fund Policy on Trading of Fund Shares

The interests of the Fund's long-term shareholders may be adversely affected by certain short-term trading activity by Fund shareholders. Such short-term trading activity, when excessive, has the potential to interfere with efficient portfolio management, generate transaction and other costs, dilute the value of Fund shares held by long-term shareholders and have other adverse effects on the Fund. This type of excessive short-term trading activity is referred to herein as "market timing." For purposes of this section, the "Columbia Funds" are the Columbia, Columbia Acorn Trust and Wanger Advisors Trust family of mutual funds. The Columbia Funds are not intended as vehicles for market timing. The board of trustees of the Fund has adopted the policies and procedures set forth below with respect to frequent trading of the Fund's shares.

The Fund, directly and through its agents, takes various steps designed to deter and curtail market timing. For example, if the Fund detects that any shareholder has conducted two "round trips" (as defined below) in the Fund in any 28-day period, except as noted below with respect to orders received through omnibus accounts, the Fund will reject the shareholder's future purchase orders, including exchange purchase orders, involving any Columbia Fund (other than a money market fund). In addition, if the Fund determines that any person, group or account has engaged in any type of market timing activity (independent of the two-round-trip limit), the Fund may, in its discretion, reject future purchase orders by the person, group or account, including exchange purchase orders, involving the same or any other Columbia Fund, and also retains the right to modify these market timing policies at any time without prior notice.

The rights of shareholders to redeem shares of the Fund are not affected by any of the limits mentioned above. However, certain funds impose a redemption fee on the proceeds of fund shares that are redeemed or exchanged within 60 days of their purchase.

For these purposes, a "round trip" is a purchase by any means into a Columbia Fund followed by a redemption, of any amount, by any means out of the same Columbia Fund. Under this definition, an exchange into the Fund followed by an exchange out of the Fund is treated as a single round trip. Also for these purposes, where known, accounts under common ownership or control generally will be counted together. Accounts maintained or managed by a common intermediary, such as an adviser, selling agent or trust department, generally will not be considered to be under common ownership or control.

Purchases, redemptions and exchanges made through the Columbia Funds' Automatic Investment Plan, Systematic Withdrawal Plan or similar automated plans are not subject to the two-round-trip limit. The two-round-trip limit may be modified for, or may not be applied to, accounts held by certain retirement plans to conform to plan limits, considerations relating to the Employee Retirement Income Security Act of 1974 or regulations of the Department of Labor, and for certain asset allocation or wrap programs.

The practices and policies described above are intended to deter and curtail market timing in the Fund. However, there can be no assurance that these policies, individually or collectively, will be totally effective in this regard because of various factors. In particular, all Fund purchase, redemption and exchange orders are received through omnibus accounts. Omnibus accounts, in which shares are held in the name of an intermediary on behalf of multiple beneficial owners, are a common form of holding shares among financial intermediaries, retirement plans and variable insurance products. The


16



Fund typically is not able to identify trading by a particular beneficial owner through an omnibus account, which may make it difficult or impossible to determine if a particular account is engaged in market timing. Consequently, there is the risk that the Fund may not be able to identify, deter or curtail certain market timing that occurs in the Fund, which may result in certain shareholders being able to market time the Fund while the shareholders in the Fund bear the burden of such activities.

Certain financial intermediaries have different policies regarding monitoring and restricting market timing in the underlying beneficial owner accounts that they maintain through an omnibus account that may be more or less restrictive than the Fund practices discussed above. If an intermediary does not enforce the Fund's policy, the intermediary must either provide data transparency to Columbia Management or Columbia Management must determine that the intermediary's policy taken in its entirety provides protections to Fund shareholders that are generally commensurate with the Fund's policy.

In addition, the terms and conditions of a particular insurance contract may limit the ability of the Participating Insurance Company to address frequent trading activity by a VA contract owner or VLI policyholder.

The Fund seeks to act in a manner that it believes is consistent with the best interests of Fund shareholders in making any judgments regarding market timing. Neither the Fund nor its agents shall be held liable for any loss resulting from rejected purchase orders or exchanges.

Purchases and Redemptions

To the extent not otherwise provided in any agreement between the Trust and a Participating Insurance Company or Retirement Plan, shares of the Fund may be purchased by check or by wire transfer of funds. To be effective, a purchase order must consist of the money to purchase the shares and (i) information identifying the purchaser, in the case of a Participating Insurance Company or Retirement Plan with which the Fund has entered into an agreement, or a subsequent purchase by a Participating Insurance Company or Retirement Plan that is already a Fund shareholder, or (ii) a completed purchase application, in the case of the initial investment by a Retirement Plan with which the Fund does not have an agreement.

The Participating Insurance Companies and Retirement Plans place daily orders to purchase and redeem shares of the Funds. These orders generally reflect the net effect of instructions they receive from holders of their VA contracts and VLI policies and certain other terms of those contracts and policies. The Fund issues and redeems shares at NAV without imposing any selling commissions, sales charge or redemption charge. Shares generally are sold and redeemed at their NAV next determined after the Participating Insurance Company or Retirement Plan receives a purchase or redemption request. The right of redemption may be suspended or payment postponed to the extent permitted by applicable law and regulations.

Normally, redemption proceeds will be paid within seven days after the Fund or its agent receives a request for redemption. Redemptions may be suspended or the payment date postponed on days when the New York Stock Exchange (NYSE) is closed (other than weekends or holidays), when trading on the NYSE is restricted, or as permitted by the SEC.

During any 90-day period for any one shareholder, the Fund is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the Fund's net assets. Redemptions in excess of these limits will normally be paid in cash, but may be paid wholly or partly by an in-kind distribution of securities.


17



How the Fund's Share Price is Determined

The Fund's share price is its NAV per share next determined. NAV is the difference between the values of the Fund's assets and liabilities divided by the number of shares outstanding. The Fund determines NAV at the close of regular trading on the New York Stock Exchange (NYSE), normally 4 p.m. Eastern time.

To calculate the NAV on a given day, the Fund values each stock listed or traded on a stock exchange at its latest sale price on that day. If there are no sales that day, the Fund values the security at the most recently quoted bid price. The Fund values each over-the-counter security as of the last sale price for that day. If a security is traded principally on the NASDAQ Stock Market Inc. (NASDAQ), the SEC approved NASDAQ Official Closing Price is applied.

When the market price of a security is not readily available, including on days when the Fund determines that the last sale or bid price of the security does not reflect that security's market value, the Fund values the security at a fair value determined in good faith under procedures established by the Board of Trustees.

The Fund also values a security at fair value when events have occurred after the last available market price and before the close of the NYSE that is expected to materially affect the security's price. In the case of foreign securities, this could include events occurring after the close of the foreign market where the securities trade and before the close of the NYSE. When the Fund uses fair value to price securities, it may value those securities higher or lower than another fund that uses market quotations to price the same securities. The Trust has retained an independent statistical fair value pricing service to assist in the fair valuation process for securities principally traded in a foreign market in order to adjust for possible changes in value that may occur between the close of the foreign exchange and the time at which Fund shares are priced. The use of an independent fair value pricing service is intended to and may decrease t he opportunities for time zone arbitrage transactions. There can be no assurance that the use of an independent fair value pricing service will successfully decrease arbitrage opportunities. If a security is valued at a "fair value," that value may be different from the last quoted market price for the security. The Fund's foreign securities may trade on days when the NYSE is closed. The Fund will not determine NAV and Participating Insurance Companies and Retirement Plans may not purchase or redeem shares on days on which the NYSE is closed for trading.

Dividends and Distributions

The Fund intends to declare and distribute, as dividends or capital gains distributions, at least annually, substantially all of its net investment income and net profits realized from the sale of portfolio securities, if any, to its shareholders (Participating Insurance Companies' separate accounts and Retirement Plan participants). The Fund's net investment income consists of all dividends and interest received by the Fund, less expenses (including the investment advisory fees). Income dividends will be declared and distributed annually by the Fund. All dividends and distributions are reinvested in additional shares of the Fund at NAV, as of the record date for the distributions.

Taxes

The Fund intends to qualify every year as a regulated investment company under the Internal Revenue Code. By so qualifying, the Fund will not be subject to federal income taxes to the extent that its net investment income and net realized capital gains are distributed to its shareholders. The Fund also intends to meet certain diversification requirements applicable to mutual funds underlying variable insurance products. For more information about the Fund tax status, see Taxes in the SAI.


18



For information concerning the federal tax consequences to VA contract owners, VLI policyholders or Retirement Plan participants, see the disclosure documents from the VA contract, VLI policy or your Retirement Plan administrator. You should consult your tax advisor about the tax consequences of any investment.


19



APPENDIX

Hypothetical Investment and Expense Information

The following supplemental hypothetical investment information provides additional information about the effect of the expenses of the Fund, including investment advisory fees and other Fund costs, on the Fund's returns over a 10-year period. The chart shows the estimated expenses that would be charged on a hypothetical investment of $10,000 in the Fund assuming a 5% return each year, the cumulative return after fees and expenses, and the hypothetical year-end balance after fees and expenses. The chart also assumes that all dividends and distributions are reinvested. The annual expense ratios used for the Fund, which are the same as those stated in the Annual Fund Operating Expenses table, are presented in the chart, and are net of any contractual fee waivers or expense reimbursements for the period of the contractual commitment. Your actual costs may be higher or lower.

Wanger Select

Maximum Sales Charge
0.00%
  Initial Hypothetical Investment Amount
$10,000.00
  Assumed Rate of Return
5%
 
Year   Cumulative
Return Before
Fees & Expenses
  Annual Expense
Ratio
  Cumulative
Return After
Fees & Expenses
  Hypothetical
Year-End
Balance After
Fees & Expenses
  Annual
Fees &
Expenses(1)
 
  1       5.00 %     0.94 %     4.06 %   $ 10,406.00     $ 95.91    
  2       10.25 %     0.94 %     8.28 %   $ 10,828.48     $ 99.80    
  3       15.76 %     0.94 %     12.68 %   $ 11,268.12     $ 103.85    
  4       21.55 %     0.94 %     17.26 %   $ 11,725.61     $ 108.07    
  5       27.63 %     0.94 %     22.02 %   $ 12,201.67     $ 112.46    
  6       34.01 %     0.94 %     26.97 %   $ 12,697.05     $ 117.02    
  7       40.71 %     0.94 %     32.13 %   $ 13,212.55     $ 121.78    
  8       47.75 %     0.94 %     37.49 %   $ 13,748.98     $ 126.72    
  9       55.13 %     0.94 %     43.07 %   $ 14,307.19     $ 131.86    
  10       62.89 %     0.94 %     48.88 %   $ 14,888.06     $ 137.22    
Total Gain After Fees and Expenses   $ 4,888.06    
Total Annual Fees and Expenses   $ 1,154.69    

 

(1)  Annual Fees and Expenses are calculated based on the average between the beginning and ending balance for each year. All information is calculated on an annual compounding basis.


20



Notes


21



Notes


22



Notes


23



FOR MORE INFORMATION

Adviser:  Columbia Wanger Asset Management, L.P.

Additional information about the Fund's investments is available in the Fund's semiannual and annual reports to shareholders. The annual report contains a discussion of the market conditions and investment strategies that significantly affected the Fund's performance over the last fiscal year.

You may wish to read the Fund's SAI for more information on the Fund and the securities in which it invests. The SAI is incorporated into this prospectus by reference, which means that it is considered to be part of this prospectus.

You can get free copies of the annual and semiannual reports and the SAI, request other information and discuss your questions about the Fund by writing or calling the Fund's adviser at:

Columbia Wanger Asset Management, L.P.
Shareholder Services Group
227 West Monroe, Suite 3000
Chicago, IL 60606
1 (888) 4-WANGER (1-888-492-6437)

or by calling or writing the Participating Insurance Company that issued your VA contract or VLI policy or the Retirement Plan in which you participate. The annual and semiannual reports and the SAI are not available on an internet website because Columbia Management does not maintain an internet website for these Funds, which are available for purchase only through Participating Insurance Companies' VA contracts and VLI policies and through qualified Retirement Plans.

Information about the Fund (including the SAI) can be reviewed and copied at the Public Reference Room of the SEC in Washington, D.C. Information on the Public Reference Room may be obtained by calling the SEC at 202-942-8090. Reports and other information about the Fund are available on the EDGAR database on the SEC's Internet site at http://www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the SEC's Public Reference Section, Washington, D.C. 20549-0102.

© 2007 Columbia Management Distributors, Inc.
One Financial Center, Boston, MA 02111-2621
800.426.3750

Investment Company Act file number: 811-08748




WANGER INTERNATIONAL SELECT

PROSPECTUS

MAY 1, 2007

* * * *

Fund shares are available only through variable annuity contracts and variable life insurance policies of participating insurance companies, and through certain retirement plans. This prospectus must be accompanied by a prospectus for your variable annuity contract or variable life insurance policy. Retain both prospectuses for future reference.

* * * *

Although Fund shares have been registered with the Securities and Exchange Commission (SEC), the SEC has not approved or disapproved any shares offered in this prospectus or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.



TABLE OF CONTENTS

THE TRUST     3    
THE FUND     4    
OTHER INVESTMENT STRATEGIES AND RISKS     8    
TRUST MANAGEMENT ORGANIZATIONS     10    
The Trustees     10    
The Adviser: Columbia Wanger Asset Management, L.P.     10    
Portfolio Manager     10    
Legal Proceedings     11    
Mixed and Shared Funding     12    
Additional Expenses     13    
Additional Intermediary Compensation     13    
FINANCIAL HIGHLIGHTS     14    
SHAREHOLDER INFORMATION     15    
APPENDIX     20    

 


2



THE TRUST

Wanger Advisors Trust (Trust) includes four separate mutual funds (Funds), each with its own investment goal and strategies. This prospectus contains information about Wanger International Select (Fund).

The Fund is an investment option under variable annuity contracts (VA contracts) and variable life insurance policies (VLI policies) issued by life insurance companies (Participating Insurance Companies). Participating Insurance Companies invest in the Fund through separate accounts that they set up for that purpose. Owners of VA contracts and VLI policies invest in subaccounts of those separate accounts through instructions they give to their insurance company.

Shares of the Fund also may be offered directly to certain pension plans and retirement arrangements and accounts permitting accumulation of funds on a tax-deferred basis (Retirement Plans).

The prospectuses of the Participating Insurance Companies' separate accounts describe which Funds are available to the purchasers of their own VA contracts and VLI policies. The Trust assumes no responsibility for the accuracy or adequacy of those prospectuses. A Retirement Plan's disclosure documents describe which Funds are available to participants in the plan.


3



THE FUND

INVESTMENT GOAL—WANGER INTERNATIONAL SELECT

Wanger International Select seeks long-term growth of capital.

PRINCIPAL INVESTMENT STRATEGY

Wanger International Select invests primarily in the stocks of companies with market capitalizations of $2 to $25 billion at the time of initial purchase. Although the Fund primarily invests in small- and medium-sized companies, at times the Fund may invest in larger-sized companies. The Fund invests in at least three countries. Wanger International Select takes advantage of its adviser's research and stockpicking capabilities to invest in a limited number of foreign companies (between 40-60) generally in developed markets (for example, Japan, Canada, and the United Kingdom), offering the potential to provide above-average growth over time. Wanger International Select believes that companies within this capitalization range, which are not as well known by financial analysts, may offer higher return potential than the stocks of companies with capitalizations above $25 billion. Wanger International Select typically looks for companies with:

•  A strong business franchise that offers growth potential.

•  Products and services that give the company a competitive advantage.

•  A stock price that the Fund's adviser believes is reasonable relative to the assets and earning power of the company.

Under normal circumstances, Wanger International Select invests at least 65% of its net assets in the stocks of foreign companies based in developed markets outside the United States.

The Fund's adviser may sell a portfolio holding if the security reaches the adviser's price target or if the company has a deterioration of fundamentals, such as failing to meet key operating benchmarks. The adviser also may sell a portfolio holding to fund redemptions.

Additional strategies that are not principal investment strategies and the risks associated with them are described later in this prospectus under "Other Investment Strategies and Risks."

PRINCIPAL INVESTMENT RISKS

There are two basic risks for all mutual funds that invest in stocks: management risk and market risk. You may lose money by investing in the Fund.

Management risk means that the investment decisions of Columbia Wanger Asset Management, L.P. (CWAM), the Fund's investment adviser, might produce losses or cause the Fund to underperform when compared to other funds with similar investment goals. Market risk means that security prices in a market, sector or industry may fall, reducing the value of your investment. Because of management and market risk, there is no guarantee that the Fund will achieve its investment goal or perform favorably among comparable funds.

Since the Fund purchases equity securities, it is subject to equity risk. This is the risk that stock prices will fall over short or extended periods of time. Although the stock market historically has outperformed other asset classes over the long term, the stock market tends to move in cycles. Individual stock prices may fluctuate drastically from day-to-day and may underperform other asset classes over an extended period of time. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These price movements may result from factors affecting individual companies, industries or the securities market as a whole.


4



Because the Fund invests in stocks, the price of its shares—its net asset value (NAV) per share—fluctuates daily in response to changes in the market value of the stocks.

Foreign Securities

Foreign securities are subject to special risks. Foreign markets can be extremely volatile. Fluctuations in currency exchange rates may impact the value of foreign securities denominated in foreign currencies and U.S. dollars, without a change in the intrinsic value of those securities. The liquidity of foreign securities may be more limited than that of domestic securities, which means that the Fund may, at times, be unable to sell foreign securities at desirable prices. Brokerage commissions, custodial fees and other fees are generally higher for foreign investments. In addition, foreign governments may impose withholding taxes which would reduce the amount of income and capital gains available to distribute to shareholders. Other risks include possible delays in the settlement of transactions or in the notification of income; less publicly available information about companies; the impact of political, social or diplomatic events; possibl e seizure, expropriation or nationalization of the company or its assets; and possible imposition of currency exchange controls.

Emerging Markets

Investments in emerging markets are subject to additional risk. The risks of foreign investments are typically increased in less developed countries, which are sometimes referred to as emerging markets. For example, political and economic structures in these countries may be new and developing rapidly, which may cause instability. These countries are also more likely to experience high levels of inflation, deflation or currency devaluations, which could hurt their economies and securities markets.

Small- or Mid-Cap Companies

Small- or mid-cap companies may be more susceptible to market downturns, and their prices could be more volatile than large-cap companies. These companies are more likely than larger companies to have limited product lines, operating histories, markets or financial resources. They may depend heavily on a small management team and may trade less frequently, may trade in smaller volumes and may fluctuate more sharply in price than securities of larger companies. In addition, such companies may not be widely followed by the investment community, which can lower the demand for their stocks.

Sector Risk

Sector risk may sometimes be present in the Fund's investments. Companies that are in different but closely related industries are sometimes described as being in the same broad economic sector. The values of stocks of different companies in a market sector may be similarly affected by particular economic or market events. Although the Fund does not intend to focus on any particular sector, at times, the Fund may have a large portion of its assets invested in a particular sector.

Market Timers

Because the Fund invests predominantly in foreign securities, the Fund may be particularly susceptible to market timers. Market timers generally attempt to take advantage of the way the Fund prices its shares by trading based on market information they expect will lead to a change in the Fund's net asset value on the next pricing day. Market timing activity may be disruptive to Fund management and, since a market timer's profits are effectively paid directly out of the Fund's assets, may negatively impact the investment returns of shareholders. Although the Fund has adopted certain policies and methods


5



intended to identify and discourage frequent trading based on this strategy, it cannot ensure that all such activity can be identified or terminated.

An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

The Statement of Additional Information (SAI) includes a description of the Fund's policies with respect to disclosure of portfolio holdings information.

PERFORMANCE HISTORY

The bar chart below shows the Fund's calendar-year total returns. The performance table following the bar chart shows how the Fund's average annual returns compare with those of broad measures of market performance for one year, five years and the life of the Fund. We compare the Fund to the S&P/Citigroup World ex-U.S. Cap Range $2-10B Index (S&P/Citigroup World ex-U.S. Cap Range $2-10B), the Morgan Stanley Europe, Australasia and Far East Index (MSCI EAFE) and the Lipper Variable Underlying International Growth Funds Index (Lipper VUF International Growth Funds), which are broad-based measures of market performance. The S&P/Citigroup World ex-U.S. Cap Range $2-$10B is the Fund's primary benchmark. The chart and table are intended to illustrate some of the risks of investing in the Fund by showing changes in the Fund's performance from year to year. All returns include the reinvestment of dividends and distributions. As with all mutual funds, past performance does not predict the Fund's future performance. The Fund's performance results do not reflect the cost of insurance and separate account charges that are imposed under your VA contract or VLI policy, or any charges imposed by your Retirement Plan. Returns and value of an investment will vary, resulting in a gain or a loss on sale.

Calendar-Year Total Returns

YEAR-BY-YEAR TOTAL RETURN

Best quarter: 2nd quarter 2003, 19.58%
Worst quarter: 3rd quarter 2001, –21.53%

Average Annual Total Returns   1 Year   5 Years   Life of
Fund†
 
Wanger International Select     36.00 %     18.69 %     15.50 %  
S&P/Citigroup World ex-U.S. Cap Range $2-10B**     27.88 %     21.24 %     12.70 %  
MSCI EAFE*     26.34 %     14.98 %     7.13 %  
Lipper VUF_International Growth Funds*     25.90 %     12.43 %     6.79 %**  

 

†  Wanger International Select's inception date was 2/1/1999.


6



*  The S&P/Citigroup World ex-U.S. Cap Range $2-10B, the Fund's primary benchmark, is a subset of the broad market, selected by the index sponsor, representing the mid-cap developed market, excluding the United States. MCSI 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. Lipper Indexes include the largest funds tracked by Lipper, Inc. in the named category. The Lipper VUF International Growth Funds is made up of the 10 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 information is from 1/31/1999.

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund, not including fees and expenses imposed under your VA contract, VLI policy or Retirement Plan.

Shareholder Transaction Expenses
Fees paid directly from your investment:

Maximum sales charge     None    
Deferred sales charge     None    

 

Annual Fund Operating Expenses
Expenses that are deducted from Fund assets:

Management fees(1)     0.99 %  
12b-1 fee     None    
Other expenses     0.20 %  
Total annual Fund operating expenses(2)     1.19 %  

 

(1)  The Fund pays an investment advisory fee of 0.99%.

(2)  CWAM has undertaken to limit Wanger International Select's annual expenses to 1.45% of its average net assets. This expense limitation is contractual and will terminate on April 30, 2008.

Example

This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. It assumes a $10,000 investment in Wanger International Select for the time periods indicated, a 5% total return each year, reinvestment of all dividends and distributions, and that operating expenses remain the same. Your actual returns and costs may be higher or lower. This example does not include the effect of CWAM's undertaking to limit the Fund's expenses.

1 Year   $ 121    
3 Years   $ 378    
5 Years   $ 654    
10 Years   $ 1,443    

 


7



OTHER INVESTMENT STRATEGIES AND RISKS

The Fund's principal investment strategies and their associated risks are described above. This section provides more detail about the Fund's investment strategies, and describes other investments the Fund may make and the risks associated with them. In seeking to achieve its investment goal, the Fund may invest in various types of securities and engage in various investment techniques, which are not the principal focus of the Fund and therefore are not described in this prospectus. These types of securities and investment practices are identified and discussed in the Fund's SAI, which you may obtain free of charge (see back cover). Except as otherwise noted, approval by the Fund's shareholders is not required to modify or change the Fund's investment goal or investment strategies.

The Information Edge

CWAM invests in entrepreneurially managed smaller- and mid-sized companies that it believes are not as well known by financial analysts and whose position in a niche creates the opportunity for superior earnings-growth potential. CWAM may identify what it believes are important economic, social or technological trends (for example, the growth of outsourcing as a business strategy, or the productivity gains from the increasing use of technology) and try to identify companies it thinks will benefit from those trends.

In making investments for the Fund, CWAM relies primarily on its independent, internally generated research to uncover companies that may be less well known than the more popular names. To find these companies, CWAM compares growth potential, financial strength and fundamental value among companies.

Growth Potential   Financial Strength   Fundamental Value  
• superior technology
• innovative marketing
• managerial skill
• market niche
• good earnings prospects
• strong demand for product
  • low debt
• adequate working capital
• conservative accounting practices
• adequate profit margin
  • reasonable stock price relative to growth potential
• valuable assets
 
The realization of this growth potential would likely produce superior performance that is sustainable over time.   A strong balance sheet gives management greater flexibility to pursue strategic objectives and is important to maintaining a competitive advantage.   Once CWAM uncovers an attractive company, it identifies a price that it believes would also make the stock a good value.  

 

Long-Term Investing

CWAM's analysts continually screen companies and contact more than 1,000 companies around the globe each year. To accomplish this, CWAM analysts often talk directly to top management, vendors, suppliers and competitors.

In managing the Fund, CWAM tries to maintain lower transaction costs by investing with a long-term time horizon (at least two to five years). However, securities purchased on a long-term basis may be sold within 12 months after purchase due to changes in the circumstances of a particular company or industry, or changes in general market or economic conditions.


8



State Insurance Restrictions

The Fund is sold to Participating Insurance Companies in connection with VA contracts and VLI policies, and will seek to be available under VA contracts and VLI policies sold in a number of jurisdictions. Certain states have regulations or guidelines concerning concentration of investments and other investment techniques that could limit the Fund's ability to engage in certain techniques and to manage its portfolio with the flexibility provided herein. In order to permit the Fund to be available under VA contracts and VLI policies sold in certain states, the Fund may make commitments that are more restrictive than the investment policies and limitations described herein and in the SAI. If the Fund determines that such a commitment is no longer in the Fund's best interest, the commitment may be revoked by terminating the availability of the Fund to VA contract owners and VLI policyholders residing in such states.

Temporary Defensive Positions

At times, CWAM may determine that adverse market conditions make it desirable to temporarily suspend the Fund's normal investment activities. During such times, the Fund may, but is not required to, invest in cash or high-quality, short-term debt securities, without limit. Taking a temporary defensive position may prevent the Fund from achieving its investment goal.

Derivative Strategies

The Fund may enter into a number of derivative strategies, including those that employ futures, options and swap contracts, to gain or reduce exposure to particular securities or markets. These strategies, commonly referred to as derivatives, involve the use of financial instruments whose values depend on, or are derived from, the value of an underlying security, index or currency. The Fund may use these strategies to adjust for both hedging and non-hedging purposes, such as to adjust the Fund's sensitivity to changes in interest rates or to offset a potential loss in one position by establishing an interest in an opposite position. Derivative strategies involve the risk that they may exaggerate a loss, potentially losing more money than the actual cost of the underlying security, or limit a potential gain. Also, with some derivative strategies, there is the risk that the other party to the transaction may fail to honor its contract terms, c ausing a loss to the Fund. The Fund also may not be able to find a suitable derivative transaction counterparty, and thus may be unable to invest in derivatives altogether.

Portfolio Turnover

The Fund does not have limits on portfolio turnover. Turnover may vary significantly from year to year. CWAM does not expect the Fund's turnover to exceed 125% under normal conditions. Portfolio turnover increases transaction expenses, which reduce the Fund's return.


9



TRUST MANAGEMENT ORGANIZATIONS

The Trustees

The business of the Trust and the Fund is supervised by the Trust's Board of Trustees. The SAI contains names of and biographical information on the Trustees.

More than 75% of the Fund's Trustees are independent, meaning that they have no affiliation with the adviser or the Funds, apart from their positions as Trustees and the personal investments they may have made as private individuals.

The independent Trustees bring backgrounds in business and their professions, academia, and public service to their task of working with the Funds' officers to establish the policies and oversee the activities of the Funds. Among the Trustees' responsibilities are selecting the investment adviser for the Funds; negotiating the advisory agreement; approving investment policies; monitoring Fund operations, performance, and costs; reviewing other contracts; and nominating or selecting new Trustees.

Each Trustee serves until his or her retirement, resignation, death or removal; otherwise as specified in the Trust's organizational documents; or as otherwise agreed upon. It is expected that every five years the Trustees will call a meeting of shareholders to elect Trustees. A Trustee must retire at the end of the year in which he or she attains the age of 75. Any Trustee may be removed at a shareholders' meeting by a vote representing two-thirds of all shares of the Funds of the Trust. The mailing address for the Trustees and officers is 227 W. Monroe, Suite 3000, Chicago, Illinois 60606.

The Adviser: Columbia Wanger Asset Management, L.P.

Columbia Wanger Asset Management, L.P. (CWAM), 227 West Monroe Street, Suite 3000, Chicago, IL 60606, is the Fund's investment adviser. CWAM is responsible for the Fund's management, subject to the oversight of the Fund's Board of Trustees. CWAM and its predecessor have managed mutual funds, including Wanger International Select, since 1992. In its duties as investment adviser, CWAM runs the Fund's day-to-day business, including making investment decisions and placing all orders for the purchase and sale of the Fund's portfolio securities. As of December 31, 2006, CWAM managed more than $32.9 billion in assets. CWAM is an indirect wholly owned subsidiary of Columbia Management Group, LLC, which is an indirect wholly owned subsidiary of Bank of America Corporation.

For the fiscal year 2006 the Fund paid CWAM management fees at 0.99% of the Fund's average daily net assets. A discussion of the factors considered by the Fund's Board of Trustees in approving the Fund's investment advisory contract is included in the Fund's annual report to shareholders for the period ended December 31, 2006.

Portfolio Manager

CWAM uses a team to assist the lead portfolio manager in managing the Fund. Team members share responsibility for providing ideas, information and knowledge in managing the Fund, and each team member has one or more particular areas of expertise. The lead portfolio manager is responsible for making daily investment decisions and utilizing the management team's input and advice when making buy and sell determinations.

Christopher Olson is a vice president of the Trust and the lead portfolio manager of Wanger International Select and has managed Wanger International Select since September 2001. He has been a member of


10



the international analytical team at CWAM since January 2001. Mr. Olson also is a vice president of Columbia Acorn Trust, lead portfolio manager of Columbia Acorn International Select and a co-portfolio manager of Wanger International Small Cap.

The SAI provides additional information about the portfolio manager's compensation, other accounts managed and ownership of securities in the Fund.

Legal Proceedings

CWAM, Columbia Acorn Trust, another mutual fund family advised by CWAM, and the trustees of Columbia Acorn Trust (collectively, the "Columbia defendants") are named as defendants in class and derivative complaints, which were consolidated in a Multi-District Action in the federal district court for the District of Maryland on February 20, 2004 (the "MDL Action"). These lawsuits contend that defendants permitted certain investors to market time their trades in certain Columbia Acorn Funds. All claims against Columbia Acorn Trust and its independent trustees have been dismissed; however, the interested trustees of Columbia Acorn Trust are still parties to the MDL Action.

On March 21, 2005, a class action complaint was filed against Columbia Acorn Trust in the Superior Court of the Commonwealth of Massachusetts seeking to rescind the contingent deferred sales charges assessed upon redemption of Class B shares of Columbia Acorn Funds due to the alleged market timing of the Columbia Acorn Funds. In addition to the rescission of sales charges, plaintiffs seek recovery of actual damages, attorneys' fees and costs. The case has been transferred to the MDL Action in the federal district court of Maryland.

Columbia Acorn Trust and CWAM are also defendants in a class action lawsuit, filed on November 13, 2003 in the Circuit Court of the Third Judicial Circuit, Madison County, Illinois, that alleges, in summary, that Columbia Acorn Trust and CWAM exposed shareholders of Columbia Acorn International to trading by market timers by allegedly (a) failing to properly evaluate daily whether a significant event affecting the value of that fund's securities had occurred after foreign markets had closed but before the calculation of the fund's NAV; (b) failing to implement the fund's portfolio valuation and share pricing policies and procedures; and (c) failing to know and implement applicable rules and regulations concerning the calculation of NAV (the "Fair Valuation Lawsuit"). On April 5, 2005, the United States Court of Appeals for the Seventh Circuit ruled that the plaintiffs' state law claims were preempted under federal law resulting in the dismis sal of plaintiffs' complaint. Plaintiffs appealed the Seventh Circuit's ruling to the United States Supreme Court. On June 15, 2006, the Supreme Court reversed the Seventh Circuit's ruling on jurisdictional grounds, and the case ultimately was remanded to the state court. The state court has entered a stay of all proceedings given the settlement, as discussed below.

On April 4, 2006, the plaintiffs and the Columbia defendants named in the MDL Action executed an agreement in principle intended to fully resolve all of the lawsuits consolidated in the MDL Action as well as the Fair Valuation Lawsuit. The court entered a stay after the parties executed the agreement in principle. The settlement is subject to court approval.

In 2004, CWAM and the trustees of the Columbia Acorn Trust were named as defendants in certain purported shareholder class and derivative actions making claims, including claims under the Investment Company and the Investment Advisers Acts of 1940 and state law. Certain Columbia Acorn Funds were named as nominal defendants. The suits allege, inter alia, that the fees and expenses paid by the funds are excessive and that the funds' advisers and their affiliates inappropriately used fund assets to distribute the funds and for other improper purposes. On March 2, 2005, the actions were consolidated in the Massachusetts federal court as In re Columbia Entities Litigation. The plaintiffs filed a consolidated amended complaint on June 9, 2005. On November 30, 2005, the judge dismissed


11



all claims by plaintiffs and entered final judgment in favor of the defendants. The plaintiffs appealed to the United States Court of Appeals for the First Circuit on December 30, 2005. A stipulation and settlement agreement dated January 19, 2007 was filed in the First Circuit on February 14, 2007, with a joint stipulation of dismissal and motion for remand to obtain district court approval of the settlement. That joint motion was granted and the appeal was dismissed. On March 6, 2007, the case was remanded to the District Court, where the parties will seek court approval of the settlement. The terms of the proposed settlement, if approved, will require payments by the funds' adviser and/or its affiliates, including payment of plaintiffs' attorneys' fees and notice to class members. In the event that the settlement is not approved, the plaintiffs may elect to go forward with their appeal and no opinion is expressed regarding the likely outc ome or financial impact of such an appeal on any fund.

On or about January 11, 2005, a putative class action lawsuit was filed in federal district court in Massachusetts against Columbia Acorn Trust and its trustees, along with Columbia Management Advisors, LLC, the sub-administrator of the Wanger Advisors Funds and the Columbia Acorn Funds. The plaintiffs allege that the defendants failed to submit Proof of Claims in connection with settlements of securities class action lawsuits filed against companies in which the Columbia Acorn Funds held positions. The complaint seeks compensatory and punitive damages, and the disgorgement of all fees paid to Columbia Management Advisors, LLC. Plaintiffs have voluntarily dismissed Columbia Acorn Trust and its independent trustees.

Columbia Acorn Trust and CWAM intend to defend these suits vigorously.

As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of Fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the Fund.

However, based on currently available information, CWAM believes that the lawsuits are not likely to materially affect its ability to provide investment management services to the Fund.

Mixed and Shared Funding

As described previously, the Trust serves as a funding medium for VA contracts and VLI policies of Participating Insurance Companies and for certain Retirement Plans, so-called mixed and shared funding. As of the date of this prospectus, the Participating Insurance Companies are Keyport Life Insurance Company (Keyport), Keyport Benefit Life Insurance Company (Keyport Benefit), Aegon Financial Services Group, Inc., Symetra Life Insurance Company, PHL Variable Life Insurance Company, Phoenix Home Life Mutual Insurance Company, RiverSource Life Insurance Company, RiverSource Life Insurance Co. of New York, Sun Life Assurance Company of Canada (U.S.), Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company, ING Insurance Company of America, ING Life Insurance and Annuity Company, Reliastar Life Insurance Company, Sun Life Insurance & Annuity Company of New York, Merrill Lynch Life Insurance Company, ML Life Insuran ce Company of New York and TIAA-CREF Life Insurance Company. The Fund is or may become a funding vehicle for VA contracts or VLI policies of the Participating Insurance Companies or may become a funding vehicle for VA contracts or VLI policies of other Participating Insurance Companies.

The interests in shares of the Fund of owners of VA contracts and VLI policies could diverge based on differences in state regulatory requirements, changes in the tax laws or other unanticipated developments. The Trust does not foresee any such differences or disadvantages at this time. However, the Trustees will monitor for such developments to identify any material irreconcilable conflicts and to determine what action, if any, should be taken in response to any such conflicts. If such a conflict were to occur, one or more separate accounts might be required to withdraw their investments in the Fund or shares of another fund may be substituted. This might force the Fund to sell securities at disadvantageous prices.


12



Additional Expenses

Owners of VA contracts and VLI policies and the Retirement Plan participants incur additional expenses that are not described in this prospectus. They should consult the contract or policy disclosure documents or Retirement Plan information regarding these expenses.

Additional Intermediary Compensation

From time to time, CWAM or its affiliates may pay amounts from its past profits to Participating Insurance Companies or other organizations that provide administrative services for the Fund or that provide other services relating to the Fund to owners of VA contracts, VLI policies and/or participants in Retirement Plans. These services include, among other things: subaccounting services; answering inquiries regarding the Fund; transmitting, on behalf of the Fund, proxy statements, shareholder reports, updated prospectuses and other communications regarding the Fund; and such other related services as the Fund, owners of VA contracts, VLI policies and/or participants in Retirement Plans may request. Payment of such amounts by CWAM will not increase the fees paid by the Fund or its shareholders.

The Fund's distributor, investment adviser or their affiliates may make payments, from their own resources, to certain financial intermediaries for marketing support services. For purposes of this section the term "financial intermediary" includes any Participating Insurance Company, broker, dealer, bank, bank trust department, registered investment adviser, financial planner, Retirement Plan or other third party administrator and any other institution having a selling, services or any similar agreement with the Fund's distributor, investment adviser or one of their affiliates. These payments are generally based upon one or more of the following factors: average net assets of the mutual funds distributed by the Fund's distributor attributable to that financial intermediary, gross sales of the mutual funds distributed by the Fund's distributor attributable to that financial intermediary, reimbursement of ticket charges (fees that a financial intermediary firm charges its representatives for effecting transactions in fund shares) or a negotiated lump sum payment.

While the financial arrangements may vary for each financial intermediary, the payments to any one financial intermediary are generally expected to be between 0.20% and 0.50% on an annual basis for payments based on average net assets of the Funds attributable to the financial intermediary.

The Fund's distributor, investment adviser, or their affiliates may make other payments or allow promotional incentives to financial intermediaries to the extent permitted by SEC and NASD rules and by other applicable laws and regulations.

Amounts paid by the Fund's distributor, investment adviser or their affiliates are paid out of the distributor's, investment adviser's or its affiliates' own resources and do not increase the amount paid by you or the Fund. You can find further details about the payments made by the Fund's distributor, investment adviser or their affiliates and the services provided by financial intermediaries as well as a list of the financial intermediaries to which the Fund's distributor, investment adviser or its affiliates has agreed to make marketing support payments in the Fund's SAI. Your financial intermediary may charge you fees or commissions in addition to those disclosed in this prospectus. You can ask your financial intermediary for information about any payments it receives from the Fund's distributor, investment adviser and their affiliates and any services your financial intermediary provides, as well as fees and/or commissions it charges. I n addition, depending on the financial arrangement in place at any particular time, a financial intermediary and its financial consultants also may have a financial incentive for recommending a particular fund or share class over others. You should consult with your financial adviser and review carefully any disclosure by the financial intermediary as to compensation received by your financial adviser.


13



FINANCIAL HIGHLIGHTS

The financial highlights table that follows is intended to help you understand the Fund's financial performance. Information is shown since the Fund's inception and for the Fund's last five fiscal years, which run from January 1 to December 31. Certain information in the table reflects the financial results for a single Fund share. The total returns in the table represent the return that you would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information is included in the Fund's financial statements, which have been audited for the years ended December 31, 2004, 2005 and 2006 by PricewaterhouseCoopers LLP, an independent registered public accounting firm, whose report, along with the Fund's audited financial statements, is included in the Fund's annual report. The information for the years ended December 31, 2002 and 2003 is included in the Fund's financial statements, wh ich have been audited by another independent registered public accounting firm, whose report expressed an unqualified opinion on those financial statements. You can request a free annual report by calling 1-888-4-WANGER (1-888-492-6437). The Fund's total returns presented below do not reflect the cost of insurance and other separate account charges which vary among the VA contracts, VLI policies and Retirement Plans.

Wanger International Select

    Year Ended December 31,  
Selected data for a share outstanding throughout each period   2006   2005   2004   2003   2002  
Net Asset Value, Beginning of Period   $ 19.63     $ 17.19     $ 13.87     $ 9.86     $ 11.64    
Income From Investment Operations:  
Net investment income(a)     0.11       0.13       0.04       0.04       0.04    
Net realized and unrealized gain (loss) on investments
and foreign currency transactions
    6.94       2.66       3.33       4.01       (1.82 )  
Total from Investment Operations     7.05       2.79       3.37       4.05       (1.78 )  
Less Distributions Declared to Shareholders:  
From net investment income     (0.06 )     (0.35 )     (0.05 )     (0.04 )        
Net Asset Value, End of Period   $ 26.62     $ 19.63     $ 17.19     $ 13.87     $ 9.86    
Total Return(b)     36.00 %     16.43 %(c)     24.34 %     41.24 %(c)     (15.29 )%(c)  
Ratios to Average Net Assets/Supplemental Data:  
Expenses(d)     1.19 %     1.32 %     1.43 %     1.45 %     1.45 %  
Net investment income (loss)(d)     0.47 %     0.76 %     0.29 %     0.39 %     0.35 %  
Waiver/Reimbursement           0.00 %(e)           0.09 %     0.10 %  
Portfolio turnover rate     61 %     48 %     71 %     59 %     113 %  
Net assets, end of period (000's)   $ 62,594     $ 44,026     $ 35,232     $ 26,928     $ 14,083    

 

(a)  Net investment income 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 investment adviser not waived or reimbursed a portion of expenses, total return would have been reduced.

(d)  The benefits derived from custody fees paid indirectly had no impact.

(e)  Rounds to less then 0.01%.


14



SHAREHOLDER INFORMATION

Shareholder and Account Policies

Participating Insurance Companies and Retirement Plans may obtain information about the Fund Monday through Friday (except holidays) from 8:00 a.m. to 4:30 p.m. Central time. For information, prices, literature, or to obtain information regarding the availability of Fund shares or how Fund shares are redeemed, call CWAM at 1-888-4-WANGER (1-888-492-6437).

Shares of the Fund are issued and redeemed in connection with investments in and payments under certain qualified and non-qualified VA contracts and VLI policies issued through separate accounts of Participating Insurance Companies. Shares of the Fund are also offered directly to certain of the following types of qualified plans and retirement arrangements and accounts, collectively called Retirement Plans:

•  a plan described in section 401(a) of the Internal Revenue Code that includes a trust exempt from tax under section 501(a);

•  an annuity plan described in section 403(a);

•  an annuity contract described in section 403(b), including a 403(b)(7) custodial account;

•  a governmental plan under section 414(d) or an eligible deferred compensation plan under section 457(b); and

•  a plan described in section 501(c)(18).

The retirement trust or plan must be established before shares of the Fund can be purchased by the plan. Neither the Fund nor CWAM offers prototypes of these plans. The Fund has imposed certain additional restrictions on sales to Retirement Plans to reduce Fund expenses. To be eligible to invest in the Fund, a Retirement Plan must be domiciled in a state in which Fund shares may be sold without payment of a fee to the state. In most states, this policy will require that a Retirement Plan investing in the Fund have at least $5 million in assets and that its investment decisions are made by a plan fiduciary rather than plan participants. A Retirement Plan may call CWAM at 1-888-4WANGER (1-888-492-6437) to determine if it is eligible to invest.

How to Invest and Redeem

Shares of the Fund may not be purchased or redeemed directly by individual VA contract owners, VLI policyholders or individual Retirement Plan participants. VA contract owners, VLI policyholders or Retirement Plan participants should consult the disclosure documents for their VA contract, VLI policy or the plan documents for their Retirement Plan, for information on the availability of the Fund as an investment vehicle for allocations under their VA contract, VLI policy or Retirement Plan. In the case of a Participating Insurance Company purchaser, particular purchase and redemption procedures typically are included in an agreement between the Fund and the Participating Insurance Company. The Fund may enter into similar agreements with Retirement Plans.

The Participating Insurance Companies and Retirement Plans place daily orders to purchase and redeem shares of the Fund. These orders generally reflect the net effect of instructions they receive from holders of their VA contracts, VLI policies or Retirement Plan participants and certain other terms of those contracts, policies or Retirement Plans. The Trust issues and redeems shares at NAV without imposing any selling commission, sales load or redemption charge. However, each VA contract and VLI policy imposes its own charges and fees on owners of the VA contract or VLI policy and each


15



Retirement Plan may impose such charges on participants in the Retirement Plan. Shares generally are sold and redeemed at their NAV next determined after Participating Insurance Companies and Retirement Plans receive purchase or redemption requests. The right of redemption may be suspended or payment postponed whenever permitted by applicable law and regulations.

Fund Policy on Trading of Fund Shares

The interests of the Fund's long-term shareholders may be adversely affected by certain short-term trading activity by Fund shareholders. Such short-term trading activity, when excessive, has the potential to interfere with efficient portfolio management, generate transaction and other costs, dilute the value of Fund shares held by long-term shareholders and have other adverse effects on the Fund. This type of excessive short-term trading activity is referred to herein as "market timing." For purposes of this section, the "Columbia Funds" are the Columbia, Columbia Acorn Trust and Wanger Advisors Trust family of mutual funds. The Columbia Funds are not intended as vehicles for market timing. The board of trustees of the Fund has adopted the policies and procedures set forth below with respect to frequent trading of the Fund's shares.

The Fund, directly and through its agents, takes various steps designed to deter and curtail market timing. For example, if the Fund detects that any shareholder has conducted two "round trips" (as defined below) in the Fund in any 28-day period, except as noted below with respect to orders received through omnibus accounts, the Fund will reject the shareholder's future purchase orders, including exchange purchase orders, involving any Columbia Fund (other than a money market fund). In addition, if the Fund determines that any person, group or account has engaged in any type of market timing activity (independent of the two-round-trip limit), the Fund may, in its discretion, reject future purchase orders by the person, group or account, including exchange purchase orders, involving the same or any other Columbia Fund, and also retains the right to modify these market timing policies at any time without prior notice.

The rights of shareholders to redeem shares of the Fund are not affected by any of the limits mentioned above. However, certain funds impose a redemption fee on the proceeds of fund shares that are redeemed or exchanged within 60 days of their purchase.

For these purposes, a "round trip" is a purchase by any means into a Columbia Fund followed by a redemption, of any amount, by any means out of the same Columbia Fund. Under this definition, an exchange into the Fund followed by an exchange out of the Fund is treated as a single round trip. Also for these purposes, where known, accounts under common ownership or control generally will be counted together. Accounts maintained or managed by a common intermediary, such as an adviser, selling agent or trust department, generally will not be considered to be under common ownership or control.

Purchases, redemptions and exchanges made through the Columbia Funds' Automatic Investment Plan, Systematic Withdrawal Plan or similar automated plans are not subject to the two-round-trip limit. The two-round-trip limit may be modified for, or may not be applied to, accounts held by certain retirement plans to conform to plan limits, considerations relating to the Employee Retirement Income Security Act of 1974 or regulations of the Department of Labor, and for certain asset allocation or wrap programs.

The practices and policies described above are intended to deter and curtail market timing in the Fund. However, there can be no assurance that these policies, individually or collectively, will be totally effective in this regard because of various factors. In particular, all Fund purchase, redemption and exchange orders are received through omnibus accounts. Omnibus accounts, in which shares are


16



held in the name of an intermediary on behalf of multiple beneficial owners, are a common form of holding shares among financial intermediaries, retirement plans and variable insurance products. The Fund typically is not able to identify trading by a particular beneficial owner through an omnibus account, which may make it difficult or impossible to determine if a particular account is engaged in market timing. Consequently, there is the risk that the Fund may not be able to identify, deter or curtail certain market timing that occurs in the Fund, which may result in certain shareholders being able to market time the Fund while the shareholders in the Fund bear the burden of such activities.

Certain financial intermediaries have different policies regarding monitoring and restricting market timing in the underlying beneficial owner accounts that they maintain through an omnibus account that may be more or less restrictive than the Fund practices discussed above. If an intermediary does not enforce the Fund's policy, the intermediary must either provide data transparency to Columbia Management or Columbia Management must determine that the intermediary's policy taken in its entirety provides protections to Fund shareholders that are generally commensurate with the Fund's policy.

In addition, the terms and conditions of a particular insurance contract may limit the ability of the Participating Insurance Company to address frequent trading activity by a VA contract owner or VLI policyholder.

The Fund seeks to act in a manner that it believes is consistent with the best interests of Fund shareholders in making any judgments regarding market timing. Neither the Fund nor its agents shall be held liable for any loss resulting from rejected purchase orders or exchanges.

Purchases and Redemptions

To the extent not otherwise provided in any agreement between the Trust and a Participating Insurance Company or Retirement Plan, shares of the Fund may be purchased by check or by wire transfer of funds. To be effective, a purchase order must consist of the money to purchase the shares and (i) information identifying the purchaser, in the case of a Participating Insurance Company or Retirement Plan with which the Fund has entered into an agreement, or a subsequent purchase by a Participating Insurance Company or Retirement Plan that is already a Fund shareholder, or (ii) a completed purchase application, in the case of the initial investment by a Retirement Plan with which the Fund does not have an agreement.

The Participating Insurance Companies and Retirement Plans place daily orders to purchase and redeem shares of the Funds. These orders generally reflect the net effect of instructions they receive from holders of their VA contracts and VLI policies and certain other terms of those contracts and policies. The Fund issues and redeems shares at NAV without imposing any selling commissions, sales charge or redemption charge. Shares generally are sold and redeemed at their NAV next determined after the Participating Insurance Company or Retirement Plan receives a purchase or redemption request. The right of redemption may be suspended or payment postponed to the extent permitted by applicable law and regulations.

Normally, redemption proceeds will be paid within seven days after the Fund or its agent receives a request for redemption. Redemptions may be suspended or the payment date postponed on days when the New York Stock Exchange (NYSE) is closed (other than weekends or holidays), when trading on the NYSE is restricted, or as permitted by the SEC.

During any 90-day period for any one shareholder, the Fund is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the Fund's net assets. Redemptions in excess of these limits will normally be paid in cash, but may be paid wholly or partly by an in-kind distribution of securities.


17



How the Fund's Share Price is Determined

The Fund's share price is its NAV per share next determined. NAV is the difference between the values of the Fund's assets and liabilities divided by the number of shares outstanding. The Fund determines NAV at the close of regular trading on the New York Stock Exchange (NYSE), normally 4 p.m. Eastern time.

To calculate the NAV on a given day, the Fund values each stock listed or traded on a stock exchange at its latest sale price on that day. If there are no sales that day, the Fund values the security at the most recently quoted bid price. The Fund values each over-the-counter security as of the last sale price for that day. If a security is traded principally on the NASDAQ Stock Market Inc. (NASDAQ), the SEC-approved NASDAQ Official Closing Price is applied.

When the market price of a security is not readily available, including on days when the Fund determines that the last sale or bid price of the security does not reflect that security's market value, the Fund values the security at a fair value determined in good faith under procedures established by the Board of Trustees.

The Fund also values a security at fair value when events have occurred after the last available market price and before the close of the NYSE that is expected to materially affect the security's price. In the case of foreign securities, this could include events occurring after the close of the foreign market where the securities trade and before the close of the NYSE. When the Fund uses fair value to price securities, it may value those securities higher or lower than another fund that uses market quotations to price the same securities. The Trust has retained an independent statistical fair value pricing service to assist in the fair valuation process for securities principally traded in a foreign market in order to adjust for possible changes in value that may occur between the close of the foreign exchange and the time at which Fund shares are priced. The use of an independent fair value pricing service is intended to and may decrease t he opportunities for time zone arbitrage transactions. There can be no assurance that the use of an independent fair value pricing service will successfully decrease arbitrage opportunities. If a security is valued at a "fair value," that value may be different from the last quoted market price for the security. The Fund's foreign securities may trade on days when the NYSE is closed. The Fund will not determine NAV and Participating Insurance Companies and Retirement Plans may not purchase or redeem shares on days on which the NYSE is closed for trading.

Dividends and Distributions

The Fund intends to declare and distribute, as dividends or capital gains distributions, at least annually, substantially all of its net investment income and net profits realized from the sale of portfolio securities, if any, to its shareholders (Participating Insurance Companies' separate accounts and Retirement Plan participants). The Fund's net investment income of the Fund consists of all dividends and interest received by the Fund, less expenses (including the investment advisory fees). Income dividends will be declared and distributed annually by the Fund. All dividends and distributions are reinvested in additional shares of the Fund at NAV, as of the record date for the distributions.

Taxes

The Fund intends to qualify every year as a regulated investment company under the Internal Revenue Code. By so qualifying, the Fund will not be subject to federal income taxes to the extent that its net investment income and net realized capital gains are distributed to its shareholders. The Fund also intends to meet certain diversification requirements applicable to mutual funds underlying variable insurance products. For more information about the Fund's tax status, see Taxes in the SAI.


18



For information concerning the federal tax consequences to VA contract owners, VLI policyholders or Retirement Plan participants, see the disclosure documents from the VA contract, VLI policy or your Retirement Plan administrator. You should consult your tax advisor about the tax consequences of any investment.


19



APPENDIX

Hypothetical Investment and Expense Information

The following supplemental hypothetical investment information provides additional information about the effect of the expenses of the Fund, including investment advisory fees and other Fund costs, on the Fund's returns over a 10-year period. The chart shows the estimated expenses that would be charged on a hypothetical investment of $10,000 in the Fund assuming a 5% return each year, the cumulative return after fees and expenses, and the hypothetical year-end balance after fees and expenses. The chart also assumes that all dividends and distributions are reinvested. The annual expense ratios used for the Fund, which are the same as those stated in the Annual Fund Operating Expenses table, are presented in the chart, and are net of any contractual fee waivers or expense reimbursements for the period of the contractual commitment. Your actual costs may be higher or lower.

Wanger International Select

Maximum Sales Charge
0.00%
  Initial Hypothetical Investment Amount
$10,000.00
  Assumed Rate of Return
5%
 
Year   Cumulative
Return Before
Fees & Expenses
  Annual Expense
Ratio
  Cumulative
Return After
Fees & Expenses
  Hypothetical
Year-End
Balance After
Fees & Expenses
  Annual
Fees &
Expenses(1)
 
  1       5.00 %     1.19 %     3.81 %   $ 10,381.00     $ 121.27    
  2       10.25 %     1.19 %     7.77 %   $ 10,776.52     $ 125.89    
  3       15.76 %     1.19 %     11.87 %   $ 11,187.10     $ 130.68    
  4       21.55 %     1.19 %     16.13 %   $ 11,613.33     $ 135.66    
  5       27.63 %     1.19 %     20.56 %   $ 12,055.80     $ 140.83    
  6       34.01 %     1.19 %     25.15 %   $ 12,515.12     $ 146.20    
  7       40.71 %     1.19 %     29.92 %   $ 12,991.95     $ 151.77    
  8       47.75 %     1.19 %     34.87 %   $ 13,486.94     $ 157.55    
  9       55.13 %     1.19 %     40.01 %   $ 14,000.80     $ 163.55    
  10       62.89 %     1.19 %     45.34 %   $ 14,534.23     $ 169.78    
Total Gain After Fees and Expenses   $ 4,534.23    
Total Annual Fees and Expenses   $ 1,443.18    

 

(1)  Annual Fees and Expenses are calculated based on the average between the beginning and ending balance for each year. All information is calculated on an annual compounding basis.


20



Notes


21



Notes


22



Notes


23



FOR MORE INFORMATION

Adviser:   Columbia Wanger Asset Management, L.P.

Additional information about the Fund's investments is available in the Fund's semiannual and annual reports to shareholders. The annual report contains a discussion of the market conditions and investment strategies that significantly affected the Fund's performance over the last fiscal year.

You may wish to read the Fund's SAI for more information on the Fund and the securities in which it invests. The SAI is incorporated into this prospectus by reference, which means that it is considered to be part of this prospectus.

You can get free copies of the annual and semiannual reports and the SAI, request other information and discuss your questions about the Fund by writing or calling the Fund's adviser at:

Columbia Wanger Asset Management, L.P.
Shareholder Services Group
227 West Monroe, Suite 3000
Chicago, IL 60606
1 (888) 4-WANGER (1-888-492-6437)

or by calling or writing the Participating Insurance Company that issued your VA contract or VLI policy or the Retirement Plan in which you participate. The annual and semiannual reports and the SAI are not available on an internet website because Columbia Management does not maintain an internet website for these Funds, which are available for purchase only through Participating Insurance Companies' VA contracts and VLI policies and through qualified Retirement Plans.

Information about the Fund (including the SAI) can be reviewed and copied at the Public Reference Room of the SEC in Washington, D.C. Information on the Public Reference Room may be obtained by calling the SEC at 202-942-8090. Reports and other information about the Fund are available on the EDGAR database on the SEC's Internet site at http://www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the SEC's Public Reference Section, Washington, D.C. 20549-0102.

©2007 Columbia Management Distributors, Inc.
One Financial Center, Boston, MA 02111-2621
800.426.3750

Investment Company Act file number: 811-08748




WANGER ADVISORS TRUST

227 West Monroe Street, Suite 3000, Chicago, Illinois 60606

STATEMENT OF ADDITIONAL INFORMATION

Dated May 1, 2007

This Statement of Additional Information (SAI) is not a prospectus, but provides additional information that should be read in conjunction with the Trust’s prospectuses dated May 1, 2007 and any supplement thereto.  Audited financial statements, which are contained in the Funds’ December 31, 2006 annual reports, are incorporated by reference into this SAI.  The prospectuses and annual reports may be obtained at no charge by calling Columbia Wanger Asset Management (CWAM) at (888) 492-6437 or by contacting the applicable participating insurance company, the broker-dealers offering certain variable annuity contracts or variable life insurance policies issued by the participating insurance company, or the applicable retirement plan.

TABLE OF CONTENTS

 

Page

General Information and History

 

2

Investment Restrictions

 

4

Portfolio Turnover

 

9

Purchases and Redemptions

 

9

Trustees and Officers

 

11

Management Arrangements

 

21

Transfer Agent

 

26

Trust Charges and Expenses

 

26

Underwriter

 

27

Codes of Ethics

 

29

Legal Proceedings

 

29

Custodian and Fund Accounting Agent

 

29

Portfolio Transactions

 

30

Net Asset Value

 

35

Taxes

 

36

Investment Performance

 

38

Record Shareholders

 

39

Anti-Money Laundering Compliance

 

43

Proxy Voting Policies

 

43

Disclosure of Fund Information

 

44

Independent Registered Public Accounting Firm

 

47

Appendix A – Investment Techniques and Securities

 

48

Appendix B – Proxy Voting Policy and Procedures

 

67

 

1




GENERAL INFORMATION AND HISTORY

Wanger Advisors Trust (the Trust) is an open-end, registered management investment company currently consisting of four Funds with differing investment objectives, policies and restrictions.  Currently, the Trust consists of Wanger U.S. Smaller Companies, formerly named Wanger U.S. Small Cap Advisor through April 30, 2002 (U.S. Smaller Companies), Wanger International Small Cap (International Small Cap), Wanger Select, formerly named Wanger Twenty through April 30, 2004 (Wanger Select), and Wanger International Select, formerly named Wanger Foreign Forty through April 30, 2004 (Wanger International Select) (individually referred to as a Fund, or by the defined name indicated, or collectively as the Funds).

U.S. Smaller Companies, International Small Cap and Wanger International Select are diversified funds under the federal securities laws.  Wanger Select is non-diversified under the federal securities laws.  However, all of the Funds comply with the diversification standards established by the tax laws for regulated investment companies.  See the section entitled “Taxes” for more information.

The Trust issues shares of beneficial interest in each Fund that represent interests in a separate portfolio of securities and other assets. The Trust is permitted to offer separate series (Funds) and different classes of shares. The Trust currently offers one class of shares of each Fund.  Sales of shares are made without a sales charge at each Fund’s per share net asset value. The Trust may add or delete Funds and/or classes of shares from time to time.  The Trust is the funding vehicle for variable annuity contracts (VA contracts) and variable life insurance policies (VLI policies) offered by the separate accounts of life insurance companies (Participating Insurance Companies).  The Trust also can be a funding vehicle for certain types of pension plans, retirement arrangements and accounts permitting the accumulation of funds on a tax-deferred basis (Retirement Plans).  Currently, no such arrangements exist.

The Trustees of the Trust (Board of Trustees or Trustees) monitor events to identify any material conflicts that may arise between the interests of the Participating Insurance Companies and Retirement Plans, or between the interests of owners of VA contracts, VLI policies and Retirement Plan participants.  The interests of owners of VA contracts, VLI policies and Retirement Plan participants could diverge for a variety of reasons, including: (a) an action by a state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or similar action by an insurance, tax, or securities regulatory authority; (c) an administrative or judicial decision in a relevant proceeding; (d) the manner in which the investments of a Fund are being managed; (e) a difference in voting instructions given by VA contract owners and VLI contract owners; (f) a decision by a Participating Insurance Company to disregard the voting instructions of contract owners; or (g) as applicable, a decision by a Retirement Plan to disregard the voting instructions of Retirement Plan participants.  The Trust currently does not foresee any disadvantages to the owners of VA contracts and VLI policies or Retirement Plan participants arising from the fact that certain interests of owners may differ.  However, the Trustees will monitor for any such developments to identify any material irreconcilable conflicts and to determine what action, if any, should be taken in response to such conflicts.  If such a conflict were to occur, one or more separate accounts might be required to withdraw their investments in a Fund or shares of another fund may be substituted.  This might

2




force the Funds to sell securities at disadvantageous prices.  Additional information regarding such differing interests and related risks are described in the prospectus under “Mixed and Shared Funding.”

The Trust was organized under an Agreement and Declaration of Trust (Declaration of Trust) as a Massachusetts business trust on August 30, 1994.  The Trust is authorized to issue an unlimited number of shares of beneficial interest, without par value, in one or more series, each with one or more classes, as the Trustees may authorize.  Each Fund is a separate series of the Trust.

Each share of a Fund is entitled to participate pro rata in any dividends and other distributions declared by the Board of Trustees with respect to that Fund, and all shares of a Fund have equal rights in the event of liquidation of that Fund.

Shareholders of a Fund are entitled to one vote for each share of that Fund held on any matter presented to shareholders.  Shares of the Funds will vote separately as individual series when required by the Investment Company Act of 1940, as amended (the 1940 Act), or other applicable law or when the Board of Trustees determines that the matter affects only the interests of one or more Funds, such as, for example, a proposal to approve an amendment to that Fund’s Advisory Agreement, but shares of all the Funds vote together, to the extent required by the 1940 Act, in the election or selection of Trustees.

The shares do not have cumulative voting rights, which means that the holders of more than 50% of the shares of the Funds voting for the election of Trustees can elect all of the Trustees, and, in such event, the holders of the remaining shares will not be able to elect any Trustees.

The Funds are not required by law to hold regular annual meetings of their shareholders and do not intend to do so.  However, it is expected that every five years the Trustees will call a meeting of shareholders to elect Trustees.  Additional meetings may be called for purposes of electing or removing Trustees or changing fundamental policies.

The Trust is required to hold a shareholders’ meeting to elect Trustees to fill vacancies in the event that less than a majority of Trustees were elected by shareholders.  Trustees may also be removed, with or without cause, by the vote of two-thirds of the outstanding shares at a meeting called for that purpose.

Under Massachusetts law, shareholders of a business trust may, under certain circumstances, be held personally liable for the obligations of the Trust.  The Trust’s shareholders are the separate accounts of Participating Insurance Companies and the Retirement Plans.  However, the Trust’s Declaration of Trust disclaims liability of the shareholders, the Trustees, or officers of the Trust for acts or obligations of the Trust, which are binding only on the assets and property of the Trust (or the applicable Fund thereof), and requires that notice of such disclaimer be given in each agreement, obligation or contract entered into or executed by the Trust or the Board of Trustees.  The Declaration of Trust provides for indemnification out of the Trust’s assets (or the applicable Fund) for all losses and expenses of any shareholder held personally liable for the obligations of the Trust.  Thus, the risk of a shareholder incurring

3




financial loss on account of shareholder liability is believed to be remote because it is limited to circumstances in which the disclaimer is inoperative and the Trust itself is unable to meet its obligations.  The risk to any one Fund of sustaining a loss on account of liabilities incurred by another Fund also is believed to be remote.

INVESTMENT RESTRICTIONS

U.S. Smaller Companies and International Small Cap operate under the investment restrictions listed below.  Restrictions numbered 1 through 10 are fundamental policies which may not be changed for a Fund without approval of a majority of the outstanding voting shares of a Fund, defined as the lesser of the vote of (a) 67% of the shares of a Fund at a meeting where more than 50% of the outstanding shares are present in person or by proxy or (b) more than 50% of the outstanding shares of a Fund.  Other restrictions are not fundamental policies and may be changed with respect to a Fund by the Trustees without shareholder approval.

The following investment restrictions apply to each of U.S. Smaller Companies and International Small Cap except as otherwise indicated.  U.S. Smaller Companies and International Small Cap each may not:

1.                                       With respect to 75% of the value of the Fund’s total assets, invest more than 5% of its total assets (valued at the time of investment) in securities of a single issuer, except securities issued or guaranteed by the government of the U.S., or any of its agencies or instrumentalities;

2.                                       Acquire securities of any one issuer that at the time of investment (a) represent more than 10% of the voting securities of the issuer or (b) have a value greater than 10% of the value of the outstanding securities of the issuer;

3.                                       Invest more than 25% of its assets (valued at the time of investment) in securities of companies in any one industry;

4.                                       Make loans, but this restriction shall not prevent the Fund from (a) buying a part of an issue of bonds, debentures, or other obligations that are publicly distributed, or from investing up to an aggregate of 15% of its total assets (taken at market value at the time of each purchase) in parts of issues of bonds, debentures or other obligations of a type privately placed with financial institutions, (b) investing in repurchase agreements, or (c) lending portfolio securities, provided that it may not lend securities if, as a result, the aggregate value of all securities loaned would exceed 33% of its total assets (taken at market value at the time of such loan);

5.                                       Borrow money except (a) from banks for temporary or emergency purposes in amounts not exceeding 33% of the value of the Fund’s total assets at the time of

 

4




borrowing, and (b) in connection with transactions in options, futures and options on futures;(1)

6.                                       Underwrite the distribution of securities of other issuers; however, the Fund may acquire “restricted” securities which, in the event of a resale, might be required to be registered under the Securities Act of 1933 on the ground that the Fund could be regarded as an underwriter as defined by that act with respect to such resale; but the Fund will limit its total investment in restricted securities and in other securities for which there is no ready market, including repurchase agreements maturing in more than seven days, to not more than 15% of its net assets at the time of acquisition;

7.                                       Purchase and sell real estate or interests in real estate, although it may invest in marketable securities of enterprises which invest in real estate or interests in real estate;

8.                                       Purchase and sell commodities or commodity contracts, except that it may enter into (a) futures and options on futures and (b) forward contracts;

9.                                       Make margin purchases of securities, except for use of such short-term credits as are needed for clearance of transactions and except in connection with transactions in options, futures and options on futures;

10.                                 Issue any senior security except to the extent permitted under the Investment Company Act of 1940.

U.S. Smaller Companies and International Small Cap are also subject to the following restrictions and policies, which are not fundamental and may be changed by the Trustees without shareholder approval.  U.S. Smaller Companies and International Small Cap may not:

(a)                                  [International Small Cap only] Under normal circumstances, invest less than 80% of its net assets (plus any borrowings for investment purposes), at market value at the time of investment, in companies with total stock market capitalizations of $5 billion or less at the time of initial purchase.(2)  International Small Cap will notify shareholders at least 60 days prior to any change in its 80% policy;

(b)                                 [U.S. Smaller Companies only] Under normal circumstances, invest less than 80% of its net assets (plus any borrowings for investment purposes), at market value at the time of investment, in companies with total stock market capitalizations of $5 billion


(1)                   State insurance laws currently restrict a Fund’s borrowings to facilitate redemptions to no more than 25% of the Fund’s net assets.

(2)                   The Fund may add to positions of stocks whose market capitalizations have grown above the designated market capitalization range since they were first purchased, if the investment adviser deems such stocks to be attractive.

5




or less at the time of initial purchase. (3)  U.S. Smaller Companies will notify shareholders at least 60 days prior to any change in its 80% policy;

(c)                                  [U.S. Smaller Companies only] Under normal circumstances, invest less than 80% of its net assets (plus any borrowings for investment purposes) in domestic securities.  U.S. Smaller Companies will notify shareholders at least 60 days prior to any change in its 80% policy;

(d)                                 Invest in companies for the purpose of management or the exercise of control;

(e)                                  Acquire securities of other registered investment companies except in compliance with the Investment Company Act of 1940 and applicable state law;

(f)                                    Pledge, mortgage or hypothecate its assets, except as may be necessary in connection with permitted borrowings or in connection with short sales, options, futures and options on futures;

(g)                                 Sell securities short or maintain a short position.

Wanger Select and Wanger International Select operate under the investment restrictions listed below.  Restrictions numbered 1 through 12 are fundamental policies which may not be changed for a Fund without approval of a majority of the outstanding voting shares of a Fund, defined as the lesser of the vote of (a) 67% of the shares of a Fund at a meeting where more than 50% of the outstanding shares are present in person or by proxy or (b) more than 50% of the outstanding shares of a Fund.  Other restrictions are not fundamental policies and may be changed with respect to a Fund by the Trustees without shareholder approval.

The following investment restrictions apply to each of Wanger Select and Wanger International Select except as otherwise indicated.  Wanger Select and Wanger International Select each may not:

1.                                       [Wanger International Select only] With respect to 75% of the value of the Fund’s total assets, invest more than 5% of its total assets (valued at the time of investment) in securities of a single issuer, except securities issued or guaranteed by the government of the U.S., or any of its agencies or instrumentalities;

2.                                       Acquire securities of any one issuer, which at the time of investment (a) represent more than 10% of the voting securities of the issuer or (b) have a value greater than 10% of the value of the outstanding securities of the issuer;

3.                                       [Wanger Select only] With respect to 50% of its total assets, purchase the securities of any issuer (other than cash items and U.S. government securities and


(3)                   The Fund may add to positions of stocks whose market capitalizations have grown above the designated market capitalization range since they were first purchased, if the investment adviser deems such stocks to be attractive.

6




securities of other investment companies) if such purchase would cause the Fund’s holdings of that issuer to exceed more than 5% of the Fund’s total assets;

4.                                       Invest more than 25% of its total assets in a single issuer (other than U.S. government securities);

5.                                       Invest more than 25% of its total assets in the securities of companies in a single industry (excluding U.S. government securities);

6.                                       Make loans, but this restriction shall not prevent the Fund from (a) investing in debt securities, (b) investing in repurchase agreements, or (c) lending its portfolio securities, provided that it may not lend securities if, as a result, the aggregate value of all securities loaned would exceed 33% of its total assets (taken at market value at the time of such loan);

7.                                       Borrow money except (a) from banks for temporary or emergency purposes in amounts not exceeding 33% of the value of the Fund’s total assets at the time of borrowing, and (b) in connection with transactions in options, futures, and options on futures;

8.                                       Underwrite the distribution of securities of other issuers; however, the Fund may acquire “restricted” securities which, in the event of a resale, might be required to be registered under the Securities Act of 1933 on the ground that the Fund could be regarded as an underwriter as defined by that act with respect to such resale;

9.                                       Purchase and sell real estate or interests in real estate, although it may invest in marketable securities of enterprises which invest in real estate or interests in real estate;

10.                                 Purchase and sell commodities or commodity contracts, except that it may enter into (a) futures and options on futures and (b) foreign currency contracts;

11.                                 Make margin purchases of securities, except for use of such short-term credits as are needed for clearance of transactions and except in connection with transactions in options, futures, and options on futures;

12.                                 Issue any senior security except to the extent permitted under the Investment Company Act of 1940.

Wanger Select and Wanger International Select are also subject to the following restrictions and policies, which are not fundamental and may be changed by the Trustees without shareholder approval.  Wanger Select and Wanger International Select may not:

(a)                                  [Wanger International Select only] Under normal circumstances, invest less than 65% of its net assets (plus any borrowings for investment purposes) in the stocks of foreign companies based in developed markets outside the U.S.;

(b)                                 Invest in companies for the purpose of management or the exercise of control;

7




(c)                                  Acquire securities of other registered investment companies except in compliance with the Investment Company Act of 1940;

(d)                                 Invest more than 25% of its net assets (valued at time of investment) in illiquid securities, including repurchase agreements maturing in more than seven days;

(e)                                  Pledge, mortgage or hypothecate its assets, except as may be necessary in connection with permitted borrowings or in connection with short sales, options, futures, and options on futures;

(f)                                    Make short sales of securities unless the Fund owns at least an equal amount of such securities, or owns securities that are convertible or exchangeable, without payment of further consideration, into at least an equal amount of such securities;

(g)                                 [Wanger Select only]  Invest more than 25% of its total assets (valued at the time of investment) in the securities of foreign issuers;

(h)                                 [Wanger International Select only]  Invest more than 15% of its total assets in securities of United States issuers, under normal market conditions.

Notwithstanding the foregoing investment restrictions, any Fund may purchase securities pursuant to the exercise of subscription rights, provided that such purchase will not result in the Fund’s ceasing to be a diversified investment company.  Japanese and European corporations frequently issue additional capital stock by means of subscription rights offerings to existing shareholders at a price substantially below the market price of the shares.  The failure to exercise such rights would result in a Fund’s interest in the issuing company being diluted.  The market for such rights is not well developed in all cases and, accordingly, the Fund may not always realize full value on the sale of rights.  The exception applies in cases where the limits set forth in the investment restrictions would otherwise be exceeded by exercising rights or would have already been exceeded as a result of fluctuations in the market value of the Fund’s portfolio securities with the result that the Fund would be forced either to sell securities at a time when it might not otherwise have done so, or to forego exercising the rights.

Each Fund is also subject to the following additional restrictions and policies under certain applicable insurance laws pertaining to variable annuity contract separate accounts.  These policies and restrictions are not fundamental and may be changed by the Trustees without shareholder approval:

(a)                                  A Fund may not acquire the securities of any issuer if, as a result of such investment, more than 10% of the Fund’s total assets would be invested in the securities of any one issuer, except that this restriction shall not apply to U.S. Government securities or foreign government securities; and the Fund will not invest in a security if, as a result of such investment, it would hold more than 10% of the outstanding voting securities of any one issuer.

(b)                                 Each Fund may borrow no more than 10% of the value of its net assets when borrowing for any general purpose and 25% of net assets when borrowing as a temporary measure to facilitate redemptions.

8




If a percentage limit with respect to any of the foregoing fundamental and non-fundamental policies is satisfied at the time of investment or borrowing, a later increase or decrease in a Fund’s assets will not constitute a violation of the limit.

PORTFOLIO TURNOVER

The portfolio turnover of each Fund will vary from year to year.  Although no Fund will trade in securities for short-term profits, when circumstances warrant securities may be sold without regard to the length of time held.  Portfolio turnover for each Fund is shown under “FINANCIAL HIGHLIGHTS” in the prospectus.  A 100% turnover rate would occur if all of the securities in the portfolio were sold and either repurchased or replaced within one year.  Transaction costs reduce the Funds’ returns.  During the fiscal years 2005 and 2006, the portfolio turnover rates of the respective Funds did not vary significantly.

PURCHASES AND REDEMPTIONS

Purchases and redemptions are discussed in the prospectus under the heading “SHAREHOLDER INFORMATION.”

Each Fund’s net asset value per share (NAV) is determined on days that the New York Stock Exchange (NYSE) is open for regular trading.  The NYSE is regularly closed on Saturdays and Sundays and on New Year’s Day, the third Monday in January, the third Monday in February, Good Friday, the last Monday in May, Independence Day, Labor Day, Thanksgiving and Christmas.  If one of these holidays falls on a Saturday or Sunday, the NYSE will be closed on the preceding Friday or the following Monday, respectively.  NAV will not be determined on days when the NYSE is closed unless, in the judgment of the Trustees, the NAV of a Fund should be determined on any such day, in which case the determination will be made at 4 p.m., Eastern time.

To calculate the NAV on a given day, a Fund values each stock listed or traded on a stock exchange at its latest sale price on that day.  If there are no sales that day, a Fund values the security at the most recently quoted bid price.  A Fund values each over-the-counter security as of the last sale price for that day.  If a security is traded principally on the NASDAQ Stock Market Inc. (NASDAQ), the SEC-approved NASDAQ Official Closing Price is applied.  When the market price of a security is not readily available, including on days when the Fund determines that the last sale or bid price of the security does not reflect that security’s market value, the Fund values the security at a fair value determined in good faith under procedures established by the Board of Trustees.

A Fund also values a security at fair value when events have occurred after the last available market price and before the close of the NYSE that is expected to materially affect the security’s price.  In the case of foreign securities, this could include events occurring after the close of the foreign market where the securities are traded and before the close of the NYSE.  When a Fund uses fair value to price securities, it may value those securities higher or lower than another fund that uses market quotations to price the same securities.  The Trust has retained an independent statistical fair value pricing service to assist in the fair valuation process for securities principally traded in a foreign market in order to adjust for possible changes in value

9




that may occur between the close of the foreign exchange and the time at which NAV is determined.  The use of an independent fair value pricing service is intended to decrease the opportunities for time zone arbitrage transactions.  There can be no assurance that the use of an independent fair value pricing service will successfully decrease arbitrage opportunities.  If a security is valued at a “fair value,” that value may be different from the last quoted market price for that security.  The Fund’s foreign securities may trade on days when the NYSE is closed.  A Fund will not determine NAV, and Participating Insurance Companies and Retirement Plans may not purchase or redeem shares, on days that NYSE is closed for trading.

The Trust reserves the right to suspend or postpone redemptions of shares of any Fund during any period when:  (a) trading on the NYSE is restricted, as determined by the Commission, or the NYSE is closed for other than customary weekend and holiday closing; (b) the Commission has by order permitted such suspension; or (c) an emergency, as determined by the Commission, exists, making disposal of portfolio securities or the valuation of net assets of such Fund not reasonably practicable.

Participating Insurance Companies may charge transaction fees for their services in connection with accepting share purchase and redemption orders on behalf of the Funds.  For purchase orders placed through a Participating Insurance Company, a shareholder will pay the Fund’s NAV next determined after the Participating Insurance Company receives such purchase order, plus any applicable transaction charge imposed by the Participating Insurance Company.  For redemption orders placed through a Participating Insurance Company, a shareholder will receive redemption proceeds, which reflect the NAV next determined after the Participating Insurance Company receives the redemption order, less any redemption fees imposed by the Participating Insurance Company.

In some instances, a Participating Insurance Company will not charge any transaction fees directly to investors in a Fund.  However, for certain shareholder servicing services provided by the Participating Insurance Company with respect to Fund share accounts held on behalf of its customers, the Participating Insurance Company may charge a fee based on net assets that is paid by Columbia Wanger Asset Management, L.P. (CWAM) out of its resources.

In addition, you may, subject to the approval of the Trust, purchase shares of a Fund with securities that are held in the Funds’ portfolio (or, rarely, with securities that are not currently held in the portfolio but that are eligible for purchase by the Fund, consistent with the Fund’s investment objectives and restrictions) that have a value that is readily ascertainable in accordance with the Trust’s valuation policies.  Should the Trust approve your purchase of a Fund’s shares with securities, the Trust would follow its purchase-in-kind procedures and would value the securities tendered in payment (determined as of the next close of regular session trading on the NYSE after receipt of the purchase order) pursuant to the Trust’s valuation procedures as then in effect, and you would receive the number of Fund shares having a net asset value on the purchase date equal to the aggregate purchase price.

The Trust has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which it is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of a Fund during any 90-day period for any one shareholder.  Redemptions in excess of the above amounts will normally be paid in cash, but may be paid wholly or partly by a distribution

10




in kind of securities.  If a redemption is made in kind, the redeeming shareholder would bear any transaction costs incurred in selling the securities received.  The Agreement and Declaration of Trust also authorizes the Trust to redeem shares under certain other circumstances as may be specified by the Board of Trustees.

The Trust does not have any arrangements with shareholders or other individuals that would permit frequent purchases or redemptions of Fund shares.

TRUSTEES AND OFFICERS

The Board of Trustees of the Trust has overall management responsibility for the Trust and the Funds.  Each Trustee serves a term of unlimited duration provided that a majority of Trustees always has been elected by shareholders.  However, it is expected that every five years the Trustees will call a meeting of shareholders to elect Trustees.  The retirement age for Trustees is 75.  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.

On September 11, 2006, at a special meeting of shareholders, a majority of the shareholders of the Funds elected eleven trustees to serve on the board of the Trust, including two current trustees and nine new trustees.  Ms. Werhane will serve as a trustee of the Trust for a period of approximately one year from the date of the shareholder meeting.

The names of the Trustees and officers of the Trust, the date each was first elected or appointed to office, their principal business occupations during at least the last five years and other directorships they hold, are shown below.  Each Trustee also serves as a trustee of Columbia Acorn Trust (Acorn), another open-end investment company, consisting of six portfolios, managed by CWAM.

 

11




 

Name, Position(s) with
Wanger Advisors Trust
and Age at April 30, 2007

 

Year First
Elected or
Appointed
to Office

 

Principal Occupation(s) during
Past Five Years

 

Number of
Portfolios
in Fund
Complex
Overseen
by Trustee

 

Other
Directorships

 

 

 

 

 

 

 

 

 

Trustees who are not interested persons of the Trust:

 

 

 

 

 

 

 

 

 

 

 

 

 

Margaret Eisen, 53,
Trustee

 

2006

 

Managing Director, CFA Institute since 2005; Chief Investment Officer, EAM International LLC (corporate finance and asset management) since 2003; prior thereto, managing director, DeGuardiola Advisors (investment bank); formerly managing director, North American Equities at General Motors Asset Management, and director, Worldwide Pension Investments for DuPont Asset Management.

 

10

 

Antigenics, Inc. (biotechnology and pharmaceuticals); Columbia Acorn Trust.

 

 

 

 

 

 

 

 

 

Jerome Kahn, Jr., 73,
Trustee

 

2006

 

Portfolio manager and stock analyst and former president, William Harris Investors, Inc. (investment adviser).

 

10

 

Columbia Acorn Trust.

 

 

 

 

 

 

 

 

 

Steven N. Kaplan, 47,
Trustee

 

2006

 

Neubauer Family Professor of Entrepreneurship and Finance, Graduate School of Business, University of Chicago.

 

10

 

Morningstar, Inc. (provider of independent investment research); Columbia Acorn Trust.

 

 

 

 

 

 

 

 

 

David C. Kleinman, 71,
Trustee

 

2006

 

Adjunct professor of strategic management, University of Chicago Graduate School of Business; Business consultant.

 

10

 

Sonic Foundry, Inc. (rich media systems and software); Columbia Acorn Trust.

 

 

 

 

 

 

 

 

 

Allan B. Muchin, 71,
Trustee

 

2006

 

Chairman emeritus, Katten Muchin Rosenman LLP (law firm).

 

10

 

Columbia Acorn Trust.

 

 

 

 

 

 

 

 

 

Robert E. Nason, 70,
Chairman of the Board and Trustee

 

2006

 

Consultant and private investor.

 

10

 

Columbia Acorn Trust.

 

12




 

Name, Position(s) with
Wanger Advisors Trust
and Age at April 30, 2007

 

Year First
Elected or
Appointed
to Office

 

Principal Occupation(s) during
Past Five Years

 

Number of
Portfolios
in Fund
Complex
Overseen
by Trustee

 

Other
Directorships

 

 

 

 

 

 

 

 

 

James A. Star, 46,
Trustee

 

2006

 

President, Longview Asset Management LLC (investment adviser) since 2003, prior thereto, portfolio manager and vice president, Henry Crown and Company (investment firm); president and chief investment officer, Star Partners (hedge fund) 1998-2003.

 

10

 

Columbia Acorn Trust.

 

 

 

 

 

 

 

 

 

Patricia H. Werhane, 71,
Trustee

 

1998

 

Ruffin Professor of Business Ethics, Darden Graduate School of Business Administration, University of Virginia since 1993; Senior Fellow of the Olsson Center for Applied Ethics, Darden Graduate School of Business Administration, University of Virginia since 2001; and Wicklander Chair of Business Ethics and Director of the Institute for Business and Professional Ethics, DePaul University since September 2003.

 

10

 

Columbia Acorn Trust.

 

 

 

 

 

 

 

 

 

John A. Wing, 71,
Trustee

 

2006

 

Partner, Dancing Lion Partners (investment partnership); prior thereto, Frank Wakely Gunsaulus Professor of Law and Finance, and chairman of the Center for the Study of Law and Financial Markets, Illinois Institute of Technology; formerly chairman of the board and chief executive officer of ABN-AMRO Incorporated (formerly named The Chicago Corporation, a financial services firm) and chief executive officer of Market Liquidity Network, LLC.

 

10

 

First Chicago Bank and Trust and First Chicago Bancorp; Columbia Acorn Trust.

 

13




Trustees who are interested persons of the Trust:

Name, Position(s) with
Wanger Advisors Trust
and Age at April 30, 2007

 

Year First
Elected or
Appointed
to Office

 

Principal Occupation(s) during
Past Five Years

 

Number of
Portfolios
in Fund
Complex
Overseen
by Trustee

 

Other
Directorships

 

 

 

 

 

 

 

 

 

Charles P. McQuaid, 53,
Trustee and President (1)

 

2006

 

President and Chief Investment Officer, CWAM since October 2003; portfolio manager since 1995 and director of research, CWAM and its predecessor from July 1992 through December 2003; interim director of international research, CWAM from October 2003 to December 2004; president, Columbia Acorn Trust and the Trust since 2003.

 

10

 

Columbia Acorn Trust.

 

 

 

 

 

 

 

 

 

Ralph Wanger, 72
 Trustee (2)

 

1994

 

Founder, former president, chief investment officer and portfolio manager, CWAM from July 1992 to September 2003; former president, Columbia Acorn Trust from April 1992 through September 2003; former president, Wanger Advisors Trust 1994 through September 2003; director, Wanger Investment Company PLC; adviser to CWAM from September 2003 to September 2005.

 

10

 

Columbia Acorn Trust.

 

Name, Position(s) with
Wanger Advisors Trust
and Age at April 30, 2007

 

Year First
Elected or
Appointed
to Office

 

Principal Occupation(s) during
Past Five Years

 

Number of
Portfolios
in Fund
Complex
Overseen by
Officer

 

Other
Directorships

 

 

 

 

 

 

 

 

 

Officers of the Trust:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ben Andrews, 41,
Vice President

 

2004

 

Analyst and portfolio manager, CWAM since 1998; vice president, Columbia Acorn Trust since 2004.

 

10

 

None.

 

14




 

Name, Position(s) with
Wanger Advisors Trust
and Age at April 30, 2007

 

Year First
Elected or
Appointed
to Office

 

Principal Occupation(s) during
Past Five Years

 

Number of
Portfolios
in Fund
Complex
Overseen by
Officer

 

Other
Directorships

 

 

 

 

 

 

 

 

 

Michael G. Clarke, 37,
Assistant Treasurer

 

2004

 

Assistant treasurer, Columbia Acorn Trust; chief accounting officer and assistant treasurer of the Columbia Funds since October 2004; managing director of CWAM since February 2001; controller of the Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star Funds from May 2004 to October 2004 and assistant treasurer from June 2002 to May 2004; vice president, Product Strategy & Development of the Liberty Funds and Stein Roe Funds from February 2001 to June 2002.

 

155

 

None.

 

 

 

 

 

 

 

 

 

Jeffrey R. Coleman, 37
Assistant Treasurer

 

2006

 

Assistant treasurer, Columbia Acorn Trust since March 2006; Group Operations Manager, CWAM since October 2004; vice president of CDC IXIS Asset Management Services, Inc. (investment management) from August 2000 to September 2004.

 

155

 

None.

 

 

 

 

 

 

 

 

 

J. Kevin Connaughton, 42,
Assistant Treasurer

 

2001

 

Treasurer and Chief Financial Officer of the Columbia Funds since December 2000 and of the Liberty All-Star Funds from December 2000 to December 2006;  managing director of Columbia’s Fund Administration Group since December 2000; director of Global Liquidity Fund LLC and Bank of America Capital Management LLC since September 2004; assistant treasurer of Columbia Acorn Trust since 2001; treasurer of the Galaxy Funds from September 2002 through November 2005; treasurer, Columbia Management Multi-Strategy Hedge Fund, LLC from December 2002 to December 2004.

 

155

 

None

 

 

 

 

 

 

 

 

 

Peter T. Fariel, 49,
Assistant Secretary

 

2006

 

Associate General Counsel, Bank of America since April 2005; prior thereto, Partner, Goodwin Procter LLP (law firm).

 

155

 

None.

 

 

 

 

 

 

 

 

 

John Kunka, 36,
Assistant Treasurer

 

2006

 

Director of Accounting and Operations, CWAM, since May 2006; assistant treasurer, Columbia Acorn Trust, since 2006; Manager of Mutual Fund Operations, Calamos Advisors, Inc. from September 2005 to May 2006; prior thereto, Manager of Mutual Fund Administration, Van Kampen Investments.

 

10

 

None.

 

15




 

Name, Position(s) with
Wanger Advisors Trust
and Age at April 30, 2007

 

Year First
Elected or
Appointed
to Office

 

Principal Occupation(s) during
Past Five Years

 

Number of
Portfolios
in Fund
Complex
Overseen by
Officer

 

Other
Directorships

 

 

 

 

 

 

 

 

 

Joseph LaPalm, 36,
Vice President

 

2006

 

Chief compliance officer, CWAM since 2005; vice president, Columbia Acorn Trust since 2006; prior thereto, compliance officer, William Blair & Company (investment firm).

 

10

 

None.

 

 

 

 

 

 

 

 

 

Bruce H. Lauer, 49,
Vice President, Secretary and Treasurer

 

1995

 

Chief operating officer, CWAM since April 1995; vice president, treasurer and secretary, Columbia Acorn Trust since 1995; director, Wanger Investment Company PLC; director, Banc of America Capital Management (Ireland) Ltd.

 

10

 

None.

 

 

 

 

 

 

 

 

 

Louis J. Mendes, 42,
Vice President

 

2006

 

Analyst and portfolio manager, CWAM since 2001; vice president, Columbia Acorn Trust; prior thereto, analyst and portfolio manager, Merrill Lynch (investment firm).

 

10

 

None.

 

 

 

 

 

 

 

 

 

Robert A. Mohn, 45,
Vice President

 

1997

 

Analyst and portfolio manager, CWAM since August 1992; director of domestic research, CWAM since March 2004; vice president, Columbia Acorn Trust.

 

10

 

None.

 

 

 

 

 

 

 

 

 

Christopher Olson, 42,
Vice President

 

2001

 

Analyst and portfolio manager, CWAM since January 2001; vice president, Columbia Acorn Trust.

 

10

 

None.

 

 

 

 

 

 

 

 

 

Robert Scales, 54,
Chief Compliance Officer, Senior Vice President and General Counsel

 

2004

 

Senior vice president, chief legal officer and general counsel, Columbia Acorn Trust since 2004; prior thereto, Associate General Counsel, Grant Thornton LLP.

 

10

 

None.

 

 

 

 

 

 

 

 

 

Linda Roth-Wiszowaty, 37,
Assistant Secretary

 

2006

 

Assistant secretary, Columbia Acorn Trust; executive administrator, CWAM since April 2004; prior thereto, executive assistant to the Chief Operating Officer, CWAM.

 

10

 

None.

 


(1)          Trustee who is an “interested person” of the Trust and of CWAM, as defined in the 1940 Act, because he is an officer of the Trust and/or because he is an employee or other affiliated person of CWAM.

(2)          Trustee who is treated as an “interested person” of the Trust and of CWAM, as defined in the 1940 Act, because he is a former officer of the Trust, former employee of CWAM and former consultant to CWAM.

16




Committees.         On September 11, 2006, at a special meeting of shareholders, a majority of shareholders of the Funds elected a new Board of Trustees of the Trust.  On September 12, 2006, the new Board of Trustees designated by unanimous written consent the seven standing committees of the Board as listed in the table below.  Charters for each of these committees were adopted by the affirmative vote of all of the Trustees, including a majority of non-interested Trustees, at a meeting of the Board held on September 26, 2006.

Committee

 

Members

 

Function

 

No. of
Meetings Held
in 2006(1)

 

 

 

 

 

 

 

Executive

 

Charles P. McQuaid
Allan B. Muchin
Robert E. Nason
Alternate:

  Ralph Wanger

 

Exercise powers of the Board of Trustees during intervals between meetings of the Board, with certain exceptions.

 

1

 

 

 

 

 

 

 

Audit

 

David C. Kleinman (chairman)
Jerome Kahn, Jr.
Robert E. Nason
John A. Wing

 

Make recommendations to the Board of Trustees regarding the selection of independent auditors for the Trust, confer with the independent auditors regarding the scope and results of each audit and carry out the provisions of its charter.

 

3

 

 

 

 

 

 

 

Valuation

 

Charles P. McQuaid (chairman)
Ralph Wanger
Robert E. Nason

Alternates:

Margaret Eisen

Jerome Kahn, Jr.

Steven N. Kaplan

David C. Kleinman

Allan B. Muchin

James A. Star

John A. Wing

Bruce H. Lauer (alternate

representative of CWAM)

 

Determine a fair value valuation of any portfolio security held by any series of the Trust under certain circumstances as required by the Trust’s Portfolio Pricing Policy and CWAM’s pricing procedures, as adopted by the Board of Trustees.

 

19

 

 

 

 

 

 

 

Contract

 

Margaret Eisen (chair)
Allan B. Muchin
Jerome Kahn, Jr.
James A. Star
Patricia Werhane
Ex-officio*:

Robert E. Nason

 

Make recommendations to the Board of Trustees regarding the continuation or amendment of the investment advisory agreements between the Trust and the Adviser and other agreements with third-party service providers that are required to be approved by a majority of the Independent Trustees of the Trust.

 

2

 

17




 

Committee

 

Members

 

Function

 

No. of
Meetings Held
in 2006(1)

 

 

 

 

 

 

 

Governance (2)

 

Allan B. Muchin (chairman)
Steven N. Kaplan
Robert E. Nason
John A. Wing

 

Make recommendations to the Board of Trustees regarding committees of the board and committee assignments, make recommendations to the Board regarding the composition of the board and candidates for election as non-interested Trustees, oversee the process for evaluating the functioning of the board, and make recommendations to the board regarding the compensation of Trustees who are not affiliated with any investment adviser, administrator or distributor of the Funds.

 

3

 

 

 

 

 

 

 

Investment Performance Analysis

 

James A. Star (chairman)
Margaret Eisen
Steven N. Kaplan
David C. Kleinman
Ralph Wanger
Ex-officio*:

Charles P. McQuaid

 

Monitor and review the investment performance of each series of the Trust.

 

1

 

 

 

 

 

 

 

Compliance

 

John A. Wing (chairman)
Margaret M. Eisen
Steven N. Kaplan
Jerome Kahn, Jr.
David C. Kleinman
Patricia Werhane

 

Provide oversight of the monitoring processes and controls regarding the Trust’s compliance with legal, regulatory and internal rules, policies, procedures and standards other than those relating to accounting matters and oversight of compliance by the Trust’s investment adviser, principal underwriter and transfer agent.

 

3

 


*          Ex-officio committee members are non-voting.

(1)       Includes committee meetings held during 2006 by both the committees of the prior board and the existing board, other than as follows.  Prior to September 12, 2006, the Trust had one joint Compliance/Contract Review Committee.  The joint Compliance/Contract Review Committee met five times during the period from January 1, 2006 to September 11, 2006.  Those meetings are not reflected above.

(2)       The Governance Committee will consider shareholder recommendations regarding candidates for election as Trustees. Written recommendations may be submitted to the Secretary of the Trust at 227 W. Monroe Street, Suite 3000, Chicago, IL 60606.  The shareholder recommendation must include: (i) the class or series and number of all shares of the Funds owned beneficially and of record by the nominating shareholder at the time the recommendation is submitted and the dates on which such shares were acquired, specifying the number of shares owned beneficially; (ii) a full listing of the proposed candidate’s education, experience (including knowledge of the investment company industry, experience as a director or senior officer of public or private companies, and directorships on other boards of other registered investment companies), current employment, date of birth, business and residence address, and the names and addresses of at least three professional references; (iii) information as to whether the candidate is or may be an “interested person” (as such term is defined in the 1940 Act) of the Trust, Columbia Acorn Trust, CWAM, or any subadviser to a Fund, and, if believed not to be an “interested person,” information regarding the candidate that will be sufficient for the Fund to make such determination; (iv) the written and signed consent of the candidate to be named as a nominee and to serve as a Trustee of the Trust, if elected; (v) a description of all arrangements or understandings between the nominating shareholder, the candidate and/or any other person or persons (including their names) pursuant to which the shareholder recommendation is being made, and if none, so

18




specify; (vi) the class or series and number of all shares of the Fund owned of record or beneficially by the candidate, as reported by the candidate; and (vii) such other information that would be helpful to the Governance Committee in evaluating the candidate. The Governance Committee may require the nominating shareholder to furnish such other information as it may reasonably require or deem necessary to verify any information furnished to determine the qualifications and eligibility of the candidate proposed by the nominating shareholder to serve as a Trustee of a Trust.  If the nominating shareholder fails to provide such other information in writing within seven days of receipt of written request from the Governance Committee, the recommendation of such candidate as a nominee will be deemed not properly submitted for consideration, and the Governance Committee is not required to consider such candidate.

Pursuant to the Settlements under the heading “LEGAL PROCEEDINGS,” at least 75% of the Board must meet the independence standards set forth in the Settlements (certain of those standards being more restrictive than those contained in the 1940 Act and rules thereunder and that generally prohibit affiliations with certain Columbia and Bank of America-related entities).  Those independence standards are referred to as “super-independence” standards.  The chairman of the Board must meet even more stringent independence standards.  Certain other conditions in the Settlements generally require that:

·                                          No action may be taken by the Board of Trustees (or any committee thereof) unless such action is approved by a majority of the members of the board or the committee who meet the super-independence standards.  If any proposed action to be approved by a majority of the independent trustees is not approved by the full board, the Trust is required to disclose the proposal and the vote in its shareholder report for that period;

·                                          Beginning in 2005 and not less than every fifth calendar year thereafter, the Trust must hold a meeting of shareholders to elect trustees†; and  

·                                          The Board of Trustees must appoint either (a) a full-time senior officer who must report directly to the board with respect to his or her responsibilities, including (i) monitoring compliance with federal and state securities, applicable state laws respecting potential or actual conflicts of interest and fiduciary duties, and applicable codes of ethics and compliance manuals, (ii) managing the process by which management fees to be charged to the Funds are negotiated and (iii) preparing, or directing the preparation of, a written evaluation of, among other things, management fees charged to the Funds and to institutional and other clients, profit margins of CWAM and its affiliates from supplying services to the Funds and possible economies of scale or (b) an independent compliance consultant and an independent fee consultant with similar responsibilities.‡


                  The Trust held a meeting of shareholders on September 30, 2006 to elect trustees.

                  At a meeting of the Board of Trustees held on February 18, 2005, a majority of the trustees at that time, other than interested persons of the Trust or the Adviser, found Promontory Financial Group LLC not unacceptable to serve as the independent compliance consultant to Columbia Management Distributors, Inc. (CMD) (f/k/a Columbia Funds Distributor, Inc.).  At a meeting of the Board of Trustees held on November 17, 2004, the trustees at that time unanimously voted to appoint Robert Scales as the Senior Vice President of the Trust and to designate Mr. Scales as the individual responsible for performing the duties and responsibilities of the Senior Officer as set forth in the Assurance of Discontinuance dated February 9, 2005 among the Attorney General of the State of New York, Columbia Management Advisors, Inc. and CMD, including the responsibilities of the independent fee consultant.

19




As noted above certain officers of the Trust also hold positions with CWAM.  A Trustee and certain of the officers of the Trust are also Trustees or officers of Columbia Acorn Trust, which is also managed by CWAM.

The address for the Trustees and officers is c/o Columbia Wanger Asset Management, L.P., 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606, except for Messrs. Clarke, Coleman, Connaughton, and Fariel, whose address is Columbia Management Group, LLC (Columbia Management), Mail Stop: MA5-515-11-05, One Financial Center, Boston, MA 02111.

Compensation of Trustees

The table set forth below presents certain information regarding the fees paid to the Trustees for his or her services in such capacity during the year ended December 31, 2006.  Each Trustee is paid an annual retainer plus an attendance fee for each meeting of the Board of Trustees or standing committee thereof attended.  Trustees do not receive any pension or retirement benefits from the Trust.  No officers of the Trust or other individuals who are affiliated with the Trust, other than the Trust’s Chief Compliance Officer, receive any compensation from the Trust for services provided to it.

Name of Trustee

 

Aggregate 
Comp.
from Funds

 

Total
Comp. from 
Fund Complex(1)

 

Jerome L. Duffy(2)

 

$

33,000

 

$

33,000

 

Fred D. Hasselbring(3)

 

$

23,000

 

$

23,000

 

Margaret Eisen(4)

 

$

3,880

 

$

115,500

 

Jerome Kahn, Jr.(4)(5)

 

$

4,185

 

$

117,000

 

Steven N. Kaplan(4)(5)

 

$

3,361

 

$

94,500

 

David C. Kleinman(4)

 

$

4,162

 

$

123,000

 

Dr. Kathryn A. Krueger(2)

 

$

30,750

 

$

30,750

 

Charles P. McQuaid(4)

 

$

0

 

$

0

 

Allan B. Muchin(4)(5)

 

$

3,240

 

$

102,000

 

Robert E. Nason (4)(5)(8)

 

$

8,316

 

$

179,000

 

James A. Star(4)(6)

 

$

2,561

 

$

66,000

 

Ralph Wanger(5)

 

$

31,665

 

$

91,583

 

Patricia H. Werhane(7)

 

$

41,449

 

$

92,250

 

John A. Wing(4)(5)

 

$

3,885

 

$

99,000

 

 


(1)          In addition to the Trustee compensation fees paid by the Trust during the year ended December 31, 2006, the Trust paid $74,250 (of which $12,100 was reimbursed by Columbia Management) to Robert Scales, the Trust’s Chief Compliance Officer, for his services in 2006. Mr. Scales’ “Total Compensation from Fund Complex” was $675,000, $110,000 of which was reimbursed by Columbia Management as required by the Settlements.

(2)          Mr. Duffy and Dr. Krueger retired as trustees effective September 11, 2006.

(3)          Mr. Hasselbring retired as a trustee effective April 24, 2006.

(4)          Ms. Eisen and Messrs. Kahn, Kaplan, Kleinman, McQuaid, Muchin, Nason, Star and Wing were elected trustees of the Trust effective September 11, 2006.

(5)          Includes fees deferred during the year pursuant to the Acorn deferred compensation plan.  As of December 31, 2006, the value of each of the deferred compensation accounts in the Acorn funds for

20




Messrs. Kahn, Kaplan, Muchin, Nason, Wanger and Wing was $1,015,310, $402,155, $225,300, $1,144,425, $69,665, and $540,925, respectively.

(6)          Mr. Star was appointed a trustee of Acorn effective March 7, 2006.

(7)          Ms. Werhane was appointed a trustee of Acorn effective June 6, 2006.

(8)          Includes an aggregate of $25,000 in supplemental compensation paid by the Trust and Acorn for the 2006 fiscal year.

MANAGEMENT ARRANGEMENTS

Investment Adviser

CWAM was previously named Liberty Wanger Asset Management, L.P. and its predecessor was named Wanger Asset Management, L.P. (WAM).  CWAM serves as the investment adviser for the Funds, the Acorn funds and for other institutional accounts.  As of December 31, 2006, CWAM had approximately $32.9 billion under management, including the Funds.  CWAM changed its name from Liberty Wanger Asset Management, L.P. to its current name on October 13, 2003.  CWAM is a wholly owned subsidiary of Columbia Management Group, LLC, which is an indirect wholly owned subsidiary of Bank of America Corporation.  CWAM has advised and managed mutual funds, including the Funds, since 1992.

The Advisory Agreement between the Trust and CWAM will continue from year to year so long as such continuation is approved at least annually by (1) the Board of Trustees or the vote of a majority of the outstanding voting securities of the Fund, and (2) a majority of the Trustees who are not interested persons of any party to the Advisory Agreement, cast in person at a meeting called for the purpose of voting on such approval.  The Advisory Agreement may be terminated at any time, without penalty, by either the Trust or CWAM upon 60 days’ written notice, and automatically terminates in the event of its assignment as defined in the 1940 Act.

A discussion of the factors considered by the Board of Trustees in approving the Advisory Agreement can be found in the Trust’s annual report for the period ended December 31, 2006.

CWAM, at its own expense, provides office space, facilities and supplies, equipment and personnel for the performance of its functions under the Trust’s Advisory Agreement and pays all compensation of the Trustees, officers and employees who are employees of CWAM.

The Advisory Agreement provides that neither CWAM nor any of its directors, officers, stockholders (or partners of stockholders), agents, or employees shall have any liability to the Trust or any shareholder of the Fund for any error or judgment, mistake of law or any loss arising out of any investment, or for any other act or omission in the performance by CWAM of its duties under the Advisory Agreement, except for liability resulting from willful misfeasance, bad faith or gross negligence on the part of CWAM in the performance of its duties or from reckless disregard by CWAM of its obligations and duties under the Advisory Agreement.

Portfolio Managers

Robert A. Mohn is the lead portfolio manager of Wanger U.S. Smaller Companies.  Chris Olson and Louis Mendes are the co-portfolio managers of Wanger International Small Cap.

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Chris Olson is the lead portfolio manager of Wanger International Select.  Ben Andrews is the lead portfolio manager of Wanger Select.   

CWAM’s largest fund portfolios are team managed.  Intermediate and senior analysts have buy and sell authority and transact under the guidelines and supervision of portfolio managers.  Portfolio managers are responsible for portfolio structures, including industry weightings for all funds and regional weightings for international funds, and provide approvals for transactions by the newer analysts.  In contrast, CWAM’s smaller mutual funds and separate accounts are conventionally managed with portfolio managers writing or approving all trades.

Other Accounts Managed by Portfolio Managers

The portfolio managers also have responsibility for the day-to-day management of accounts other than the Funds, including separate accounts and unregistered funds.  Information regarding those other accounts is set forth below.  The advisory fees received by CWAM in connection with the management of the Funds and other accounts are not based on the performance of the Funds or the other accounts.

 

Number of Other Accounts Managed and Assets 
by Account Type as of December 31, 2006

 

Portfolio Manager

 

Registered Investment

Companies

 

Other Pooled
Investment Vehicles

 

Other Accounts

 

 

 

(Other than the Funds)

 

 

 

 

 

Ben Andrews

 

 

 

 

 

 

 

Number:

 

1

 

0

 

4

 

Assets:

 

$2,237,574,000

 

$0

 

$3,000,000

 

 

 

 

 

 

 

 

 

Louis Mendes

 

 

 

 

 

 

 

Number:

 

2

 

0

 

12

 

Assets:

 

$4,562,665,000

 

$0

 

$2,800,000

 

 

 

 

 

 

 

 

 

Robert A. Mohn

 

 

 

 

 

 

 

Number:

 

3

 

1

 

8

 

Assets:

 

$20,627,805,000

 

$260,575,000

 

$1,438,978,000

 

 

 

 

 

 

 

 

 

Chris Olson

 

 

 

 

 

 

 

Number:

 

1

 

0

 

4

 

Assets:

 

$168,604,000

 

$0

 

$600,000

 

Ownership of Securities

At December 31, 2006, none of the portfolio managers owned shares of the Funds they manage because shares of the Funds are issued in connection with investments in and payments under certain qualified and non-qualified variable annuity contracts and variable life insurance policies issued through separate accounts of Participating Insurance Companies.

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Compensation

As of December 31, 2006, the portfolio managers received all of their compensation from CWAM and its parent company.  Ben Andrews, Robert Mohn, Louis Mendes and Chris Olson each received compensation in the form of salary and bonus. Typically, a high proportion of an analyst’s or manager’s bonus is paid in cash with a smaller proportion going into two separate incentive plans. The first plan is a notional investment based on the performance of certain Columbia funds, including the Columbia Acorn Funds. The second plan consists of Bank of America restricted stock and/or options. Both plans vest over three years from the date of issuance. The Columbia Wanger total bonus pool, including cash and the two incentive plans, is based on a formula, with firm wide investment performance as the primary driver.

All analysts and portfolio managers have performance benchmarks.  Analyst performance is compared to assigned industry or region stock performance within benchmark indices while portfolio manager performance is compared to entire benchmark indices.  The benchmark index for each Fund currently is:  (1) Wanger U.S. Smaller Companies: Russell 2000; (2) Wanger International Small Cap: S&P/Citigroup EMI Global ex-U.S.; (3) Wanger Select: Standard & Poor’s MidCap 400; and (4) Wanger International Select: S&P/Citigroup World ex-U.S. Cap Range $2-10B.  Performance compared to benchmark indices is the dominant performance evaluation factor for all analysts and managers.  Industry (or country) weighting recommendations are the second most important factor for all analysts and managers.  Other factors are assets managed, new analyst mentoring, teamwork, and managerial, marketing, compliance and other qualitative contributions.

Analysts and managers are positioned in a number of compensation tiers based on cumulative performance.  Excellent performance results in advancement to a higher tier until the highest tier is reached.  Higher tiers have higher base compensation levels and wider bonus ranges.  While cumulative performance places analysts and managers in tiers, current year performance drives changes in bonus levels.  Incentive bonuses vary by tier, and can range between a fraction of base pay to several times base pay; the objective being to provide very competitive total compensation for high performers.

In addition, Messrs. Andrews and Mohn each received a distribution on September 30, 2006, in connection with his association with CWAM prior to its acquisition in September 2000 and CWAM’s performance through September 30, 2005. Messrs. Mendes and Olson received a distribution on September 30, 2006 from a supplemental pool for CWAM employees that was established in connection with the acquisition of CWAM and was based on CWAM’s performance through September 30, 2005. The final distribution each portfolio manager mentioned herein will receive is payable on September 30, 2007.

Potential conflicts of interest in managing multiple accounts

Like other investment professionals with multiple clients, a portfolio manager for a Fund may face certain potential conflicts of interest in connection with managing both the Fund and other accounts at the same time.  The paragraphs below describe some of these potential conflicts that CWAM believes are faced by investment professionals at most major financial firms.  CWAM and the Trustees of the Funds have adopted compliance policies and procedures that attempt to address certain of these potential conflicts.  

23




The management of accounts with different advisory fee rates and/or fee structures may raise potential conflicts of interest by creating an incentive to favor higher-fee accounts.  These potential conflicts may include, among others:

·                                          The most attractive investments could be allocated to higher-fee accounts.

·                                          The trading of higher-fee accounts could be favored as to timing and/or execution price.  For example, higher-fee accounts could be permitted to sell securities earlier than other accounts when a prompt sale is desirable or to buy securities at an earlier and more opportune time.

·                                          The trading of other accounts could be used to benefit higher-fee accounts (front- running).  

·                                          The investment management team could focus their time and efforts primarily on higher-fee accounts due to a personal stake in compensation.   

Potential conflicts of interest may also arise when the portfolio managers have personal investments in other accounts that may create an incentive to favor those accounts.  As a general matter and subject to limited exceptions, CWAM’s investment professionals do not have the opportunity to invest in client accounts, other than the Funds.   

A potential conflict of interest may arise when a Fund and other accounts purchase or sell the same securities.  On occasions when a portfolio manager considers the purchase or sale of a security to be in the best interests of a Fund as well as other accounts, CWAM’s trading desk may, to the extent permitted by applicable laws and regulations, aggregate the securities to be sold or purchased in order to obtain the best execution and lower brokerage commissions, if any.   Aggregation of trades may create the potential for unfairness to the Fund or another account if one account is favored over another in allocating the securities purchased or sold — for example, by allocating a disproportionate amount of a security that is likely to increase in value to a favored account.

“Cross trades,” in which one Columbia account sells a particular security to another account (potentially saving transaction costs for both accounts), may also pose a potential conflict of interest.  Cross trades may be seen to involve a potential conflict of interest if, for example, one account is permitted to sell a security to another account at a higher price than an independent third party would pay.  CWAM and the Funds’ Trustees have adopted compliance procedures that provide that any transactions between the Funds and another Columbia-advised account are to be made at an independent current market price, as required by law.

Another potential conflict of interest may arise based on the different investment objectives and strategies of the Funds and other accounts.  For example, another account may have a shorter-term investment horizon or different investment objectives, policies or restrictions than a Fund.  Depending on another account’s objectives or other factors, a portfolio manager may give advice and make decisions that may differ from advice given, or the timing or nature of decisions made, with respect to a Fund.  In addition, investment decisions are the product of many factors in addition to basic suitability for the particular account involved.  Thus, a

24




particular security may be bought or sold for certain accounts even though it could have been bought or sold for other accounts at the same time.  More rarely, a particular security may be bought for one or more accounts managed by a portfolio manager when one or more other accounts are selling the security (including short sales). There may be circumstances when purchases or sales of portfolio securities for one or more accounts may have an adverse effect on other accounts.   

A Fund’s portfolio manager who is responsible for managing multiple funds and/or accounts may devote unequal time and attention to the management of those funds and/or accounts.  As a result, the portfolio manager may not be able to formulate as complete a strategy or identify equally attractive investment opportunities for each of those accounts as might be the case if he or she were to devote substantially more attention to the management of a single fund.  The effects of this potential conflict may be more pronounced where funds and/or accounts overseen by a particular portfolio manager have different investment strategies.

The Funds’ portfolio managers may be able to select or influence the selection of the brokers and dealers that are used to execute securities transactions for the Funds.  In addition to executing trades, some brokers and dealers provide portfolio managers with brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934 (the 1934 Act)), which may result in the payment of higher brokerage fees than might have otherwise be available.  These services may be more beneficial to certain funds or accounts than to others.  Although the payment of brokerage commissions is subject to the requirement that the portfolio manager determine in good faith that the commissions are reasonable in relation to the value of the brokerage and research services provided to a Fund, a portfolio manager’s decision as to the selection of brokers and dealers could yield disproportionate costs and benefits among the Funds and/or accounts that he or she manages.

CWAM or an affiliate may provide more services (such as distribution or recordkeeping) for some types of funds or accounts than for others.  In such cases, a portfolio manager may benefit, either directly or indirectly, by devoting disproportionate attention to the management of a Fund and/or accounts that provide greater overall returns to the investment manager and its affiliates.

The Funds’ portfolio managers may also face other potential conflicts of interest in managing the Funds, and the description above is not a complete description of every conflict that could be deemed to exist in managing both a Fund and other accounts.  In addition, the Funds’ portfolio managers may also manage other accounts (including their personal assets or the assets of family members) in their personal capacity.  The management of these accounts may also involve certain of the potential conflicts described above.  Investment personnel at CWAM, including the Funds’ portfolio managers, are subject to restrictions on engaging in personal securities transactions pursuant to Codes of Ethics adopted by CWAM and the Funds, which contain provisions and requirements designed to identify and address certain conflicts of interest between personal investment activities and the interests of the Funds.  

25




Certain Investment Activity Limitations

The overall investment activities of CWAM and its affiliates may limit the investment opportunities for the Funds in certain markets in which limitations are imposed by regulators upon the amount of investment by affiliated investors, in the aggregate or in individual issuers.  From time to time, a Fund’s activities also may be restricted because of regulatory restrictions applicable to CWAM and its affiliates, and/or their internal policies.

TRANSFER AGENT

Under the Fund’s transfer agency and shareholder servicing agreement, the Funds pay Columbia Management Services, Inc. (CMS) a monthly fee based on the number of open accounts plus out-of-pocket expenses.  The address of CMS is One Financial Center, Boston, Massachusetts 02111.

TRUST CHARGES AND EXPENSES

Management Fees:

Each Fund pays CWAM an annual advisory fee based on the following schedule. Fees are computed and accrued daily and paid monthly.  During each year in the three-year period ended December 31, 2006, pursuant to the Advisory Agreements, each Fund paid CWAM management fees as follows:

 

 

2006

 

2005

 

2004

 

Annual Fee Rate
(as a percent of average net assets)

Wanger U.S. Smaller Companies

 

 

 

 

 

 

 

First $100 million: 0.99%

Gross advisory fee

 

$

14,426,386

 

$

11,560,012

 

$

8,747,399

 

$100 million to $250 million: 0.94%

Exp. Waiver

 

0

 

21,040

 

0

 

$250 million and  over: 0.89%

Net advisory fee

 

$

14,426,386

 

$

11,538,972

 

$

8,747,399

 

 

 

 

 

 

 

 

 

 

 

Wanger International Small Cap

 

 

 

 

 

 

 

First $100 million: 1.15%

Gross advisory fee

 

$

11,257,303

 

$

7,405,850

 

$

5,493,529

 

$100 million to $250 million: 1.00%

Exp. Waiver

 

0

 

188,761

 

0

 

$250 million to $500 million: 0.95%

Net advisory fee

 

$

11,257,303

 

$

7,217,089

 

$

5,493,529

 

$500 million and over: 0.85%

 

 

 

 

 

 

 

 

 

Wanger Select

 

 

 

 

 

 

 

0.85% on all assets

Gross advisory fee

 

$

1,181,375

 

$

745,156

 

$

598,432

 

 

Exp. Reimb.

 

0

 

14,597

 

0

 

 

Net advisory fee

 

$

1,181,375

 

$

730,559

 

$

598,432

 

 

 

 

 

 

 

 

 

 

 

Wanger International Select

 

 

 

 

 

 

 

0.99% on all assets

Gross advisory fee

 

$

548,729

 

$

392,342

 

$

281,849

 

 

Exp. Reimb.

 

0

 

674

 

0

 

 

Net advisory fee

 

$

548,729

 

$

391,668

 

$

281,849

 

 

 

26




Expense Limitation:

CWAM has contractually agreed to reimburse all expenses, including management fees, but excluding interest, taxes, 12b-1, brokerage and extraordinary expenses of the Funds as follows:

Fund

 

Expenses Exceeding

Wanger Select

 

1.35% of average net assets

Wanger International Select

 

1.45% of average net assets

 

Each of the above expense limitations will terminate on April 30, 2008.

UNDERWRITER

Columbia Management Distributors, Inc. (CMD), One Financial Center, Boston, MA 02111, serves as the principal underwriter of the Trust.  CMD is a subsidiary of Columbia Management, which is a wholly owned subsidiary of Bank of America Corporation.  Like CMD, the address for Columbia Management is One Financial Center, Boston, MA 02111.  The Underwriting Agreement continues in effect from year to year, provided such continuance is approved annually (i) by a majority of the Trustees or by a majority of the outstanding voting securities of the Trust, and (ii) by a majority of the Trustees who are not parties to the Underwriting Agreement or interested persons of any such party.  Shares of the Funds are offered for sale on a continuous basis through CMD on a best efforts basis without any sales commission or charges to the Funds or Participating Insurance Companies or Retirement Plans purchasing Fund shares.  However, each VA contract and VLI policy imposes its own charges and fees on owners of VA contracts and VLI policies, and Retirement Plans may impose such charges on participants in a Retirement Plan.

Additional Financial Intermediary Payments

As described in this Underwriter section, financial intermediaries may receive different payments with respect to sales of shares of the Funds.  For purposes of this section the term “financial intermediary” includes any Participating Insurance Company, broker, dealer, bank, bank trust department, registered investment adviser, financial planner, Retirement Plan or other third party administrator and any other institution having a selling, services or any similar agreement with CMD, CWAM or one of their affiliates.

CMD, CWAM and their affiliates may pay additional compensation to selected financial intermediaries under the categories described below. These categories are not mutually exclusive, and a single financial intermediary may receive payments under all categories. These payments may create an incentive for a financial intermediary or its representatives to recommend or offer shares of a Fund to its customers. The amount of payments made to financial intermediaries may vary. In determining the amount of payments to be made, CMD, CWAM and their affiliates may consider a number of factors, including, without limitation, asset mix and length or relationship with the financial intermediary, the size of the customer/shareholder base of the financial intermediary, the manner in which customers of the financial intermediary make investments in the Funds, the nature and scope of marketing support or services provided by the financial intermediary (as more fully described below), and

27




the costs incurred by the financial intermediary in connection with maintaining the infrastructure necessary or desirable to support investments in the Funds.

These additional payments by CMD, CWAM or their affiliates are made pursuant to agreements between CMD, CWAM and their affiliates and financial intermediaries and do not change the price paid by investors for the purchase of a share or the amount a Fund will receive as proceeds from such sales.

Administrative and Marketing Support Payments

From time to time, CWAM or its affiliates may pay amounts from its past profits to Participating Insurance Companies or other organizations that provide administrative services for a Fund or that provide other services relating to a Fund to owners of VA contracts, VLI policies and/or participants in Retirement Plans.  These services include, among other things:  subaccounting services; answering inquiries regarding a Fund; transmitting, on behalf of a Fund, proxy statements, shareholder reports, updated prospectuses and other communications regarding a Fund; and such other related services as a Fund, owners of VA contracts, VLI policies and/or participants in Retirement Plans may request.  Payment of such amounts by CWAM will not increase the fees paid by a Fund or its shareholders

CMD, CWAM or their affiliates may make payments, from their own resources, to certain financial intermediaries for marketing support services, including, but not limited to, business planning assistance, educating financial intermediary personnel about the Funds and shareholder financial planning needs, placement on the financial intermediary’s preferred or recommended fund list or otherwise identifying a Fund as being part of a complex to be accorded a higher degree of marketing support than complexes not making such payments, access to sales meetings, sales representatives and management representatives of the financial intermediary, client servicing, and systems infrastructure support. These payments are generally based upon one or more of the following factors: average net assets of the mutual funds distributed by CMD attributable to that financial intermediary, gross sales of the mutual funds distributed by CMD attributable to that financial intermediary, reimbursement of ticket charges (fees that a financial intermediary firm charges its representatives for effecting transactions in fund shares) or a negotiated lump sum payment.

While the financial arrangements may vary for each financial intermediary, the payments to each financial intermediary are generally expected to be between 0.20% and 0.50% on an annual basis for payments based on average net assets of the Funds attributable to the financial intermediary.

As of the date of this SAI, CMD, CWAM or their affiliates had agreed to make payments to the following financial intermediaries or their affiliates:

Aegon Financial Services Group, Inc.
Ameriprise Financial Services, Inc.
ING Insurance Company of America
Keyport Life Insurance Company
Merrill Lynch Life Insurance Company
ML Life Insurance Company of New York
Phoenix Home Life Mutual Insurance Company
RiverSource Life Insurance Company
RiverSource Life Insurance Co. of New York
Symetra Life Insurance Company
Sun Life Assurance Company of Canada
TIAA-CREF Life Insurance Company
Transamerica Financial Life Insurance Company

28




CMD, CWAM or their affiliates may enter into similar arrangements with other financial intermediaries from time to time. Therefore, the preceding list is subject to change at any time without notice.  

Other Payments  

From time to time, CMD or CWAM, from their own resources, may provide additional compensation to certain financial intermediaries that sell or arrange for the sale of shares of a Fund to the extent not prohibited by laws or the rules of any self-regulatory agency, such as the NASD. Such compensation provided by CMD or CWAM may include financial assistance to financial intermediaries that enable CMD and CWAM to participate in and/or present at financial intermediary-sponsored conferences or seminars, sales or training programs for invited registered representatives and other financial intermediary employees, financial intermediary entertainment, and other financial intermediary-sponsored events, and travel expenses, including lodging incurred by registered representatives and other employees in connection with prospecting, retention and due diligence trips. CMD or CWAM makes payments for entertainment events it deems appropriate, subject to CMD’s and CWAM’s internal guidelines and applicable law. These payments may vary upon the nature of the event.  

Your financial intermediary may charge you fees or commissions in addition to those disclosed in this SAI. You can ask your financial intermediary for information about any payments it receives from CMD, CWAM and their affiliates and any services it provides, as well as fees and/or commissions it charges. In addition, depending on the financial arrangement in place at any particular time, a financial intermediary and its financial consultants also may have a financial incentive for recommending a particular Fund or share class over others. You should consult with your financial adviser and review carefully any disclosure by the financial intermediary as to compensation received by your financial adviser.  

Please contact your Financial intermediary for details about payments it may receive.  During fiscal year ended December 31, 2006, the Funds made no payments to dealers.  

CODES OF ETHICS

The Funds, CWAM and CMD have adopted Codes of Ethics pursuant to the requirements of the 1940 Act.  These Codes of Ethics permit personnel subject to the Codes to invest in securities, including securities that may be purchased or held by the Funds under limited circumstances. These Codes of Ethics can be reviewed and copied at the Securities and Exchange Commission (SEC) Public Reference Room and may be obtained by calling the SEC at 1-202-942-8090.  These Codes are also available on the EDGAR Database on the SEC’s website at http://www.sec.gov, and may also be obtained, after paying a duplicating fee, by electronic request to publicinfo@sec.gov or by writing to the SEC’s Public Reference Section, Washington, D.C. 20549-0102.    

LEGAL PROCEEDINGS  

The discussion below supplements the information included in the Prospectuses under the heading “Trust Management Organizations - - Legal Proceedings.”  

On February 9, 2005, Columbia Management Advisors, Inc. (which has since merged into Banc of America Capital Management, LLC (now named Columbia Management Advisors, LLC)) (CMA) and Columbia Funds Distributor, Inc. (which has been renamed Columbia Management Distributors, Inc.) (CMD) (collectively, the Columbia Group) entered into an Assurance of Discontinuance with the New York Attorney General (NYAG) (the NYAG Settlement) and consented to the entry of a cease-and-desist order by the SEC (the SEC Order) on matters relating to mutual fund trading. The SEC Order and the NYAG Settlement are referred to collectively as the “Settlements”.  CWAM, the adviser to the Wanger Advisors Funds and the Columbia Acorn Funds, was not a respondent in either proceeding nor were any of its officers or affiliates.  Although none of the Wanger Advisors Funds is a party to the Settlements and in order for CMA to continue to provide administrative services to the Wanger Advisors Funds, the Board of Trustees of the Wanger Advisors Funds agreed to conform to certain governance requirements, including the election of an independent board chair.  

Under the terms of the SEC Order, the Columbia Group agreed, among other things, to: pay $70 million in disgorgement and $70 million in civil money penalties; cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; maintain certain compliance and ethics oversight structures; retain an independent consultant to review the Columbia Group’s applicable supervisory, compliance, control and other policies and procedures; and retain an independent distribution consultant (see below). The NYAG Settlement also, among other things, requires Columbia and its affiliates to reduce management fees for certain of the funds in the Columbia, Columbia Acorn Trust and Wanger Advisors Trust family of mutual funds (including the former Nations Funds) and other mutual funds collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions.  

Pursuant to the procedures set forth in the SEC Order, the $140 million in settlement amounts described above will be distributed in accordance with a distribution plan that was developed by an independent distribution consultant and approved by the SEC on April 6, 2007.  

As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds.  

A copy of the SEC Order is available on the SEC website at http://www.sec.gov. A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005.  

CUSTODIAN AND FUND ACCOUNTING AGENT

State Street Bank and Trust Company (the Bank), 2 Avenue De Lafayette, Boston, Massachusetts 02111-2900, is the custodian and fund accounting agent for the Trust.  It is responsible for holding all securities and cash of each Fund, receiving and paying for securities purchased, delivering against payment securities sold, receiving and collecting income from

29




investments, making all payments covering expenses of the Trust, and performing other administrative duties, all as directed by authorized persons.  CWAM and Columbia Management supervise the Bank in such matters as purchase and sale of portfolio securities, payment of dividends or payment of expenses of the Funds.  Portfolio securities purchased in the United States are maintained in the custody of the Bank or other domestic banks or depositories.  Portfolio securities purchased outside of the United States are maintained in the custody of foreign banks and trust companies who are members of the Bank’s Global Custody Network and foreign depositories (foreign subcustodians).

With respect to foreign subcustodians, there can be no assurance that a Fund, and the value of its shares, will not be adversely affected by acts of foreign governments, financial or operational difficulties of the foreign subcustodians, difficulties and costs of obtaining jurisdiction over, or enforcing judgments against, the foreign subcustodians or application of foreign law to a Fund’s foreign subcustodial arrangements.  Accordingly, an investor should recognize that the noninvestment risks involved in holding assets abroad are greater than those associated with investing in the United States.

The Funds may invest in obligations of the Bank and may purchase or sell securities from or to the Bank.

PORTFOLIO TRANSACTIONS

CWAM places the orders for the purchase and sale of portfolio securities and options and futures contracts for the Funds.  CWAM’s overriding objective in selecting brokers and dealers to effect portfolio transactions is to seek the best combination of net price and execution.  The best net price, giving effect to brokerage commissions, if any, and other transaction costs, is an important factor in this decision; however, a number of other judgmental factors may also enter into the decision.  These factors include CWAM’s knowledge of negotiated commission rates currently available and other current transaction costs; the nature of the security being purchased or sold; the size of the transaction; the desired timing of the transaction; the activity existing and expected in the market for the particular security; confidentiality; the execution, clearance and settlement capabilities of the broker or dealer selected and others considered; CWAM’s knowledge of the financial stability of the broker or dealer selected and such other brokers and dealers; evaluation of competing markets, including exchanges, over-the-counter markets, electronic communications networks or other alternative trading facilities; the broker’s or dealer’s responsiveness to CWAM; and CWAM’s knowledge of actual or apparent operation problems of any broker or dealer.

Recognizing the value of these factors, CWAM may cause a Fund to pay a brokerage commission in excess of that which another broker may have charged for effecting the same transaction.  CWAM has established internal policies for the guidance of its trading personnel, specifying minimum and maximum commissions to be paid for various types and sizes of transactions effected for the Funds.  CWAM has discretion for all trades of the Funds.  Transactions which vary from the guidelines are subject to periodic supervisory review.  These guidelines are reviewed and periodically adjusted, and the general level of brokerage commissions paid is periodically reviewed by CWAM.  Evaluations of the reasonableness of brokerage commissions, based on the factors described in the preceding paragraph, are made by

30




CWAM’s trading personnel while effecting portfolio transactions.  The general level of brokerage commissions paid is reviewed by CWAM, and reports are made at least annually to the Board of Trustees.

CWAM maintains and periodically updates a list of approved brokers and dealers that in CWAM’s judgment, are generally capable of providing best price and execution and are financially stable.  CWAM’s traders are directed to use only brokers and dealers on the approved list.

CWAM may place trades for the Funds through a registered broker-dealer that is an affiliate of CWAM pursuant to procedures adopted by the Board of Trustees.  Such trades will only be effected consistent with CWAM’s obligation to seek best execution for its clients, and the Funds will pay these affiliates a commission for these transactions.  The Funds have adopted procedures consistent with Investment Company Act Rule 17e-1 governing such transactions.

It is CWAM’s practice, when feasible, to aggregate for execution as a single transaction orders for the purchase or sale of a particular security, with the same terms and conditions, for the accounts of several clients in order to seek a lower commission or more advantageous net price.  All clients participating in the aggregated execution receive the same execution price and transaction costs are shared pro rata, whenever possible.

Investment Research Products and Services Furnished by Brokers and Dealers  

CWAM engages in the long-standing practice in the money management industry of acquiring research and brokerage products and services (research products) from broker-dealer firms in return for directing trades for the Funds to those firms.  In effect, CWAM is using the commission dollars generated from the Funds to pay for these research products.  The money management industry uses the term “soft dollars” to refer to this industry practice.  The Board reviews CWAM’s soft-dollar practices on a semiannual basis.  

CWAM has a duty to seek the best combination of net price and execution.  CWAM faces a potential conflict of interest with this duty when it uses Fund trades to obtain soft dollar products.  This conflict exists because CWAM is able to use the soft dollar products in managing its Funds without paying cash (hard dollars) for the product.  This reduces CWAM’s expenses.

Moreover, under a provision of the federal securities laws applicable to soft dollars, CWAM is not required to use the soft dollar product in managing those accounts that generate the trade.  Thus, the Funds that generate the brokerage commission used to acquire the soft dollar product may not benefit directly from that product.  In effect, those Funds are cross subsidizing CWAM’s management of the other Funds that do benefit directly from the product.  This practice is explicitly sanctioned by a provision of the 1934 Act, which creates a “safe harbor” for soft dollar transactions conducted in a specified manner.  Although it is inherently difficult if not impossible to document, CWAM believes that over time most, if not all, Funds benefit from soft dollar products such that cross subsidizations even out.

31




CWAM attempts to reduce or eliminate this conflict by directing Fund trades for soft dollar products only if CWAM concludes that the broker-dealer supplying the product is capable of providing a combination of the best net price and execution on the trade.  As noted above, the best net price, while significant, is one of a number of judgmental factors CWAM considers in determining whether a particular broker is capable of providing the best net price and execution.  CWAM may cause a Fund to pay a brokerage commission in a soft dollar trade in excess of that which another broker-dealer might have charged for the same transaction.

CWAM acquires two types of soft dollar research products: (i) proprietary research created by the broker-dealer firm executing the trade and (ii) other research created by third parties that are supplied to CWAM through the broker-dealer firm executing the trade.

Proprietary research consists primarily of traditional research reports, recommendations and similar materials produced by the in-house research staffs of broker-dealer firms.  This research includes evaluations and recommendations of specific companies or industry groups, as well as analyses of general economic and market conditions and trends, market data, contacts and other related information and assistance.  CWAM’s research analysts periodically rate the quality of proprietary research produced by various broker-dealer firms.  Based on these evaluations, CWAM develops target levels of commission dollars on a firm-by-firm basis.  CWAM attempts to direct trades to each firm to meet these targets.

CWAM also uses soft dollars to acquire research created by third parties that are supplied to CWAM through broker-dealers executing the trade (or other broker-dealers who “step in” to a transaction and receive a portion of the brokerage commission for the trade).   

The targets that CWAM establishes for both proprietary and for third-party research typically will reflect discussions that CWAM has with the broker-dealer providing the research regarding the level of commissions it expects to receive for the research.  However, these targets are not binding commitments, and CWAM does not agree to direct a minimum amount of commissions to any broker-dealer for soft dollar research.  In setting these targets, CWAM makes a determination that the value of the research is reasonably commensurate with the cost of acquiring it.  These targets are established on a calendar-year basis.  CWAM will receive the research whether or not commissions directed to the applicable broker-dealer are less than, equal to or in excess of the target.  CWAM generally will carry over target shortages and excesses to the next year’s target.  CWAM believes that this practice reduces the conflicts of interest associated with soft dollar transactions, since CWAM can meet the non-binding expectations of broker-dealers providing soft dollar research over flexible time periods.  In the case of third-party research, the third-party is paid by the broker-dealer and not by CWAM.  CWAM may enter into a contract with the third-party vendor to use the research.   

CWAM also receives company-specific research for soft dollars from independent research organizations that are not brokers.

Consistent with industry practice, CWAM does not require that the Fund that generates the trade receive any benefit from the soft dollar product obtained through the trade.  As noted above, this may result in cross subsidization of soft dollar products among Funds.  As noted, this  

32




practice is explicitly sanctioned by a provision of the 1934 Act, which creates a “safe harbor” for soft dollar transactions conducted in a specified manner.

In certain instances, CWAM utilizes Electronic Communication Networks (ECNs) to execute trades, rather than executing trades directly with a broker-dealer to pay for research services.  CWAM may direct a portion of the commissions from these trades to an introducing broker through Commission Sharing Agreements (CSAs).  Where CWAM has executed a CSA with an introducing broker, CWAM will place a trade with the ECN, and pay the negotiated commission to the ECN.  The ECN will then credit a negotiated portion of the commission to the introducing broker as requested by CWAM for the purpose of funding a pool to be used to pay for research services received by CWAM from other third parties.  In addition, the ECN will credit a further portion of the commission negotiated by the ECN and the introducing broker to the introducing broker for its services administrating the CSA.  ECNs will make periodic lump-sum payments to the introducing brokers.  CSAs are a permitted form of soft dollar transaction under the 1934 Act.  As stated above, CWAM’s overriding objective in effecting portfolio transactions for the Funds is to seek to obtain the best combination of price and execution.   

Except as described in the following sentence, neither the Trust nor any Fund nor CWAM has entered into any agreement with, or made any commitment to, any unaffiliated broker-dealer which would bind CWAM, the Trust or any Fund to compensate any such broker-dealer, directly or indirectly, for sales of VA contracts or VLI policies.  CWAM has entered into arrangements with sponsors of programs for the sale of VA contracts or VLI policies issued by Participating Insurance Companies that are not affiliates of CWAM.  CWAM pays the sponsor from CWAM’s fee for managing the Funds. The fee is an amount of the Funds’ assets allocable to the Fund shares held in separate accounts of such unaffiliated Participating Insurance Companies.  CWAM does not cause the Trust or any Fund to pay brokerage commissions higher than those obtainable from other broker-dealers in recognition of such sales of VA contracts or VLI policies.  

In certain cases, CWAM will direct a trade to one broker-dealer with the instruction that it execute the trade and pay over a portion of the commission from the trade to another broker-dealer who provides CWAM with soft dollar research.  The broker-dealer executing the trade “steps out” of a portion of the commission in favor of the other broker-dealer providing the soft dollar product.  CWAM may engage in step-out transactions in order to direct soft dollar commissions to a broker-dealer which provides research but may not be able to provide best execution.  Brokers who receive step-out commissions typically are brokers providing third-party soft dollar research that is not available on a hard-dollars basis.  CWAM has not engaged in step-out transactions as a manner of compensating broker-dealers that sell shares of investment companies managed by CWAM.

The Trust’s purchases and sales of securities not traded on securities exchanges generally are placed by CWAM with market makers for these securities on a net basis, without any brokerage commissions being paid by the Trust.  Net trading does involve, however, transaction costs.  Included in prices paid to underwriters of portfolio securities is the spread between the price paid by the underwriter to the issuer and the price paid by the purchasers.  Each Fund’s purchases and sales of portfolio securities in the over-the-counter market usually are transacted with a broker-dealer on a net basis without any brokerage commission being paid by such Fund,

33




but do reflect the spread between the bid and asked prices.  CWAM may also transact purchases of some portfolio securities directly with the issuers.

With respect to a Fund’s purchases and sales of portfolio securities transacted with a broker or dealer on a net basis, CWAM may also consider the part, if any, played by the broker or dealer in bringing the security involved to CWAM’s attention, including investment research related to the security and provided to the Fund.  CWAM may place trades for the Funds through affiliates of CWAM in accordance with 1940 Act Rule 17e-1 governing such transactions and pursuant to procedures adopted by the Board of Trustees.  CWAM did not place any trades for the Funds through its affiliates during the fiscal year 2006.  

The table below shows information on brokerage commissions paid by each of the Funds during the periods indicated.

 

 

Wanger
U.S.
Smaller
Companies

 

Wanger
International
Small Cap

 

Wanger
Select

 

Wanger
International
Select

 

Total brokerage commissions paid during 2006

 

$

1,460,967

 

$

2,465,676

 

$

139,057

 

$

136,109

 

Total brokerage commissions paid during 2005

 

$

1,015,455

 

$

1,724,288

 

$

189,885

 

$

95,178

 

Total brokerage commissions paid during 2004

 

$

978,168

 

$

1,250,424

 

$

130,751

 

$

89,919

 

 

Brokerage commissions paid by the Funds in 2006 generally increased from prior years due to increases in net assets, as well as slight increases in portfolio trading.  

Directed transactions include transactions that the Funds or CWAM directs to a registered broker-dealer, through an agreement or understanding or otherwise through an internal allocation procedure, because of research services provided by the registered broker-dealer to the Funds.  For each registered broker-dealer to which the Funds or CWAM directed transactions during the last fiscal year, the following tables show the dollar amount of directed transactions for each Fund, and the commissions paid by each Fund on directed transactions.   

 

 

Wanger
U.S.
Smaller
Companies

 

Wanger
International
Small Cap

 

Wanger
Select

 

Wanger
International
Select

 

Total amount of directed brokerage transactions during 2006  

 

$

114,282,347

 

$

607,738,575

 

$

10,822,988

 

$

41,748,058

 

 

34




 

 

 

Wanger
U.S.
Smaller
Companies

 

Wanger
International
Small Cap

 

Wanger
Select

 

Wanger
International
Select

 

Total amount of directed brokerage commissions paid during 2006  

 

$

238,190

 

$

1,423,278

 

$

25,022

 

$

79,018

 

 

During the last three most recent fiscal years, the Funds have not paid any brokerage commissions to any broker that is an affiliated person of the Funds, at the time of the transaction, CWAM or CMD, or any of their affiliates.

The Trust is required to identify any securities of its “regular brokers or dealers” that the Funds have acquired during their most recent fiscal year.  At December 31, 2006, the Funds held securities of their regular brokers or dealers as set forth below:  

Wanger U.S. Smaller Companies

ISSUER

 

VALUE

 

SEI Investments Company  

 

$

19,118,760

 

 

Wanger International Small Cap

ISSUER

 

VALUE

 

Hong Kong Exchanges and Clearing  

 

$

18,023,621

 

Komercni Banka

 

$

8,337,339

 

Perpetual Trustees Australia

 

$

6,158,684

 

Hiroshima Bank

 

$

3,889,965

 

Sparx Asset Management

 

$

3,700,442

 

 

Wanger Select

 

ISSUER

 

VALUE

 

Janus Capital Group Inc.  

 

$

5,894,070

 

Nuveen Investments Inc.

 

$

3,994,760

 

SEI Investments Company

 

$

3,394,920

 

 

Wanger International Select Fund

ISSUER

 

VALUE

 

Hong Kong Exchanges and Clearing

 

$

2,075,447

 

Komercni Banka

 

$

803,958

 

Deutsche Boerse AG

 

$

662,090

 

 

NET ASSET VALUE

The net asset value per share of each Fund is determined by dividing the total value of the Fund’s assets, less all liabilities (including accrued expenses), by the total number of shares outstanding.  

The proceeds received by each Fund for each purchase or sale of its shares, and all income, earnings, profits and proceeds thereof, subject only to the rights of creditors, will be specifically allocated to such Fund, and constitute the underlying assets of that Fund.  The

35




underlying assets of each Fund will be segregated on the books of account, and will be charged with the liabilities in respect to such Fund and with a share of the general liabilities of the Trust.

If an event has occurred after the time of the last available market price and before the close of the NYSE that is expected to materially affect a security’s price, the security will be valued at a fair value in accordance with the fair valuation procedures approved by the Board of Trustees.  In the case of foreign securities, this could include events occurring after the close of the foreign market where the securities are traded and before the close of the NYSE.  When a Fund uses fair value to price securities, it may value those securities higher or lower than another fund that uses market quotations to price the same securities.  The Trust has retained an independent statistical fair value pricing service to assist in the fair valuation process for securities principally traded in a foreign market in order to adjust for possible changes in value that may occur between the close of the foreign exchange and the time as of which NAV is determined.  The use of an independent fair value pricing service is intended to decrease the opportunities for time zone arbitrage transactions.  There can be no assurance that the use of an independent fair value pricing service will successfully decrease arbitrage opportunities.  If a security is valued at a “fair value,” that value may be different from the last quoted market price for the security.  The Fund’s foreign securities may trade on days when the NYSE is closed.  The Funds will not determine NAV, and Participating Insurance Companies and Retirement Plans may not purchase or redeem shares, on days on which the NYSE is closed for trading.  

TAXES

Each Fund has elected to be treated and to qualify as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986 (Code).  As a result of such election, for any tax year in which a Fund meets the investment limitations and the distribution, diversification and other requirements referred to below, that Fund will not be subject to federal income tax, and the income of the Fund that is distributed, or deemed to be distributed, to its shareholders will be treated as dividends distributed to its shareholders.  Under current law, since the shareholders are life insurance company “segregated asset accounts,” they will not be subject to income tax currently on this income to the extent such income is applied to increase the values of VA contracts and VLI policies.  If a Fund were to fail to qualify under Subchapter M, it would be required to pay taxes on any income and realized capital gains, reducing the amount of income and realized capital gains that would otherwise be available for distribution to Fund shareholders.  

Among the conditions for qualification and avoidance of taxation at the Trust or Fund level, Subchapter M imposes investment limitations, distribution requirements, and requirements relating to the diversification of investments.  The requirements of Subchapter M may affect the investments made by each Fund.  Any of the applicable diversification requirements could require a sale of assets of a Fund that would affect the net asset value of the Fund.

Pursuant to the requirements of Section 817(h) of the Code, the only shareholders of the Trust and its Funds will be Participating Insurance Companies and their separate accounts that fund VA contracts, VLI policies and other variable insurance contracts, and certain Retirement Plans, which are pension plans and retirement arrangements and accounts permitting the accumulation of funds on a tax-deferred basis.  The prospectus that describes a particular VA

36




contract or VLI policy discusses the taxation of both separate accounts and the owner of such contract or policy.  The plan documents (including the summary plan description) for the Retirement Plan discuss the taxation of Retirement Plans and the participants therein.

Each Fund intends to comply with the requirements of Section 817(h) and the related regulations issued thereunder by the Treasury Department.  These provisions impose certain diversification requirements affecting the securities in which the Funds may invest and other limitations.  The diversification requirements of Section 817(h) of the Code are in addition to the diversification requirements under Subchapter M and the 1940 Act.  The consequences of failure to meet the requirements of Section 817(h) could result in taxation of the Participating Insurance Companies offering the VA contracts and VLI policies and immediate taxation of all owners of the contracts and policies to the extent of appreciation on investment under the contracts.  The Trust believes it is in compliance with these requirements.  

The Secretary of the Treasury may issue additional rulings or regulations that will prescribe the circumstances in which control of the investments of a segregated asset account by an owner of a variable insurance contract may cause such owner, rather than the insurance company, to be treated as the owner of the assets of a segregated asset account.  It is expected that such regulations would have prospective application.  However, if a ruling or regulation were not considered to set forth a new position, the ruling or regulation could have retroactive effect.

The Trust therefore may find it necessary, and reserves the right, to take action to assure that a VA contract or VLI policy continues to qualify as an annuity or insurance contract under federal tax laws.  The Trust, for example, may be required to alter the investment objectives of any Fund or substitute the shares of one Fund for those of another.  No such change of investment objectives or substitution of securities will take place without notice to the contract and policy owners with interests invested in the affected Fund and without prior approval of the Securities and Exchange Commission, or the approval of a majority of such owners, to the extent legally required.

To the extent a Fund invests in foreign securities, investment income received by the Fund from sources within foreign countries may be subject to foreign income taxes withheld at the source.  The United States has entered into tax treaties with many foreign countries which entitle a Fund to a reduced rate of tax or exemption from tax on such income.  Gains and losses from foreign currency dispositions, foreign-currency denominated debt securities and payables or receivables, and foreign currency forward contracts are subject to special tax rules that generally cause them to be recharacterized as ordinary income and losses, and may affect the timing and amount of the Fund’s recognition of income, gain or loss.

It is impossible to determine the effective rate of foreign tax in advance since the amount of a Fund’s assets, if any, to be invested within various countries will fluctuate and the extent to which tax refunds will be recovered is uncertain.  The Funds intend to operate so as to qualify for treaty-reduced tax rates where applicable.

The Funds will not be subject to the 4% federal excise tax imposed on regulated investment companies that do not distribute substantially all their income and gains each

37




calendar year because that tax does not apply to a regulated investment company whose only shareholders are segregated asset accounts of life insurance companies held in connection with VA contracts, VLI policies and/or Retirement Plans.

The preceding is a brief summary of some relevant tax considerations.  This discussion is not intended as a complete explanation or a substitute for careful tax planning and consultation with individual tax advisors.

INVESTMENT PERFORMANCE

Each of the Funds may quote total return figures from time to time.  Total return on a per share basis is the amount of dividends received per share plus or minus the change in the net asset value per share for a given period.  Total return percentage may be calculated by dividing the value of a share at the end of a given period (including dividends reinvested) by the value of the share at the beginning of the period and subtracting one.

The Funds’ total returns do not reflect the cost of insurance and other insurance company separate account charges which vary with the VA contracts and VLI policies offered through the separate accounts of the Participating Insurance Companies, or expenses imposed by Retirement Plans.

Funds that have been in operation at least three years may also use statistics to indicate volatility or risk.  The premise of each of these measures is that greater volatility connotes greater risk undertaken in achieving performance.  The Funds may quote the following measures of volatility:

Beta.  Beta is the volatility of a fund’s total return relative to the movements of a benchmark index.  A beta greater than one indicates volatility greater than the index, and a beta of less than one indicates a volatility less than the index.  

R-squared.  R-squared reflects the percentage of a fund’s price movements that are explained by movements in the benchmark index.  An R-squared of 1.00 indicates that all movements of a fund’s price are completely explained by movements in the index. Generally, a higher R-squared will indicate a more reliable beta figure.   

Alpha.  Alpha is a measure used to discuss a fund’s relative performance.  Alpha measures the actual return of a fund compared to the expected return of a fund given its risk (as measured by beta).  The expected return of a fund is based on how historical movements of the benchmark index and historical performance of a fund compare to the benchmark index.  The expected return is computed by multiplying the advance or decline in a market represented by a fund’s beta.  A positive alpha quantifies the value that a fund manager has added and a negative alpha quantifies the value that a fund manager has lost.

Standard deviation.  Standard deviation quantifies the volatility in the returns of a fund by measuring the amount of variation in the group of returns that make up a fund’s average return.  Standard deviation is generally calculated over a three or five year period using monthly returns and modified to present an annualized standard deviation.   

38




Sharpe ratio.  A fund’s Sharpe ratio quantifies its total return in excess of the return of a guaranteed investment (90 day U.S. treasury bills), relative to its volatility as measured by its standard deviation.  The higher a fund’s Sharpe ratio, the better a fund’s returns have been relative to the amount of investment risk it has taken.

Beta and R-squared are calculated by performing a least squares linear regression using five years of monthly total return figures for each of U.S. Smaller Companies and International Small Cap and their respective benchmarks, and using three years of monthly total return figures for each of Wanger Select and Wanger International Select and their respective benchmarks.  Alpha is calculated by taking the difference between the average monthly portfolio return and the beta-adjusted average monthly benchmark return.  The result of this calculation is then geometrically annualized.

RECORD SHAREHOLDERS

All the shares of the Funds are held of record by subaccounts of separate accounts of Participating Insurance Companies on behalf of the owners of VLI policies and VA contracts, or by Retirement Plans on behalf of the participants therein.  At all meetings of shareholders of the Funds each Participating Insurance Company will vote the shares held of record by subaccounts of its separate accounts only in accordance with the instructions received from the VLI policy and VA contract owners on behalf of whom such shares are held, and each Retirement Plan will vote the shares held of record by participants in the Retirement Plans only in accordance with the instructions received from the participants on behalf of whom such shares are held.  All such shares as to which no instructions are received will be voted in the same proportion as shares as to which instructions are received.  Accordingly, each Participating Insurance Company disclaims beneficial ownership of the shares of the Funds held of record by the subaccounts of its separate accounts, and each Retirement Plan disclaims beneficial ownership of the shares of the Funds held of record by its participants.   

The following table shows the dollar range of equity securities of the Funds “beneficially” owned (within the meaning of that term as defined in rule 16a-1(a)(2) under the Securities Exchange Act of 1934) by each Trustee as of December 31, 2006:  

39




 

Name of Trustee

 

Name of Fund

 

Dollar Range of Equity
Securities in each
Fund*

 

Aggregate Dollar Range of
Equity Securities in All
Registered Investment
Companies Overseen by
Trustee in Family of
Investment Companies

 

 

 

 

 

 

 

Trustees who are not interested persons of the Trust:

 

 

 

 

 

 

 

Margaret Eisen

 

Wanger U.S. Smaller Companies

 

None

 

Over $100,000

 

Wanger International Small Cap

 

None

 

 

 

Wanger Select

 

None

 

 

 

Wanger International Select

 

None

 

 

 

 

 

 

 

 

 

Jerome Kahn, Jr.

 

Wanger U.S. Smaller Companies

 

None

 

Over $100,000

 

Wanger International Small Cap

 

None

 

 

 

Wanger Select

 

None

 

 

 

Wanger International Select

 

None

 

 

 

 

 

 

 

 

 

Steven N. Kaplan

 

Wanger U.S. Smaller Companies

 

None

 

$10,001-$50,000

 

Wanger International Small Cap

 

None

 

 

 

Wanger Select

 

None

 

 

 

Wanger International Select

 

None

 

 

 

 

 

 

 

 

 

David C. Kleinman

 

Wanger U.S. Smaller Companies

 

None

 

Over $100,000

 

Wanger International Small Cap

 

None

 

 

 

Wanger Select

 

None

 

 

 

Wanger International Select

 

None

 

 

 

 

 

 

 

 

 

Allan B. Muchin

 

Wanger U.S. Smaller Companies

 

None

 

Over $100,000

 

Wanger International Small Cap

 

None

 

 

 

Wanger Select

 

None

 

 

 

Wanger International Select

 

None

 

 

 

40




 

Name of Trustee

 

Name of Fund

 

Dollar Range of Equity
Securities in each
Fund*

 

Aggregate Dollar Range of
Equity Securities in All
Registered Investment
Companies Overseen by
Trustee in Family of
Investment Companies

 

 

 

 

 

 

 

Robert E. Nason

 

Wanger U.S. Smaller Companies

 

None

 

Over $100,000

 

Wanger International Small Cap

 

None

 

 

 

Wanger Select

 

None

 

 

 

Wanger International Select

 

None

 

 

 

 

 

 

 

 

 

James A. Star

 

Wanger U.S. Smaller Companies

 

None

 

Over $100,000

 

Wanger International Small Cap

 

None

 

 

 

Wanger Select

 

None

 

 

 

Wanger International Select

 

None

 

 

 

 

 

 

 

 

 

Patricia H. Werhane

 

Wanger U.S. Smaller Companies

 

None

 

$50,001-$100,000

 

Wanger International Small Cap

 

None

 

 

 

Wanger Select

 

None

 

 

 

Wanger International Select

 

None

 

 

 

 

 

 

 

 

 

John A. Wing

 

Wanger U.S. Smaller Companies

 

None

 

Over $100,000

 

Wanger International Small Cap

 

None

 

 

 

Wanger Select

 

None

 

 

 

Wanger International Select

 

None

 

 

 

 

 

 

 

 

 

Trustee who is an interested person of the Trust:

 

 

 

Charles P. McQuaid

 

Wanger U.S. Smaller Companies

 

None

 

Over $100,000

 

Wanger International Small Cap

 

None

 

 

 

Wanger Select

 

None

 

 

 

Wanger International Select

 

None

 

 

 

41




 

Name of Trustee

 

Name of Fund

 

Dollar Range of Equity
Securities in each
Fund*

 

Aggregate Dollar Range of
Equity Securities in All
Registered Investment
Companies Overseen by
Trustee in Family of
Investment Companies

 

 

 

 

 

 

 

Ralph Wanger

 

Wanger U.S. Smaller Companies

 

None

 

Over $100,000

 

Wanger International Small Cap

 

None

 

 

 

Wanger Select

 

None

 

 

 

Wanger International Select

 

None

 

 

 


*  None of the Trustees and officers owned any shares of the Fund because shares of the Funds are issued in connection with investments in and payments under certain qualified and non-qualified variable annuity contracts and variable life insurance policies issued through separate accounts of Participating Insurance Companies.  However, as of December 31, 2006, Messrs. McQuaid and Wanger owned variable insurance policies which held shares of the Funds (which shares are also reported under the names of the contract issuers).  At that date, the aggregate dollar range of equity securities in the family of investment companies attributable to the variable annuity contracts of both Messrs. McQuaid and Wanger was over $100,000, respectively.  

At March 31, 2007, none of the Trustees and officers owned shares of the Funds because shares of the Funds are issued in connection with investments in and payments under certain qualified and non-qualified variable annuity contracts and variable life insurance policies issued through separate accounts of Participating Insurance Companies.**  At March 31, 2007, Phoenix Home Life Mutual Insurance Company (and its affiliates), 31 Tech Valley Drive, East Greenbush, New York  12061-4134, was the record holder of approximately 18.21% of the outstanding shares of International Small Cap, approximately 16.04% of the outstanding shares of U.S. Smaller Companies, approximately 25.09% of the outstanding shares of Wanger Select and approximately 73.78% of the outstanding shares of Wanger International Select all of which are beneficially owned by variable contract owners.  At March 31, 2007, American Express Managed Assets, 222 AXP Financial Center, Minneapolis, Minnesota 55474-0002, was the record holder of approximately 65.11% of the outstanding shares of U.S. Smaller Companies and approximately 75.14% of the outstanding shares of International Small Cap, all of which are owned by variable contract owners.  At March 31, 2007, Sun Life Assurance Company, One Sun Life Executive Park, Wellesley Hills, MA 02481 was the record holder of approximately 13.36% of the outstanding shares of Wanger Select and approximately 17.50% of the outstanding shares of Wanger International Select.  At March 31, 2007, ING Life Insurance and Annuity Company, 151 Farmington Avenue, Hartford, CT 06156, was the record holder of approximately 55.55% of the outstanding shares of Wanger Select Fund, all of which are owned by variable contract owners.  As of March 31, 2007, none of the independent Trustees owned beneficially or of record any shares of CWAM or CMD, or of any person directly or indirectly controlling, controlled by, or under common control with CWAM or CMD.  

** However, as of March 31, 2007, Messrs. McQuaid and Wanger owned variable insurance policies which held shares of the Funds (which shares are also reported under the names of the Participating Insurance Companies).  Including those shares, as of March 31, 2007, the Trustees and officers as a group owned beneficially less than 1%  

42




of the outstanding shares of Wanger U.S. Smaller Companies, Wanger International Small Cap and Wanger Select.  As of March 31, 2007, the Trustees and officers as a group owned beneficially 5.73% of the outstanding shares of Wanger International Select.  

ANTI-MONEY LAUNDERING COMPLIANCE

The Funds are required to comply with various anti-money laundering laws and regulations.  Consequently, the Funds may request additional information from you to verify your identity.  If at any time the Funds believe a shareholder may be involved in suspicious activity or if certain account information matches information on government lists of suspicious persons, the Funds may choose not to establish a new account or may be required to “freeze” a shareholder’s account.  The Funds also may be required to provide a governmental agency with information about transactions that have occurred in a shareholder’s account or to transfer monies received to establish a new account, transfer an existing account or transfer the proceeds of an existing account to a governmental agency.  In some circumstances, the law may not permit a Fund to inform the shareholder that it has taken the actions described above.

PROXY VOTING POLICIES

The Funds have delegated to CWAM the responsibility to vote proxies relating to portfolio securities held by the Funds.  In deciding to delegate this responsibility to CWAM, the Board of Trustees of the Trust reviewed and approved the policies and procedures adopted by CWAM.  These included the procedures that CWAM follows when a vote presents a conflict between the interests of the Funds and their shareholders and CWAM, its affiliates, its other clients or other persons.

CWAM’s policy is to vote all proxies for Fund securities in a manner considered by CWAM to be in the best interest of the Funds and their shareholders without regard to any benefit to CWAM, its affiliates, its other clients or other persons.  CWAM examines each proposal and votes against the proposal, if, in its judgment, approval or adoption of the proposal would be expected to impact adversely the current or potential market value of the issuer’s securities.  CWAM also examines each proposal and votes the proxies against the proposal, if, in its judgment, the proposal would be expected to affect adversely the best interest of the Funds.  CWAM determines the best interest of the Funds in light of the potential economic return on the Funds’ investment.

CWAM addresses potential material conflicts of interest by having predetermined voting guidelines and by having each individual stock analyst review and vote each proxy for the stocks that he or she follows.  For those proposals that require special consideration or in instances where special circumstances may require varying from the predetermined guideline, CWAM’s Proxy Committee determines the vote in the best interest of the Funds, without consideration of any benefit to CWAM, its affiliates, its other clients or other persons.  CWAM’s Proxy Committee is composed of representatives of CWAM’s equity investments, equity research and compliance functions.  In addition to the responsibilities described above, the Proxy Committee has the responsibility to review, on an annual basis, CWAM’s proxy voting policies to ensure consistency with internal and regulatory agency policies, and to develop additional predetermined voting guidelines to assist in the review of proxy proposals.

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The Proxy Committee may vary from a predetermined guideline if it determines that voting on the proposal according to the predetermined guideline would be expected to impact adversely the current or potential market value of the issuer’s securities or to affect adversely the best interest of the client.  References to the best interest of a client refer to the interest of the client in terms of the potential economic return on the client’s investment.  In determining the vote on any proposal, the Proxy Committee does not consider any benefit other than benefits to the owner of the securities to be voted.  A member of the Proxy Committee is prohibited from voting on any proposal for which he or she has a conflict of interest by reason of a direct relationship with the issuer or other party affected by a given proposal.  Persons making recommendations to the Proxy Committee or its members are required to disclose to the Committee any relationship with a party making a proposal or other matter known to the person that would create a potential conflict of interest.

CWAM has retained Institutional Shareholder Services (ISS), a third-party vendor, to implement its proxy-voting process.  ISS provides proxy analysis, record keeping services, vote disclosure services and independent proxy voting services.  

CWAM’s proxy voting policies, guidelines and procedures are included in this SAI as Appendix B.  In accordance with SEC regulations the Funds’ proxy voting record for the most recent twelve-month period ended June 30 has been filed with the SEC.  You may obtain a copy of the Funds’ proxy voting record (i) on the SEC’s website at www.sec.gov; and (ii) without charge, upon request, by calling (888) 492-6437.  

DISCLOSURE OF FUND INFORMATION  

The Trustees of Wanger Advisors Trust have adopted policies and procedures with respect to the disclosure of the Funds’ portfolio holdings and trading strategies by the Funds, CWAM, Columbia Management and their affiliates (the Policies).  The Policies are designed to prevent any disclosure of confidential Fund portfolio holdings information that could harm the Funds and their shareholders.  The Policies provide that Fund portfolio holdings information generally may not be disclosed to any party prior to public disclosure, which is the time a Fund discloses the information in a publicly available SEC filing required to include such information.  As described below, the Policies provide for certain limited exceptions that allow for disclosure of Fund portfolio holdings information in advance of public dissemination only when a Fund has legitimate business purposes for doing so and the recipients are subject to a duty of confidentiality, including a duty not to trade on the nonpublic information.  The Policies prohibit Columbia Management, CWAM and the Funds’ other service providers from entering into any agreement to disclose Fund portfolio holdings information or trading strategies in violation of the Policies or from entering into any agreement to disclose portfolio information in exchange for any form of consideration.  The Policies incorporate and adopt the supervisory controls and recordkeeping requirements established in CWAM’s Policies.  CWAM has also adopted policies and procedures to monitor for compliance with the Policies.  

Public Disclosures  

The Funds’ portfolio holdings are disclosed to the public through required filings with the SEC.  The Funds file their portfolio holdings with the SEC for each fiscal quarter either on Form N-CSR (with respect to each annual period and semiannual period) on Form N-Q (with respect  

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to the first and third quarters of the Funds’ fiscal year).  Shareholders may obtain the Funds’ Forms N-CSR and N-Q filings on the SEC’s website at www.sec.gov, a link to which is provided on Columbia Management’s website at www.columbiafunds.com.  In addition, the Funds’ Forms N-CSR and N-Q filings may be reviewed and copied at the SEC’s public reference room in Washington, D.C.  You may call the SEC at 1-800-SEC-0330 for information about the SEC’s website or the operation of the public reference room.  

A Fund, Columbia Management, CWAM or their affiliates may include portfolio holdings information that has already been made public through an SEC filing in marketing literature and other communications to shareholders, advisers or other parties.  In addition, certain advisory clients of CWAM that follow a strategy similar to that of a Fund have access to their own custodial account’s portfolio holdings information before such Fund files its portfolio holdings with the SEC.  It is possible that when clients observe transactions in their own accounts, they may infer transactions of the Funds prior to public disclosure of Fund transactions.  

Other Disclosures  

Pursuant to the Policies, the Funds may selectively disclose their portfolio holdings information in advance of public disclosure on a confidential basis to various Fund service providers that require such information for the legitimate business purpose of assisting the Funds with day-to-day business affairs.  Neither the Funds nor Columbia Management, CWAM and their affiliates receive compensation or consideration from the service providers for the portfolio holdings information.  In addition to Columbia Management, CWAM and their affiliates, these service providers are listed below:  

Identity of Recipient  

 

Purpose of Disclosure

 

Frequency of Disclosure

Wilshire Associates

 

Supports performance analysis software.

 

Daily

 

 

 

 

 

Plexus

 

Provides best execution data.

 

Quarterly

 

 

 

 

 

State Street Bank and Trust Company

 

Funds’ custodian; receives trade files containing information for the Funds.

 

Daily

 

 

 

 

 

Sikich ICS

 

Host of the Funds’ trustee website.

 

Monthly

 

 

 

 

 

GIS Ltd. (MFACT)

 

Provides support for CWAM’s accounting systems.

 

Information sent on an “as needed basis,” which is generally less than twice per year

 

 

 

 

 

Macgregor

 

Provides support for CWAM’s trading system.

 

1 – 2 times per year

 

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Identity of Recipient  

 

Purpose of Disclosure

 

Frequency of Disclosure

Data Communique

 

Automates marketing materials and populates data in fact sheet templates. Fact sheets will be distributed to investment professionals and clients only after the information is deemed public under the Policies.

 

Monthly/ Quarterly

 

 

 

 

 

Factset Data Systems, Inc.

 

Provides quantitative analytics, charting and fundamental data to investment, marketing, performance and distribution personnel.

 

Daily

 

 

 

 

 

Merrill Corporation

 

Printer for the Funds’ prospectuses, SAIs, supplements and sales materials.

 

Quarterly

 

 

 

 

 

Bowne & Co., Inc.

 

Printer for the Funds’ prospectuses, SAIs, supplements and sales materials.

 

Quarterly

 

 

 

 

 

Institutional Shareholder Services, Inc. (ISS)

 

Proxy service provider to the Funds. Holdings are only redistributed by ISS through voting the shares held and within the Funds’ N-PX filings.

 

Daily

 

 

 

 

 

ING

 

Provides shareholder fact sheets

 

Quarterly

 

 

 

 

 

Bell, Boyd & Lloyd LLP

 

Legal counsel to the Funds and the independent trustees.

 

As needed

 

 

 

 

 

PricewaterhouseCoopers LLP

 

Funds’ independent registered public accounting firm, providing audit services, tax return review services, and assistance and consultation in connection with the review of various SEC filings.

 

As needed

 

Pursuant to agreements in such form as the Chief Compliance Officer (CCO) may require, these service providers are required to keep such information confidential, and are prohibited from trading based on the information or otherwise using the information except as necessary in providing services to the Funds.  

The Funds have authorized CWAM’s President (and his designated subordinates) to make appropriate disclosures of the Funds’ holdings to certain Columbia Management affiliates, to provide the Funds’ custodian, subcustodians and pricing service with daily trade information and to disclose necessary portfolio information to the Funds’ proxy service. The Funds have also authorized CWAM’s President and Chief Operating Officer (and their designated subordinates) to disclose portfolio information to independent auditors in connection with audit procedures.  In addition, the Funds have authorized CMA and CWAM’s President (and his designated subordinates) to disclose necessary information to printing firms engaged by CMA to prepare periodic reports to Fund shareholders.  

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CWAM uses a variety of broker-dealers and other agents to effect securities transactions on behalf of the Funds.  These broker-dealers become aware of the Funds’ intentions, transactions and positions, in performing their functions.  Further, the Funds’ ability to identify and execute transactions in securities is dependent, in part, on information provided to CWAM by broker-dealers who are market makers in certain securities or otherwise have the ability to assist the Funds in executing their orders.  To facilitate that process, the Trustees have authorized CWAM’s President and Managing Director of Trading (and their designated subordinates) to disclose portfolio information or anticipated transactions to broker-dealers who may execute Fund transactions.  This disclosure is limited to that information necessary to effect the Funds’ securities transactions and assist CWAM in seeking to obtain best execution.  

The CCO is responsible for implementation of the Policies.  The CCO is required to report to the Trustees any violations of the Policies that come to his attention and may approve non-public disclosures of a Fund’s portfolio holdings; provided that, such disclosure is consistent with the Policies, including whether the disclosure furthers a legitimate business purpose of such Fund and is therefore in the best interest of the Fund’s shareholders, and that such approvals are reported to the Trustees.  

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

PricewaterhouseCoopers LLP, the Trust’s independent registered public accounting firm, audits and reports on the annual financial statements and provide tax return review services and assistance and consultation in connection with the review of various SEC filings. Its offices are located at: One North Wacker Drive, Chicago, IL, 60606.  The financial statements of the Trust and reports of independent registered public accounting firm appearing in the December 31, 2006 annual report of the Trust are incorporated in this SAI by reference.  

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APPENDIX A

INVESTMENT TECHNIQUES AND SECURITIES

COMMON STOCKS

The Funds invest mostly in common stocks, which represent an equity interest (ownership) in a corporation.  This ownership interest often gives a Fund the right to vote on measures affecting the company’s organization and operations.  The Funds also invest in other types of equity securities, including preferred stocks and securities convertible into common stocks.  Over time, common stocks have historically provided superior long-term capital growth potential.  However, stock prices may decline over short or even extended periods.  Stock markets tend to move in cycles, with periods of rising stock prices and periods of falling stock prices.  As a result, the Funds should be considered long-term investments, designed to provide the best results when held for several years or more.  The Funds may not be suitable investments if you have a short-term investment horizon or are unwilling to accept fluctuations in share price, including significant declines over a given period.

DIVERSIFICATION

Diversification is a means of reducing risk by investing in a broad range of stocks or other securities.  Because Wanger Select is non-diversified, it has the ability to take larger positions in a smaller number of issuers.  The appreciation or depreciation of a single stock may have a greater impact on the NAV of a non-diversified fund, because it is likely to have a greater percentage of its assets invested in that stock.  As a result, the share price of Wanger Select can be expected to fluctuate more than that of a broadly diversified fund investing in similar securities.  Because Wanger Select is non-diversified, it is not subject to the limitations under the 1940 Act on the percentage of its assets that it may invest in any one issuer.  Wanger Select, however, intends to comply with the diversification standards for regulated investment companies under Subchapter M of the Internal Revenue Code (summarized in “Investment Restrictions”) and Section 817(h) of the Code (see “Taxes”).

Although Wanger International Select was previously registered as a non-diversified fund, its investments remained diversified through February 1, 2002 (three years after it began operations).  As a result, the Fund lost the ability to invest in a non-diversified manner and is now considered a diversified fund.  Wanger International Select will not be able to become non-diversified unless it seeks and obtains the approval of the holders of a “majority of its outstanding voting securities,” as defined in the 1940 Act.

FOREIGN SECURITIES

Each Fund may invest in foreign securities, which may entail a greater degree of risk (including risks relating to exchange rate fluctuations, tax provisions, or expropriation of assets) than does investment in securities of domestic issuers.  Under normal circumstances, Wanger International Select invests at least 65% of its net assets (plus any borrowings for investment purposes), and International Small Cap invests at least 80% of its net assets, in each case taken at market value, in foreign securities; Wanger Select’s investments in foreign securities are limited to not more than 25% of its total assets.  U.S. Smaller Companies may invest up to 35% of its net  

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assets in foreign securities, but under normal circumstances, the Fund would not invest more than 20% of its net assets in foreign securities and the Fund does not have a present intention of investing more than 5% of its net assets in foreign securities.  

Wanger International Select invests primarily in developed countries but may invest up to 15% of its total assets in “emerging markets or frontier markets.”  The Funds use the terms “developed markets” and “emerging markets” as those terms are defined by the International Financial Corporation, a member of the World Bank Group.

The securities markets of emerging markets are substantially smaller, less developed, less liquid, and more volatile than the securities markets of the United States and other more developed countries.  Disclosure and regulatory standards in many respects are less stringent than in the United States.  There also may be a lower level of monitoring and regulation of emerging markets of traders, insiders, and investors.  Enforcement of existing regulations has been extremely limited.

The Funds may invest in securities of foreign issuers directly or in the form of American Depository Receipts (ADRs), European Depository Receipts (EDRs), Global Depository Receipts (GDRs) or other securities representing underlying shares of foreign issuers.  Positions in these securities are not necessarily denominated in the same currency as the common stocks into which they may be converted.  ADRs are receipts typically issued by an American bank or trust company evidencing ownership of the underlying securities.  EDRs are European receipts evidencing a similar arrangement.  GDRs are receipts that may trade in U.S. or non-U.S. markets.  The Funds may invest in sponsored or unsponsored depository receipts.  Generally ADRs, in registered form, are designed for use in the U.S. securities markets and EDRs, in bearer form, are designed for use in European securities markets.

The Funds may invest in both “sponsored” and “unsponsored” depository receipts.  In a sponsored depository receipt, the issuer typically pays some or all of the expenses of the depository and agrees to provide its regular shareholder communications to receipt holders.  An unsponsored depository receipt is created independently of the issuer of the underlying security.  The receipt holders generally pay the expenses of the depository and do not have an undertaking from the issuer of the underlying security to furnish shareholder communications.  Therefore, in the case of an unsponsored depository receipt, a Fund is likely to bear its proportionate share of the expenses of the depository and it may have greater difficulty in receiving shareholder communications than it would have with a sponsored depository receipt.  None of the Funds expects to invest 5% or more of its total assets in unsponsored depository receipts.

The investment performance of a Fund that invests in securities of foreign issuers is affected by the strength or weakness of the U.S. dollar against the currencies of the foreign markets in which its securities trade or in which they are denominated.  For example, if the dollar falls in value relative to the Japanese yen, the dollar value of a yen-denominated stock held in the portfolio will rise even though the price of the stock remains unchanged.  Conversely, if the dollar rises in value relative to the yen, the dollar value of the yen-denominated stock will fall.  (See discussion of transaction hedging and portfolio hedging under “Currency Exchange Transactions,” below.)

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Investors should understand and consider carefully the risks involved in foreign investing.  Investing in foreign securities, positions in which are generally denominated in foreign currencies, and utilization of forward foreign currency exchange contracts involve risks and opportunities not typically associated with investing in U.S. securities.  These considerations include: fluctuations in exchange rates of foreign currencies; possible imposition of exchange control regulation or currency restrictions that would prevent cash from being brought back to the United States; less public information with respect to issuers of securities; less governmental supervision of stock exchanges, securities brokers, and issuers of securities; lack of uniform accounting, auditing, and financial reporting standards; lack of uniform settlement periods and trading practices; less liquidity and frequently greater price volatility in foreign markets than in the United States; possible imposition of foreign taxes; possible investment in securities of companies in developing as well as developed countries; and sometimes less advantageous legal, operational, and financial protections applicable to foreign subcustodial arrangements.  In addition, the costs of investing in foreign securities are higher than the costs of investing in U.S. securities.

Although the Funds try to invest in companies and governments of countries having stable political environments, there is the possibility of expropriation or confiscatory taxation, seizure, or nationalization of foreign bank deposits or other assets, establishment of exchange controls, the adoption of foreign government restrictions, or other adverse political, social, or diplomatic developments that could affect investment in these nations.

CURRENCY EXCHANGE TRANSACTIONS

Each of the Funds may engage in currency exchange transactions to protect against uncertainty in the level of future currency exchange rates.  The Funds may purchase foreign currencies on a spot or forward basis in conjunction with their investments in foreign securities and to hedge against fluctuations in foreign currencies.  The Funds also may buy and sell currency futures contracts and options thereon for such hedging purposes.

A Fund may engage in both “transaction hedging” and “position hedging.”  When it engages in transaction hedging, a Fund enters into foreign currency transactions with respect to specific receivables or payables of the Fund generally arising in connection with purchases or sales of its portfolio securities.  A Fund will engage in transaction hedging when it desires to “lock in” the U.S. dollar price of a security it has agreed to purchase or sell, or the U.S. dollar equivalent of a dividend or interest payment in a foreign currency.  By transaction hedging a Fund attempts to protect itself against a possible loss resulting from an adverse change in the relationship between the U.S. dollar and the applicable foreign currency during the period between the date on which the security is purchased or sold, or on which the dividend or interest payments is declared, and the date on which such payments are made or received.

A Fund may purchase or sell a foreign currency on a spot (or cash) basis at the prevailing spot rate in connection with the settlement of transactions in portfolio securities denominated in that foreign currency.  A Fund may also enter into contracts to purchase or sell foreign currencies at a future date (“forward contracts”) and (if the Fund is so authorized) purchase and sell foreign currency futures contracts.

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For transaction hedging purposes a Fund which is so authorized may also purchase exchange-listed and over-the-counter call and put options on foreign currency futures contracts and on foreign currencies.  Over-the-counter options are considered to be illiquid by the SEC staff.  A put option on a futures contract gives the Fund the right to assume a short position in the futures contract until expiration of the option.  A put option on a currency gives the Fund the right to sell a currency at an exercise price until the expiration of the option.  A call option on a futures contract gives the Fund the right to assume a long position in the futures contract until the expiration of the option.  A call option on a currency gives the Fund the right to purchase a currency at the exercise price until the expiration of the option.

When it engages in position hedging, a Fund enters into foreign currency exchange transactions to protect against a decline in the values of the foreign currencies in which its portfolio securities are denominated (or an increase in the value of currency for securities which the Fund expects to purchase, when the Fund holds cash or short-term investments).  In connection with position hedging, a Fund which is so authorized may purchase put or call options on foreign currency and foreign currency futures contracts and buy or sell forward contracts and foreign currency futures contracts.  A Fund may enter into short sales of a foreign currency to hedge a position in a security denominated in that currency.  In such circumstances, the Fund will maintain, in a segregated account with its custodian, an amount of cash or liquid debt securities equal to the excess of (i) the amount of foreign currency required to cover such short sale position over (ii) the amount of such foreign currency which could then be realized through the sale of the foreign securities denominated in the currency subject to the hedge.  

The precise matching of the amounts of foreign currency exchange transactions and the value of the portfolio securities involved will not generally be possible since the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the dates the currency exchange transactions are entered into and the dates they mature.

It is impossible to forecast with precision the market value of portfolio securities at the expiration or maturity of a forward or futures contract.  Accordingly, it may be necessary for a Fund to purchase additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of the security or securities being hedged is less than the amount of foreign currency the Fund is obligated to deliver and if a decision is made to sell the security or securities and make delivery of the foreign currency.  Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the portfolio security or securities if the market value of such security or securities exceeds the amount of foreign currency the Fund is obligated to deliver.

Transaction and position hedging do not eliminate fluctuations in the underlying prices of the securities which the Fund owns or intends to purchase or sell.  They simply establish a rate of exchange which the Fund can achieve at some future point in time.  Additionally, although these techniques tend to minimize the risk of loss due to a decline in the value of the hedged currency, they tend to limit any potential gain which might result from the increase in value of such currency.

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SYNTHETIC FOREIGN MONEY MARKET POSITIONS

The Funds may invest in money market instruments denominated in foreign currencies.  In addition to, or in lieu of, such direct investment, the Funds may construct a synthetic foreign money market position by (a) purchasing a money market instrument denominated in one currency (generally U.S. dollars) and (b) concurrently entering into a forward contract to deliver a corresponding amount of that currency in exchange for a different currency on a future date and at a specified rate of exchange.  For example, a synthetic money market position in Japanese yen could be constructed by purchasing a U.S. dollar money market instrument and entering concurrently into a forward contract to deliver a corresponding amount of U.S. dollars in exchange for Japanese yen on a specified date and at a specified rate of exchange.  Because of the availability of a variety of highly liquid short-term U.S. dollar money market instruments, a synthetic money market position utilizing such U.S. dollar instruments may offer greater liquidity than direct investment in foreign money market instruments.  The results of a direct investment in a foreign currency and a concurrent construction of a synthetic position in such foreign currency, in terms of both income yield and gain or loss from changes in currency exchange rates, in general should be similar, but would not be identical, because the components of the alternative investments would not be identical.  Except to the extent a synthetic foreign money market position consists of a money market instrument denominated in a foreign currency, the synthetic foreign money market position shall not be deemed a “foreign security” for purposes of the policies that, under normal conditions: U.S. Smaller Companies will not invest more than 20% of its net assets in foreign securities; Wanger Select will not invest more than 25% of its net assets, valued at the time of investment, in foreign securities; Wanger International Small Cap will generally invest at least 80% of its net assets in foreign securities; and Wanger International Select will invest at least 65% of its net assets (plus any borrowings for investment purposes) in foreign securities.  

OPTIONS, FUTURES AND OTHER DERIVATIVES

Each Fund may purchase and write both call options and put options on securities, indexes and foreign currencies, and enter into interest rate, index and foreign currency futures contracts and options on such futures contracts (futures options) in order to achieve its investment objective, to provide additional revenue, or to hedge against changes in security prices, interest rates or currency exchange rates.  A Fund also may use other types of options, futures contracts, futures options, and other types of forward or investment contracts linked to individual securities, interest rates, foreign currencies, indices or other benchmarks (derivative products) currently traded or subsequently developed and traded, provided the Trustees determine that their use is consistent with the Fund’s investment objective.

Options

A Fund may purchase and write both put and call options on securities, indexes or foreign currencies in standardized contracts traded on recognized securities exchanges, boards of trade or similar entities, or quoted on NASDAQ.  A Fund also may purchase agreements, sometimes called cash puts, which may accompany the purchase of a new issue of bonds from a dealer that the Fund might buy as a temporary defensive measure.  

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An option on a security (or index or foreign currency) is a contract that gives the purchaser (holder) of the option, in return for a premium, the right to buy from (call) or sell to (put) the seller (writer) of the option the security underlying the option (or the cash value of the index or a specified quantity of the foreign currency) at a specified exercise price at any time during the term of the option (normally not exceeding nine months).  The writer of an option on an individual security or on a foreign currency has the obligation upon exercise of the option to deliver the underlying security or foreign currency upon payment of the exercise price or to pay the exercise price upon delivery of the underlying security or foreign currency.  Upon exercise, the writer of an option on an index is obligated to pay the difference between the cash value of the index and the exercise price multiplied by the specified multiplier for the index option.  (An index is designed to reflect specified facets of a particular financial or securities market, a specific group of financial instruments or securities, or certain other economic indicators.)

A Fund will write call options and put options only if they are “covered.”  For example, in the case of a call option on a security, the option is “covered” if the Fund owns the security underlying the call or has an absolute and immediate right to acquire that security without additional cash consideration upon conversion or exchange of other securities held in its portfolio (or, if additional cash consideration is required, cash or cash equivalents in such amount are held in a segregated account by its custodian).

If an option written by a Fund expires, the Fund realizes a capital gain equal to the premium received at the time the option was written.  If an option purchased by a Fund expires, the Fund realizes a capital loss equal to the premium paid.

Prior to the earlier of exercise or expiration, an option may be closed out by an offsetting purchase or sale of an option of the same series (type, exchange, underlying security, currency or index, exercise price and expiration).  There can be no assurance, however, that a closing purchase or sale transaction can be effected when a Fund desires.

A Fund will realize a capital gain from a closing purchase transaction if the cost of the closing option is less than the premium received from writing the option, or, if it is more, the Fund will realize a capital loss.  If the premium received from a closing sale transaction is more than the premium paid to purchase the option, the Fund will realize a capital gain or, if it is less, the Fund will realize a capital loss.  The principal factors affecting the market value of a put or a call option include supply and demand, interest rates, the current market price of the underlying security, currency or index in relation to the exercise price of the option, the volatility of the underlying security, currency or index, and the time remaining until expiration.

A put or call option purchased by a Fund is an asset of the Fund, valued initially at the premium paid for the option.  The premium received for an option written by a Fund is recorded as a deferred credit.  The value of an option purchased or written is marked-to-market daily and is valued at the closing price on the exchange on which it is traded or, if not traded on an exchange or no closing price is available, at the mean between the last bid and asked prices.

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OTC Derivatives

The Funds may buy and sell over-the-counter (OTC) derivatives (derivatives not traded on exchanges).  Unlike exchange-traded derivatives, which are standardized with respect to the underlying instrument, expiration date, contract size, and strike price, the terms of OTC derivatives generally are established through negotiation with the other party to the contract.  This type of arrangement allows a Fund greater flexibility to tailor an instrument to its needs; OTC derivatives generally involve greater credit risk than exchange-traded derivatives, which are guaranteed by the clearing organization of the exchanges where they are traded.  Each Fund will limit its investments so that no more than 5% of its total assets will be placed at risk in the use of OTC derivatives.  See “Illiquid and Restricted Securities” below for more information on the risks associated with investing in OTC derivatives.

Risks Associated with Options

There are several risks associated with transactions in options.  For example, there are significant differences between the securities and the currency markets and the options markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve its objectives.  A decision as to whether, when and how to use options involves the exercise of skill and judgment, and even a well-conceived transaction may be unsuccessful to some degree because of market behavior or unexpected events.

There can be no assurance that a liquid market will exist when a Fund seeks to close out an option position.  If a Fund were unable to close out an option that it had purchased, it would have to exercise the option in order to realize any profit or the option would expire and become worthless.  If a Fund were unable to close out a covered call option that it had written on a security or a foreign currency, it would not be able to sell the underlying security or currency unless the option expired.  As the writer of a covered call option on a security, a Fund foregoes, during the option’s life, the opportunity to profit from increases in the market value of the security covering the call option above the sum of the premium and the exercise price of the call.  As the writer of a covered call option on a foreign currency, the Fund foregoes, during the option’s life, the opportunity to profit from appreciation of the currency covering the call.

If trading were suspended in an option purchased or written by a Fund, the Fund would not be able to close out the option.  If restrictions on exercise were imposed, the Fund might be unable to exercise the option.  Except to the extent that a call option on an index written by the Fund is covered by an option on the same index purchased by the Fund, movements in the index may result in a loss to the Fund; however, such losses may be mitigated by changes in the value of the Fund’s portfolio securities during the period the option was outstanding.

Futures Contracts and Options on Futures Contracts

A Fund may use interest rate, index and foreign currency futures contracts.  An interest rate, index or foreign currency futures contract provides for the future sale by one party and purchase by another party of a specified quantity of a financial instrument, the cash value of an

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index (5) or a specified quantity of a foreign currency at a specified price and time.  A public market exists in futures contracts covering a number of indexes (including, but not limited to, the Standard & Poor’s 500 Stock Index, the Value Line Composite Index and the New York Stock Exchange Composite Index), certain financial instruments (including, but not limited to:  U.S. Treasury bonds, U.S. Treasury notes and Eurodollar certificates of deposit) and foreign currencies.  Other index and financial instrument futures contracts are available and it is expected that additional futures contracts will be developed and traded.

A Fund may purchase and write call and put futures options.  Futures options possess many of the same characteristics as options on securities, indexes and foreign currencies (discussed above).  A futures option gives the holder the right, in return for the premium paid, to assume a long position (call) or a short position (put) in a futures contract at a specified exercise price at any time during the period of the option.  Upon exercise of a call option, the holder acquires a long position in the futures contract and the writer is assigned the opposite short position.  In the case of a put option, the opposite is true.

To the extent required by regulatory authorities having jurisdiction over a Fund, such Fund will limit its use of futures contracts and futures options to hedging transactions.  For example, a Fund might use futures contracts to hedge against or gain exposure to fluctuations in the general level of stock prices or anticipated changes in interest rates or currency exchange rates which might adversely affect either the value of the Fund’s securities or the price of the securities that the Fund intends to purchase.  Although other techniques could be used to reduce that Fund’s exposure to stock price and interest rate and currency fluctuations, the Fund may be able to hedge its exposure more effectively and perhaps at a lower cost by using futures contracts and futures options.

A Fund will only enter into futures contracts and futures options that are standardized and traded on an exchange, board of trade or similar entity or quoted on an automated quotation system.

The success of any futures transaction depends on CWAM correctly predicting changes in the level and direction of stock prices, interest rates, currency exchange rates and other factors.  Should those predictions be incorrect, a Fund’s return might have been better had the transaction not been attempted; however, in the absence of the ability to use futures contracts, CWAM might have taken portfolio actions in anticipation of the same market movements with similar investment results but, presumably, at greater transaction costs.

When a purchase or sale of a futures contract is made by a Fund, the Fund is required to deposit with its custodian (or broker, if legally permitted) a specified amount of cash or U.S. Government securities or other securities acceptable to the broker (initial margin).  The margin required for a futures contract is set by the exchange on which the contact is traded and may be modified during the term of the contract.  The initial margin is in the nature of a performance


(5)                                  A futures contract on an index is an agreement between two parties to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of the last trading day of the contract and the price at which the index contract was originally written.  Although the value of a securities index is a function of the value of certain specified securities, no physical delivery of those securities is made.

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bond or good faith deposit on the futures contract, which is returned to the Fund upon termination of the contract, assuming all contractual obligations have been satisfied.  A Fund expects to earn interest income on its initial margin deposits.  A futures contract held by a Fund is valued daily at the official settlement price of the exchange on which it is traded.  Each day the Fund pays or receives cash, called “variation margin,” equal to the daily change in value of the futures contract.  This process is known as “marking-to-market.”  Variation margin paid or received by a Fund does not represent a borrowing or loan by the Fund but is instead settlement between the Fund and the broker of the amount one would owe the other if the futures contract had expired at the close of the previous day.  In computing daily net asset value, a Fund will mark-to-market its open futures positions.

The Funds are also required to deposit and maintain margin with respect to put and call options on futures contracts written by it.  Such margin deposits will vary depending on the nature of the underlying futures contract (and the related initial margin requirements), the current market value of the option and other futures positions held by the Fund.

Although some futures contracts call for making or taking delivery of the underlying property, usually these obligations are closed out prior to delivery by offsetting purchases or sales of matching futures contracts (same exchange, underlying property and delivery month).  If an offsetting purchase price is less than the original sale price, the Fund engaging in the transaction realizes a capital gain, or if it is more, the Fund realizes a capital loss.  Conversely, if an offsetting sale price is more than the original purchase price, the Fund engaging in the transaction realizes a capital gain, or if it is less, the Fund realizes a capital loss.  The transaction costs must also be included in these calculations.

Risks Associated with Futures

There are several risks associated with the use of futures contracts and futures options.  A purchase or sale of a futures contract may result in losses in excess of the amount invested in the futures contract.  There can be no guarantee that there will be a correlation between price movements in the hedging vehicle and in the portfolio securities being hedged.  In addition, there are significant differences between the securities and the currency markets and the futures markets that could result in an imperfect correlation between the markets, causing a given transaction not to achieve its objectives.  The degree of imperfection of correlation depends on circumstances such as:  variations in speculative market demand for futures, futures options and the related securities or currencies, including technical influences in futures and futures options trading and differences between the Fund’s investments being hedged and the securities or currencies underlying the standard contracts available for trading.  For example, in the case of index futures contracts, the composition of the index, including the issuers and the weighting of each issue, may differ from the composition of the Fund’s portfolio, and, in the case of interest rate futures contracts, the interest rate levels, maturities, and creditworthiness of the issues underlying the futures contract may differ from the financial instruments held in the Fund’s portfolio.  A decision as to whether, when and how to use futures contracts involves the exercise of skill and judgment, and even a well-conceived transaction may be unsuccessful to some degree because of market behavior or unexpected security price, interest rate or currency exchange rate trends.

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Futures exchanges may limit the amount of fluctuation permitted in certain futures contract prices during a single trading day.  The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day’s settlement price at the end of the current trading session.  Once the daily limit has been reached in a futures contract subject to the limit, no more trades may be made on that day at a price beyond that limit.  The daily limit governs only price movements during a particular trading day and therefore does not limit potential losses because the limit may work to prevent the liquidation of unfavorable positions.  For example, futures prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of positions and subjecting some holders of futures contracts to substantial losses.  Stock index futures contracts are not normally subject to such daily price change limitations.

There can be no assurance that a liquid market will exist at a time when a Fund seeks to close out a futures or futures option position.  The Fund would be exposed to possible loss on the position during the interval of inability to close, and would continue to be required to meet margin requirements until the position is closed.  In addition, many of the contracts discussed above are relatively new instruments without a significant long-term trading history.  As a result, there can be no assurance that an active secondary market will develop or continue to exist.

Limitations on Options and Futures

A Fund will not enter into a futures contract or purchase an option if, immediately thereafter, the initial margin deposits for futures contracts held by that Fund plus premiums paid by it for open futures option positions, less the amount by which any such positions are “in-the-money,”(6) would exceed 5% of the Fund’s total assets.

When purchasing a futures contract or writing a put option on a futures contract, a Fund must maintain with its custodian (or broker, if legally permitted) cash or cash equivalents (including any margin) equal to the market value of such contract.  When writing a call option on a futures contract, the Fund similarly will maintain with its custodian cash or cash equivalents (including any margin) equal to the amount by which such option is in-the-money until the option expires or is closed out by the Fund.

A Fund may not maintain open short positions in futures contracts, call options written on futures contracts or call options written on indexes if, in the aggregate, the market value of all such open positions exceeds the current value of the securities in its portfolio, plus or minus unrealized gains and losses on the open positions, adjusted for the historical relative volatility of the relationship between the portfolio and the positions.  For this purpose, to the extent the Fund has written call options on specific securities in its portfolio, the value of those securities will be deducted from the current market value of the securities portfolio.

To avoid the Fund and its principals being deemed a “commodity pool operator,” the Trust and its Trustees have claimed the exclusion from the definition of the term “commodity pool operator” pursuant to Rule 4.5(c)(2) and, therefore, they are not subject to registration or regulation as a commodity pool operator under the Commodity Exchange Act, as amended. For each Fund of the Trust,


(6) A call option is “in-the-money” if the value of the futures contract that is the subject of the option exceeds the exercise price.  A put option is “in-the-money” if the exercise price exceeds the value of the futures contract that is the subject of the option.

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the aggregate initial margin and premiums required to establish positions in commodity futures and commodity options contracts will not exceed 5% of the fair market value of the assets of a Fund, after taking into account unrealized profits and unrealized losses on any such contracts it has entered into [in the case of an option that is in-the-money at the time of purchase, the in-the-money amount (as defined in Section 190.01(x) of the Commodity Futures Trading Commission Regulations) may be excluded in computing such 5%].

Taxation of Options and Futures

If a Fund exercises a call or put option it holds, the premium paid for the option is added to the cost basis of the security purchased (call) or deducted from the proceeds of the security sold (put).  For cash settlement options and futures options exercised by a Fund, the difference between the cash received at exercise and the premium paid is a capital gain or loss.

If a call or put option written by a Fund is exercised, the premium is included in the proceeds of the sale of the underlying security (call) or reduces the cost basis of the security purchased (put).  For cash settlement options and futures options written by a Fund, the difference between the cash paid at exercise and the premium received is a capital gain or loss.

Entry into a closing purchase transaction will result in capital gain or loss.  If an option written by a Fund was in-the-money at the time it was written and the security covering the option was held for more than the long-term holding period prior to the writing of the option, any loss realized as a result of a closing purchase transaction will be long-term.  The holding period of the securities covering an in-the-money option will not include the period of time the option is outstanding.

If a Fund writes an equity call option (7) other than a “qualified covered call option,” as defined in the Internal Revenue Code, any loss on such option transaction, to the extent it does not exceed the unrealized gains on the securities covering the option, may be subject to deferral until the securities covering the option have been sold.

A futures contract held until delivery results in capital gain or loss equal to the difference between the price at which the futures contract was entered into and the settlement price on the earlier of delivery notice date or expiration date.  If a Fund delivers securities under a futures contract, the Fund also realizes a capital gain or loss on those securities.

For federal income tax purposes, a Fund generally is required to recognize as income for each taxable year its net unrealized gains and losses as of the end of the year on futures, futures options and non-equity options positions (year-end mark-to-market).  Generally, any gain or loss recognized with respect to such positions (either by year-end mark-to-market or by actual closing of the positions) is considered to be 60% long-term and 40% short-term, without regard to the  


(7) An equity option is defined to mean any option to buy or sell stock, and any other option the value of which is determined by reference to an index of stocks of the type that is ineligible to be traded on a commodity futures exchange (e.g., an option contract on a sub-index based on the price of nine hotel-casino stocks).  The definition of equity option excludes options on broad-based stock indexes (such as the Standard & Poor’s 500 Stock Index).

 

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holding periods of the contracts.  However, in the case of positions classified as part of a “mixed straddle,” the recognition of losses on certain positions (including options, futures and options positions on futures, the related securities and certain successor positions thereto) may be deferred to a later taxable year.  Sale of futures contracts or writing of call options (or futures call options) or buying put options (or futures put options) that are intended to hedge against a change in the value of securities held by a Fund: (1) will affect the holding period of the hedged securities; and (2) may cause unrealized gain or loss on such securities to be recognized upon entry into the hedge.

If a Fund were to enter into a short index future, short index futures option or short index option position and the Fund’s portfolio were deemed to “mimic” the performance of the index underlying such contract, the option or futures contract position and the Fund’s stock positions would be deemed to be positions in a mixed straddle, subject to the above-mentioned loss deferral rules.

In order for a Fund to continue to qualify for federal income tax treatment as a regulated investment company, at least 90% of its gross income for a taxable year must be derived from qualifying income; i.e., dividends, interest, income derived from loans of securities, and gains from the sale of securities or foreign currencies, or other income (including but not limited to gains from options and futures contracts).  Any net gain realized from futures (or futures options) contracts will be considered gain from the sale of securities and therefore be qualifying income for purposes of the 90% requirement.

Swap Agreements

A swap agreement is generally individually negotiated and structured to include exposure to one or more of a variety of different types of investments or market factors.  Depending on its structure, a swap agreement may increase or decrease a Fund’s exposure to changes in the value of an index of securities in which the Fund might invest, the value of a particular security or group of securities, or foreign currency values.  Swap agreements can take many different forms and are known by a variety of names.  A Fund may enter into any form of swap agreement if CWAM determines it is consistent with its investment objective and policies, but each Fund will limit its use of swap agreements so that no more than 5% of its total assets will be invested in such agreements.

A swap agreement tends to shift a Fund’s investment exposure from one type of investment to another.  For example, if a Fund agrees to exchange payments in dollars at a fixed rate for payments in a foreign currency the amount of which is determined by movements of a foreign securities index, the swap agreement would tend to increase the Fund’s exposure to foreign stock market movements and foreign currencies.  Depending on how it is used, a swap agreement may increase or decrease the overall volatility of a Fund’s investments and its NAV.

The performance of a swap agreement is determined by the change in the specific currency, market index, security, or other factors that determine the amounts of payments due to and from the Fund.  If a swap agreement calls for payments by a Fund, the Fund must be prepared to make such payments when due.  If the counterparty’s creditworthiness declines, the value of a swap agreement would be likely to decline, potentially resulting in a loss.  CWAM  

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expects to be able to eliminate each Fund’s exposure under any swap agreement either by assignment or by other disposition, or by entering into an offsetting swap agreement with the same party or a similarly creditworthy party.

Each Fund will segregate its assets to cover its current obligations under a swap agreement.  If a Fund enters into a swap agreement on a net basis, it will segregate assets with a daily value at least equal to the excess, if any, of its accumulated obligations under the swap agreement over the accumulated amount the Fund is entitled to receive under the agreement.  If a Fund enters into a swap agreement on other than a net basis, it will segregate assets with a value equal to the full amount of its accumulated obligations under the agreement.

Short Sales Against the Box

Each Fund may make short sales of securities if, at all times when a short position is open, the Fund owns an equal amount of such securities or securities convertible into or exchangeable for, without payment of any further consideration, securities of the same issue as, and equal in amount to, the securities sold short.  This technique is called selling short “against the box.”  Although permitted by their investment restrictions, the Funds do not currently intend to sell securities short.

In a short sale against the box, a Fund does not deliver from its portfolio the securities sold and does not receive immediately the proceeds from the short sale.  Instead, the Fund borrows the securities sold short from a broker-dealer through which the short sale is executed, and the broker-dealer delivers those securities, on behalf of the Fund, to the purchaser of the securities.  The broker-dealer is entitled to retain the proceeds from the short sale until the Fund delivers to the broker-dealer the securities sold short.  In addition, the Fund is required to pay to the broker-dealer the amount of any dividends paid on shares sold short.  Finally, to secure its obligation to deliver to the broker-dealer the securities sold short, the Fund must deposit and continuously maintain in a separate account with its custodian an equivalent amount of the securities sold short or securities convertible into or exchangeable for the securities without the payment of additional consideration.  The Fund is said to have a short position in the securities sold until it delivers to the broker-dealer the securities sold, at which time the Fund receives the proceeds of the sale.  Because the Fund ordinarily will want to continue to hold securities in its portfolio that are sold short, the Fund will normally close out a short position by purchasing on the open market and delivering to the broker-dealer an equal amount of the securities sold short, rather than by delivering portfolio securities.

Short sales may protect a Fund against the risk of losses in the value of its portfolio securities because any unrealized losses with respect to the portfolio securities should be wholly or partially offset by a corresponding gain in the short position.  However, any potential gains in the portfolio securities should be wholly or partially offset by a corresponding loss in the short position.  The extent to which such gains or losses are offset will depend upon the amount of securities sold short relative to the amount the Fund owns, either directly or indirectly, and, in the case where the Fund owns convertible securities, changes in the conversion premium.  A Fund will incur transaction costs in connection with short sales.

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In addition to enabling a Fund to hedge against market risk, a short sale may afford the Fund an opportunity to earn additional current income to the extent the Fund is able to enter into an arrangement with the broker-dealer through which the short sale is executed to receive income with respect to the proceeds of the short sale during the period the Fund’s short position remain open.

The Code imposes constructive sale treatment for federal income tax purposes on certain hedging strategies with respect to appreciated securities.  Under these rules taxpayers will recognize gain, but not loss, with respect to securities if they enter into short sales or “offsetting notional principal contracts” (as defined by the Code) with respect to the same or substantially identical property, or if they enter into such transactions and then acquire the same or substantially identical property.  The Secretary of the Treasury is authorized to promulgate regulations that will treat as constructive sales certain transactions that have substantially the same effect as short sales.

DEBT SECURITIES

The Funds may invest in debt securities, including lower-rated securities (i.e., securities rated BB or lower by Standard & Poor’s Corporation (S&P) or Ba or lower by Moody’s Investor Services, Inc. (Moody’s), commonly called “junk bonds”), and securities that are not rated.  There are no restrictions as to the ratings of debt securities acquired by the Funds or the portion of each Fund’s assets that may be invested in debt securities in a particular ratings category.  No Fund intends to invest more than 20% of its total assets in debt securities or more than 5% of its total assets in securities rated at or lower than the lowest investment grade.

Securities rated BBB or Baa are considered to be medium grade and to have speculative characteristics.  Lower-rated debt securities are predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal.  Investment in medium- or lower-quality debt securities involves greater investment risk, including the possibility of issuer default or bankruptcy.  An economic downturn could severely disrupt the market for such securities and adversely affect the value of such securities.  In addition, lower-quality bonds are less sensitive to interest rate changes than higher-quality instruments and generally are more sensitive to adverse economic changes or individual corporate developments.  During a period of adverse economic changes, including a period of rising interest rates, the junk bond market may be severely disrupted, and issuers of such bonds may experience difficulty in servicing their principal and interest payment obligations.

Medium- and lower-quality debt securities may be less marketable than higher quality debt securities because the market for them is less broad.  The market for unrated debt securities is even narrower.  During periods of thin trading in these markets, the spread between bid and asked prices is likely to increase significantly, and a Fund may have greater difficulty selling its portfolio securities.  The market value of these securities and their liquidity may be affected by adverse publicity and investor perceptions.

A rating of a rating service represents the service’s opinion as to the credit quality of the security being rated.  However, the ratings are general and are not absolute standards of quality or guarantees as to the creditworthiness of an issuer. Consequently, CWAM believes that the  

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quality of debt securities in which the Funds invest should be continuously reviewed.  A rating is not a recommendation to purchase, sell, or hold a security, because it does not take into account market value or suitability for a particular investor.  When a security has received a rating from more than one service, each rating should be evaluated independently.  Ratings are based on current information furnished by the issuer or obtained by the ratings services from other sources which they consider reliable.  Ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of, such information, or for other reasons.

The following is a description of the characteristics of ratings used by Moody’s and S&P.

Moody’s Ratings

Aaa—Bonds rated Aaa are judged to be the best quality.  They carry the smallest degree of investment risk and are generally referred to as “gilt-edge”.  Interest payments are protected by a large or by an exceptionally stable margin and principal is secure.  Although the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such bonds.

Aa—Bonds rated Aa are judged to be high quality by all standards.  Together with the Aaa group they comprise what are generally known as high-grade bonds.  They are rated lower than the best bonds because margins of protection may not be as large as in Aaa bonds or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long term risk appear somewhat larger than in Aaa bonds.

A—Bonds rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations.  Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future.

Baa—Bonds rated Baa are considered as medium-grade obligations, (i.e., they are neither highly protected nor poorly secured).  Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time.  Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.

Ba—Bonds rated Ba are judged to have speculative elements; their future cannot be considered as well assured.  Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future.  Uncertainty of position characterizes bonds in this class.

B—Bonds rated B generally lack characteristics of the desirable investment.  Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.

Caa—Bonds rated Caa are of poor standing.  Such bonds may be in default or there may be present elements of danger with respect to principal or interest.

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Ca—Bonds rated Ca represent obligations which are speculative in a high degree.  Such bonds are often in default or have other marked shortcomings.

C—Bonds rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.

S&P Ratings

AAA—Bonds rated AAA have the highest rating.  Capacity to pay principal and interest is extremely strong.

AA—Bonds rated AA have a very strong capacity to pay principal and interest and differ from AAA bonds only in small degree.

A—Bonds rated A have a strong capacity to pay principal and interest, although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than bonds in higher rated categories.

BBB—Bonds rated BBB are regarded as having an adequate capacity to pay principal and interest.  However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to meet its financial commitments.

BB—B—CCC—CC—Bonds rated BB, B, CCC and CC are regarded, on balance, as having significant speculative characteristics.  BB indicates the lowest degree of speculation among such bonds and CC the highest degree of speculation.  Although such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.

REPURCHASE AGREEMENTS

A repurchase agreement involves a transaction in which a Fund purchases a security from a bank or recognized securities dealer and simultaneously commits to resell that security to the bank or dealer at an agreed-upon price, date, and market rate of interest unrelated to the coupon rate or maturity of the purchased security.  Although repurchase agreements carry certain risks not associated with direct investments in securities, the Funds will enter into repurchase agreements only with banks, dealers, and clearing corporations that CWAM believes present minimal credit risks in accordance with guidelines approved by the Board of Trustees. CWAM will review and monitor the creditworthiness of such institutions, and will consider the capitalization of the institution, CWAM’s prior dealings with the institution, any rating of the institution’s senior long-term debt by independent rating agencies, and other relevant factors.

A Fund will invest in a repurchase agreement only if it is collateralized at all times in an amount at least equal to the repurchase price plus accrued interest.  To the extent that the proceeds from any sale of such collateral upon a default in the obligation to repurchase were less than the repurchase price, the Fund would suffer a loss.  If the financial institution that is party to the repurchase agreement petitions for bankruptcy or otherwise becomes subject to bankruptcy or other liquidation proceedings, there may be restrictions on the Fund’s ability to sell the collateral and the Fund could suffer a loss.  However, with respect to financial institutions whose  

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bankruptcy or liquidation proceedings are subject to the U.S. Bankruptcy Code, each Fund intends to comply with provisions under such Code that would allow it immediately to resell such collateral.

“WHEN-ISSUED” SECURITIES AND COMMITMENT AGREEMENTS; REVERSE REPURCHASE AGREEMENTS

Each Fund may purchase and sell securities on a when-issued and delayed-delivery basis.

When-issued or delayed-delivery transactions arise when securities are purchased or sold by the Funds with payment and delivery taking place in the future in order to secure what is considered to be an advantageous price and yield to the Funds at the time of entering into the transaction.  However, yields available in the market when delivery takes place may be higher than the yields on securities to be delivered.  When the Funds engage in when-issued and delayed-delivery transactions, the Funds rely on the buyer or seller, as the case may be, to consummate the sale.  Failure to do so may result in the Funds missing the opportunity to obtain a price or yield considered to be advantageous.  When-issued and delayed-delivery transactions may be expected to occur a month or more before delivery is due.  However, no payment or delivery is made by the Funds until they receive payment or delivery from the other party to the transaction.  A separate account of liquid assets equal to the value of such purchase commitments will be maintained with the Trust’s custodian until payment is made and will not be available to meet redemption requests.  When-issued and delayed-delivery agreements are subject to risks from changes in value based upon changes in the level of interest rates and other market factors, both before and after delivery.  The Funds do not accrue any income on such securities prior to their delivery.  To the extent a Fund engages in when-issued and delayed-delivery transactions, it will do so for the purpose of acquiring portfolio securities consistent with its investment objectives and policies and not for the purpose of investment leverage.

A Fund may enter into reverse repurchase agreements with banks and securities dealers.  A reverse repurchase agreement is a repurchase agreement in which the Fund is the seller of, rather than the investor in, securities and agrees to repurchase them at an agreed-upon time and price.  Use of a reverse repurchase agreement may be preferable to a regular sale and later repurchase of securities because it avoids certain market risks and transaction costs.

At the time a Fund enters into a binding obligation to purchase securities on a when-issued basis or enters into a reverse repurchase agreement, assets of the Fund having a value at least as great as the purchase price of the securities to be purchased will be segregated on the books of the Fund and held by its custodian throughout the period of the obligation.  The use of these investment strategies, as well as any borrowing by the Fund, may increase NAV fluctuation.  The Funds have no present intention of investing in reverse repurchase agreements.

TEMPORARY STRATEGIES

The Funds have the flexibility to respond promptly to changes in market and economic conditions.  In the interest of preserving shareholders’ capital, CWAM may employ a temporary defensive investment strategy if it determines such a strategy to be warranted.  Pursuant to such a defensive strategy, each Fund temporarily may hold cash (U.S. dollars, foreign currencies, multinational currency units) and/or invest up to 100% of its assets in high quality debt securities

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or money market instruments of U.S. or foreign issuers, and most or all of the Fund’s investments may be made in the United States and denominated in U.S. dollars.  It is impossible to predict whether, when, or for how long a Fund might employ defensive strategies.

In addition, pending investment of proceeds from new sales of Fund shares or to meet ordinary daily cash needs, a Fund temporarily may hold cash (U.S. dollars, foreign currencies, or multinational currency units) and may invest any portion of its assets in money market instruments.

ILLIQUID AND RESTRICTED SECURITIES

No Fund may invest in illiquid securities, including restricted securities and OTC derivatives, if as a result, they would comprise more than 15% of the value of its net assets.  An illiquid security generally is one that cannot be sold in the ordinary course of business within seven days at approximately the value assigned to it in calculations of a Fund’s net asset value.  Repurchase agreements maturing in more than seven days, OTC derivatives and restricted securities are generally illiquid; other types of investments may also be illiquid from time to time.  If, through the appreciation of illiquid securities or the depreciation of liquid securities, a Fund should be in a position where more than 15% of the value of its net assets are invested in illiquid assets, that Fund will take appropriate steps to protect liquidity.  Illiquid securities are priced at a fair value determined in good faith by the Board of Trustees or its delegate.

Restricted securities are acquired through private placement transactions, directly from the issuer or from security holders, generally at higher yields or on terms more favorable to investors than comparable publicly traded securities.  Privately placed securities are not readily marketable and ordinarily can be sold only in privately negotiated transactions to a limited number of purchasers or in public offerings made pursuant to an effective registration statement under the Securities Act of 1933, as amended (the 1933 Act).  Private or public sales of such securities by a Fund may involve significant delays and expense.  Private sales require negotiations with one or more purchasers and generally produce less favorable prices than the sale of comparable unrestricted securities.  Public sales generally involve the time and expense of preparing and processing a registration statement under the 1933 Act and may involve the payment of underwriting commissions; accordingly, the proceeds may be less than the proceeds from the sale of securities of the same class which are freely marketable.  Restricted securities are valued at a fair value determined in good faith by the Board of Trustees or its delegate.  None of the Funds will invest more than 15% of its total assets (valued at the time of investment) in restricted securities.

Notwithstanding the above, a Fund may purchase securities that have been privately placed but that are eligible for purchase and sale under Rule 144A under the 1933 Act.  That rule permits certain qualified institutional buyers, such as the Funds, to trade in privately placed securities that have not been registered for sale under the 1933 Act.  CWAM, under the supervision of the Board of Trustees, will consider whether securities purchased under Rule 144A are illiquid and thus subject to each Fund’s restriction of investing no more than 15% of the value of its assets in illiquid securities.  A determination of whether a Rule 144A security is liquid or not is a question of fact.  In making the determination CWAM will consider the trading markets for the specific security taking into account the unregistered nature of a Rule 144A

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security.  In addition, CWAM could consider (1) the frequency of trades and quotes, (2) the number of dealers and potential purchasers, (3) the dealer undertakings to make a market, and (4) the nature of the security and of market place trades (e.g., the time needed to dispose of the security, the method of soliciting offers, and the mechanics of transfer).  The liquidity of Rule 144A securities would be monitored and if, as a result of changed conditions, it were determined that a Rule 144A security was no longer liquid, a Fund’s holding of the security would be reviewed to determine what, if any, steps were required to assure that the Fund did not invest more than 15% of its assets in illiquid securities.  Investing in Rule 144A securities could have the effect of increasing the amount of a Fund’s assets invested in illiquid securities if qualified institutional buyers were unwilling to purchase such securities.

LINE OF CREDIT

The Trust maintains a line of credit with a group of banks to permit borrowing on a temporary basis to meet share redemption requests in circumstances in which temporary borrowing may be preferable to liquidation of portfolio securities.  Any borrowings under that line of credit by the Funds would be subject to the Funds’ restrictions on borrowing under “Investment Restrictions,” above.

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APPENDIX B

Columbia Wanger Asset Management, L.P. (“CWAM”)

Policy and Procedures Manual

A.            ADMINISTRATION

VOTING CLIENT AND FUND PROXIES

 Primary Responsibility

 

CWAM Stock Analyst/Portfolio Manager

 Secondary Responsibility

 

CWAM Chief Investment Officer

 Oversight Responsibility

 

CWAM Chief Operating Officer and Chief
Compliance Officer

 Issue Date

 

8/01/03; as amended by the Columbia Acorn
Trust on 3/06/07; as amended by the Wanger
Advisors Trust on 3/06/07

 

POLICY:

All proxies for client securities for which Columbia Wanger Asset Management, L.P. (“CWAM”) has been granted authority to vote shall be voted in a manner considered to be in the best interests of CWAM’s clients, including the Columbia Acorn Funds (“Acorn”) and Wanger Advisor Trust Funds (“WAT”) and their shareholders, without regard to any benefit to CWAM or its affiliates. Where CWAM retains voting authority, as for most client securities, CWAM shall examine each recommendation and vote against management’s recommendation, if, in its judgment, approval or adoption of the recommendation would be expected to impact adversely the current or potential market value of the issuer’s securities.  References to the best interest of a client refer to the interest of the client in terms of the potential economic return on the client’s investment. In the event a client believes that its other interests require a different vote, CWAM shall vote as the client instructs.  In limited cases where in CWAM is required to adhere to regulatory restrictions over ownership limits of certain securities, CWAM may delegate voting authority to an independent third party to vote in the shareholders best interest.

CWAM addresses potential material conflicts of interest by having each individual stock analyst review and vote each proxy for the stocks that he/she follows.  For those proposals where the analyst is voting against management’s recommendation or where there is a variance from the guidelines contained herein, the CWAM Proxy Committee will determine the vote in the best interest of CWAM’s clients, without consideration of any benefit to CWAM, its affiliates or its other clients.

67




OVERVIEW:

CWAM’s policy is based upon its fiduciary obligation to act in its clients’ best interests and rules under the Investment Company Act of 1940 and the Investment Advisers Act of 1940, which impose obligations with respect to proxy voting on investment advisers and investment companies.

PROCEDURES:

I.                                         ACCOUNT POLICIES

Except as otherwise directed by the client, CWAM or independent third party, ISS delegated to vote in place of CWAM shall vote as follows:

Separately Managed Accounts

CWAM or ISS shall vote proxies on securities held in its separately managed accounts where the client has given CWAM proxy voting authority.  CWAM currently has authority to vote proxies for the Fairfax County Employees’ Retirement System and Fleet Boston Financial Pension Plan but does not have authority to vote proxies for the State of Oregon.

Columbia Acorn Trust/Wanger Advisors Trust

CWAM or ISS shall vote proxies for portfolio securities held in the Acorn and WAT funds.

CWAM Offshore Funds

CWAM or ISS shall vote proxies on securities held in the Wanger Investment Company PLC (Wanger US Smaller Companies and Wanger European Smaller Companies) and Banque Du Louvre Multi Select Funds.  CWAM has not been given authority to vote proxies on securities held in the New America Small Caps Fund.

CWAM Subadvised Mutual Fund Accounts

The authority to vote proxies on securities held in the RiverSource International Aggressive Growth Fund is reserved to the client.  CWAM or ISS has authority to vote proxies on securities held in the Optimum Small Cap Growth Fund.

II.                                     PROXY COMMITTEE

CWAM has established a Proxy Committee, which consists of the Chief Investment Officer, the Chief Operating Officer and the Chief Compliance Officer of CWAM.  For proxy voting purposes only, the Proxy Committee will also include the analyst who follows the portfolio security on which to be voted.  The director of domestic research may serve as an alternate member of the Proxy Committee for voting purposes.

The functions of the Proxy Committee shall include, in part,

(a)          direction of the vote on proposals where there has been a recommendation to the Committee not to vote according to the Voting Guidelines,

68




(b)         annual review of this Policy and Procedures Manual to ensure consistency with internal policies and legal and regulatory requirements,

(c)          annual review of existing Voting Guidelines and development of additional Voting Guidelines to assist in the review of proxy proposals, and

(d)         development and modification of Voting Procedures as it deems appropriate or necessary.

In determining the vote on any proposal for which it has responsibility, the Proxy Committee shall act in accordance with the policy stated above.

The Proxy Committee shall create a charter, which shall be consistent with this policy and procedure. The charter shall set forth the Committee’s purpose, membership and operation. The charter shall include procedures prohibiting a member from voting on a matter for which he or she has a conflict of interest by reason of a direct relationship with the issuer or other party affected by a given proposal, e.g., is a portfolio manager for an account of the issuer.

The Proxy Committee shall furnish a copy of the charter to the trustees of Columbia Acorn Trust and of Wanger Advisors Trust and copies of any modifications of the charter or of this Policy and Procedures Manual (including any modification of the Voting Guidelines or Voting Procedures).

III.                                 VOTING GUIDELINES

Except under limited circumstances (described in Section IV) where CWAM delegates voting power to an independent third party,  The stock analyst who follows the stock reviews all proxies and ballot items for which CWAM has authority to vote.  The analyst will consider the views of management on each proposal, and if these views are consistent with the CWAM Proxy Policy, will vote in favor of management.  However, each analyst has the responsibility of independently analyzing each proposal and voting each proxy item on a case-by-case basis.

Following are some guidelines CWAM uses with respect to voting on specific matters:

 Election of the Board of Directors

CWAM will generally support management’s recommendation for proposals for the election of directors or for an increase or decrease in the number of directors provided a majority of directors would be independent.  When director elections are contested, the analyst’s recommendation and vote should be forwarded to the Proxy Committee for a full vote.

69




Approval of Independent Auditors

CWAM will generally support management in its annual appointment or approval of independent corporate auditors.  An auditor will usually be thought of as independent unless the auditor receives more than 50% of its revenues from non-audit activities from the company and its affiliates.  In those cases, the vote should be forwarded to the Proxy Committee for a full vote.

Compensation and Equity-Based Compensation Plans

CWAM is generally opposed to compensation plans that substantially dilute ownership interest in a company, provide participants with excessive awards, or have inherently objectionable structural features.  Specifically, for equity-based plans, if the proposed number of shares authorized for option programs (excluding authorized shares of expired or exercised options) exceed 10% of the currently outstanding shares overall or 3% for directors only, the proposal should be referred to the Proxy Committee.  The Committee will then consider the circumstances surrounding the issue and vote in the best interests of the client.

Corporate Governance Issues

CWAM will generally support resolutions to improve shareholder democracy and reduce the likelihood of management entrenchment or conflict-of-interest.  All matters relating to corporate governance will be voted by CWAM on a case-by-case basis using this basic premise.  If an analyst believes that a vote should be made contrary to this premise, then the recommendation should be brought to the Proxy Committee for a full vote.

Social and Corporate Responsibility Issues

CWAM believes that “ordinary business matters” are primarily the responsibility of management and should be approved solely by the corporation’s board of directors.  However, proposals regarding social issues initiated by shareholders asking the company to disclose or amend certain business practices will be analyzed by the appropriate CWAM stock analyst and evaluated on a case-by-case basis.  If an analyst believes that a vote against management is appropriate, he/she should refer the proposal to the full vote by the Proxy Committee.

“Blank Check” Proposals

Occasionally proxy statements ask that shareholders allow proxies to approve any other items in a “blank check” manner.  Analysts should vote against such proposals without referring those to the Proxy Committee.

Special Issues Voting Foreign Proxies

Voting proxies with respect to shares of foreign stocks may involve significantly greater effort and corresponding cost due to the variety of regulatory schemes and corporate practices in foreign countries.  Oftentimes, there may be language barriers, which will mean that an English translation of proxy information may not be available.  Or, a translation must be obtained or  

70




commissioned before the relevant shareholder meeting.  Time frames between shareholder notification, distribution of proxy materials, book-closure and the actual meeting date may be too short to allow timely action.  In situations like these and in others where CWAM believes that it is uncertain with regards to the information received or because the cost of voting a proxy could exceed the expected benefit, the CWAM analyst may elect to abstain from voting.

In addition, to vote shares in some countries, shares must be “blocked” by the custodian or depository for a specified number of days before the shareholder meeting.  Blocked shares typically may not be traded until the day after the shareholder meeting.  CWAM may refrain from voting shares of foreign stocks subject to blocking restrictions where, in the judgment of the CWAM analyst, the benefit from voting the shares is outweighed by the interest of maintaining client liquidity in the shares.  The decision to vote/not vote is made by the CWAM analyst and is generally made on a case-by-case basis based on relevant factors, including the length of the blocking period, the significance of the holding, and whether the stock is considered a long-term holding.

In cases where the CWAM analyst determines that CWAM should abstain from voting foreign proxies, the CWAM librarian (or a substitute) should document the reasons for abstaining from voting the proxy.

IV.                                                                                VOTING PROCEDURES

The Proxy Committee has developed the following procedures to assist in the voting of proxies according to the Voting Guidelines set forth in Section III above. The Proxy Committee may revise these procedures from time to time, as it deems appropriate or necessary to effect the purposes of this Policy and Procedures.

For Columbia Acorn Trust and Wanger Advisors Trust

·                  CWAM shall use Institutional Shareholder Services (“ISS”), a third party vendor, to implement its proxy voting process.  ISS shall provide record keeping services.  ISS also will provide its internally generated proxy analysis, which can be used to help supplement the CWAM analyst’s research in the proxy voting process.  In limited instances as described later in this section, CWAM may delegate voting power to ISS.

·                  On a daily basis, the funds’ custodian shall send ISS a holding file detailing each domestic equity holding held in the funds. Information on equity holdings for the international portfolio shall be sent weekly.

·                  ISS shall receive proxy material information from Proxy Edge or State Street Bank for the funds.  This shall include issues to be voted upon, together with a breakdown of holdings for the funds.

·                  Whenever a vote is solicited, ISS shall send CWAM a request to vote over a secure website.  The CWAM librarian (or a substitute) will be responsible to check this website daily. The librarian will forward all materials to the appropriate CWAM analyst, who will  

71




review and complete the proxy ballot and return to the CWAM librarian or will refer one or more proposals to the Proxy Committee. The analyst will keep documentation (usually copies of email correspondence) of any proposals brought before the Proxy Committee and will instruct the CWAM librarian to vote the proposal in accordance with the Proxy Committee decision.  The analyst will file Proxy Committee documentation under G:\Shared\ProxyComm.  The CWAM librarian will promptly provide ISS the final instructions as how to vote the proxy.

·                  ISS shall have procedures in place to ensure that a vote is cast on every security holding maintained by the funds on which a vote is solicited unless otherwise directed by the analyst.  On a yearly basis (or when requested), CWAM  shall receive a report from ISS detailing CWAM’s voting for the previous period on behalf of the funds.

For All Other Accounts For Which CWAM Has Voting Authority

·                  CWAM shall use the respective custodian for the account it advises to vote proxies.  CWAM shall separately maintain voting records for these accounts.

·                  The CWAM librarian will be responsible for obtaining all proxy materials from the custodian, forward these to the appropriate CWAM analyst who will review and complete the proxy ballot and return to the librarian or will refer one or more proposals to the Proxy Committee. The analyst will keep documentation (usually copies of email correspondence) of any proposals brought before the Proxy Committee and will instruct the CWAM librarian to vote the proposal in accordance with the Proxy Committee decision.  The analyst will file Proxy Committee documentation under G:\Shared\ProxyComm.  The CWAM librarian will promptly provide ISS the final instructions as how to vote the proxy.

·                  The CWAM librarian will be responsible for recording all voting records onto a spreadsheet, which will comprise the detail of how CWAM voted each proxy on behalf of the respective client.  This spreadsheet shall comply with the appropriate record keeping requirements of the applicable rules and will be available to clients upon request.

Delegation of Proxy Voting to an Independent Third Party

From time to time, CWAM may face regulatory or compliance limits on the types or amounts of voting securities that it may purchase or hold for client accounts.  Among other limits, federal, state, foreign regulatory restrictions, or company-specific ownership limits may restrict the total percentage of an issuer’s voting securities that CWAM can hold for clients (collectively, “Ownership Limits”).

The regulations or company-specific documents governing a number of these Ownership Limits Often focus upon holdings in voting securities.  As a result, in limited circumstances in order to comply with such Ownership Limits and/or internal policies designed to comply with such limits, CWAM may delegate proxy voting in certain issuers to ISS, as a qualified, independent third party.

 

72




PART C

Item 23.

 

Exhibits

 

a.

 

Agreement and Declaration of Trust. (3) 

 

 

 

b.

 

By-laws, as amended effective December 20, 2004. (14)

 

 

 

c.1.

 

Specimen Share Certificate - Wanger U.S. Small Cap. (1)

 

 

 

c.2.

 

Specimen Share Certificate - Wanger International Small Cap. (2)

 

 

 

d.

 

Amended and Restated Investment Advisory Agreement between Wanger Advisors Trust and Columbia Wanger Asset Management, L.P. dated July 24, 2006. 

 

 

 

e.1.

 

Underwriting Agreement between Wanger Advisors Trust and Liberty Funds Distributor, Inc. dated November 1, 2001. (11)

 

 

 

e.2.

 

Amendment No. 1 to the Underwriting Agreement between Wanger Advisors Trust and Columbia Management Distributors, Inc. dated July 24, 2006.

 

 

 

f.

 

None.

 

 

 

g.

 

Amended and Restated Master Custodian Agreement between Wanger Advisors Trust and State Street Bank and Trust Company dated September 19, 2005. (16) 

 

 

 

h.1.

 

Amendment No. 1 to the Participation Agreement between Wanger Advisors Trust and Phoenix Home Life Mutual Insurance Company dated April 18, 1995 (exhibit 9(a)(1) to post-effective amendment No. 2) (2) (amendment dated December 16, 1996) (exhibit 9(a)(1) to post-effective amendment No. 3). (5)

 

 

 

h.2.

 

Amendment No. 1 to the Participation Agreement between Wanger Advisors Trust and PHL Variable Insurance Company dated February 23, 1995 (exhibit 9(a)(2) to post-effective amendment No. 2) (2) (amendment dated December 16, 1996) (exhibit 9(a)(2) to post-effective amendment No. 3). (6)

 

 

 

h.3.

 

Amendment No. 1 to the Participation Agreement between Wanger Advisors Trust and Aegon Financial Services Group, Inc. (formerly Providian Life and Health Insurance Company and formerly National Home Life Assurance Company) dated May 19, 1995 (exhibit 9(a)(3) to post-effective amendment No. 2) (2) (amendment dated December 16, 1996) (exhibit 9(a)(3) to post-effective amendment No. 3). (7)

 

 

 

h.4.

 

Participation Agreement between Wanger Advisors Trust and First Providian Life and Health Insurance Company dated November 15, 1996, and Amendment No. 1 dated December 16, 1996. (8)

 

2




 

h.5.

 

Participation Agreement between Wanger Advisors Trust and Symetra Life Insurance Company (formerly SAFECO Life Insurance Company) dated September 27, 1995 and Form of Amendment No. 1 dated December 18, 1996. (9)

 

 

 

h.6.

 

Shareholders’ Servicing and Transfer Agent Agreement between Wanger Advisors Trust and Liberty Funds Services, Inc. dated September 29, 2000. (10)

 

 

 

h.7.

 

Participation Agreement between Wanger Advisors Trust and Keyport Benefit Life Insurance Company dated September 29, 2000. (10)

 

 

 

h.8.

 

Participation Agreement between Wanger Advisors Trust and Keyport Life Insurance Company dated September 29, 2000. (10)

 

 

 

h.9.

 

Participation Agreement between Wanger Advisors Trust, Liberty Funds Distributor, Inc. and Transamerica Life Insurance Company dated May 1, 2002. (12)

 

 

 

h.10.

 

Amendment No. 1 to the Participation Agreement between Wanger Advisors Trust, Liberty Funds Distributor, Inc. and Transamerica Life Insurance Company dated December 1, 2002. (12)

 

 

 

h.11.

 

Amendment No. 2 to the Participation Agreement between Wanger Advisors Trust, Liberty Funds Distributor, Inc. and Transamerica Life Insurance Company dated December 1, 2002. (13)

 

 

 

h.12.

 

Participation Agreement between Wanger Advisors Trust, Columbia Funds Distributor, Inc. and Transamerica Financial Life Insurance Company dated May 1, 2004. (13)

 

 

 

h.13.

 

Letter agreement between Wanger Advisors Trust and Columbia Wanger Asset Management, L.P. dated May 1, 2007.

 

3




 

h.14.

 

Amendment No. 1 to the Shareholders’ Servicing and Transfer Agent Agreement between Wanger Advisors Trust and Columbia Funds Services, Inc. dated February 1, 2004. (15)

 

 

 

h.15.

 

Participation Agreement between Wanger Advisors Trust, Columbia Wanger Asset Management, L.P. and ING Insurance Company of America dated May 1, 2004. (14)

 

 

 

h.16.

 

Participation Agreement between Wanger Advisors Trust, Columbia Funds Distributor, Inc., Sun Life Assurance Company of Canada (U.S.) and Sun Life Insurance and Annuity Company of New York dated December 1, 2004. (14)

 

 

 

h.17.

 

Participation Agreement among Merrill Lynch Life Insurance Company, Wanger Advisors Trust and Columbia Funds Distributor, Inc. dated March 4, 2005. (16)

 

 

 

h.18

 

Amendment No. 1 to Participation Agreement among Merrill Lynch Life Insurance Company, Wanger Advisors Trust and Columbia Management Distriubutors, Inc. (formerly Columbia Funds Distributor, Inc.) dated April 27, 2007.

 

 

 

h.19.

 

Participation Agreement among ML Life Insurance Company of New York, Wanger Advisors Trust and Columbia Funds Distributor, Inc. dated March 4, 2005. (16)

 

 

 

h.20

 

Amendment No.1 to Participation Agreement among ML Life Insurance Company of New York, Wanger Advisors Trust and Columbia Management Distriubutors, Inc. (formerly Columbia Funds Distributor, Inc.) dated April 27, 2007.

 

 

 

h.21.

 

Participation Agreement among TIAA-CREF Life Insurance Company, Wanger Advisors Trust, Columbia Wanger Asset Management, LLP and Columbia Management Distributors, Inc. dated March 1, 2006. (16)

 

 

 

h.22.

 

Amendment No. 2 to the Shareholders’ Servicing and Transfer Agent Agreement between Wanger Advisors Trust and Columbia Management Services, Inc. dated July 24, 2006.

 

 

 

h.23.

 

Amendment No. 3 to the Shareholders’ Servicing and Transfer Agent Agreement between Wanger Advisors Trust and Columbia Management Services, Inc. dated March 6, 2007.

 

 

 

h.24.

 

Participation Agreement among RiverSource Life Insurance Company, Wanger Advisors Trust, Columbia Wanger Asset Management, L.P. and Columbia Management Distributors, Inc. dated April 2, 2007.

 

 

 

h.25.

 

Participation Agreement among RiverSource Life Insurance Co. of New York, Wanger Advisors Trust, Columbia Wanger Asset Management, L.P. and Columbia Management Distributors, Inc. dated April 2, 2007. 

 

 

 

h.26.

 

Participation Agreement between Wanger Advisors Trust, Columbia Wanger Asset Management, L.P., ING Life Insurance and Annuity Company, and Reliastar Life Insurance Company dated May 1, 2004.

 

 

 

i.

 

Consent of Bell, Boyd & Lloyd LLP.

 

 

 

j.

 

Consent of Independent Registered Public Accounting Firm.

 

 

 

k.

 

None.

 

 

 

l.

 

Subscription Agreement. (4)

 

 

 

m.

 

None.

 

 

 

n.

 

None.

 

 

 

p.1.

 

Code of Ethics of Columbia Wanger Asset Management, L.P., Columbia Acorn Trust and Wanger Advisors Trust, as amended January 2, 2007.

 

 

 

p.2.

 

Code of Ethics for Non-Management Trustees, as amended September 26, 2006.

 

4




 

p.3.

 

Code of Ethics of Columbia Management Distributors, Inc., the principal underwriter of the Funds, dated January 1, 2006.

 


(1)           Incorporated by reference to exhibit 4(a) filed with post-effective amendment no. 1 to Registrant’s registration statement on form N-1A, Securities Act registration no. 33-83548 (the “Registration Statement”) filed on August 25, 1995.

(2)           Incorporated by reference to exhibit 4(b) filed with post-effective amendment no. 1 to the Registration Statement filed on August 25, 1995.

(3)           Incorporated by reference to exhibit 1 filed with post-effective amendment no. 2 to the Registration Statement filed on April 19, 1996

(4)           Incorporated by reference to exhibit 13 filed with post-effective amendment no. 2 to the Registration Statement filed on April 19, 1996.

(5)           Incorporated by reference to exhibit 9(a)(1) filed with post-effective amendment no. 3 to the Registration Statement filed on April 21, 1997.

(6)           Incorporated by reference to exhibit 9(a)(2) filed with post-effective amendment no. 3 to the Registration Statement filed on April 21, 1997.

(7)           Incorporated by reference to exhibit 9(a)(3) filed with post-effective amendment no. 3 to the Registration Statement filed on April 21, 1997.

(8)           Incorporated by reference to exhibit 9(a)(4) filed with post-effective amendment no. 3 to the Registration Statement filed on April 21, 1997.

(9)           Incorporated by reference to exhibit 9(a)(5) filed with post-effective amendment no. 3 to the Registration Statement filed on April 21, 1997.

(10)         Incorporated by reference to Registrant’s previous filing of post-effective amendment no. 13 to the Registration Statement filed April 25, 2001.

(11)         Incorporated by reference to Registrant’s previous filing of post-effective amendment no. 14 to the Registration Statement filed April 10, 2002.

(12)         Incorporated by reference to Registrant’s previous filing of post-effective amendment no. 15 to the Registration Statement filed April 10, 2003.

(13)         Incorporated by reference to Registrant’s previous filing of post-effective amendment no. 16 to the Registration Statement filed April 20, 2004.

5




(14)         Incorporated by reference to Registrant’s previous filing of post-effective amendment no. 17 to the Registration Statement filed February 18, 2005.

(15)         Incorporated by reference to Registrant’s previous filing of post-effective amendment no. 18 to the Registration Statement filed April 13, 2005.

(16)         Incorporated by reference to Registrant’s previous filing of post-effective amendment no. 19 to the Registration Statement filed April 20, 2006.

Item 24.                                                  Persons Controlled by or Under Common Control with Registrant

The Registrant does not consider that there are any persons directly or indirectly controlling, controlled by, or under common control with, the Registrant within the meaning of this item.  The information in the prospectus under the caption “Trust Management Organizations” and in the Statement of Additional Information under the caption “Management Arrangements” is incorporated by reference.

Item 25.                                                  Indemnification

Article VIII of the Agreement and Declaration of Trust of the Registrant (Exhibit a included herein) provides in effect that the Registrant shall provide certain indemnification of its trustees and officers.  In accordance with Section 17(h) of the Investment Company Act of 1940, that provision shall not protect any person against any liability to the Registrant or its shareholders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Securities Act”) may be permitted to Trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the 1940 Act and is, therefore, unenforceable.  In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a Trustee, officer, or controlling person of the Registrant in connection with the successful defense of any action, suit or proceeding) is asserted by such Trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1940 Act and will be governed by the final adjudication of such issue.

The Registrant, its trustees and officers, its investment adviser and persons affiliated with them are insured under a policy of insurance maintained by Registrant and its investment adviser, within the limits and subject to the limitations of the policy, against certain expenses in connection with the defense of actions, suits or proceedings, and certain liabilities that might be imposed as a result of such actions, suits or proceedings, to which they are parties by reason of being or having been such trustees or officers.  The policy expressly excludes coverage for any trustee or officer whose personal dishonesty, fraudulent breach of trust, lack of good faith, or intention to deceive or defraud has been finally adjudicated or may be established or who willfully fails to act prudently.

6




Item 26.                                                  Business and Other Connections of Investment Adviser

The information in the prospectus under the caption “Trust Management Organizations” is incorporated by reference.  Neither Columbia Wanger Asset Management, L.P. nor its general partner has at any time during the past two years been engaged in any other business, profession, vocation or employment of a substantial nature either for its own account or in the capacity of director, officer, employee, partner or trustee.

Item 27.                                                  Principal Underwriter

 

(a)           Columbia Management Distributors, Inc. (“CMD”), a subsidiary of Columbia Management Advisors, LLC, is the Registrant’s principal underwriter.  CMD acts in such capacity for each series of Columbia Funds Variable Insurance Trust, Columbia Funds Series Trust, Columbia Funds Series Trust I, Columbia Funds Institutional Trust, Columbia Funds Variable Insurance Trust I and Columbia Acorn Trust.

(b)                                 The table below lists each director or officer of the principal underwriter named in the answer to Item 20. 

7




 

Name and Principal
Business Address*

 

Positions and Offices with
Underwriter

 

Positions and Offices with
Registrant

 

 

 

 

 

Ahmed, Yaqub

 

Vice President

 

None

 

 

 

 

 

Aldi, Andrew

 

Vice President

 

None

 

 

 

 

 

Anderson, Judith M.

 

Vice President

 

None

 

 

 

 

 

Ash, James R.

 

Vice President

 

None

 

 

 

 

 

Banks, Keith T.

 

Director

 

None

 

 

 

 

 

Ballou, Rick

 

Senior Vice President

 

None

 

 

 

 

 

Bartlett, John

 

Managing Director

 

None

 

 

 

 

 

Berretta, Frederick R.

 

Director and Managing Director

 

None

 

 

 

 

 

Brantley, Thomas

 

Senior Vice President

 

None

 

 

 

 

 

Bozek, James

 

Senior Vice President

 

None

 

 

 

 

 

Brown, Beth Ann

 

Senior Vice President

 

None

 

 

 

 

 

Claiborne, Douglas

 

Senior Vice President

 

None

 

 

 

 

 

Climer, Quentin

 

Vice President

 

None

 

 

 

 

 

Conley, Brook

 

Vice President

 

None

 

 

 

 

 

Davis, W. Keith

 

Senior Vice President

 

None

 

 

 

 

 

DeFao, Michael

 

Chief Legal Officer

 

None

 

 

 

 

 

Desilets, Marian

 

Vice President

 

Assistant Secretary

 

 

 

 

 

Devaney, James

 

Senior Vice President

 

None

 

 

 

 

 

Devlin, Audrey

 

Assistant Vice President

 

None

 

 

 

 

 

Difiore, James R.

 

Assistant Treasurer

 

None

 

 

 

 

 

Dolan, Kevin

 

Vice President

 

None

 

 

 

 

 

Donovan, M. Patrick

 

Chief Compliance Officer

 

None

 

 

 

 

 

Doyle, Matthew

 

Vice President

 

None

 

 

 

 

 

Emerson, Kim P.

 

Senior Vice President

 

None

 

 

 

 

 

Feldman, David

 

Managing Director

 

None

 

8




 

Name and Principal
Business Address*

 

Positions and Offices with
Underwriter

 

Positions and Offices with
Registrant

 

 

 

 

 

Feloney, Joseph

 

Senior Vice President

 

None

 

 

 

 

 

Ferullo, Jeanne

 

Vice President

 

None

 

 

 

 

 

Fisher, James F.

 

Vice President

 

None

 

 

 

 

 

Fisher, Michael

 

Assistant Secretary

 

None

 

 

 

 

 

Ford, David C.

 

Vice President

 

None

 

 

 

 

 

Gellman, Laura D.

 

Conflicts of Interest Officer

 

None

 

 

 

 

 

Gentile, Russell

 

Vice President

 

None

 

 

 

 

 

Goldberg, Matthew

 

Senior Vice President

 

None

 

 

 

 

 

Gubala, Jeffrey

 

Vice President

 

None

 

 

 

 

 

Guenard, Brian

 

Vice President

 

None

 

 

 

 

 

Hall, Jennifer

 

Assistant Vice President

 

None

 

 

 

 

 

Hoefler, Heidi A.

 

Assistant Secretary

 

None

 

 

 

 

 

Hohmann, David

 

Assistant Secretary

 

None

 

 

 

 

 

Jones, Michael A.

 

Director, President and Chief Executive Officer

 

None

 

 

 

 

 

Kamin, Eric

 

Assistant Vice President

 

None

 

 

 

 

 

Lynch, Andrew R.

 

Managing Director

 

None

 

 

 

 

 

Marcelonis, Sheila

 

Vice President

 

None

 

 

 

 

 

Martin, William W.

 

Operational Risk Officer

 

None

 

 

 

 

 

McKinley, Katherine S.

 

Assistant Secretary

 

None

 

 

 

 

 

Miller, Anthony

 

Vice President

 

None

 

 

 

 

 

Miller, Gregory M.

 

Vice President

 

None

 

 

 

 

 

Moberly, Ann R.

 

Senior Vice President

 

None

 

 

 

 

 

Moon, Leslie

 

Assistant Vice President

 

None

 

 

 

 

 

Mroz, Gregory

 

Senior Vice President

 

None

 

 

 

 

 

Nigrosh, Diane J.

 

Vice President

 

None

 

9




 

Name and Principal
Business Address*

 

Positions and Offices with
Underwriter

 

Positions and Offices with
Registrant

 

 

 

 

 

Owen, Stephanie

 

Vice President

 

None

 

 

 

 

 

Piken, Keith

 

Senior Vice President

 

None

 

 

 

 

 

Pryor, Elizabeth A.

 

Secretary

 

None

 

 

 

 

 

Ratto, Gregory

 

Vice President

 

None

 

 

 

 

 

Rawdon, Gary

 

Assistant Vice President

 

None

 

 

 

 

 

Reed, Christopher B.

 

Senior Vice President

 

None

 

 

 

 

 

Roberts, Amy S.

 

Director

 

None

 

 

 

 

 

Ross, Gary

 

Senior Vice President

 

None

 

 

 

 

 

Schortmann, Matthew

 

Assistant Vice President

 

None

 

 

 

 

 

Scully-Power, Adam

 

Vice President

 

None

 

 

 

 

 

Seller, Gregory

 

Vice President

 

None

 

 

 

 

 

Shea, Terence

 

Vice President

 

None

 

 

 

 

 

Sideropoulos, Lou

 

Senior Vice President

 

None

 

 

 

 

 

Smith, Connie B.

 

Assistant Secretary

 

None

 

 

 

 

 

Studer, Eric

 

Senior Vice President

 

None

 

 

 

 

 

Waldron, Thomas

 

Vice President

 

None

 

 

 

 

 

Walsh, Brian

 

Vice President

 

None

 

 

 

 

 

Wasp, Kevin

 

Corporate Ombudsman

 

None

 

 

 

 

 

Weidner, Donna M.

 

Chief Financial Officer and Treasurer

 

None

 

 

 

 

 

Wess, Valerie

 

Senior Vice President

 

None

 

 

 

 

 

Wheeler, Eben

 

Assistant Vice President

 

None

 

 

 

 

 

Wilson, Christopher L.

 

Senior Vice President

 

None

 

 

 

 

 

Winn, Keith

 

Senior Vice President

 

None

 

 

 

 

 

Yates, Susan

 

Vice President

 

None

 

10





*The principal business address of each officer of Columbia Management Distributors, Inc. is One Financial Center, Boston, MA 02111.

Item 28.                                                  Location of Accounts and Records

Bruce H. Lauer, Vice President, Secretary and Treasurer
Wanger Advisors Trust
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606

Certain records, including records relating to the Registrant’s shareholders and the physical possession of its securities, may be maintained at the main office of Registrant’s transfer agent, Columbia Management Services, Inc., located at One Financial Center, Boston, MA 02111 or custodian, State Street Bank and Trust Company, located at 2 Avenue De Lafayette, Boston, MA 02111-2900.

Item 29.                                                  Management Services

Not applicable.

Item 30.                                                  Undertakings

Not applicable.

 

11




SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this post-effective amendment pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this amendment to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Chicago, Illinois on April 16, 2007.

WANGER ADVISORS TRUST

 

 

 

 

By:

/s/ Charles P. McQuaid

 

 

 

Charles P. McQuaid, President

 

Pursuant to the requirements of the Securities Act of 1933, this amendment to the registration statement has been signed below by the following persons in the capacities and on the dates indicated.

Name

 

Title

 

Date

 

 

 

 

 

/s/ Margaret M. Eisen

 

Trustee

)

 

Margaret M. Eisen

 

 

)

 

 

 

 

)

 

/s/ Jerome Kahn, Jr.

 

Trustee

)

 

Jerome Kahn, Jr.

 

 

)

 

 

 

 

)

 

/s/ Steven Kaplan

 

Trustee

)

 

Steven Kaplan

 

 

)

April 16, 2007

 

 

 

)

 

/s/ David C. Kleinman

 

Trustee

)

 

David C. Kleinman

 

 

)

 

 

 

 

)

 

 /s/ Allan B. Muchin

 

Trustee

)

 

Allan B. Muchin

 

 

)

 

 

 

 

)

 

/s/ Robert E. Nason

 

Trustee and

)

 

Robert E. Nason

 

Chair of the Board

)

 

 

 

 

)

 

/s/ James A. Star

 

Trustee

)

 

James A. Star

 

 

)

 

 

 

 

)

 

/s/ Patricia H. Werhane

 

Trustee

)

 

Patricia H. Werhane

 

 

)

 

 

 

 

)

 

/s/ John Wing

 

Trustee

)

 

John Wing

 

 

)

 

 

 

 

)

 

/s/ Ralph Wanger

 

Trustee

)

 

Ralph Wanger

 

 

)

 

 

 

 

)

 

/s/ Charles P. McQuaid

 

President

)

 

Charles P. McQuaid

 

(principal executive

)

 

 

 

officer)

)

 

 

 

 

)

 

/s/ Bruce H. Lauer

 

Treasurer (principal

)

 

Bruce H. Lauer

 

financial and accounting

)

 

 

 

officer)

)

 

 

 

12




Index of Exhibits Filed with this Amendment

Exhibit
Number

 


Exhibit

d.

 

Amended and Restated Investment Advisory Agreement between Wanger Advisors Trust and Columbia Wanger Asset Management, L.P. dated July 24, 2006.

 

 

 

e.2.

 

Amendment No. 1 to the Underwriting Agreement between Wanger Advisors Trust and Columbia Management Distributors, Inc. dated July 24, 2006.

 

 

 

h.13.

 

Letter agreement between Wanger Advisors Trust and Columbia Wanger Asset Management, L.P. dated May 1, 2007.

 

 

 

h.18

 

Amendment No. 1 to Participation Agreement among Merrill Lynch Life Insurance Company, Wanger Advisors Trust and Columbia Management Distributors, Inc. (formerly Columbia Funds Distributor, Inc.) dated April 27, 2007.

 

 

 

h.20

 

Amendment No.1 to Participation Agreement among ML Life Insurance Company of New York, Wanger Advisors Trust and Columbia Management Distributors, Inc. (formerly Columbia Funds Distributor, Inc.) dated April 27, 2007.

 

 

 

h.22.

 

Amendment No. 2 to the Shareholders’ Servicing and Transfer Agent Agreement between Wanger Advisors Trust and Columbia Management Services, Inc. dated July 24, 2006.

 

 

 

h.23.

 

Amendment No. 3 to the Shareholders’ Servicing and Transfer Agent Agreement between Wanger Advisors Trust and Columbia Management Services, Inc. dated March 6, 2007.

 

 

 

h.24.

 

Participation Agreement among RiverSource Life Insurance Company, Wanger Advisors Trust, Columbia Wanger Asset Management, L.P. and Columbia Management Distributors, Inc. dated April 2, 2007.

 

 

 

h.25.

 

Participation Agreement among RiverSource Life Insurance Co. of New York, Wanger Advisors Trust, Columbia Wanger Asset Management, L.P. and Columbia Management Distributors, Inc. dated April 2, 2007.

 

 

 

h.26.

 

Participation Agreement between Wanger Advisors Trust, Columbia Wanger Asset Management, L.P., ING Life Insurance and Annuity Company, and Reliastar Life Insurance Company dated May 1, 2004.

 

 

 

i.

 

Consent of Bell, Boyd & Lloyd LLP.

 

 

 

j.

 

Consent of Independent Registered Public Accounting Firm.

 

 

 

p.1.

 

Code of Ethics of Columbia Wanger Asset Management, L.P., Columbia Acorn Trust and Wanger Advisors Trust, as amended January 2, 2007.

 

 

 

p.2.

 

Code of Ethics for Non-Management Trustees, as amended September 26, 2006.

 

13



EX-99.(D) 2 a07-7397_5ex99dd.htm EX-99.(D)

Exhibit 99(d)

AMENDED AND RESTATED INVESTMENT ADVISORY AGREEMENT

WANGER ADVISORS TRUST, a Massachusetts business trust registered under the Investment Company Act of 1940 (the “1940 Act”) as an open-end management investment company (the “Trust”), and COLUMBIA WANGER ASSET MANAGEMENT, L.P., a Delaware limited partnership registered under the Investment Advisers Act of 1940 as an investment adviser (“Columbia WAM”), agree that:

1.  Engagement of Columbia WAM.  Columbia WAM shall manage the investment and reinvestment of the assets of Wanger U.S. Smaller Companies, Wanger International Small Cap, Wanger Select and Wanger International Select, series of the Trust (each, a “Fund,” and collectively, the “Funds”), subject to the supervision of the Board of Trustees of the Trust, for the period and on the terms set forth in this agreement.  Also subject to the supervision of the Board of Trustees of the Trust, Columbia WAM will endeavor to preserve the autonomy of the Trust as a separate legal entity.  Columbia WAM will remain a wholly-owned subsidiary of Columbia Management Group, Inc. (“CMG”) (or its successor) as a Chicago-based investment management firm.  If the Trust establishes one or more series in addition to the Funds named above with respect to which it desires to retain Columbia WAM as investment adviser hereunder, and if Columbia WAM is willing to provide such services under this agreement, the Trust and Columbia WAM may add such new series to this agreement, by written supplement to this agreement. Such supplement shall include a schedule of compensation to be paid to Columbia WAM by the Trust with respect to such series and such other modifications of the terms of this agreement with respect to such series as the Trust and Columbia WAM may agree. Upon execution of such a supplement by the Trust and Columbia WAM, that series will become a Fund hereunder and shall be subject to the provisions of this agreement to the same extent as the Funds named above, except as modified by the supplement.

Columbia WAM shall give due consideration to the investment policies and restrictions and the other statements concerning the Funds in the Trust’s agreement and declaration of trust, bylaws, and registration statement under the 1940 Act and the Securities Act of 1933 (the “1933 Act”), and to the provisions of the Internal Revenue Code of 1986, as amended, applicable to the Funds as regulated investment companies. Columbia WAM shall be deemed for all purposes to be an independent contractor and not an agent of the Trust or the Funds, and unless otherwise expressly provided or authorized, shall have no authority to act or represent the Trust or the Funds in any way.

Columbia WAM will maintain the investment philosophy and research that the Chicago-based management deems appropriate; its research activities will be separate and dedicated solely to Columbia WAM and it will maintain its own domestic and international trading activities.  Columbia WAM will use its best efforts to maintain information systems that will provide timely and uninterrupted operating information and data consistent with all regulatory and compliance requirements.  The Chicago-based management will have the responsibility and considerable latitude to recruit and compensate (on a competitive basis) investment management personnel and to control travel budgets for analysts consistent with its operational and strategic plans while always subject to the approval of the management of CMG.

Columbia WAM is authorized to make the decisions to buy and sell securities, options, futures contracts and any other investments in which the Funds may invest pursuant to its investment objectives, policies and restrictions, to place the Funds’ portfolio transactions with broker-dealers, and to negotiate the terms of such transactions, including brokerage commissions on brokerage transactions, on behalf of the Funds. Columbia WAM is authorized to exercise discretion with each Fund’s policy concerning allocation of its portfolio brokerage, consistent with the Trust’s registration statement and under the supervision of the Trust’s Board of Trustees, and as permitted by law, including but not limited to Section 28(e) of the Securities Exchange Act of 1934, and in so doing shall not be required to make any reduction in its investment advisory fees.

Columbia WAM may, where it deems it to be advisable, aggregate orders with other securities of the same type to be sold or purchased by one or more Funds with like orders on behalf of other clients of Columbia WAM (as well as clients of other investment advisers affiliated with Columbia WAM, in the event that Columbia WAM and such affiliated investment advisers share common trading facilities). In such event, Columbia WAM (or Columbia WAM and its affiliated advisers, as the case may be) will allocate the shares so sold or purchased, as well as the expenses incurred in the transaction, in a manner it (or it and they) consider to be equitable and fair and consistent with its (or its or their) fiduciary obligations to clients.

Columbia WAM acknowledges the importance that the Board and its compliance committee place on full legal and regulatory compliance by CMG, Columbia WAM, and all other Trust service providers and their personnel (“collectively “Providers”) and agrees to (i) fully cooperate with the Board, the compliance/contract review committee and the Chief Compliance Officer of the Trust with all inquiries by the Trust concerning such compliance by the Providers and (ii) proactively communicate with the Board, the




compliance/contract review committee and the Chief Compliance Officer of the Trust concerning material compliance matters and any instance of legal or regulatory non-compliance by the Providers of which Columbia WAM is aware and that Columbia WAM deems to be material.  Such cooperation and communication by Columbia WAM will be done after receipt of an inquiry or upon learning of any such legal or regulatory non-compliance.

Columbia WAM will report promptly any potential or existing conflicts of which it is aware to the Board of Trustees of the Trust.  Columbia WAM will assist the Board in carrying out its responsibilities under the Mixed and Shared Funding Exemptive Order, by providing the Board with all information reasonably necessary for the Board to consider any issues raised.

2.  Administrative Services.  Columbia WAM shall supervise the business and affairs of the Trust and each Fund and shall provide such services and facilities as may be required for effective administration of the Trust and Funds as are not provided by employees or other agents engaged by the Trust; provided that Columbia WAM shall not have any obligation to provide under this agreement any such services which are the subject of a separate agreement or arrangement between the Trust and Columbia WAM, any affiliate of Columbia WAM, or any third party administrator.

3.  Use of Affiliated Companies and Subcontractors.  In connection with the services to be provided by Columbia WAM under this agreement, Columbia WAM may, to the extent it deems appropriate, and subject to compliance with the requirements of applicable laws and regulations and upon receipt of approval of the Trustees, make use of (i) its affiliated companies and their directors, trustees, officers, and employees and (ii) subcontractors selected by Columbia WAM, provided that Columbia WAM shall supervise and remain fully responsible for the services of all such third parties in accordance with and to the extent provided by this agreement. All costs and expenses associated with services provided by any such third parties shall be borne by Columbia WAM or such parties.

4.  Books and Records.  In compliance with the requirements of Rule 31a-3 under the 1940 Act, Columbia WAM agrees to maintain records relating to its services under this agreement, and further agrees that all records that it maintains for the Trust are the property of the Trust and to surrender promptly to the Trust any of such records upon the Trust’s request; provided that Columbia WAM may at its own expense make and retain copies of any such records. Columbia WAM further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act.

5.  Expenses to be Paid by Columbia WAM.  Columbia WAM shall furnish to the Trust, at Columbia WAM’s expense, office space and all necessary office facilities, equipment and personnel for managing that portion of the Trust’s business relating to the Funds. Columbia WAM shall also assume and pay all other expenses incurred by it in connection with managing the assets of the Funds, including expenses in connection with placement of securities orders, all expenses of printing and distributing the Funds’ prospectus and reports to prospective investors (except to the extent such expenses are allocated to a party other than the Trust in any participation or operating agreement to which the Trust is a party), and all expenses in determination of daily price computations, portfolio accounting and related bookkeeping.

6.  Expenses to be Paid by the Trust.  Except as otherwise provided in this agreement or any other contract to which the Trust is a party, the Trust shall pay all expenses incidental to its organization, operations and business, including, without limitation:

(a)  all charges of depositories, custodians, sub-custodians and other agencies for the safekeeping and servicing of its cash, securities and other property and of its transfer agents and registrars and its dividend disbursing and redemption agents, if any;

(b)      all charges of legal counsel and of independent auditors;

(c)  all compensation of trustees other than those affiliated with Columbia WAM or the Trust’s administrator, if any, and all expenses incurred in connection with their services to the Trust;

(d)  all expenses of preparing, printing and distributing notices, proxy solicitation materials and reports to shareholders of the Funds;

(e)      all expenses of meetings of shareholders of the Funds;

(f)  all expenses of registering and maintaining the registration of the Trust under the 1940 Act and of shares of the Funds under the 1933 Act, including all expenses of preparation, filing and printing of annual or more frequent revisions of the Funds’ registration statements under the 1940 Act and 1933 Act, and of supplying each then existing shareholder or beneficial owner of shares of the Funds of a copy of each revised prospectus or supplement thereto, and of supplying a copy of the statement of additional information upon request to any then existing shareholder;

2




(g)      all costs of borrowing money;

(h)  all expenses of publication of notices and reports to shareholders and to governmental bodies or regulatory agencies;

(i)  all taxes and fees payable to federal, state or other governmental agencies, domestic or foreign, and all stamp or other taxes;

(j)  all expenses of printing and mailing certificates for shares of a Fund;

(k)  all expenses of bond and insurance coverage required by law or deemed advisable by the Board;

(l)  all expenses of qualifying and maintaining qualification of, or providing appropriate notification of intention to sell relating to, shares of the Funds under the securities laws of the various states and other jurisdictions, and of registration and qualification of the Trust under any other laws applicable to the Trust or its business activities;

(m)  all fees, dues and other expenses related to membership of the Trust in any trade association or other investment company organization; and

(n)      any extraordinary expenses.

In addition to the payment of expenses, the Trust shall also pay all brokers’ commissions and other charges relating to the purchase and sale of portfolio securities for each Fund.

Any expense borne by the Trust that is not solely attributable to a Fund, nor solely to any other series of shares of the Trust, shall be apportioned in such manner as Columbia WAM determines is fair and appropriate, or as otherwise specified by the Board of Trustees of the Trust.

7.  Compensation of Columbia WAM.  For the services to be rendered and the expenses to be assumed and to be paid by Columbia WAM under this agreement, the Trust on behalf of the respective Funds shall pay to Columbia WAM fees accrued daily and paid monthly at the annual rates (as the percentage of the Fund’s net assets) shown below:

Wanger U.S. Smaller Companies

Assets

 

Rate of Fee

 

 

 

 

 

First $100 million

 

0.990

%

$100 million to $250 million

 

0.940

%

In excess of $250 million

 

0.890

%

 

Wanger International Small Cap

Assets

 

Rate of Fee

 

 

 

 

 

First $100 million

 

1.150

%

$100 million to $250 million

 

1.000

%

$250 million to $500 million

 

0.950

%

$500 million and over

 

0.850

%

 

Wanger Select

All Assets

 

0.850

%

 

Wanger International Select

All Assets

 

0.990

%

 

3




 

8.  Limitation of Expenses of the Fund.  The total expenses of Wanger Select and Wanger International Select through April 30, 2007, exclusive of taxes, of interest and of extraordinary litigation expenses, but including fees paid to Columbia WAM, as a percentage of the Fund’s net assets, shall not exceed 1.35% or 1.45% per annum, respectively, and Columbia WAM agrees to reimburse each Fund for any sums expended for such expenses in excess of that amount. For purposes of calculating the expenses subject to this limitation, (i) brokers’ commissions and other charges relating to the purchase and sale of portfolio securities and (ii) the excess custodian costs attributable to investments in foreign securities compared to the custodian costs which would have been incurred had the investments been in domestic securities, shall not be regarded as expenses. Reimbursement, if any, shall be made by reduction of the fees otherwise payable to Columbia WAM under this agreement, no less frequently than quarterly. Notwithstanding the foregoing, the limitations on total expenses set forth above in this Section 8 shall not apply to any class of shares of a Fund established after November 1, 2001.

9.  Services of Columbia WAM Not Exclusive.  The services of Columbia WAM to the Funds hereunder are not to be deemed exclusive, and Columbia WAM shall be free to render similar services to others so long as its services under this agreement are not impaired by such other activities. The principal investment management focus and responsibilities of Columbia WAM’s portfolio managers and analysts will be dedicated to Columbia Acorn Trust and Wanger Advisors Trust.

10.  Services other than as Manager.  Columbia WAM (or an affiliate of Columbia WAM) may act as broker for the Funds in connection with the purchase or sale of securities by or to the Funds if and to the extent permitted by procedures adopted from time to time by the Board of Trustees of the Trust. Such brokerage services are not within the scope of the duties of Columbia WAM under this agreement, and, within the limits permitted by law and the Board of Trustees of the Trust, Columbia WAM (or an affiliate of Columbia WAM) may receive brokerage commissions, fees or other remuneration from the Funds for such services in addition to its fee for services under this agreement. Within the limits permitted by law, Columbia WAM or an affiliate of Columbia WAM may receive compensation from the Funds for other services performed by it for the Funds which are not within the scope of the duties of Columbia WAM under this agreement. The Trust hereby authorizes any entity or person associated with Columbia WAM that is a member of a national securities exchange to effect any transaction on the exchange for the account of a Fund to the extent permitted by and in accordance with Section 11(a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder. The Trust hereby consents to the retention by such entity or person of compensation for such transactions in accordance with Rule 11a-2(T)(a)(iv).

11.  Limitation of Liability of Columbia WAM.  To the extent permitted by applicable law, neither Columbia WAM nor any of its partners, officers, agents, employees or affiliates shall be liable to the Trust or its shareholders for any loss suffered by the Trust or its shareholders as a result of any error of judgment, or any loss arising out of any investment, or as a consequence of any other act or omission of Columbia WAM or any of its affiliates in the performance of Columbia WAM’s duties under this agreement, except for liability resulting from willful misfeasance, bad faith or gross negligence on the part of Columbia WAM or such affiliate, or by reason of reckless disregard by Columbia WAM or such affiliate of the obligations and duties of Columbia WAM under this agreement.

12.  Use of “Wanger” or “Columbia” Name.  The Trust may use the name “Wanger Advisors Trust” or any name using the name “Columbia” or “Wanger” or any combination or derivation of either of them only for so long as this agreement or any extension, renewal or amendment hereof remains in effect, including any similar agreement with any organization that shall remain affiliated with CMG and that shall have succeeded to the business of Columbia WAM as investment adviser. At such time as this agreement or any extension, renewal or amendment hereof, or such similar agreement, shall no longer be in effect, the Trust will (by amendment of its agreement and Declaration of Trust, if necessary) cease to use any name using the name “Columbia” or “Wanger” or any combination or derivation of either of them or any name similar thereto or any other name indicating that it is advised by or otherwise connected with Columbia WAM or with any organization which shall have succeeded to Columbia WAM’s business as investment adviser. Columbia WAM’s consent to the use of the name “Wanger” by the Trust shall not prevent Columbia WAM’s permitting any other enterprise, including other investment companies, to use that name.

13.  Duration and Renewal.  This agreement shall be effective on August 1, 2006. Unless terminated as provided in Section 14, this agreement shall continue in effect until July 31, 2007, and thereafter from year to year only so long as such continuance is specifically approved at least annually (a) by a majority of those trustees who are not interested persons of the Trust or of Columbia WAM, voting in person at a meeting called for the purpose of voting on such approval, and (b) by either the Board of Trustees of the Trust or vote of the holders of a majority of the outstanding shares of each Fund.

14.  Termination.  This agreement may be terminated at any time, without payment of any penalty, by the Board of Trustees of the Trust, or by a vote of the holders of a majority of the outstanding shares of each Fund, upon 60 days’ written notice to Columbia WAM. This agreement may be terminated by Columbia WAM at any time upon 60 days’ written notice to the Trust. This agreement shall terminate automatically in the event of its assignment (as defined in Section 2(a)(4) of the 1940 Act).

4




15.  Non-Liability of Trustees and Shareholders.  A copy of the declaration of trust of the Trust is on file with the Secretary of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trust by officers of the Trust as officers and not individually. Any obligation of the Trust hereunder shall be binding only upon the assets of the Trust (or applicable series thereof) and shall not be binding upon any trustee, officer, employee, agent or shareholder of the Trust. Neither the authorization of any action by the trustees or shareholders of the Trust nor the execution of this agreement on behalf of the Trust shall impose any liability upon any trustee, officer or shareholder of the Trust.

16.  Amendment.  This agreement may be amended in accordance with the 1940 Act.

17.  Notices.  Any notice, demand, change of address or other communication to be given in connection with this agreement shall be given in writing and shall be given by personal delivery, by registered or certified mail or by transmittal by facsimile or other electronic medium addressed to the recipient as follows (or at such other address or addresses as a party may provide to the other from time to time, by notice):

5




 

If to Columbia WAM:

 

Columbia Wanger Asset

 

 

Management, L.P.

 

 

Attention: Bruce H. Lauer

 

 

227 West Monroe Street,

 

 

Suite 3000

 

 

Chicago, Illinois 60606

 

 

Telephone: 312 634-9200

 

 

Facsimile: 312 634-0016

 

 

 

 

 

with a copy to:

 

 

James R. Bordewick, Jr.

 

 

Bank of America

 

 

One Financial Center

 

 

Boston, MA 02111

 

 

Telephone: 617 772-3331

 

 

Facsimile: 617 345-0919

 

 

 

If to Wanger Advisors Trust:

 

Wanger Advisors Trust

 

 

227 West Monroe Street,

 

 

Suite 3000

 

 

Chicago, Illinois 60606

 

 

Telephone: 312 634-9200

 

 

Facsimile: 312 634-1919

 

 

 

 

 

with a copy to:

 

 

 

 

 

Bell, Boyd & Lloyd LLC

 

 

Attention: Cameron S. Avery

 

 

70 West Madison Street,

 

 

Suite 3300

 

 

Chicago, Illinois 60602

 

 

Telephone: 312/372-1121

 

 

Facsimile: 312/372-2098

 

All notices shall be conclusively deemed to have been given on the day of actual delivery thereof and, if given by registered or certified mail, on the fifth business day following the deposit thereof in the mail and, if given by facsimile or other electronic medium, on the day of transmittal thereof (upon electronic confirmation of receipt thereof).

Dated as of July 24, 2006

WANGER ADVISORS TRUST

 

COLUMBIA WANGER ASSET
MANAGEMENT, L.P.,
By WAM Acquisition GP, Inc.
Its General Partner

 

 

 

 

 

 

By:

/s/ Charles P. McQuaid

 

 

By:

/s/ Bruce H. Lauer

 

Charles P. McQuaid

 

Bruce H. Lauer

 

 

6



EX-99.(E)(2) 3 a07-7397_5ex99de2.htm EX-99.(E)(2)

Exhibit 99(e)(2)

AMENDMENT NO. 1 TO UNDERWRITING AGREEMENT

This Amendment No. 1 to the Underwriting Agreement (the “Amendment”) is hereby made by and between Wanger Advisors Trust (the “Trust”), a Massachusetts business trust and Columbia Management Distributors, Inc, formerly Liberty Funds Distributor, Inc. (“CMDI” or “Distributor”), a Massachusetts corporation.  This Amendment is dated as of July 24, 2006.  Capitalized terms not defined herein shall have the meaning ascribed to them in the Underwriting Agreement dated as of November 1, 2001 (the “Agreement”).

WHEREAS, the Trust has appointed CMDI as the Distributor for each series of the Trust, each a registered investment company;

WHEREAS, the parties to the Agreement desire to amend the Agreement to include the following representations and warranties regarding CMDI’s anti-money laundering program and/or procedures;

NOW THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereto agree as follows:

1.             Anti-Money Laundering Program.  CMDI represents and warrants to the Trust that:

(a)                                              it has established and maintains, and will continue to maintain and operate, an anti-money laundering program and/or procedures (including the Trust’s customer identification program) in accordance with all applicable laws, rules and regulations of its own jurisdiction including, where applicable, the Bank Secrecy Act (as amended by the USA PATRIOT Act of 2001 (the “Act”)).   CMDI further represents that it will adopt appropriate policies, procedures and internal controls to be fully compliant with any additional laws, rules or regulations, including the Act, to which it may become subject, including compliance with the rules recently adopted by the Treasury Department regarding foreign financial institutions that became effective July 5, 2006;

(b)                                             it applies, and will continue to apply, its anti-money laundering program and/or procedures to all customers/investors of the Funds, and will take appropriate steps in accordance with the laws of its own jurisdiction to ensure that all relevant documentation is retained, as required, including identification relating to those customers/investors;

(c)                                              it will provide an annual certification to the Trust confirming that it has implemented an anti-money laundering program and/or procedures as described in paragraph (a), and that it has performed, and intends to continue to perform, the requirements of the Trust’s Customer Identification Procedures.  CMDI will provide to the Trust periodic reports on the implementation of the anti-money laundering program and its ability to monitor the program;

(d)                                             it complies with the United States regulations imposed by the Treasury Departments’ Office of Foreign Assets Control (“OFAC”) including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §1701 et seq.,




The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder, which prohibit, among other things, the engagement in transactions with, holding the securities of, and the provision of services to certain embargoed foreign countries and specially designated nationals, specially designated narcotics traffickers, terrorist sanctions, and other blocked parties;

(e)                                              it does not believe, has no current reason to believe and will notify the Trust immediately if it comes to have reason to believe that any shareholder of any Fund is engaged in money-laundering activities or is associated with any terrorist or other individual, entity or organization sanctioned by the United States or the jurisdictions in which it does business, or appear on any lists of prohibited persons, entities, and jurisdictions maintained and administered by OFAC; and

(f)                                                if it has delegated to any third party or parties any of its tasks under its agreement with the Trust, CMDI has secured from that third party such representations, warranties and undertakings as are necessary to permit CMDI to provide the representations, warranties and covenants as are set forth in subparagraphs (a)-(e) above.




IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and sealed as of the date first above written.

WANGER ADVISORS TRUST

 

 

 

 

 

 

 

By:

/s/ Bruce H. Lauer

 

Name:

Bruce H. Lauer

 

Title:

Vice President, Secretary

 

 

and Treasurer

 

 

 

 

 

 

 

COLUMBIA MANAGEMENT DISTRIBUTORS, INC.

 

 

 

By:

/s/ Donald E. Froude

 

Name:

Donald E. Froude

 

Title:

President, Intermediary Distribution

 

 



EX-99.(H)(13) 4 a07-7397_5ex99dh13.htm EX-99.(H)(13)

Exhibit 99(h)(13)

[CWAM LETTERHEAD]

May 1, 2007

Wanger Advisors Trust
227 W. Monroe Street
Suite 3300
Chicago, Illinois 60606

Ladies and Gentlemen:

Columbia Wanger Asset Management, L.P. (“CWAM”) hereby contractually undertakes as of the date hereof as follows with respect to each of the series of Wanger Advisors Trust (each such series a “Fund”):

The total expenses of Wanger Select and Wanger International Select through April 30, 2008, exclusive of taxes, of interest and of extraordinary litigation expenses, but including fees paid to CWAM, as a percentage of the Fund’s net assets, shall not exceed 1.35% or 1.45% per annum, respectively, and CWAM agrees to reimburse each Fund for any sums expended for such expenses in excess of that amount.  For purposes of calculating the expenses subject to this limitation, (i) brokers’ commissions and other charges relating to the purchase and sale of portfolio securities and (ii) the excess custodian costs attributable to investments in foreign securities compared to the custodian costs which would have been incurred had the investments been in domestic securities, shall not be regarded as expenses.  Reimbursement, if any, shall be made by reduction of the fees otherwise payable to CWAM under the Amended and Restated Investment Advisory Agreement dated July 24, 2006 between Wanger Advisors Trust and CWAM (the “Agreement”), no less frequently than quarterly.  Notwithstanding the foregoing, the limitations on total expenses set forth herein shall not apply to any class of shares of a Fund established after the effective date hereof.

Effective May 1, 2007, this contractual undertaking supercedes any prior expense limitation provisions for Wanger Select and Wanger International Select contained in the Agreement.  This undertaking shall be binding upon any successors and assignees of CWAM.

Very truly yours,

 

 

 

COLUMBIA WANGER ASSET MANAGEMENT, L.P.

 

 

 

 

 

By:

/s/ Bruce H. Lauer

 

Bruce H. Lauer

 

Chief Operating Officer

 

 

 

 

Agreed and accepted by

 

WANGER ADVISORS TRUST

 

 

 

 

 

By:

/s/ Bruce H. Lauer

 

Bruce H. Lauer

 

Vice President, Secretary and Treasurer

 

 



EX-99.(H)(18) 5 a07-7397_5ex99dh18.htm EX-99.(H)(18)

Exhibit 99(h)(18)

AMENDMENT NO. 1 TO PARTICIPATION AGREEMENT

BETWEEN WANGER ADVISORS TRUST, COLUMBIA MANAGEMENT DISTRIBUTORS, INC. AND

MERRILL LYNCH LIFE INSURANCE COMPANY

THIS AMENDMENT, effective as of the 27th  day of April, 2007, by and among Wanger Advisors Trust, a Massachusetts business trust corporation (the “Fund”), Columbia Management Distributors, Inc. (the “Underwriter”), Wanger Advisors Trust, a Massachusetts Corporation, and Merrill Lynch Life Insurance Company, an Arkansas life insurance company (the “Company”);

WITNESSETH:

WHEREAS, the Fund, the Underwriter and the Company heretofore entered into a Participation Agreement dated March 4, 2005, as amended (the “Agreement”), with regard to separate accounts established for variable life insurance and/or variable annuity contracts offered by the Company; and

WHEREAS, the Fund, the Underwriter, and the Company desire to amend Schedule A to the Agreement in accordance with the terms of the Agreement.

NOW, THEREFORE, in consideration of the above premises, the Fund, the Underwriter and the Company hereby agree:

1.               Amendment.

(a)          Schedule A to the Agreement is amended in its entirety and is replaced by the Schedule A attached hereto;

(b)         Article IX Notices. of the Agreement is hereby amended as follows:

If to the Company:                                      Barry G. Skolnick, Esquire

Senior Vice President & General Counsel

1700 Merrill Lynch Drive, 3rd Floor

Pennington, New Jersey 08534

2.               Effectiveness.  The revised Schedule A of the Agreement shall be effective as the date hereof.

3.               Continuation.  Except as set forth above, the Agreement shall remain in full force and effective in accordance with its terms.

4.               Counterparts.  This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original.

(Signatures located on following page)




IN WITNESS WHEREOF, the Fund, the Underwriter and the Company have caused the Amendment to be executed by their duly authorized officers effective as of the day and year first above written.

 

WANGER ADVISORS TRUST

 

MERRILL LYNCH LIFE INSURANCE COMPANY

 

 

 

 

 

 

 

 

By:

/s/ Charles P. McQuaid

 

 

By:

/s/ Kirsty Lieberman

 

Name:

Charles P. McQuaid

 

 

Name:

Kirsty Lieberman

 

Title:

President

 

 

Title:

Vice President & Senior Counsel

Date:

March 26, 2007

 

 

Date:

3/30/07

 

 

 

 

 

 

 

 

 

 

 

 

 

COLUMBIA MANAGEMENT DISTRIBUTORS, INC.

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Michael A. Jones

 

 

 

 

Name:

Michael A. Jones

 

 

 

 

Title:

President

 

 

 

 

Date:

3/27/07

 

 

 

 

 




Schedule A

Separate Account

Merrill Lynch Life Variable Annuity Separate Account A

Portfolio

Wanger U.S. Smaller Companies

Wanger International Small Cap

Contract

Merrill Lynch Investor Choice – Investor Series

(Form ML-VA-010 and state variations thereof)

Dated:  April 27, 2007

 



EX-99.(H)(20) 6 a07-7397_5ex99dh20.htm EX-99.(H)(20)

Exhibit-99.(h)(20)

AMENDMENT NO. 1 TO PARTICIPATION AGREEMENT

BETWEEN WANGER ADVISORS TRUST, COLUMBIA MANAGEMENT DISTRIBUTORS, INC. AND

ML LIFE INSURANCE COMPANY OF NEW YORK

THIS AMENDMENT, effective as of 27th day of April, 2007, by and among Wanger Advisors Trust, a Massachusetts business trust corporation (the “Fund”), Columbia Management Distributors, Inc. (the “Underwriter”), Wanger Advisors Trust, a Massachusetts Corporation, and ML Life Insurance Company of New York, a New York life insurance company (the “Company”);

WITNESSETH:

WHEREAS, the Fund, the Underwriter and the Company heretofore entered into a Participation Agreement dated March 4, 2005, as amended (the “Agreement”), with regard to separate accounts established for variable life insurance and/or variable annuity contracts offered by the Company; and

WHEREAS, the Fund, the Underwriter, and the Company desire to amend Schedule A to the Agreement in accordance with the terms of the Agreement.

NOW, THEREFORE, in consideration of the above premises, the Fund, the Underwriter and the Company hereby agree:

1.               Amendment.

(a)          Schedule A to the Agreement is amended in its entirety and is replaced by the Schedule A attached hereto;

(b)         Article IX Notices. of the Agreement is hereby amended as follows:

If to the Company:                                      Barry G. Skolnick, Esquire

Senior Vice President & General Counsel

1700 Merrill Lynch Drive, 3rd Floor

Pennington, New Jersey 08534

2.               Effectiveness.  The revised Schedule A of the Agreement shall be effective as the date hereof.

3.               Continuation.  Except as set forth above, the Agreement shall remain in full force and effective in accordance with its terms.

4.               Counterparts.  This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original.

(Signatures located on following page)




IN WITNESS WHEREOF, the Fund, the Underwriter and the Company have caused the Amendment to be executed by their duly authorized officers effective as of the day and year first above written.

WANGER ADVISORS TRUST

 

ML LIFE INSURANCE COMPANY

 

 

 

OF NEW YORK

 

 

 

 

 

 

 

 

 

By:

/s/ Charles P. McQuaid

 

 

By:

/s/ Kirsty Lieberman

 

Name:

Charles P. McQuaid

 

 

Name:

Kirsty Lieberman

 

Title:

President

 

 

Title:

Vice President & Senior Counsel

 

Date:

March 26, 2007

 

 

Date:

3/30/07

 

 

 

 

 

 

 

 

 

COLUMBIA MANAGEMENT DISTRIBUTORS, INC.

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Michael A. Jones

 

 

 

 

Name:

Michael A. Jones

 

 

 

 

Title:

President

 

 

 

 

Date:

3/27/07

 

 

 

 

 




Schedule A

Separate Account

ML Life of New York Variable Annuity Separate Account A

Portfolio

Wanger U.S. Smaller Companies — Class I

Wanger International Small Cap — Class               

Contract

Merrill Lynch Investor Choice — Investor Series

(Form MLNY-VA-010 and state variations thereof)


Dated:  April 27, 2007

 



EX-99.(H)(22) 7 a07-7397_5ex99dh22.htm EX-99.(H)(22)

Exhibit 99(h)(22)

AMENDMENT NO. 2 TO SHAREHOLDERS’ SERVICING AND
TRANSFER AGENT AGREEMENT

This Amendment No. 2 to the Shareholders’ Servicing and Transfer Agent Agreement (the “Amendment”) is hereby made by and between Wanger Advisors Trust (the “Trust”), a Massachusetts business trust and Columbia Management Services, Inc. (“CMSI”) (formerly Liberty Funds Services, Inc.), a Massachusetts corporation.  This Amendment is dated as of July 24, 2006.  Capitalized terms not defined herein shall have the meaning ascribed to them in the Shareholders’ Servicing and Transfer Agent Agreement dated as of September 29, 2000 (the “Agreement”).

WHEREAS, under the Agreement the Trust has appointed CMSI as Transfer Agent, Registrar and Dividend Disbursing Agent for each series of the Trust listed in Schedule A attached thereto, each a registered investment company;

WHEREAS, the parties to the Agreement desire to amend the Agreement to include the following representations and warranties regarding CMSI’s anti-money laundering program and/or procedures;

NOW THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereto agree as follows:

1.             Anti-Money Laundering Program.  CMSI represents, warrants and covenants to the Trust that:

(a)                                              it has established and maintains, and will continue to maintain and operate, an anti-money laundering program and/or procedures (including the Trust’s customer identification program) in accordance with all applicable laws, rules and regulations of its own jurisdiction including, where applicable, the Bank Secrecy Act (as amended by the USA PATRIOT Act of 2001 (the “Act”)).   CMSI further represents that it will adopt appropriate policies, procedures and internal controls to be fully compliant with any additional laws, rules or regulations, including the Act, to which it may become subject, including compliance with the rules recently adopted by the Treasury Department regarding foreign financial institutions that became effective July 5, 2006;

(b)                                             it applies, and will continue to apply, its anti-money laundering program and/or procedures to all customers/investors of the Funds, and will take appropriate steps in accordance with the laws of its own jurisdiction to ensure that all relevant documentation is retained, as required, including identification relating to those customers/investors;

(c)                                              it will provide an annual certification to the Trust confirming that it has implemented an anti-money laundering program and/or procedures as described in paragraph (a), and that it has performed, and intends to continue to perform, the requirements of the Trust’s Customer Identification Procedures.  CMSI will provide to the Trust periodic reports on the implementation of the anti-money laundering program and its ability to monitor the program;




(d)                                             it complies with the United States regulations imposed by the Treasury Departments’ Office of Foreign Assets Control (“OFAC”), including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder, which prohibit, among other things, the engagement in transactions with, holding the securities of, and the provision of services to certain embargoed foreign countries and specially designated nationals, specially designated narcotics traffickers, terrorist sanctions, and other blocked parties;

(e)                                              it does not believe, has no current reason to believe and will notify the Trust immediately if it comes to have reason to believe that any shareholder of any Fund is engaged in money-laundering activities or is associated with any terrorist or other individual, entity or organization sanctioned by the United States or the jurisdictions in which it does business, or appear on any lists of prohibited persons, entities, and jurisdictions maintained and administered by OFAC; and

(f)                                                if it has delegated to any third party or parties any of its tasks under its agreement with the Trust, CMSI has secured from that third party such representations, warranties and undertakings as a re necessary to permit CMSI to provide the representations, warranties and covenants as are set forth in subparagraphs (a)-(e) above.

2.             Compliance.  CMSI agrees to comply with all applicable federal, state and local laws and regulations, codes, orders and government rules in the performance of its duties under this Agreement.  CMSI agrees to provide the Trust with such certifications, reports and other information as the Trust may reasonably request from time to time to assist it in complying with, and monitoring for compliance with, applicable laws, rules and regulations.




IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and sealed as of the date first above written.

WANGER ADVISORS TRUST

 

 

 

 

 

By:

/s/ Bruce H. Lauer

 

Name:

Bruce H. Lauer

 

Title:

Vice President, Secretary

 

 

and Treasurer

 

 

 

 

 

 

 

COLUMBIA MANAGEMENT SERVICES, INC.

 

 

 

 

By:

/s/ Stephen T. Welsh

 

Name:

Stephen T. Welsh

 

Title:

President

 

 



EX-99.(H)(23) 8 a07-7397_5ex99dh23.htm EX-99.(H)(23)

Exhibit 99(h)(23)

AMENDMENT NO. 3 TO SHAREHOLDERS’ SERVICING AND
TRANSFER AGENT AGREEMENT

This Amendment No. 3 to the Shareholders’ Servicing and Transfer Agent Agreement (the “Amendment”) is hereby made by and between Wanger Advisors Trust (the “Trust”) a Massachusetts business trust and Columbia Management Services, Inc. (“CMSI”) (formerly Liberty Funds Services, Inc.), a Massachusetts corporation.  This Amendment is dated March 6, 2007 and effective as of October 1, 2004.  Capitalized terms not defined herein shall have the meaning ascribed to them in the Shareholders’ Servicing and Transfer Agent Agreement dated as of September 29, 2000 (the “Agreement”).

WHEREAS, under the Agreement the Trust has appointed CMSI as Transfer Agent, Registrar and Dividend Disbursing Agent for each series of the Trust listed in Schedule A attached thereto (each a “Fund”), each a registered investment company;

WHEREAS, under the Agreement the Trust will pay CMSI for the services provided thereunder in accordance with and in the manner set forth in Schedule B attached thereto; and

WHEREAS, the parties to the Agreement desire to amend Schedule B attached thereto to reflect a revised fee schedule for each Fund of the Trust.

NOW THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereto agree as follows:

1.             Schedule B.  Pursuant to Section 28 of the Agreement, the parties hereto mutually agree that Schedule B attached to the Agreement be deleted and replaced in its entirety by the Schedule B attached to this Amendment.




IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and sealed as of the date first above written.

WANGER ADVISORS TRUST

 

 

 

 

 

By:

/s/ Bruce H. Lauer

 

 

Name:

Bruce H. Lauer

 

 

Title:

Vice President, Secretary

 

 

 

and Treasurer

 

 

 

 

 

 

 

 

 

COLUMBIA MANAGEMENT SERVICES,

 

INC.

 

 

 

 

 

By:

/s/ Stephen T. Welsh

 

 

Name:

Stephen T. Welsh

 

 

Title:

President

 

 

2




SCHEDULE B

Terms used in the Schedule and not defined herein shall have the meaning specified in the SHAREHOLDERS’ SERVICING AND TRANSFER AGENT AGREEMENT, as amended from time to time (the “Agreement”).  Payments under the Agreement to CMSI shall be made in the first two weeks of the month following the month in which a service is rendered or an expense incurred.  This Schedule B shall be effective as of the date of the Amendment.

Each Fund that is a series of the Trust shall pay CMSI for the services to be provided by CMSI under the Agreement an amount equal to the sum of the following:

1.                                       An account fee for Open Accounts of $21.00 per annum.

2.                                       In addition, CMSI shall be entitled to retain as additional compensation for its services all CMSI revenues for Distributor Fees, fees for wire, telephone, redemption and exchange orders, IRA trustee agent fees and account transcripts due CMSI from shareholders of any Fund and interest (net of bank charges) earned with respect to balances in the accounts referred to in paragraph 2 of the Agreement.  CMSI is not entitled to collect any account fees with respect to any Closed Account.

OUT-OF-POCKET EXPENSES.  Each Fund shall reimburse CMSI for any and all appropriate out-of-pocket expenses and charges in performing services under this Agreement (other than charges for normal data processing services and related software, equipment and facilities) including, but not limited to, mailing service, postage, printing of shareholder statements, the cost of any and all forms of the Funds and other materials used by CMSI in communicating with shareholders of the Funds, the cost of any equipment or service used for communicating with the Funds’ custodian bank or other agent of the Funds, and all costs of telephone communication with or on behalf of shareholders allocated in a manner mutually acceptable to the Funds and CMSI.

All determinations hereunder shall be in accordance with generally accepted accounting principles and subject to audit by the Funds’ independent accountants.

Definitions

Closed Account” is any account on the books of CMSI representing record ownership of shares of a Fund which as of the first day of any calendar month has a share balance of zero and does not meet account purge criteria.

Distributor Fees” means the amount due CMSI pursuant to any agreement with the Funds’ principal underwriter for processing, accounting and reporting services in connection with the sale of shares of the Fund.

3




Fund” means each of the open-end investment companies advised or administered by Columbia Wanger Asset Management, L.P. (formerly Liberty WAM) that are series of the Trusts which are parties to the Agreement.

Open Account” is any account on the books of CMSI representing record ownership of shares of a Fund which as of the first day of any calendar month has a share balance greater than zero.  The Open Account fee shall be payable on a monthly basis, in an amount equal to 1/12 the per annum change.

4




 

Agreed:

 

 

 

 

 

THE TRUST ON BEHALF OF EACH FUND DESIGNATED

 

 

IN SCHEDULE A FROM TIME TO TIME

 

 

 

 

 

 

By:

/s/ Bruce H. Lauer

 

 

Bruce H. Lauer, Vice President, Secretary and Treasurer

 

 

 

 

 

 

COLUMBIA MANAGEMENT SERVICES, INC.

 

 

 

 

 

 

By:

/s/ Stephen T. Welsh

 

 

Stephen T. Welsh, President

 

 

 

5



EX-99.(H)(24) 9 a07-7397_5ex99dh24.htm EX-99.(H)(24)

Exhibit-99.(h)(24)

FUND PARTICIPATION AGREEMENT

Among

RIVERSOURCE LIFE INSURANCE COMPANY

WANGER ADVISORS TRUST

COLUMBIA WANGER ASSET MANAGEMENT, L.P.

And

COLUMBIA MANAGEMENT DISTRIBUTORS, INC.

April 2, 2007




TABLE OF CONTENTS

ARTICLE I .

 

Sale and Redemption of Fund Shares

 

2

 

 

 

 

 

ARTICLE II .

 

Representations and Warranties

 

5

 

 

 

 

 

ARTICLE III .

 

Prospectuses and Proxy Statements; Voting

 

10

 

 

 

 

 

ARTICLE IV .

 

Sales Material and Information

 

12

 

 

 

 

 

ARTICLE V .

 

Fees and Expenses

 

13

 

 

 

 

 

ARTICLE VI .

 

Diversification and Qualification

 

13

 

 

 

 

 

ARTICLE VII .

 

Potential Conflicts and Compliance With Mixed and Shared Funding Exemptive Order

 

14

 

 

 

 

 

ARTICLE VIII .

 

Indemnification

 

16

 

 

 

 

 

ARTICLE IX .

 

Applicable Law

 

20

 

 

 

 

 

ARTICLE X .

 

Termination

 

20

 

 

 

 

 

ARTICLE XI .

 

Notices

 

22

 

 

 

 

 

ARTICLE XII .

 

Miscellaneous

 

23

 

 

 

 

 

SCHEDULE A

 

 

 

28

 

 

 

 

 

RiverSource Life Insurance Company

 

28

 

 

 

 

 

SCHEDULE B

 

 

 

32

 

 




PARTICIPATION AGREEMENT

THIS AGREEMENT, made and entered into as of this 2nd day of April, 2007, by and among the following parties:

·                                          RIVERSOURCE LIFE INSURANCE COMPANY (the “Company”), organized under the laws of the State of Minnesota on its own behalf and on behalf of each of its separate accounts named in Schedule A to this Agreement, as may be amended from time to time (each account referred to as an “Account”);

·                                          WANGER ADVISORS TRUST (the “Fund”), an open-end management investment company organized under the laws of the Commonwealth of Massachusetts;

·                                          COLUMBIA WANGER ASSET MANAGEMENT, L.P. (the “Adviser”), a Delaware limited partnership; and

·                                          COLUMBIA MANAGEMENT DISTRIBUTORS, INC. (the “Distributor”), a Massachusetts corporation.

WHEREAS, American Enterprise Life Insurance Company merged with and into IDS Life Insurance Company  (followed by an “intact transfer” of the Accounts of American Enterprise Life Insurance Company to IDS Life Insurance Company  by operation of law and incident to a merger that occurred on December 31, 2006) and IDS Life Insurance Company  was renamed RiverSource Life Insurance Company simultaneously with the merger; and

WHEREAS, the Fund engages in business as an open-end management investment company and is available to act as the investment vehicle for separate accounts established for variable life insurance policies and/or variable annuity contracts (collectively, the “Variable Insurance Products”) to be offered by insurance companies that have entered into participation agreements similar to this Agreement (hereinafter “Participating Insurance Companies”); and

WHEREAS, the beneficial interest in the Fund is divided into several series of shares, each designated a “portfolio” and representing the interest in a particular managed portfolio of securities and other assets; and

WHEREAS, the Fund is able to rely on an order from the Securities and Exchange Commission (hereinafter the “SEC”) granting Participating Insurance Companies and variable annuity and variable life insurance separate accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended, (hereinafter the “1940 Act”) and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Fund to be sold to and held by variable annuity and variable life insurance separate accounts of life insurance companies that may or may not be affiliated with one another and qualified pension and retirement plans (“Qualified Plans”) (hereinafter the “Mixed and Shared Funding Exemptive Order”); and

1




WHEREAS, the Fund is registered as an open-end management investment company under the 1940 Act and shares of the portfolios are registered under the Securities Act of 1933, as amended (hereinafter the “1933 Act”); and

WHEREAS, the Adviser is duly registered as an investment adviser under the Investment Advisers Act of 1940, as amended; and

WHEREAS, the Distributor is duly registered as a broker-dealer under the Securities Exchange Act of 1934, as amended, (the “1934 Act”) and is a member in good standing of the National Association of Securities Dealers, Inc. (the “NASD”); and

WHEREAS, the Company issues certain variable life insurance policies and/or variable annuity contracts supported wholly or partially by the Accounts (the “Contracts”).  The Contracts are listed on Schedule A attached hereto and incorporated herein by reference, as such schedule may be amended from time to time by mutual written agreement of the parties; and

WHEREAS, each Account is a duly organized, validly existing segregated asset account, established by resolution of the Board of Directors of the Company under applicable state insurance laws to set aside and invest assets attributable to the Contracts; and

WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase shares in the portfolios listed on Schedule A attached hereto and incorporated herein by reference, as such schedule may be amended from time to time by mutual written agreement of the parties (the “Portfolios”), on behalf of the Accounts to fund the Contracts, and the Distributor is authorized to sell such shares to unit investment trusts such as the Accounts at net asset value; and

WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company also intends to continue to purchase shares in other open-end investment companies or series thereof not affiliated with the Fund (the “Unaffiliated Funds”) on behalf of the Accounts to fund the Contracts.

NOW, THEREFORE, in consideration of their mutual promises, the Company, the Fund, the Distributor and the Adviser agree as follows:

ARTICLE I.                           Sale and Redemption of Fund Shares

1.1           The Distributor agrees to sell to the Company those shares of the Portfolios which the Account orders, executing such orders on each Business Day at the net asset value next computed after receipt by the Fund or its designee of the order for the shares of the Portfolios, subject to the terms and conditions set forth in the Fund’s then-current prospectus.  For purposes of this Section 1.1, the Company shall be the designee of the Fund for receipt of such orders and receipt by such designee shall constitute receipt by the Fund, provided that the Fund receives notice of any such order by 10:00 a.m. Eastern time on the next following Business Day.  “Business Day” shall mean any day on which the New York Stock Exchange is open for trading and on which a Portfolio calculates its net asset value pursuant to the rules of the SEC.

2




1.2           The Fund agrees to make shares of the Portfolios available for purchase at the applicable net asset value per share by the Company and the Accounts on those days on which the Fund calculates its Portfolios’ net asset value pursuant to rules of the SEC, and the Fund shall calculate such net asset value on each day on which the New York Stock Exchange is open for trading.  Notwithstanding the foregoing, the Fund may refuse to sell shares of any Portfolio to any person, or suspend or terminate the offering of shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Fund acting in good faith, necessary or appropriate in the best interests of the shareholders of such Portfolio.  All orders received by the Company shall be subject to the terms of the then current prospectus of the Fund.  The Company acknowledges that orders received by it in violation of the Fund’s stated policies may be subsequently revoked or cancelled by the Fund and that the Fund shall not be responsible for any losses incurred by the Company or the Contract owner as a result of such cancellation.  In addition, the Company acknowledges that the Fund has the right to refuse any purchase order for the reasons stated in the current prospectus of the Fund.

1.3           The Fund will not sell shares of the Portfolios to any other Participating Insurance Company separate account unless an agreement containing provisions the substance of which are the same as Sections 2.1, 2.2 (except with respect to designation of applicable law), 3.6, 3.7, 3.8 and Article VII of this Agreement is in effect to govern such sales.

1.4           The Fund agrees to redeem for cash, on the Company’s request, any full or fractional shares of the Portfolios held by the Company, executing such requests on each Business Day at the net asset value next computed after receipt by the Fund or its designee of the request for redemption.  For purposes of this Section 1.4, the Company shall be the designee of the Fund for receipt of requests for redemption and receipt by such designee shall constitute receipt by the Fund, provided that the Fund receives notice of any such request for redemption by 10:00 a.m. Eastern time on the next following Business Day.

1.5           The parties hereto acknowledge that the arrangement contemplated by this Agreement is not exclusive; the Fund’s shares may be sold to other Participating Insurance Companies (subject to Section 1.3) and the cash value of the Contracts may be invested in other investment companies, the Company’s registered or unregistered modified guaranteed annuity accounts and the Company’s fixed account.

1.6           The Company shall pay for Fund shares by 3:00 p.m. Eastern time on the next Business Day after an order to purchase Fund shares is received in accordance with the provisions of Section 1.1 hereof.  Payment shall be in federal funds transmitted by wire and/or by a credit for any shares redeemed the same day as the purchase.

1.7           The Fund shall pay and transmit the proceeds of redemptions of Fund shares by 11:00 a.m. Eastern Time on the next Business Day after a redemption order is received in accordance with Section 1.4 hereof; provided, however, that the Fund may delay payment in extraordinary circumstances to the extent permitted under Section 22(e) of the 1940 Act.  Payment shall be in federal funds transmitted by wire and/or a credit for any shares purchased the same day as the redemption.

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Each party has the right to rely on information or confirmations provided by the other party (or by an affiliate of the other party), and shall not be liable in the event that an error is a result of any misinformation supplied by the other party, or its affiliate thereof.

1.8           Issuance and transfer of the Fund’s shares will be by book entry only.  Stock certificates will not be issued to the Company or the Accounts.  Shares purchased from the Fund will be recorded in an appropriate title for the relevant Account or the relevant sub-account of an Account.

1.9           The Fund shall furnish same day notice (by electronic communication or telephone, followed by electronic confirmation) to the Company of any income, dividends or capital gain distributions payable on a Portfolio’s shares.  The Company hereby elects to receive all such income dividends and capital gain distributions as are payable on a Portfolio’s shares in additional shares of that Portfolio.  The Company reserves the right to revoke this election and to receive all such income dividends and capital gain distributions in cash.  The Fund shall notify the Company by the end of the next following Business Day of the number of shares so issued as payment of such dividends and distributions.

1.10         The Fund shall make the net asset value per share for each Portfolio available to the Company on each Business Day as soon as reasonably practicable after the net asset value per share is calculated and shall use its best efforts to make such net asset value per share available by 6:00 p.m. Eastern time.  In the event of an error in the computation of a Portfolio’s net asset value per share (“NAV”) or any dividend or capital gain distribution (each, a “pricing error”), the Adviser or the Fund shall notify the Company as soon as possible after discovery of the error.  Such notification may be oral, but shall be confirmed promptly in writing.  A pricing error shall be corrected as follows:  (a) if the pricing error results in a difference between the erroneous NAV and the correct NAV of less than $0.01 per share, then no corrective action need be taken; (b) if the pricing error results in a difference between the erroneous NAV and the correct NAV equal to or greater than $0.01 per share, but less than 1/2 of 1% of the Portfolio’s NAV at the time of the error, then the Adviser shall reimburse the Portfolio for any loss, after taking into consideration any positive effect of such error; however, no adjustments to Contract owner accounts need be made; and (c) if the pricing error results in a difference between the erroneous NAV and the correct NAV equal to or greater than 1/2 of 1% of the Portfolio’s NAV at the time of the error, then the Adviser shall reimburse the Portfolio for any loss (without taking into consideration any positive effect of such error) and shall reimburse the Company for the costs of adjustments made to correct Contract owner accounts.  Upon notification by the Adviser of any overpayment due to a material error, the Company shall promptly remit to the Adviser any overpayment that has not been paid to Contract owners.  In no event shall the Company be liable to Contract owners for any such adjustments or underpayment amounts.  Only a pricing error within categories (b) or (c) above shall be deemed to be “materially incorrect” or constitute a “material error” for purposes of this Agreement.  The standards set forth in this Section 1.10 are based on the parties’ understanding of the views expressed by the staff of the SEC as of the date of this Agreement.  In the event the views of the SEC staff are later modified or superseded by SEC or judicial interpretation, the parties shall amend the foregoing provisions of this Agreement to comport with the appropriate applicable standards, on terms mutually satisfactory to all parties.

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1.11         The parties agree to mutually cooperate with respect to any state insurance law restriction or requirement applicable to the Fund’s investments; provided, however, that the Fund reserves the right not to implement restrictions or take other actions required by state insurance law if the Fund or the Adviser determines that the implementation of the restriction or other action is not in the best interest of Fund shareholders.

ARTICLE II.          Representations and Warranties

2.1.          The Company represents and warrants that:  (a) the securities issued by the Accounts under the Contracts are or will be registered under the 1933 Act, or are not so registered in proper reliance upon an exemption from such registration requirements (in the event the Company or Account relies upon an exemption from such registration requirements, the Company undertakes to promptly so notify the Fund); (b) the Contracts will be issued and sold in compliance in all material respects with all applicable federal and state laws; and (c) the sale of the Contracts shall comply in all material respects with state insurance suitability requirements.

2.2.          The Company represents and warrants that:  (a) it is an insurance company duly organized and in good standing under applicable law; (b) it, or a wholly-owned subsidiary insurance company, has legally and validly established each Account prior to any issuance or sale of units thereof as a segregated asset account under applicable state insurance law; and (c) it has registered each Account as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a segregated investment account for the Contracts and will maintain such registration for so long as any Contracts are outstanding as required by applicable law or, alternatively, the Company has not registered one or more Accounts in proper reliance upon an exclusion from such registration requirements.

2.3.          The Fund represents and warrants that:  (a) the Fund shares sold pursuant to this Agreement shall be registered under the 1933 Act; (b) the Fund shares sold pursuant to this Agreement shall be duly authorized for issuance and sold in compliance with all applicable state and federal securities laws including without limitation the 1933 Act, the 1934 Act, and the 1940 Act; (c) the Fund is and shall remain registered under the 1940 Act; and (d) the Fund shall amend the registration statement for its shares under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its shares.

2.4.          The Fund currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although it may make such payments in the future subject to applicable law and after providing notice to the Company.

2.5.          The Fund represents and warrants that it shall register and qualify the shares for sale in accordance with the laws of the various states if and to the extent required by applicable law.

2.6.           The Fund represents and warrants that it is lawfully organized and validly existing under the laws of the Commonwealth of Massachusetts and that it does and will comply in all material respects with the 1940 Act.

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2.7.           The Fund makes no representations as to whether any aspect of its operations (including, but not limited to, fees and expenses and investment policies) complies with the insurance laws or regulations of the various states.

2.8.          The Adviser represents and warrants that it is and shall remain duly registered under all applicable federal and state securities laws and that it shall perform its obligations for the Fund in compliance in all material respects with any applicable state and federal securities laws.

2.9.          The Distributor represents and warrants that it is and shall remain duly registered as a broker-dealer under all applicable federal and state securities laws and is a member in good standing with the NASD, and that it shall perform its obligations for the Fund in compliance in all material respects with the laws of any applicable state and federal securities laws.

2.10.        The Fund and the Adviser represent and warrant that all of their respective officers, employees, investment advisers, and other individuals or entities dealing with the money and/or securities of the Fund are, and shall continue to be at all times, covered by one or more blanket fidelity bonds or similar coverage for the benefit of the Fund in an amount not less than the minimal coverage required by Rule 17g-1 under the 1940 Act or related provisions as may be promulgated from time to time.  The aforesaid bonds shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company.

2.11.        The Fund and the Adviser represent and warrant that they will provide the Company with as much advance notice as is reasonably practicable of any material change affecting the Portfolios (including, but not limited to, any material change in the registration statement or prospectus affecting the Portfolios) and any proxy solicitation affecting the Portfolios and consult with the Company in order to implement any such change in an orderly manner, recognizing the expenses of changes and attempting to minimize such expense by implementing them in conjunction with regular annual updates of the prospectus for the Contracts where reasonably practicable.

2.12.        The Company represents and warrants, for purposes other than diversification under Section 817 of the Internal Revenue Code of 1986 as amended (the “Code”), that the Contracts are currently and at the time of issuance will be treated as annuity contracts or life insurance policies under applicable provisions of the Code, and that it will make every effort to maintain such treatment and that it will notify the Fund, the Distributor and the Adviser immediately upon having a reasonable basis for believing that the Contracts have ceased to be so treated or that they might not be so treated in the future.  In addition, the Company represents and warrants that each Account is a “segregated asset account” and that interests in each Account are offered exclusively through the purchase of or transfers into a “variable contract” within the meaning of such terms under Section 817 of the Code and the regulations thereunder.  The Company will use every effort to continue to meet such definitional requirements, and it will notify the Fund, the Distributor and the Adviser immediately upon having a reasonable basis for believing that such requirements have ceased to be met or that they might not be met in the future.  The Company represents and warrants that it will not purchase Fund shares with assets derived from tax-qualified retirement plans except, indirectly, through Contracts purchased in connection with such plans.

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2.13.        The Company represents and warrants that it will comply with all applicable laws and regulations designed to prevent money laundering including, without limitation, the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 (Title III of the USA PATRIOT ACT), and if required by such laws or regulations, to share with the Fund, the Distributor and the Adviser information about the individuals, entities, organizations and countries suspected of possible terrorist or money laundering activities in accordance with Section 314(b) of the USA PATRIOT ACT.

2.14         The Fund, the Distributor and the Adviser represent and warrant that each of them will comply with all applicable laws and regulations designed to prevent money laundering including, without limitation, the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 (Title III of the USA PATRIOT ACT), and if required by such laws or regulations, to share with the Company information about the individuals, entities, organizations and countries suspected of possible terrorist or money laundering activities in accordance with Section 314(b) of the USA PATRIOT ACT.

2.15.        The Company represents and warrants that it is currently in compliance, and will remain in compliance, with all applicable laws, rules and regulations relating to consumer privacy, including, but not limited to, Regulation S-P.

2.16.        The Company represents and warrants that it has adopted, and will at all times during the term of this Agreement maintain, reasonable and appropriate procedures (“Late Trading Procedures”) reasonably designed to ensure that any and all orders relating to the purchase, sale or exchange of Fund shares communicated to the Fund to be treated in accordance with Article I of this Agreement as having been received on a Business Day, have been received by the Valuation Time on such Business Day and were not modified after the Valuation Time, and that all orders received from Contract owners but not rescinded by the Valuation Time were communicated to the Fund or its agent as received for that Business Day.  “Valuation Time” shall mean the time as of which the Fund calculates net asset value for the shares of the Portfolios on the relevant Business Day.  The Company represents and warrants that it has adopted and implemented controls reasonably designed to ensure that all orders received by the Company after the close of the New York Stock Exchange on a particular Business Day will not be aggregated with orders received by the Company before the close of the New York Stock Exchange on such Business Day.

2.17.        Each transmission of orders by the Company shall constitute a representation by the Company that such orders are accurate and complete and relate to orders received by the Company by the Valuation Time on the Business Day for which the order is to be priced and that such transmission includes all orders relating to Fund shares received from Contract owners but not rescinded by the Valuation Time.  The Company agrees to provide its Late Trading Procedures to the Fund or its designee for inspection and review at the Company’s offices during normal business hours.  In addition, the Company agrees to provide the Fund or its designee such certifications and representations regarding the Late Trading Procedures as the Fund or its designee may reasonably request.  The Company will promptly notify the Fund in writing of any material change to the Late Trading Procedures.

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2.18         (a)  The Company acknowledges that the Fund has adopted policies designed to prevent frequent purchases and redemptions of any Portfolio shares in quantities great enough to disrupt orderly management of the corresponding Fund’s investment portfolio.  These policies are disclosed in the Fund’s prospectus(es).  The Fund and Distributor agree to give Company prompt written notice of material changes to the Fund’s disruptive trading policies and procedures (and revisions thereto).  The Fund and Distributor acknowledge that the Company, on behalf of its Account(s), has adopted policies reasonably designed to detect and deter frequent transfers of Contract value among the subaccounts of the Account(s) including those investing in Portfolio shares which are available as investment options under the Contracts (such policies and procedures “Frequent Trading Policies”).  The Frequent Trading Policies are described in the current prospectuses of the Account(s) through which the Contracts are offered.  The Company agrees to provide the Frequent Trading Policies to the Fund or its designee for inspection and review at the Company’s offices during normal business hours.  In addition, the Company agrees to provide the Fund or its designee such certifications and representations regarding its Frequent Trading Policies as the Fund or its designee may reasonably request.  The Company will promptly notify the Fund in writing of any material change to the Frequent Trading Policies.

(b)           In recognition of the requirements contained in Rule 22c-2 under the 1940 Act, the Company will provide the Fund or its designee promptly upon written request, the taxpayer identification number (“TIN”), if known, the Individual/International Taxpayer Identification Number (“ITIN”), or other government-issued identifier (“GII”) of any or all Shareholder(s) of the account and the amount, date, and transaction type (purchase, redemption, transfer, or exchange) of every purchase, redemption, transfer, or exchange of shares held through an account maintained by the Company during the period covered by the request.  Unless otherwise specifically requested by the Fund, the Company shall only be required to provide information relating to Shareholder-Initiated Transfer Purchases or Shareholder-Initiated Transfer Redemptions.

(i)             Requests must set forth a specific period, not to exceed ninety (90) days from the date of the request, for which transaction information is sought.  The Fund may request transaction information older than ninety (90) days from the date of the request as it deems necessary to investigate compliance with policies established by the Fund for the purpose of eliminating or reducing any dilution of the value of the outstanding shares issued by the Fund.

(ii)           The Company agrees to transmit the requested information that is on its books and records to the Fund or its designee promptly, but in any event not later than ten (10) business days, after receipt of a request.  If the requested information is not on the Company’s books and records, the Company agrees to:  (i) provide or arrange to provide to the Fund the requested information from Shareholders who hold an account with an indirect intermediary; or (ii) if directed by the Fund, block further purchases of Fund shares from such indirect intermediary.  In such instance, the Company agrees to inform the Fund whether it plans to perform (i) or (ii).  Responses required by this paragraph must be communicated in writing and in a format mutually agreed upon by the parties.  To the extent practicable, the format for any transaction information provided to the Fund should be consistent with the NSCC Standardized Data Reporting Format.  For purposes of this provision, an “indirect intermediary” has the same meaning as in SEC Rule 22c-2 under the 1940 Act.

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(iii)          The Fund and its designees (including Columbia Management Services, Inc., the Fund’s transfer agent and designee pursuant to this Section 2.18) agree that the use of the information received from the Company shall be in accordance with the confidentiality provisions contained in Section 12.1 of this Agreement.

(iv)          When the Fund has given the Company a written instruction pursuant to Section 2.18(c) below, the Fund may request and the Company will provide the Fund with the name or other identifier of any investment professional who is listed on the Company’s records as the agent of record for the restricted Shareholder if the investment professional is employed by a broker dealer affiliate of the Company.  If the restricted Shareholder’s Contract was sold by a broker dealer firm not affiliated with the Company, the Company will provide the Fund with the name of the selling broker dealer firm.

(c)           In further recognition of the requirements contained in Rule 22c-2 of the 1940 Act, the Company agrees to execute written instructions from the Fund to restrict or prohibit further purchases or exchanges of shares by a Shareholder that has been identified by the Fund as having engaged in transactions of the Fund’s shares (directly or indirectly through the Company’s account) that violate policies established by the Fund for the purpose of eliminating or reducing any dilution of the value of the outstanding shares issued by the Fund. Unless otherwise directed by the Fund, any such restrictions or prohibitions shall only apply to Shareholder-Initiated Transfer Purchases or Shareholder-Initiated Transfer Redemptions that are affected directly or indirectly through the Company.

(i)           Instructions must include the TIN, ITIN or GII and the specific restriction(s) to be executed, including how long the restriction(s) is (are) to remain in place. If the TIN, ITIN, or GII associated with the Shareholder is not known, the Fund or its designee will contact the Company and the Company will again provide the Fund or its designee with the TIN, ITIN or GII. Upon request by the Company, the Fund will provide a brief written explanation specifying how the Shareholder’s trading activity violated the affected Funds’ market timing or other abusive trading policies that the Company may provide to the Shareholder.

(ii)          The Company agrees to execute instructions as soon as reasonably practicable, but not later than five (5) Business Days after receipt of the instructions by the Company.

(iii)         The Company must provide written confirmation to the Fund that instructions have been executed.  The Company agrees to provide confirmation as soon as reasonably practicable, but not later than ten (10) Business Days after the instructions have been executed.

(d)          For purposes of this Section 2.18:

(i)           The term “Fund” includes the Adviser, and Columbia Management Services, Inc., but does not include any “excepted funds” as defined in SEC Rule 22c-2(b) under the 1940 Act.

(ii)          The term “Shareholder” means the holder of interests under a Contract.

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(iii)         The term “Shareholder-Initiated Transfer Purchase” means a transaction that is initiated or directed by a Shareholder that results in a transfer of assets within a Contract to a Fund, but does not include transactions that are executed: (i) automatically pursuant to a contractual or systematic program or enrollment such as transfer of assets within a Contract to a Fund as a result of “dollar cost averaging” programs, insurance company approved asset allocation programs, or automatic rebalancing programs; (ii) pursuant to a Contract death benefit; (iii) one-time step-up in Contract value pursuant to a Contract death benefit; (iv) allocation of assets to a Fund through a Contract  as a result of payments such as loan repayments, scheduled contributions, retirement plan salary reduction contributions, or planned premium payments to the Contract; or (v) prearranged transfers at the conclusion of a required free look period.

(iv)         The term “Shareholder-Initiated Transfer Redemption” means a transaction that is initiated or directed by a Shareholder that results in a transfer of assets within a Contract out of a Fund, but does not include transactions that are executed: (i) automatically pursuant to a contractual or systematic program or enrollments such as transfers of assets within a Contract out of a Fund as a result of annuity payouts, loans, systematic withdrawal programs, insurance company approved asset allocation programs and automatic rebalancing programs; (ii) as a result of any deduction of charges or fees under a Contract; (iii) within a Contract out of a Fund as a result of scheduled withdrawals or surrenders from a Contract; or (iv) as a result of payment of a death benefit from a Contract.

2.19                     The Company agrees to provide the Fund or its designee with reasonable assurance that it has implemented effective compliance policies and procedures administered by qualified personnel as required by and in accordance with any and all applicable laws, rules and regulations.  The Company acknowledges: (a) that it has adopted and implemented written compliance policies and procedures reasonably designed to prevent the Company from violating the Federal Securities Laws (as defined in Rule 38a-1) in its provision of services to the Fund pursuant to this Agreement; and (b) that it will provide the Fund or its designee reasonable access (i) to the Chief Compliance Officer of the Account, who will confer as needed with the Fund or its designee regarding the written compliance policies and procedures of the Accounts (including the Frequent Trading Policies), and (ii) such written policies and procedures for inspection and review at the Company’s offices during normal business hours.

2.20        Each party represents that the execution and delivery of this Agreement and the consummation of the transactions contemplated herein have been duly authorized by all necessary corporate or board action, as applicable, by such party and when so executed and delivered this Agreement will be the valid and binding obligation of such party enforceable in accordance with its terms.

ARTICLE III.                     Prospectuses and Proxy Statements; Voting

3.1.          At least annually, the Adviser or Distributor shall provide the Company with as many copies of the Fund’s current prospectus as the Company may reasonably request, with expenses to be borne in accordance with Schedule B hereof.  If requested by the Company in lieu thereof, the Adviser, Distributor or Fund shall provide such documentation (including an electronic version of the current prospectus) and other assistance as is reasonably necessary in

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order for the Company once each year (or more frequently if the prospectus for the Fund is amended) to have the prospectus for the Contracts and the prospectus for the Fund printed together in one document.

3.2.          If applicable state or federal laws or regulations require that the Statement of Additional Information (“SAI”) for the Fund be distributed to all Contract owners, then the Fund, Distributor and/or the Adviser shall provide the Company with copies of the Fund’s SAI in such quantities, with expenses to be borne in accordance with Schedule B hereof, as the Company may reasonably require to permit timely distribution thereof to Contract owners.  The Adviser, Distributor and/or the Fund shall also provide an SAI to any Contract owner or prospective owner who requests such SAI from the Fund.

3.3.          The Fund, Distributor and/or Adviser shall provide the Company with copies of the Fund’s proxy materials, reports to shareholders and other communications to shareholders in such quantity, with expenses to be borne in accordance with Schedule B hereof, as the Company may reasonably require to permit timely distribution thereof to Contract owners.  The Fund will provide written instructions to the Company each time the Fund furnishes an amendment or supplement to the Fund’s current prospectus or SAI directing the Company as to whether the amendment or supplement is to be provided (a) immediately to existing Contract owners who have Contract value allocated to the Fund or (b) is to be held and combined with another Fund or Contract related mailing as permitted by applicable federal securities laws.  The Fund agrees that the instruction it gives to the Company in each instance will be substantively identical to instructions provided to other Participating Insurance Companies.  Absent written instructions from the Fund directing otherwise, amendments and supplements to the Fund’s current prospectus or SAI may be held and combined with another Fund or Contract related mailing as permitted by applicable federal securities laws.

3.4.          It is understood and agreed that, except with respect to information regarding the Company provided in writing by that party, the Company shall not be responsible for the content of the prospectus or SAI for the Fund.  It is also understood and agreed that, except with respect to information regarding the Fund, the Distributor, the Adviser or the Portfolios provided in writing by the Fund, the Distributor or the Adviser, neither the Fund, the Distributor nor Adviser are responsible for the content of the prospectus or SAI for the Contracts.

3.5           In the event that the Fund initiates (a) a reorganization of a Portfolio as defined by Section 2 of the 1940 Act, or (ii) a change in the name of a Portfolio or the Fund, the Fund, the Distributor or the Adviser as they may among themselves determine, shall reimburse the Company for the Company’s verifiable costs associated with the aforementioned actions.  The Company agrees to use its best efforts to minimize any costs incurred under this Section and shall provide the Fund, the Distributor and the Adviser with acceptable documentation of any such costs incurred.

3.6.          If and to the extent required by law the Company shall:

(a)          solicit voting instructions from Contract owners;

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(b)           vote the Portfolio shares held in the Accounts in accordance with instructions received from Contract owners;

(c)           vote Portfolio shares held in the Accounts for which no instructions have been received in the same proportion as Portfolio shares for which instructions have been received from Contract owners, so long as and to the extent that the SEC continues to interpret the 1940 Act to require pass-through voting privileges for variable contract owners; and

(d)           vote Portfolio shares held in its general account or otherwise in the same proportion as Portfolio shares for which instructions have been received from Contract owners, so long as and to the extent that the SEC continues to interpret the 1940 Act to require such voting by the insurance company.  The Company reserves the right to vote Fund shares in its own right, to the extent permitted by law.

3.7.          The Company shall be responsible for assuring that each of its separate accounts holding shares of a Portfolio calculates voting privileges as directed by the Fund and agreed to by the Company and the Fund.  The Fund agrees to promptly notify the Company of any changes of interpretations or amendments of the Mixed and Shared Funding Exemptive Order.

3.8.          The Fund will comply with all provisions of the 1940 Act requiring voting by shareholders.  Further, the Fund will act in accordance with the SEC’s interpretation of the requirements of Section 16(a) with respect to periodic elections of directors or trustees and with whatever rules the SEC may promulgate with respect thereto.

ARTICLE IV.                          Sales Material and Information

4.1.          The Company shall furnish, or shall cause to be furnished, to the Fund or its designee, a copy of each piece of sales literature or other promotional material that the Company develops or proposes to use and in which the Fund (or Portfolio thereof), the Adviser or the Distributor is named in connection with the Contracts, at least ten (10) Business Days prior to its use.  No such material shall be used if the Fund objects to such use within five (5) Business Days after receipt of such material.

4.2.          The Company shall not give any information or make any representations or statements on behalf of the Fund in connection with the sale of the Contracts other than the information or representations contained in the registration statement, including the prospectus or SAI for the Fund shares, as the same may be amended or supplemented from time to time, or in sales literature or other promotional material approved by the Fund, Distributor or Adviser, except with the permission of the Fund, Distributor or Adviser.

4.3.          The Fund, the Adviser or the Distributor shall furnish, or shall cause to be furnished, to the Company, a copy of each piece of sales literature or other promotional material in which the Company and/or its Accounts are named at least ten (10) Business Days prior to its use.  No such material shall be used if the Company objects to such use within five (5) Business Days after receipt of such material.

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4.4.          The Fund, the Distributor and the Adviser shall not give any information or make any representations on behalf of the Company or concerning the Company, the Accounts, or the Contracts other than the information or representations contained in a registration statement, including the prospectus or SAI for the Contracts, as the same may be amended or supplemented from time to time, or in sales literature or other promotional material approved by the Company or its designee, except with the permission of the Company.

4.5.          For purposes of Articles IV and VIII, the phrase “sales literature and other promotional material” includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media; e.g., on-line networks such as the Internet or other electronic media), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, and shareholder reports, and proxy materials (including solicitations for voting instructions) and any other material constituting sales literature or advertising under the NASD rules, the 1933 Act or the 1940 Act.

4.6.          At the request of any party to this Agreement, each other party will make available to the other party’s independent auditors and/or representatives of the appropriate regulatory agencies, all records, data and access to operating procedures that may be reasonably requested in connection with compliance and regulatory requirements related to this Agreement or any party’s obligations under this Agreement.

ARTICLE V.                              Fees and Expenses

5.1.         The Fund, the Distributor and the Adviser shall pay no fee or other compensation to the Company under this Agreement, and the Company shall pay no fee or other compensation to the Fund, the Distributor or Adviser under this Agreement; provided, however, (a) the parties will bear their own expenses as reflected in Schedule B and other provisions of this Agreement, (b) the parties may enter into other agreements relating to the Company’s investment in the Fund, including services agreements and (c) each party shall in accordance with the allocation of expenses reflected in Schedule B and other provisions of this Agreement promptly reimburse other parties for expenses initially paid by one party but allocated to another party.

ARTICLE VI.                          Diversification and Qualification

6.1.          The Fund, Distributor and Adviser represent and warrant that the Fund and each Portfolio thereof will at all times comply with Section 817(h) of the Code and Treasury Regulation §1.817-5, as amended from time to time, and any Treasury interpretations thereof, relating to the diversification requirements for variable annuity, endowment, or life insurance contracts and any amendments or other modifications or successor provisions to such Section or Regulations.  The Fund, the Distributor or the Adviser shall, upon request, provide to the Company a quarterly written diversification report, which shall show the results of the quarterly

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Section 817(h) diversification test and include a certification as to whether each Portfolio complies with the Section 817(h) diversification requirement.

6.2.          The Fund, the Distributor and the Adviser agree that shares of the Portfolios will be sold only to Participating Insurance Companies and their separate accounts and to Qualified Plans.  No shares of any Portfolio of the Fund will be sold to the general public.  However, it is understood by the Company that the Fund may sell shares of any Portfolio to any person eligible to invest in that Portfolio in accordance with applicable provisions of Section 817(h) under the Code and the regulations thereunder and the terms of the Mixed and Shared Funding Exemptive Order.

6.3.          The Fund, the Distributor and the Adviser represent and warrant that the Fund and each Portfolio is currently qualified as a Regulated Investment Company under Subchapter M of the Code, and that each Portfolio will maintain such qualification (under Subchapter M or any successor or similar provisions) as long as this Agreement is in effect.

6.4           The Fund, the Distributor or the Adviser will notify the Company immediately upon having a reasonable basis for believing that the Fund or any Portfolio has ceased to comply with the aforesaid Section 817(h) diversification or Subchapter M qualification requirements.

6.5           Without in any way limiting the effect of Sections 8.2, 8.3 and 8.4 hereof and without in any way limiting or restricting any other remedies available to the Company, the Adviser or the Distributor will pay all costs associated with or arising out of any failure, or any anticipated or reasonably foreseeable failure, of the Fund or any Portfolio to comply with Section 6.1, 6.2 or 6.3 hereof, including all costs associated with reasonable and appropriate corrections or responses to any such failure; such costs may include, but are not limited to, the costs involved in creating, organizing, and registering a new investment company as a funding medium for the Contract and/or costs of obtaining whatever regulatory authorizations are required to substitute shares of another investment company for those of the failed Portfolio (including but not limited to an order pursuant to Section 26(c) of the 1940 Act.

6.6.          The Company agrees that if the Internal Revenue Service (“IRS”) asserts in writing in connection with any governmental audit or review of the Company (or, to the Company’s knowledge, of any Contract owner) that any Portfolio has failed to comply with the diversification requirements of Section 817(h) of the Code or the Company otherwise becomes aware of any facts that could give rise to any claim against the Fund, Distributor or Adviser as a result of such a failure or alleged failure, the Company shall promptly notify the Fund, the Distributor and the Adviser or such assertion or potential claim.

ARTICLE VII.                      Potential Conflicts and Compliance With Mixed and Shared Funding Exemptive Order

7.1.          The Board of Trustees of the Fund (the “Board”) will monitor the Fund for the existence of any material irreconcilable conflict between the interests of the Contract owners of all separate accounts investing in the Fund.  An irreconcilable material conflict may arise for a variety of reasons, including:  (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public

14




ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Portfolio is being managed; (e) a difference in voting instructions given by variable annuity contract and variable life insurance contract owners or by contract owners of different Participating Insurance Companies; or (f) a decision by a Participating Insurance Company to disregard the voting instructions of Contract owners.  The Board shall promptly inform the Company if it determines that an irreconcilable material conflict exists and the implications thereof.

7.2.          The Company will report any potential or existing conflicts of which it is aware to the Board.  The Company will assist the Board in carrying out its responsibilities under the Mixed and Shared Funding Exemptive Order, by providing the Board with all information reasonably necessary for the Board to consider any issues raised.  This includes, but is not limited to, an obligation by the Company to inform the Board whenever Contract owner voting instructions are to be disregarded.  Such responsibilities shall be carried out by the Company with a view only to the interests of its Contract owners.

7.3.          If it is determined by a majority of the Board, or a majority of its directors who are not interested persons of the Fund, the Distributor, the Adviser or any subadviser to any of the Portfolios (the “Independent Directors”), that a material irreconcilable conflict exists, the Company and other Participating Insurance Companies shall, at their expense and to the extent reasonably practicable (as determined by a majority of the Independent Directors), take whatever steps are necessary to remedy or eliminate the irreconcilable material conflict, up to and including:  (1) withdrawing the assets allocable to some or all of the separate accounts from the Fund or any Portfolio and reinvesting such assets in a different investment medium, including (but not limited to) another Portfolio, or submitting the question whether such segregation should be implemented to a vote of all affected Contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., annuity contract owners, life insurance contract owners, or variable contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected contract owners the option of making such a change; and (2) establishing a new registered management investment company or managed separate account.

7.4.          If a material irreconcilable conflict arises because of a decision by the Company to disregard Contract owner voting instructions and that decision represents a minority position or would preclude a majority vote, the Company may be required, at the Fund’s election, to withdraw the Account’s investment in the Fund and terminate this Agreement; provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the Independent Directors.  Any such withdrawal and termination must take place within six (6) months after the Fund gives written notice that this provision is being implemented, and until the end of that six-month period the Adviser, the Distributor and the Fund shall continue to accept and implement orders by the Company for the purchase (and redemption) of shares of the Fund, subject to the terms of the Fund’s then-current prospectus.

7.5.          If a material irreconcilable conflict arises because a particular state insurance regulator’s decision applicable to the Company conflicts with the majority of other state

 

15




regulators, then the Company will withdraw the Account’s investment in the Fund and terminate this Agreement within six months after the Board informs the Company in writing that it has determined that such decision has created an irreconcilable material conflict; provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the Independent Directors.  Until the end of the foregoing six-month period, the Fund shall continue to accept and implement orders by the Company for the purchase (and redemption) of shares of the Fund, subject to the terms of the Fund’s then-current prospectus.

7.6.       For purposes of Sections 7.3 through 7.5 of this Agreement, a majority of the Independent Directors shall determine whether any proposed action adequately remedies any irreconcilable material conflict, but in no event will the Fund be required to establish a new funding medium for the Contracts.  The Company shall not be required by Section 7.3 to establish a new funding medium for the Contracts if an offer to do so has been declined by vote of a majority of Contract owners affected by the irreconcilable material conflict.  In the event that the Board determines that any proposed action does not adequately remedy any irreconcilable material conflict, then the Company will withdraw the Account’s investment in the Fund and terminate this Agreement within six (6) months after the Board informs the Company in writing of the foregoing determination; provided, however, that such withdrawal and termination shall be limited to the extent required by any such material irreconcilable conflict as determined by a majority of the Independent Directors.

7.7.       If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act or the rules promulgated thereunder with respect to mixed or shared funding (as defined in the Mixed and Shared Funding Exemptive Order) on terms and conditions materially different from those contained in the Mixed and Shared Funding Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable: and (b) Sections 3.6, 3.7, 3.8, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue in effect only to the extent that terms and conditions substantially identical to such Sections are contained in such Rule(s) as so amended or adopted.

ARTICLE VIII.                                          Indemnification

8.1.       Indemnification by the Company

(a)         The Company agrees to indemnify and hold harmless the Fund, the Distributor and the Adviser and each of their respective officers and directors or trustees and each person, if any, who controls the Fund, Distributor or Adviser within the meaning of Section 15 of the 1933 Act (collectively, the “Indemnified Parties” for purposes of this Section 8.1) against any and all losses, claims, expenses, damages and liabilities (including amounts paid in settlement with the written consent of the Company) or litigation (including reasonable legal and other expenses) to which the Indemnified Parties may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, expenses, damages or liabilities (or actions in respect thereof) or settlements are related to the sale or acquisition of the Fund’s shares or the Contracts and:

16




(i)       arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the registration statement or prospectus or SAI covering the Contracts or contained in the Contracts or sales literature or other promotional material for the Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this Agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of the Fund for use in the registration statement or prospectus for the Contracts or in the Contracts or sales literature or other promotional material (or any amendment or supplement to any of the foregoing) or otherwise for use in connection with the sale of the Contracts or Fund shares; or

(ii)      arise out of or as a result of statements or representations (other than statements or representations contained in the registration statement, prospectus or sales literature or other promotional material of the Fund not supplied by the Company or persons under its control) or wrongful conduct of the Company or persons under its control, with respect to the sale or distribution of the Contracts or Fund Shares; or

(iii)     arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, SAI, or sales literature or other promotional material of the Fund, or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, if such a statement or omission was made in reliance upon information furnished in writing to the Fund by or on behalf of the Company; or

(iv)     arise as a result of any failure by the Company to provide the services and furnish the materials under the terms of this Agreement; or

(v)      arise out of or result from any material breach of any representation and/or warranty made by the Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Company, including without limitation Section 2.12 and Section 6.4 hereof,

as limited by and in accordance with the provisions of Sections 8.1(b) and 8.1(c) hereof.

(b)        The Company shall not be liable under this indemnification provision with respect to any losses, claims, expenses, damages, liabilities or litigation to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party’s willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party’s duties or by reason of such Indemnified Party’s reckless disregard of obligations or duties under this Agreement.

17




(c)         The Company shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Company in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Company of any such claim shall not relieve the Company from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision, except to the extent that the Company has been prejudiced by such failure to give notice.  In case any such action is brought against the Indemnified Parties, the Company shall be entitled to participate, at its own expense, in the defense of such action.  The Company also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action.  After notice from the Company to such party of the Company’s election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Company will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation.

(d)        The Indemnified Parties will promptly notify the Company of the commencement of any litigation or proceedings against them in connection with the issuance or sale of share of the Portfolios or the operation of the Fund.

8.2.       Indemnification by the Adviser

(a)         The Adviser agrees to indemnify and hold harmless the Company and its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (collectively, the “Indemnified Parties” for purposes of this Section 8.2) against any and all losses, claims, expenses, damages, liabilities (including amounts paid in settlement with the written consent of the Adviser) or litigation (including reasonable legal and other expenses) to which the Indemnified Parties may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of the Portfolios or the Contracts and:

(i)       arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement or prospectus or SAI or sales literature or other promotional material of the Fund prepared by the Fund, the Distributor or the Adviser (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this Agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished in writing to the Adviser, the Distributor or the Fund by or on behalf of the Company for use in the registration statement, prospectus or SAI for the Fund or in sales literature or other promotional material (or any amendment or supplement to any of the

18




foregoing) or otherwise for use in connection with the sale of the Contracts or the Portfolios; or

(ii)      arise out of or as a result of statements or representations (other than statements or representations contained in the registration statement, prospectus, SAI or sales literature or other promotional material for the Contracts not supplied by the Adviser or persons under its control) or wrongful conduct of the Fund, the Distributor or the Adviser or persons under their control, with respect to the sale or distribution of the Contracts or Portfolios; or

(iii)     arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, SAI, or sales literature or other promotional material covering the Contracts, or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading, if such statement or omission was made in reliance upon information furnished in writing to the Company by or on behalf of the Adviser, the Distributor or the Fund; or

(iv)     arise as a result of any failure by the Fund, the Distributor or the Adviser to provide the services and furnish the materials under the terms of this Agreement (including a failure, whether unintentional or in good faith or otherwise, to comply with the diversification and other qualification requirements specified in Article VI of this Agreement); or

(v)      arise out of or result from any material breach of any representation and/or warranty made by the Fund, the Distributor or the Adviser in this Agreement or arise out of or result from any other material breach of this Agreement by the Adviser, the Distributor or the Fund; or

(vi)     arise out of or result from the incorrect or untimely calculation or reporting by the Fund, the Distributor, the Adviser or any service provider of the foregoing Parties of the daily net asset value per share (subject to Section 1.10 of this Agreement) or dividend or capital gain distribution rate;

as limited by and in accordance with the provisions of Sections 8.2(b) and 8.2(c) hereof.  This indemnification is in addition to and apart from the responsibilities and obligations of the Adviser specified in Article VI hereof.

(b)        The Adviser shall not be liable under this indemnification provision with respect to any losses, claims, expenses, damages, liabilities or litigation to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party’s willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party’s duties or by reason of such Indemnified Party’s reckless disregard of obligations or duties under this Agreement.

(c)         The Adviser shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have

19




notified the Adviser in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Adviser of any such claim shall not relieve the Adviser from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision, except to the extent that the Adviser has been prejudiced by such failure to give notice.  In case any such action is brought against the Indemnified Parties, the Adviser will be entitled to participate, at its own expense, in the defense thereof.  The Adviser also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action.  After notice from the Adviser to such party of the Adviser’s election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Adviser will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation.

(d)        The Company agrees promptly to notify the Adviser of the commencement of any litigation or proceeding against it or any of its officers or directors in connection with the issuance or sale of the Contracts or the operation of the Account.

ARTICLE IX.     Applicable Law

9.1.       This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the Commonwealth of Massachusetts, without regard to conflict of laws provisions.

9.2.       This Agreement shall be subject to the provisions of the 1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder, including such exemptions from those statutes, rules and regulations as the SEC may grant (including, but not limited to, the Mixed and Shared Funding Exemptive Order) and the terms hereof shall be interpreted and construed in accordance therewith.

ARTICLE X.    Termination

10.1.     This Agreement shall terminate:

(a)       at the option of any party, with or without cause, with respect to some or all Portfolios, upon sixty (60) days advance written notice delivered to the other parties; or

(b)      at the option of the Company by written notice to the other parties with respect to any Portfolio based upon the Company’s determination that shares of such Portfolio are not reasonably available to meet the requirements of the Contracts; or

(c)       at the option of the Company by written notice to the other parties with respect to any Portfolio in the event any of the Portfolio’s shares are not registered, issued or sold in accordance with applicable state and/or federal law or such law precludes the use of such

20




shares as the underlying investment media of the Contracts issued or to be issued by the Company; or

(d)        at the option of the Fund, Distributor or Adviser in the event that formal administrative proceedings are instituted against the Company by the NASD, the SEC, the Insurance Commissioner or like official of any state or any other regulatory body regarding the Company’s duties under this Agreement or related to the sale of the Contracts, the operation of any Account, or the purchase of the Fund shares, if, in each case, the Fund, Distributor or Adviser, as the case may be, reasonably determines in its sole judgment exercised in good faith, that any such administrative proceedings will have a material adverse effect upon the ability of the Company to perform its obligations under this Agreement; or

(e)         at the option of the Company in the event that formal administrative proceedings are instituted against the Fund, the Distributor or the Adviser by the NASD, the SEC, or any state securities or insurance department or any other regulatory body, if the Company reasonably determines in its sole judgment exercised in good faith, that any such administrative proceedings will have a material adverse effect upon the ability of the Fund, the Distributor or the Adviser to perform their obligations under this Agreement; or

(f)         at the option of the Company by written notice to the Fund with respect to any Portfolio if the Company reasonably believes that the Portfolio will fail to meet the Section 817(h) diversification requirements or Subchapter M qualifications specified in Article VI hereof; or

(g)        at the option of any non-defaulting party hereto in the event of a material breach of this Agreement by any party hereto (the “defaulting party”) other than as described in Section 10.1(a)-(h); provided, that the non-defaulting party gives written notice thereof to the defaulting party, with copies of such notice to all other non-defaulting parties, and if such breach shall not have been remedied within thirty (30) days after such written notice is given, then the non-defaulting party giving such written notice may terminate this Agreement by giving thirty (30) days written notice of termination to the defaulting party; or

(h)        at any time upon written agreement of all parties to this Agreement.

10.2.     Notice Requirement

No termination of this Agreement shall be effective unless and until the party terminating this Agreement gives prior written notice to all other parties of its intent to terminate, which notice shall set forth the basis for the termination.  Furthermore,

(a)         in the event any termination is based upon the provisions of Article VII, or the provisions of Section 10.1(a) of this Agreement, the prior written notice shall be given in advance of the effective date of termination as required by those provisions unless such notice period is shortened by mutual written agreement of the parties;

21




(b)        in the event any termination is based upon the provisions of Section 10.1(d), 10.1(e) or 10.1(g) of this Agreement, the prior written notice shall be given at least sixty (60) days before the effective date of termination; and

(c)         in the event any termination is based upon the provisions of Section 10.1(b), 10.1(c) or 10.1(f), the prior written notice shall be given in advance of the effective date of termination, which date shall be determined by the party sending the notice.

10.3.     Effect of Termination

Notwithstanding any termination of this Agreement, other than as a result of a failure by either the Fund or the Company to meet Section 817(h) of the Code diversification requirements, the Fund, the Distributor and the Adviser shall, at the option of the Company, continue to make available additional shares of the Fund pursuant to the terms and conditions of this Agreement, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as “Existing Contracts”).  Specifically, without limitation, the owners of the Existing Contracts shall be permitted to reallocate investments in the Fund, redeem investments in the Fund and/or invest in the Fund upon the making of additional purchase payments under the Existing Contracts.  The parties agree that this Section 10.3 shall not apply to any terminations under Article VII and the effect of such Article VII terminations shall be governed by Article VII of this Agreement.

10.4.               Surviving Provisions

Notwithstanding any termination of this Agreement, each party’s obligations under Article VIII to indemnify other parties shall survive and not be affected by any termination of this Agreement.  In addition, with respect to Existing Contracts, all provisions of this Agreement shall also survive and not be affected by any termination of this Agreement.

ARTICLE XI.     Notices

Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other parties.

If to the Company:

RiverSource Life Insurance Company

1765 Ameriprise Financial Center

Minneapolis, MN 55474

Attention:  Vice President

If to the Fund:

Wanger Advisors Trust

227 West Monroe Street

Suite 3000

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Chicago, IL 60606

Attention:  Secretary

If to the Adviser:

Columbia Wanger Asset Management, L.P.

227 West Monroe Street

Suite 3000

Chicago, IL 60606

Attention:  Secretary

If to the Distributor:

Columbia Management Distributors, Inc.

One Financial Center

Boston, MA 02111

Attention:  Secretary

ARTICLE XII.                   Miscellaneous

12.1.     Notwithstanding anything to the contrary contained in this Agreement, in addition and not in lieu of other provisions in this Agreement:

(a)         “Confidential Information” includes, but is not limited to all proprietary and confidential information of the Company and its subsidiaries, affiliates and licensees (collectively, the “Protected Parties”) for purposes of this Section 12.1), including without limitation all information regarding the customers of the Protected Parties, or the accounts, account numbers, names, addresses, social security numbers or any other personal identifier of such customers, or any information derived therefrom.

(b)        Neither the Fund, the Adviser, nor the Distributor may use or disclose Confidential Information for any purpose other than to carry out the purpose for which Confidential Information was provided to the Fund, the Adviser or the Distributor (or by the Fund, the Adviser or the Distributor to any service providers thereof) as set forth in this Agreement; and the Fund, the Adviser and the Distributor agree to require that all of their employees, agents and representatives, or any party to whom the Fund, the Adviser or the Distributor may provide access to or disclose Confidential Information to limit the use and disclosure of Confidential Information to that purpose.

(c)         The Company may not use or disclose any information that the Fund, the Adviser or the Distributor may designate from time to time as proprietary.  Such designation will be made in writing to the Company.  Likewise, to the extent not otherwise covered in this Section 12.1, neither the Fund, the Advisor nor the Distributor may use or disclose any information that the Company may designate from time to time as proprietary.  Such designation will be made in writing to the Fund.

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(d)        The Fund, the Adviser and the Distributor agree to implement appropriate measures designed to ensure the security and confidentiality of Confidential Information and any other information designated as proprietary pursuant to Section 12.1(c), to protect such information against any anticipated threats or hazards to the security or integrity of such information, and to protect against unauthorized access to, or use of, Confidential Information and any other information designated as proprietary pursuant to Section 12.1(c) that could result in substantial harm or inconvenience to any customer or Protected Parties; the Fund, the Adviser and the Distributor further agree to cause all their agents, representatives or subcontractors of, or any other party to whom the Fund, the Adviser or the Distributor may provide access to or disclose Confidential Information and any other information designated as proprietary pursuant to Section 12.1(c) to implement appropriate measures designed to meet the obligations set forth in this Section 12.1.  The Company agrees to implement appropriate measures designed to ensure the security and confidentiality of information designated by the Fund, the Advisor or the Distributor as proprietary in accordance with Section 12.1(c).

(e)         The Company, the Fund, the Adviser and the Distributor acknowledge that any breach of the agreements in this Section 12.1 would result in immediate and irreparable harm to the Protected Parties or alternatively to the Fund, the Adviser or the Distributor, for which there would be no adequate remedy at law and agree that in the event of such a breach, the Protected Parties or alternatively the Fund, the Adviser or the Distributor, will be entitled to equitable relief by way of temporary and permanent injunctions, as well as such other relief as any court of competent jurisdiction deems appropriate.

12.2.     The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect.

12.3.     This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument.

12.4.     If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby.

12.5.     Each party hereto shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the NASD and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby.

12.6.     Any controversy or claim arising out of or relating to this Agreement, or breach thereof, shall be settled by arbitration in a forum jointly selected by the relevant parties (but if applicable law requires some other forum, then such other forum) in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.  The number of arbitrators will be three, one of whom will be appointed by the Company or an affiliate, one of whom will be appointed by the Fund and/or the Adviser or an affiliate, and the third of whom will be selected by mutual agreement, if possible, within 30 days of the selection

24




of the second arbitrator and thereafter by the administering authority.  The place of arbitration will be New York, NY.  The arbitrators will have no authority to award punitive damages or any other damages not measured by the prevailing party’s actual damages, and may not, in any event, make any ruling, finding or award that does not conform to the terms and conditions of this Agreement.  Any party may make an application to the arbitrators seeking injunctive relief to maintain the status quo until such time as the arbitration award is rendered or the controversy is otherwise resolved.  Any party may apply to any court having jurisdiction hereof and seek injunctive relief in order to maintain the status quo until such time as the arbitration award is rendered or the controversy is otherwise resolved.

12.7.     The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws.

12.8.     This Agreement or any of the rights and obligations hereunder may not be assigned by any party without the prior written consent of all parties hereto.

12.9.     The Company agrees that the obligations assumed by the Fund, Distributor and the Adviser pursuant to this Agreement shall be limited in any case to the Fund, Distributor and Adviser and their respective assets and the Company shall not seek satisfaction of any such obligation from the shareholders of the Fund, Distributor or the Adviser, the Directors, officers, employees or agents of the Fund, Distributor or Adviser, or any of them.

12.10.   The Fund, the Distributor and the Adviser agree that the obligations assumed by the Company pursuant to this Agreement shall be limited in any case to the Company and its assets and neither the Fund, Distributor nor Adviser shall seek satisfaction of any such obligation from the shareholders of the Company, the directors, officers, employees or agents of the Company, or any of them.

12.11.   No provision of this Agreement may be deemed or construed to modify or supersede any contractual rights, duties, or indemnifications, as between the Adviser and the Fund, and the Distributor and the Fund.

12.12    The parties to this Agreement may amend this Agreement in writing from time to time to reflect changes in or relating to the Contracts, the Portfolios available under the Contracts and other terms of this Agreement.

12.13    A copy of the Agreement and Declaration of Trust of the Fund is on file with the Secretary of the Commonwealth of Massachusetts, and notice is hereby given that this Agreement is executed on behalf of the Fund by an officer of the Fund in his or her capacity as an officer of the Fund and not individually and that the obligations of or arising out of this Agreement are not binding upon any of the trustees, officers or shareholders individually but are binding only upon the assets and property of the Fund.  Furthermore, notice is given that the assets and liabilities of each series of the Fund is separate and distinct and that the obligations of or arising out of this Agreement with respect to the series of the Fund are several and not joint, and to the extent not otherwise reasonably allocated among such series by the trustees of the Fund, shall be deemed to have been allocated in accordance with the relative net assets of such

25




series, and Company agrees not to proceed against any series for the obligations of another series.

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and on its behalf by its duly authorized representative and its seal to be hereunder affixed hereto as of the date specified below.

RIVERSOURCE LIFE INSURANCE CO.

 

Attest:

 

 

 

 

 

 

 

 

 

By:

/s/ Patrick H. Carey III

 

 

By:

/s/ Betsy Hannum

Name: Patrick H. Carey III

 

Name: Betsy Hannum

Title: Vice President

 

Title: Assistant Secretary

 

 

 

WANGER ADVISORS TRUST

 

 

 

 

 

 

 

 

By:

/s/ Bruce H. Lauer

 

 

 

Name: Bruce H. Lauer

 

 

Title: Vice President, Treasurer and Secretary

 

 

 

 

 

COLUMBIA WANGER ASSET MANAGEMENT, L.P.

 

 

 

 

 

 

 

 

By:

/s/ Bruce H. Lauer

 

 

 

Name: Bruce H. Lauer

 

 

Title: Chief Operating Officer

 

 

 

 

 

COLUMBIA MANAGEMENT DISTRIBUTORS, INC.

 

 

 

 

 

 

 

 

By:

/s/ Michael A. Jones

 

 

 

Name: Michael A. Jones

 

 

Title: President

 

 

 

 

27




SCHEDULE A

RiverSource Life Insurance Company

Account, Contract, Fund and Portfolios

Separate Account
Name; Date Established
by Board of Directors

 

Contract
Form No.

 

Contract Name

 

Fund

 

Portfolios

RiverSource Variable
Annuity Account
(prior
to January 1, 2007:
American Enterprise
Variable Annuity
Account), established
July 15, 1987.

 

272876

 

RiverSource
Signature Select Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

 

 

 

 

 

 

 

 

 

272876

 

RiverSource
Signature One Select Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

272646
272877

 

RiverSource
Innovations Select Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

271491
271496

 

RiverSource
FlexChoice Select Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

272646
272877

 

RiverSource
Endeavor Select Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

272876

 

Riversource
AccessChoice Select Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

272646
272877

 

RiverSource
Innovations Classic Select Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

43431

 

RiverSource
Signature Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

240180

 

RiverSource
Signature One Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

272646
272877

 

Wells Fargo
Advantage Select Variable Annuity

 

Wanger Advisors Trust

 

U.S. Smaller Companies

 

 

272876

 

Wells Fargo
Advantage Builder Select Variable Annuity

 

Wanger Advisors Trust

 

U.S. Smaller Companies

 

 

272876

 

Wells Fargo
Advanatage Choice Variable Annuity

 

Wanger Advisors Trust

 

U.S. Smaller Companies

 

 

340343

 

Evergreen Essential
Select Variable Annuity

 

Wanger Advisors Trust

 

U.S. Smaller Companies

 




 

 

 

271491
271496

 

Evergreen Privilege Select Variable Annuity

 

Wanger Advisors Trust

 

U.S. Smaller Companies

 

 

240343

 

Evergreen New Solutions Select Variable Annuity

 

Wanger Advisors Trust

 

U.S. Smaller Companies

 

 

272876

 

Evergreen Pathways Select Variable Annuity

 

Wanger Advisors Trust

 

U.S. Smaller Companies

 

Separate Account
Name; Date Established
by Board of Directors

 

Contract
Form No.

 

Contract Name

 

Fund

 

Portfolios

RiverSource Variable
Life Account
(prior to
January 1, 2007:
American Enterprise
Variable Life Account),
established July 15, 1987.

 

37022

 

RiverSource
Signature Variable Universal Life

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

Separate Account
Name; Date Established
by Board of Directors

 

Contract
Form No.

 

Contract Name

 

Fund

 

Portfolios

RiverSource Variable Life Separate Account (prior to January 1, 2007: IDS Life Variable Life Separate Account), established October 16, 1985).

 

30060

 

RiverSource Variable Universal Life InsuranceSM

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

30061

 

RiverSource Variable Universal Life II

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

30090

 

RiverSource Variable Second-To-Die Life InsuranceSM

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

39090C

 

RiverSource Succession SelectSM Variable Life Insurance

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

39061

 

RiverSource Variable Universal Life III

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 




 

Separate Account
Name; Date Established
by Board of Directors

 

Contract
Form No.

 

Contract Name

 

Fund

 

Portfolios

 

 

39061

 

RiverSource Variable Universal Life IV and RiverSource Variable Universal Life IV—Estate Series

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

132019

 

RiverSource Single Premium Variable
Life Insurance

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 




 

RiverSource Variable
Account 10
(prior to January 1, 2007:
IDS Life Variable
Account 10), established
August 23, 1995.

 

31043-NQ 31045-IRA 31046-NQ 31047-Q 31048-IRA

 

RiverSource Retirement Advisor Variable Annuity® and RiverSource Retirement Advisor Variable Annuity—BAND 3

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

31043-NQ 31045-IRA 31046-NQ 31047-Q 31048-IRA

 

RiverSource Retirement Advisor AdvantageSM Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

131041
131042
131043

 

RiverSource Retirement Advisor Select Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

31043A

 

RiverSource Retirement Advisor AdvantageSM Plus Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

131041A

 

RiverSource Retirement Advisor SelectSM Plus Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

131101-US

 

RiverSource Retirement Advisor 4 AdvantageSM Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

131102-US

 

RiverSource Retirement Advisor 4 SelectSM Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

131103-US

 

RiverSource Retirement Advisor AccessSM Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 




SCHEDULE B

EXPENSES

The Fund and/or the Distributor and/or Adviser, and the Company will coordinate the functions and pay the costs of the completing these functions based upon an allocation of costs in the tables below.  Costs shall be allocated to reflect the Fund’s share of the total costs determined according to the number of pages of the Fund’s respective portions of the documents.

Item

 

Function

 

Party Responsible
for Coordination

 

Party Responsible
for Expense

Mutual Fund Prospectus

 

Electronic copy of combined prospectuses made available

 

Company

 

Current - Fund Prospective - Company

 

 

Distribution (including postage) to Current Clients

 

Company

 

Fund

 

 

Distribution (including postage) to Prospective Clients

 

Company

 

Company

Product Prospectus

 

Printing and Distribution for Current and Prospective Clients

 

Company

 

Company

Mutual Fund Prospectus Update & Distribution

 

Electronic copy, if Required by Fund, Distributor or Adviser

 

Fund, Distributor or Adviser

 

Fund, Distributor or Adviser

 

 

If Required by Company

 

Company (Fund, Distributor or Adviser to provide Company with document in PDF format)

 

Company

Product Prospectus Update & Distribution

 

If Required by Fund, Distributor or Adviser

 

Company

 

Fund, Distributor or Adviser

 

 

If Required by Company

 

Company

 

Company

 




 

Item

 

Function

 

Party Responsible
for Coordination

 

Party Responsible
for Expense

Mutual Fund SAI

 

Printing

 

Fund, Distributor or Adviser

 

Fund, Distributor or Adviser

 

 

Distribution (including postage)

 

Party who receives the request

 

Party who receives the request

Product SAI

 

Printing

 

Company

 

Company

 

 

Distribution

 

Company

 

Company

Proxy Material for Mutual Fund

 

Electronic copy of proxy if required by Law

 

Fund, Distributor or Adviser

 

Fund, Distributor or Adviser

 

 

Distribution (including labor) if proxy required by Law

 

Company

 

Fund, Distributor or Adviser

 

 

Printing & distribution if required by Company

 

Company

 

Company

Mutual Fund Annual & Semi-Annual Report

 

Electronic copy made available

 

Fund, Distributor or Adviser

 

Fund, Distributor or Adviser

 

 

Distribution

 

Company

 

Fund, Distributor or Adviser

Operations of the Accounts

 

Federal registration of units of separate account (24f-2 fees)

 

Company

 

Company

 

 



EX-99.(H)(25) 10 a07-7397_5ex99dh25.htm EX-99.(H)(25)

Exhibit 99(h)(25)

FUND PARTICIPATION AGREEMENT

Among

RIVERSOURCE LIFE INSURANCE CO. OF NEW YORK

WANGER ADVISORS TRUST

COLUMBIA WANGER ASSET MANAGEMENT, L.P.

And

COLUMBIA MANAGEMENT DISTRIBUTORS, INC.

April 2, 2007

 




TABLE OF CONTENTS

ARTICLE I .

 

Sale and Redemption of Fund Shares

 

2

 

 

 

 

 

ARTICLE II .

 

Representations and Warranties

 

5

 

 

 

 

 

ARTICLE III .

 

Prospectuses and Proxy Statements; Voting

 

11

 

 

 

 

 

ARTICLE IV .

 

Sales Material and Information

 

12

 

 

 

 

 

ARTICLE V .

 

Fees and Expenses

 

13

 

 

 

 

 

ARTICLE VI .

 

Diversification and Qualification

 

13

 

 

 

 

 

ARTICLE VII .

 

Potential Conflicts and Compliance With Mixed and Shared Funding Exemptive Order

 

15

 

 

 

 

 

ARTICLE VIII .

 

Indemnification

 

16

 

 

 

 

 

ARTICLE IX .

 

Applicable Law

 

20

 

 

 

 

 

ARTICLE X .

 

Termination

 

20

 

 

 

 

 

ARTICLE XI .

 

Notices

 

22

 

 

 

 

 

ARTICLE XII .

 

Miscellaneous

 

23

 

 

 

 

 

SCHEDULE A

 

 

 

28

 

 

 

 

 

SCHEDULE B

 

 

 

30

 

 




PARTICIPATION AGREEMENT

THIS AGREEMENT, made and entered into as of this 2nd day of April, 2007, by and among the following parties:

·                                          RIVERSOURCE LIFE INSURANCE CO. OF NEW YORK (the “Company”), organized under the laws of the State of New York on its own behalf and on behalf of each of its separate accounts named in Schedule A to this Agreement, as may be amended from time to time (each account referred to as an “Account”);

·                                          WANGER ADVISORS TRUST (the “Fund”), an open-end management investment company organized under the laws of the Commonwealth of Massachusetts;

·                                          COLUMBIA WANGER ASSET MANAGEMENT, L.P. (the “Adviser”), a Delaware limited partnership; and

·                                          COLUMBIA MANAGEMENT DISTRIBUTORS, INC. (the “Distributor”), a Massachusetts corporation.

WHEREAS, American Centurion Life Assurance Company merged with and into IDS Life Insurance Company of New York (followed by an “intact transfer” of the Accounts of American Centurion Life Assurance Company to IDS Life Insurance Company of New York by operation of law and incident to a merger that occurred on December 31, 2006) and IDS Life Insurance Company of New York was renamed RiverSource Life Insurance Co. of New York simultaneously with the merger; and

WHEREAS, the Fund engages in business as an open-end management investment company and is available to act as the investment vehicle for separate accounts established for variable life insurance policies and/or variable annuity contracts (collectively, the “Variable Insurance Products”) to be offered by insurance companies that have entered into participation agreements similar to this Agreement (hereinafter “Participating Insurance Companies”); and

WHEREAS, the beneficial interest in the Fund is divided into several series of shares, each designated a “portfolio” and representing the interest in a particular managed portfolio of securities and other assets; and

WHEREAS, the Fund is able to rely on an order from the Securities and Exchange Commission (hereinafter the “SEC”) granting Participating Insurance Companies and variable annuity and variable life insurance separate accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended, (hereinafter the “1940 Act”) and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Fund to be sold to and held by variable annuity and variable life insurance separate accounts of life insurance companies that may or may not be affiliated with one another

1




and qualified pension and retirement plans (“Qualified Plans”) (hereinafter the “Mixed and Shared Funding Exemptive Order”); and

WHEREAS, the Fund is registered as an open-end management investment company under the 1940 Act and shares of the portfolios are registered under the Securities Act of 1933, as amended (hereinafter the “1933 Act”); and

WHEREAS, the Adviser is duly registered as an investment adviser under the Investment Advisers Act of 1940, as amended; and

WHEREAS, the Distributor is duly registered as a broker-dealer under the Securities Exchange Act of 1934, as amended, (the “1934 Act”) and is a member in good standing of the National Association of Securities Dealers, Inc. (the “NASD”); and

WHEREAS, the Company issues certain variable life insurance policies and/or variable annuity contracts supported wholly or partially by the Accounts (the “Contracts”).  The Contracts are listed on Schedule A attached hereto and incorporated herein by reference, as such schedule may be amended from time to time by mutual written agreement of the parties; and

WHEREAS, each Account is a duly organized, validly existing segregated asset account, established by resolution of the Board of Directors of the Company under applicable state insurance laws to set aside and invest assets attributable to the Contracts; and

WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase shares in the portfolios listed on Schedule A attached hereto and incorporated herein by reference, as such schedule may be amended from time to time by mutual written agreement of the parties (the “Portfolios”), on behalf of the Accounts to fund the Contracts, and the Distributor is authorized to sell such shares to unit investment trusts such as the Accounts at net asset value; and

WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company also intends to continue to purchase shares in other open-end investment companies or series thereof not affiliated with the Fund (the “Unaffiliated Funds”) on behalf of the Accounts to fund the Contracts.

NOW, THEREFORE, in consideration of their mutual promises, the Company, the Fund, the Distributor and the Adviser agree as follows:

ARTICLE I.                           Sale and Redemption of Fund Shares

1.1           The Distributor agrees to sell to the Company those shares of the Portfolios which the Account orders, executing such orders on each Business Day at the net asset value next computed after receipt by the Fund or its designee of the order for the shares of the Portfolios, subject to the terms and conditions set forth in the Fund’s then-current prospectus.  For purposes of this Section 1.1, the Company shall be the designee of the Fund for receipt of such orders and receipt by such designee shall constitute receipt by the Fund, provided that the Fund receives notice of any such order by 10:00 a.m. Eastern time on the next following Business Day.

2




“Business Day” shall mean any day on which the New York Stock Exchange is open for trading and on which a Portfolio calculates its net asset value pursuant to the rules of the SEC.

1.2           The Fund agrees to make shares of the Portfolios available for purchase at the applicable net asset value per share by the Company and the Accounts on those days on which the Fund calculates its Portfolios’ net asset value pursuant to rules of the SEC, and the Fund shall calculate such net asset value on each day on which the New York Stock Exchange is open for trading.  Notwithstanding the foregoing, the Fund may refuse to sell shares of any Portfolio to any person, or suspend or terminate the offering of shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Fund acting in good faith, necessary or appropriate in the best interests of the shareholders of such Portfolio.  All orders received by the Company shall be subject to the terms of the then current prospectus of the Fund.  The Company acknowledges that orders received by it in violation of the Fund’s stated policies may be subsequently revoked or cancelled by the Fund and that the Fund shall not be responsible for any losses incurred by the Company or the Contract owner as a result of such cancellation.  In addition, the Company acknowledges that the Fund has the right to refuse any purchase order for the reasons stated in the current prospectus of the Fund.

1.3           The Fund will not sell shares of the Portfolios to any other Participating Insurance Company separate account unless an agreement containing provisions the substance of which are the same as Sections 2.1, 2.2 (except with respect to designation of applicable law), 3.6, 3.7, 3.8 and Article VII of this Agreement is in effect to govern such sales.

1.4           The Fund agrees to redeem for cash, on the Company’s request, any full or fractional shares of the Portfolios held by the Company, executing such requests on each Business Day at the net asset value next computed after receipt by the Fund or its designee of the request for redemption.  For purposes of this Section 1.4, the Company shall be the designee of the Fund for receipt of requests for redemption and receipt by such designee shall constitute receipt by the Fund, provided that the Fund receives notice of any such request for redemption by 10:00 a.m. Eastern time on the next following Business Day.

1.5           The parties hereto acknowledge that the arrangement contemplated by this Agreement is not exclusive; the Fund’s shares may be sold to other Participating Insurance Companies (subject to Section 1.3) and the cash value of the Contracts may be invested in other investment companies, the Company’s registered or unregistered modified guaranteed annuity accounts and the Company’s fixed account.

1.6           The Company shall pay for Fund shares by 3:00 p.m. Eastern time on the next Business Day after an order to purchase Fund shares is received in accordance with the provisions of Section 1.1 hereof.  Payment shall be in federal funds transmitted by wire and/or by a credit for any shares redeemed the same day as the purchase.

1.7           The Fund shall pay and transmit the proceeds of redemptions of Fund shares by 11:00 a.m. Eastern Time on the next Business Day after a redemption order is received in accordance with Section 1.4 hereof; provided, however, that the Fund may delay payment in extraordinary circumstances to the extent permitted under Section 22(e) of the 1940 Act. 

3




Payment shall be in federal funds transmitted by wire and/or a credit for any shares purchased the same day as the redemption.

Each party has the right to rely on information or confirmations provided by the other party (or by an affiliate of the other party), and shall not be liable in the event that an error is a result of any misinformation supplied by the other party, or its affiliate thereof.

1.8           Issuance and transfer of the Fund’s shares will be by book entry only.  Stock certificates will not be issued to the Company or the Accounts.  Shares purchased from the Fund will be recorded in an appropriate title for the relevant Account or the relevant sub-account of an Account.

1.9           The Fund shall furnish same day notice (by electronic communication or telephone, followed by electronic confirmation) to the Company of any income, dividends or capital gain distributions payable on a Portfolio’s shares.  The Company hereby elects to receive all such income dividends and capital gain distributions as are payable on a Portfolio’s shares in additional shares of that Portfolio.  The Company reserves the right to revoke this election and to receive all such income dividends and capital gain distributions in cash.  The Fund shall notify the Company by the end of the next following Business Day of the number of shares so issued as payment of such dividends and distributions.

1.10         The Fund shall make the net asset value per share for each Portfolio available to the Company on each Business Day as soon as reasonably practicable after the net asset value per share is calculated and shall use its best efforts to make such net asset value per share available by 6:00 p.m. Eastern time.  In the event of an error in the computation of a Portfolio’s net asset value per share (“NAV”) or any dividend or capital gain distribution (each, a “pricing error”), the Adviser or the Fund shall notify the Company as soon as possible after discovery of the error.  Such notification may be oral, but shall be confirmed promptly in writing.  A pricing error shall be corrected as follows:  (a) if the pricing error results in a difference between the erroneous NAV and the correct NAV of less than $0.01 per share, then no corrective action need be taken; (b) if the pricing error results in a difference between the erroneous NAV and the correct NAV equal to or greater than $0.01 per share, but less than 1/2 of 1% of the Portfolio’s NAV at the time of the error, then the Adviser shall reimburse the Portfolio for any loss, after taking into consideration any positive effect of such error; however, no adjustments to Contract owner accounts need be made; and (c) if the pricing error results in a difference between the erroneous NAV and the correct NAV equal to or greater than 1/2 of 1% of the Portfolio’s NAV at the time of the error, then the Adviser shall reimburse the Portfolio for any loss (without taking into consideration any positive effect of such error) and shall reimburse the Company for the costs of adjustments made to correct Contract owner accounts.  Upon notification by the Adviser of any overpayment due to a material error, the Company shall promptly remit to the Adviser any overpayment that has not been paid to Contract owners.  In no event shall the Company be liable to Contract owners for any such adjustments or underpayment amounts.  Only a pricing error within categories (b) or (c) above shall be deemed to be “materially incorrect” or constitute a “material error” for purposes of this Agreement.  The standards set forth in this Section 1.10 are based on the parties’ understanding of the views expressed by the staff of the SEC as of the date of this Agreement.  In the event the views of the SEC staff are later modified or superseded by SEC or judicial interpretation, the parties shall amend the

4




foregoing provisions of this Agreement to comport with the appropriate applicable standards, on terms mutually satisfactory to all parties.

1.11         The parties agree to mutually cooperate with respect to any state insurance law restriction or requirement applicable to the Fund’s investments; provided, however, that the Fund reserves the right not to implement restrictions or take other actions required by state insurance law if the Fund or the Adviser determines that the implementation of the restriction or other action is not in the best interest of Fund shareholders.

ARTICLE II.          Representations and Warranties

2.1.          The Company represents and warrants that:  (a) the securities issued by the Accounts under the Contracts are or will be registered under the 1933 Act, or are not so registered in proper reliance upon an exemption from such registration requirements (in the event the Company or Account relies upon an exemption from such registration requirements, the Company undertakes to promptly so notify the Fund); (b) the Contracts will be issued and sold in compliance in all material respects with all applicable federal and state laws; and (c) the sale of the Contracts shall comply in all material respects with state insurance suitability requirements.

2.2.          The Company represents and warrants that:  (a) it is an insurance company duly organized and in good standing under applicable law; (b) it, or a wholly-owned subsidiary insurance company, has legally and validly established each Account prior to any issuance or sale of units thereof as a segregated asset account under applicable state insurance law; and (c) it has registered each Account as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a segregated investment account for the Contracts and will maintain such registration for so long as any Contracts are outstanding as required by applicable law or, alternatively, the Company has not registered one or more Accounts in proper reliance upon an exclusion from such registration requirements.

2.3.          The Fund represents and warrants that:  (a) the Fund shares sold pursuant to this Agreement shall be registered under the 1933 Act; (b) the Fund shares sold pursuant to this Agreement shall be duly authorized for issuance and sold in compliance with all applicable state and federal securities laws including without limitation the 1933 Act, the 1934 Act, and the 1940 Act; (c) the Fund is and shall remain registered under the 1940 Act; and (d) the Fund shall amend the registration statement for its shares under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its shares.

2.4.          The Fund currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although it may make such payments in the future subject to applicable law and after providing notice to the Company.

2.5.          The Fund represents and warrants that it shall register and qualify the shares for sale in accordance with the laws of the various states if and to the extent required by applicable law.

5




2.6.           The Fund represents and warrants that it is lawfully organized and validly existing under the laws of the Commonwealth of Massachusetts and that it does and will comply in all material respects with the 1940 Act.

2.7.           The Fund makes no representations as to whether any aspect of its operations (including, but not limited to, fees and expenses and investment policies) complies with the insurance laws or regulations of the various states.

2.8.          The Adviser represents and warrants that it is and shall remain duly registered under all applicable federal and state securities laws and that it shall perform its obligations for the Fund in compliance in all material respects with any applicable state and federal securities laws.

2.9.          The Distributor represents and warrants that it is and shall remain duly registered as a broker-dealer under all applicable federal and state securities laws and is a member in good standing with the NASD, and that it shall perform its obligations for the Fund in compliance in all material respects with the laws of any applicable state and federal securities laws.

2.10.        The Fund and the Adviser represent and warrant that all of their respective officers, employees, investment advisers, and other individuals or entities dealing with the money and/or securities of the Fund are, and shall continue to be at all times, covered by one or more blanket fidelity bonds or similar coverage for the benefit of the Fund in an amount not less than the minimal coverage required by Rule 17g-1 under the 1940 Act or related provisions as may be promulgated from time to time.  The aforesaid bonds shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company.

2.11.        The Fund and the Adviser represent and warrant that they will provide the Company with as much advance notice as is reasonably practicable of any material change affecting the Portfolios (including, but not limited to, any material change in the registration statement or prospectus affecting the Portfolios) and any proxy solicitation affecting the Portfolios and consult with the Company in order to implement any such change in an orderly manner, recognizing the expenses of changes and attempting to minimize such expense by implementing them in conjunction with regular annual updates of the prospectus for the Contracts where reasonably practicable.

2.12.        The Company represents and warrants, for purposes other than diversification under Section 817 of the Internal Revenue Code of 1986 as amended (the “Code”), that the Contracts are currently and at the time of issuance will be treated as annuity contracts or life insurance policies under applicable provisions of the Code, and that it will make every effort to maintain such treatment and that it will notify the Fund, the Distributor and the Adviser immediately upon having a reasonable basis for believing that the Contracts have ceased to be so treated or that they might not be so treated in the future.  In addition, the Company represents and warrants that each Account is a “segregated asset account” and that interests in each Account are offered exclusively through the purchase of or transfers into a “variable contract” within the meaning of such terms under Section 817 of the Code and the regulations thereunder.  The Company will use every effort to continue to meet such definitional requirements, and it will notify the Fund, the Distributor and the Adviser immediately upon having a reasonable basis for

6




believing that such requirements have ceased to be met or that they might not be met in the future.  The Company represents and warrants that it will not purchase Fund shares with assets derived from tax-qualified retirement plans except, indirectly, through Contracts purchased in connection with such plans.

2.13.        The Company represents and warrants that it will comply with all applicable laws and regulations designed to prevent money laundering including, without limitation, the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 (Title III of the USA PATRIOT ACT), and if required by such laws or regulations, to share with the Fund, the Distributor and the Adviser information about the individuals, entities, organizations and countries suspected of possible terrorist or money laundering activities in accordance with Section 314(b) of the USA PATRIOT ACT.

2.14         The Fund, the Distributor and the Adviser represent and warrant that each of them will comply with all applicable laws and regulations designed to prevent money laundering including, without limitation, the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 (Title III of the USA PATRIOT ACT), and if required by such laws or regulations, to share with the Company information about the individuals, entities, organizations and countries suspected of possible terrorist or money laundering activities in accordance with Section 314(b) of the USA PATRIOT ACT.

2.15.        The Company represents and warrants that it is currently in compliance, and will remain in compliance, with all applicable laws, rules and regulations relating to consumer privacy, including, but not limited to, Regulation S-P.

2.16.        The Company represents and warrants that it has adopted, and will at all times during the term of this Agreement maintain, reasonable and appropriate procedures (“Late Trading Procedures”) reasonably designed to ensure that any and all orders relating to the purchase, sale or exchange of Fund shares communicated to the Fund to be treated in accordance with Article I of this Agreement as having been received on a Business Day, have been received by the Valuation Time on such Business Day and were not modified after the Valuation Time, and that all orders received from Contract owners but not rescinded by the Valuation Time were communicated to the Fund or its agent as received for that Business Day.  “Valuation Time” shall mean the time as of which the Fund calculates net asset value for the shares of the Portfolios on the relevant Business Day.  The Company represents and warrants that it has adopted and implemented controls reasonably designed to ensure that all orders received by the Company after the close of the New York Stock Exchange on a particular Business Day will not be aggregated with orders received by the Company before the close of the New York Stock Exchange on such Business Day.

2.17.        Each transmission of orders by the Company shall constitute a representation by the Company that such orders are accurate and complete and relate to orders received by the Company by the Valuation Time on the Business Day for which the order is to be priced and that such transmission includes all orders relating to Fund shares received from Contract owners but not rescinded by the Valuation Time.  The Company agrees to provide its Late Trading Procedures to the Fund or its designee for inspection and review at the Company’s offices during normal business hours.  In addition, the Company agrees to provide the Fund or its designee such

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certifications and representations regarding the Late Trading Procedures as the Fund or its designee may reasonably request.  The Company will promptly notify the Fund in writing of any material change to the Late Trading Procedures.

2.18         (a)  The Company acknowledges that the Fund has adopted policies designed to prevent frequent purchases and redemptions of any Portfolio shares in quantities great enough to disrupt orderly management of the corresponding Fund’s investment portfolio.  These policies are disclosed in the Fund’s prospectus(es).  The Fund and Distributor agree to give Company prompt written notice of material changes to the Fund’s disruptive trading policies and procedures (and revisions thereto).  The Fund and Distributor acknowledge that the Company, on behalf of its Account(s), has adopted policies reasonably designed to detect and deter frequent transfers of Contract value among the subaccounts of the Account(s) including those investing in Portfolio shares which are available as investment options under the Contracts (such policies and procedures “Frequent Trading Policies”).  The Frequent Trading Policies are described in the current prospectuses of the Account(s) through which the Contracts are offered.  The Company agrees to provide the Frequent Trading Policies to the Fund or its designee for inspection and review at the Company’s offices during normal business hours.  In addition, the Company agrees to provide the Fund or its designee such certifications and representations regarding its Frequent Trading Policies as the Fund or its designee may reasonably request.  The Company will promptly notify the Fund in writing of any material change to the Frequent Trading Policies.

(b)           In recognition of the requirements contained in Rule 22c-2 under the 1940 Act, the Company will provide the Fund or its designee promptly upon written request, the taxpayer identification number (“TIN”), if known, the Individual/International Taxpayer Identification Number (“ITIN”), or other government-issued identifier (“GII”) of any or all Shareholder(s) of the account and the amount, date, and transaction type (purchase, redemption, transfer, or exchange) of every purchase, redemption, transfer, or exchange of shares held through an account maintained by the Company during the period covered by the request.  Unless otherwise specifically requested by the Fund, the Company shall only be required to provide information relating to Shareholder-Initiated Transfer Purchases or Shareholder-Initiated Transfer Redemptions.

(i)             Requests must set forth a specific period, not to exceed ninety (90) days from the date of the request, for which transaction information is sought.  The Fund may request transaction information older than ninety (90) days from the date of the request as it deems necessary to investigate compliance with policies established by the Fund for the purpose of eliminating or reducing any dilution of the value of the outstanding shares issued by the Fund.

(ii)           The Company agrees to transmit the requested information that is on its books and records to the Fund or its designee promptly, but in any event not later than ten (10) business days, after receipt of a request.  If the requested information is not on the Company’s books and records, the Company agrees to:  (i) provide or arrange to provide to the Fund the requested information from Shareholders who hold an account with an indirect intermediary; or (ii) if directed by the Fund, block further purchases of Fund shares from such indirect intermediary.  In such instance, the Company agrees to inform the Fund whether it plans to perform (i) or (ii).  Responses required by this paragraph must be communicated in writing and

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in a format mutually agreed upon by the parties.  To the extent practicable, the format for any transaction information provided to the Fund should be consistent with the NSCC Standardized Data Reporting Format.  For purposes of this provision, an “indirect intermediary” has the same meaning as in SEC Rule 22c-2 under the 1940 Act.

(iii)          The Fund and its designees (including Columbia Management Services, Inc., the Fund’s transfer agent and designee pursuant to this Section 2.18) agree that the use of the information received from the Company shall be in accordance with the confidentiality provisions contained in Section 12.1 of this Agreement.

(iv)          When the Fund has given the Company a written instruction pursuant to Section 2.18(c) below, the Fund may request and the Company will provide the Fund with the name or other identifier of any investment professional who is listed on the Company’s records as the agent of record for the restricted Shareholder if the investment professional is employed by a broker dealer affiliate of the Company.  If the restricted Shareholder’s Contract was sold by a broker dealer firm not affiliated with the Company, the Company will provide the Fund with the name of the selling broker dealer firm.

(c)            In further recognition of the requirements contained in Rule 22c-2 of the 1940 Act, the Company agrees to execute written instructions from the Fund to restrict or prohibit further purchases or exchanges of shares by a Shareholder that has been identified by the Fund as having engaged in transactions of the Fund’s shares (directly or indirectly through the Company’s account) that violate policies established by the Fund for the purpose of eliminating or reducing any dilution of the value of the outstanding shares issued by the Fund. Unless otherwise directed by the Fund, any such restrictions or prohibitions shall only apply to Shareholder-Initiated Transfer Purchases or Shareholder-Initiated Transfer Redemptions that are affected directly or indirectly through the Company.

(i)            Instructions must include the TIN, ITIN or GII and the specific restriction(s) to be executed, including how long the restriction(s) is (are) to remain in place. If the TIN, ITIN, or GII associated with the Shareholder is not known, the Fund or its designee will contact the Company and the Company will again provide the Fund or its designee with the TIN, ITIN or GII. Upon request by the Company, the Fund will provide a brief written explanation specifying how the Shareholder’s trading activity violated the affected Funds’ market timing or other abusive trading policies that the Company may provide to the Shareholder.

(ii)           The Company agrees to execute instructions as soon as reasonably practicable, but not later than five (5) Business Days after receipt of the instructions by the Company.

(iii)          The Company must provide written confirmation to the Fund that instructions have been executed.  The Company agrees to provide confirmation as soon as reasonably practicable, but not later than ten (10) Business Days after the instructions have been executed.

(d)          For purposes of this Section 2.18:

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(i)            The term “Fund” includes the Adviser, and Columbia Management Services, Inc., but does not include any “excepted funds” as defined in SEC Rule 22c-2(b) under the 1940 Act.

(ii)           The term “Shareholder” means the holder of interests under a Contract.

(iii)          The term “Shareholder-Initiated Transfer Purchase” means a transaction that is initiated or directed by a Shareholder that results in a transfer of assets within a Contract to a Fund, but does not include transactions that are executed: (i) automatically pursuant to a contractual or systematic program or enrollment such as transfer of assets within a Contract to a Fund as a result of “dollar cost averaging” programs, insurance company approved asset allocation programs, or automatic rebalancing programs; (ii) pursuant to a Contract death benefit; (iii) one-time step-up in Contract value pursuant to a Contract death benefit; (iv) allocation of assets to a Fund through a Contract as a result of payments such as loan repayments, scheduled contributions, retirement plan salary reduction contributions, or planned premium payments to the Contract; or (v) prearranged transfers at the conclusion of a required free look period.

(iv)          The term “Shareholder-Initiated Transfer Redemption” means a transaction that is initiated or directed by a Shareholder that results in a transfer of assets within a Contract out of a Fund, but does not include transactions that are executed: (i) automatically pursuant to a contractual or systematic program or enrollments such as transfers of assets within a Contract out of a Fund as a result of annuity payouts, loans, systematic withdrawal programs, insurance company approved asset allocation programs and automatic rebalancing programs; (ii) as a result of any deduction of charges or fees under a Contract; (iii) within a Contract out of a Fund as a result of scheduled withdrawals or surrenders from a Contract; or (iv) as a result of payment of a death benefit from a Contract.

2.19                         The Company agrees to provide the Fund or its designee with reasonable assurance that it has implemented effective compliance policies and procedures administered by qualified personnel as required by and in accordance with any and all applicable laws, rules and regulations.  The Company acknowledges: (a) that it has adopted and implemented written compliance policies and procedures reasonably designed to prevent the Company from violating the Federal Securities Laws (as defined in Rule 38a-1) in its provision of services to the Fund pursuant to this Agreement; and (b) that it will provide the Fund or its designee reasonable access (i) to the Chief Compliance Officer of the Account, who will confer as needed with the Fund or its designee regarding the written compliance policies and procedures of the Accounts (including the Frequent Trading Policies), and (ii) such written policies and procedures for inspection and review at the Company’s offices during normal business hours.

2.20        Each party represents that the execution and delivery of this Agreement and the consummation of the transactions contemplated herein have been duly authorized by all necessary corporate or board action, as applicable, by such party and when so executed and delivered this Agreement will be the valid and binding obligation of such party enforceable in accordance with its terms.

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ARTICLE III.                         Prospectuses and Proxy Statements; Voting

3.1.          At least annually, the Adviser or Distributor shall provide the Company with as many copies of the Fund’s current prospectus as the Company may reasonably request, with expenses to be borne in accordance with Schedule B hereof.  If requested by the Company in lieu thereof, the Adviser, Distributor or Fund shall provide such documentation (including an electronic version of the current prospectus) and other assistance as is reasonably necessary in order for the Company once each year (or more frequently if the prospectus for the Fund is amended) to have the prospectus for the Contracts and the prospectus for the Fund printed together in one document.

3.2.          If applicable state or federal laws or regulations require that the Statement of Additional Information (“SAI”) for the Fund be distributed to all Contract owners, then the Fund, Distributor and/or the Adviser shall provide the Company with copies of the Fund’s SAI in such quantities, with expenses to be borne in accordance with Schedule B hereof, as the Company may reasonably require to permit timely distribution thereof to Contract owners.  The Adviser, Distributor and/or the Fund shall also provide an SAI to any Contract owner or prospective owner who requests such SAI from the Fund.

3.3.          The Fund, Distributor and/or Adviser shall provide the Company with copies of the Fund’s proxy materials, reports to shareholders and other communications to shareholders in such quantity, with expenses to be borne in accordance with Schedule B hereof, as the Company may reasonably require to permit timely distribution thereof to Contract owners.  The Fund will provide written instructions to the Company each time the Fund furnishes an amendment or supplement to the Fund’s current prospectus or SAI directing the Company as to whether the amendment or supplement is to be provided (a) immediately to existing Contract owners who have Contract value allocated to the Fund or (b) is to be held and combined with another Fund or Contract related mailing as permitted by applicable federal securities laws.  The Fund agrees that the instruction it gives to the Company in each instance will be substantively identical to instructions provided to other Participating Insurance Companies.  Absent written instructions from the Fund directing otherwise, amendments and supplements to the Fund’s current prospectus or SAI may be held and combined with another Fund or Contract related mailing as permitted by applicable federal securities laws.

3.4.          It is understood and agreed that, except with respect to information regarding the Company provided in writing by that party, the Company shall not be responsible for the content of the prospectus or SAI for the Fund.  It is also understood and agreed that, except with respect to information regarding the Fund, the Distributor, the Adviser or the Portfolios provided in writing by the Fund, the Distributor or the Adviser, neither the Fund, the Distributor nor Adviser are responsible for the content of the prospectus or SAI for the Contracts.

3.5           In the event that the Fund initiates (a) a reorganization of a Portfolio as defined by Section 2 of the 1940 Act, or (ii) a change in the name of a Portfolio or the Fund, the Fund, the Distributor or the Adviser as they may among themselves determine, shall reimburse the Company for the Company’s verifiable costs associated with the aforementioned actions.  The Company agrees to use its best efforts to minimize any costs incurred under this Section and

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shall provide the Fund, the Distributor and the Adviser with acceptable documentation of any such costs incurred.

3.6.          If and to the extent required by law the Company shall:

(a)           solicit voting instructions from Contract owners;

(b)           vote the Portfolio shares held in the Accounts in accordance with instructions received from Contract owners;

(c)           vote Portfolio shares held in the Accounts for which no instructions have been received in the same proportion as Portfolio shares for which instructions have been received from Contract owners, so long as and to the extent that the SEC continues to interpret the 1940 Act to require pass-through voting privileges for variable contract owners; and

(d)           vote Portfolio shares held in its general account or otherwise in the same proportion as Portfolio shares for which instructions have been received from Contract owners, so long as and to the extent that the SEC continues to interpret the 1940 Act to require such voting by the insurance company.  The Company reserves the right to vote Fund shares in its own right, to the extent permitted by law.

3.7.          The Company shall be responsible for assuring that each of its separate accounts holding shares of a Portfolio calculates voting privileges as directed by the Fund and agreed to by the Company and the Fund.  The Fund agrees to promptly notify the Company of any changes of interpretations or amendments of the Mixed and Shared Funding Exemptive Order.

3.8.          The Fund will comply with all provisions of the 1940 Act requiring voting by shareholders.  Further, the Fund will act in accordance with the SEC’s interpretation of the requirements of Section 16(a) with respect to periodic elections of directors or trustees and with whatever rules the SEC may promulgate with respect thereto.

ARTICLE IV.         Sales Material and Information

4.1.          The Company shall furnish, or shall cause to be furnished, to the Fund or its designee, a copy of each piece of sales literature or other promotional material that the Company develops or proposes to use and in which the Fund (or Portfolio thereof), the Adviser or the Distributor is named in connection with the Contracts, at least ten (10) Business Days prior to its use.  No such material shall be used if the Fund objects to such use within five (5) Business Days after receipt of such material.

4.2.          The Company shall not give any information or make any representations or statements on behalf of the Fund in connection with the sale of the Contracts other than the information or representations contained in the registration statement, including the prospectus or SAI for the Fund shares, as the same may be amended or supplemented from time to time, or in sales literature or other promotional material approved by the Fund, Distributor or Adviser, except with the permission of the Fund, Distributor or Adviser.

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4.3.          The Fund, the Adviser or the Distributor shall furnish, or shall cause to be furnished, to the Company, a copy of each piece of sales literature or other promotional material in which the Company and/or its Accounts are named at least ten (10) Business Days prior to its use.  No such material shall be used if the Company objects to such use within five (5) Business Days after receipt of such material.

4.4.          The Fund, the Distributor and the Adviser shall not give any information or make any representations on behalf of the Company or concerning the Company, the Accounts, or the Contracts other than the information or representations contained in a registration statement, including the prospectus or SAI for the Contracts, as the same may be amended or supplemented from time to time, or in sales literature or other promotional material approved by the Company or its designee, except with the permission of the Company.

4.5.          For purposes of Articles IV and VIII, the phrase “sales literature and other promotional material” includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media; e.g., on-line networks such as the Internet or other electronic media), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, and shareholder reports, and proxy materials (including solicitations for voting instructions) and any other material constituting sales literature or advertising under the NASD rules, the 1933 Act or the 1940 Act.

4.6.          At the request of any party to this Agreement, each other party will make available to the other party’s independent auditors and/or representatives of the appropriate regulatory agencies, all records, data and access to operating procedures that may be reasonably requested in connection with compliance and regulatory requirements related to this Agreement or any party’s obligations under this Agreement.

ARTICLE V.          Fees and Expenses

5.1.         The Fund, the Distributor and the Adviser shall pay no fee or other compensation to the Company under this Agreement, and the Company shall pay no fee or other compensation to the Fund, the Distributor or Adviser under this Agreement; provided, however, (a) the parties will bear their own expenses as reflected in Schedule B and other provisions of this Agreement, (b) the parties may enter into other agreements relating to the Company’s investment in the Fund, including services agreements and (c) each party shall in accordance with the allocation of expenses reflected in Schedule B and other provisions of this Agreement promptly reimburse other parties for expenses initially paid by one party but allocated to another party.

ARTICLE VI.         Diversification and Qualification

6.1.          The Fund, Distributor and Adviser represent and warrant that the Fund and each Portfolio thereof will at all times comply with Section 817(h) of the Code and Treasury

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Regulation §1.817-5, as amended from time to time, and any Treasury interpretations thereof, relating to the diversification requirements for variable annuity, endowment, or life insurance contracts and any amendments or other modifications or successor provisions to such Section or Regulations.  The Fund, the Distributor or the Adviser shall, upon request, provide to the Company a quarterly written diversification report, which shall show the results of the quarterly Section 817(h) diversification test and include a certification as to whether each Portfolio complies with the Section 817(h) diversification requirement.

6.2.          The Fund, the Distributor and the Adviser agree that shares of the Portfolios will be sold only to Participating Insurance Companies and their separate accounts and to Qualified Plans.  No shares of any Portfolio of the Fund will be sold to the general public.  However, it is understood by the Company that the Fund may sell shares of any Portfolio to any person eligible to invest in that Portfolio in accordance with applicable provisions of Section 817(h) under the Code and the regulations thereunder and the terms of the Mixed and Shared Funding Exemptive Order.

6.3.          The Fund, the Distributor and the Adviser represent and warrant that the Fund and each Portfolio is currently qualified as a Regulated Investment Company under Subchapter M of the Code, and that each Portfolio will maintain such qualification (under Subchapter M or any successor or similar provisions) as long as this Agreement is in effect.

6.4           The Fund, the Distributor or the Adviser will notify the Company immediately upon having a reasonable basis for believing that the Fund or any Portfolio has ceased to comply with the aforesaid Section 817(h) diversification or Subchapter M qualification requirements.

6.5           Without in any way limiting the effect of Sections 8.2, 8.3 and 8.4 hereof and without in any way limiting or restricting any other remedies available to the Company, the Adviser or the Distributor will pay all costs associated with or arising out of any failure, or any anticipated or reasonably foreseeable failure, of the Fund or any Portfolio to comply with Section 6.1, 6.2 or 6.3 hereof, including all costs associated with reasonable and appropriate corrections or responses to any such failure; such costs may include, but are not limited to, the costs involved in creating, organizing, and registering a new investment company as a funding medium for the Contract and/or costs of obtaining whatever regulatory authorizations are required to substitute shares of another investment company for those of the failed Portfolio (including but not limited to an order pursuant to Section 26(c) of the 1940 Act.

6.6.          The Company agrees that if the Internal Revenue Service (“IRS”) asserts in writing in connection with any governmental audit or review of the Company (or, to the Company’s knowledge, of any Contract owner) that any Portfolio has failed to comply with the diversification requirements of Section 817(h) of the Code or the Company otherwise becomes aware of any facts that could give rise to any claim against the Fund, Distributor or Adviser as a result of such a failure or alleged failure, the Company shall promptly notify the Fund, the Distributor and the Adviser or such assertion or potential claim.

 

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ARTICLE VII.                                                                      Potential Conflicts and Compliance With Mixed and Shared Funding Exemptive Order

7.1.          The Board of Trustees of the Fund (the “Board”) will monitor the Fund for the existence of any material irreconcilable conflict between the interests of the Contract owners of all separate accounts investing in the Fund.  An irreconcilable material conflict may arise for a variety of reasons, including:  (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Portfolio is being managed; (e) a difference in voting instructions given by variable annuity contract and variable life insurance contract owners or by contract owners of different Participating Insurance Companies; or (f) a decision by a Participating Insurance Company to disregard the voting instructions of Contract owners.  The Board shall promptly inform the Company if it determines that an irreconcilable material conflict exists and the implications thereof.

7.2.          The Company will report any potential or existing conflicts of which it is aware to the Board.  The Company will assist the Board in carrying out its responsibilities under the Mixed and Shared Funding Exemptive Order, by providing the Board with all information reasonably necessary for the Board to consider any issues raised.  This includes, but is not limited to, an obligation by the Company to inform the Board whenever Contract owner voting instructions are to be disregarded.  Such responsibilities shall be carried out by the Company with a view only to the interests of its Contract owners.

7.3.          If it is determined by a majority of the Board, or a majority of its directors who are not interested persons of the Fund, the Distributor, the Adviser or any subadviser to any of the Portfolios (the “Independent Directors”), that a material irreconcilable conflict exists, the Company and other Participating Insurance Companies shall, at their expense and to the extent reasonably practicable (as determined by a majority of the Independent Directors), take whatever steps are necessary to remedy or eliminate the irreconcilable material conflict, up to and including:  (1) withdrawing the assets allocable to some or all of the separate accounts from the Fund or any Portfolio and reinvesting such assets in a different investment medium, including (but not limited to) another Portfolio, or submitting the question whether such segregation should be implemented to a vote of all affected Contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., annuity contract owners, life insurance contract owners, or variable contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected contract owners the option of making such a change; and (2) establishing a new registered management investment company or managed separate account.

7.4.          If a material irreconcilable conflict arises because of a decision by the Company to disregard Contract owner voting instructions and that decision represents a minority position or would preclude a majority vote, the Company may be required, at the Fund’s election, to withdraw the Account’s investment in the Fund and terminate this Agreement; provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the Independent

15




Directors.  Any such withdrawal and termination must take place within six (6) months after the Fund gives written notice that this provision is being implemented, and until the end of that six-month period the Adviser, the Distributor and the Fund shall continue to accept and implement orders by the Company for the purchase (and redemption) of shares of the Fund, subject to the terms of the Fund’s then-current prospectus.

7.5.          If a material irreconcilable conflict arises because a particular state insurance regulator’s decision applicable to the Company conflicts with the majority of other state regulators, then the Company will withdraw the Account’s investment in the Fund and terminate this Agreement within six months after the Board informs the Company in writing that it has determined that such decision has created an irreconcilable material conflict; provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the Independent Directors.  Until the end of the foregoing six-month period, the Fund shall continue to accept and implement orders by the Company for the purchase (and redemption) of shares of the Fund, subject to the terms of the Fund’s then-current prospectus.

7.6.          For purposes of Sections 7.3 through 7.5 of this Agreement, a majority of the Independent Directors shall determine whether any proposed action adequately remedies any irreconcilable material conflict, but in no event will the Fund be required to establish a new funding medium for the Contracts.  The Company shall not be required by Section 7.3 to establish a new funding medium for the Contracts if an offer to do so has been declined by vote of a majority of Contract owners affected by the irreconcilable material conflict.  In the event that the Board determines that any proposed action does not adequately remedy any irreconcilable material conflict, then the Company will withdraw the Account’s investment in the Fund and terminate this Agreement within six (6) months after the Board informs the Company in writing of the foregoing determination; provided, however, that such withdrawal and termination shall be limited to the extent required by any such material irreconcilable conflict as determined by a majority of the Independent Directors.

7.7.          If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act or the rules promulgated thereunder with respect to mixed or shared funding (as defined in the Mixed and Shared Funding Exemptive Order) on terms and conditions materially different from those contained in the Mixed and Shared Funding Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable: and (b) Sections 3.6, 3.7, 3.8, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue in effect only to the extent that terms and conditions substantially identical to such Sections are contained in such Rule(s) as so amended or adopted.

ARTICLE VIII.                                                                  Indemnification

8.1.          Indemnification by the Company

(a)           The Company agrees to indemnify and hold harmless the Fund, the Distributor and the Adviser and each of their respective officers and directors or trustees and

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each person, if any, who controls the Fund, Distributor or Adviser within the meaning of Section 15 of the 1933 Act (collectively, the “Indemnified Parties” for purposes of this Section 8.1) against any and all losses, claims, expenses, damages and liabilities (including amounts paid in settlement with the written consent of the Company) or litigation (including reasonable legal and other expenses) to which the Indemnified Parties may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, expenses, damages or liabilities (or actions in respect thereof) or settlements are related to the sale or acquisition of the Fund’s shares or the Contracts and:

(i)    arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the registration statement or prospectus or SAI covering the Contracts or contained in the Contracts or sales literature or other promotional material for the Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this Agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of the Fund for use in the registration statement or prospectus for the Contracts or in the Contracts or sales literature or other promotional material (or any amendment or supplement to any of the foregoing) or otherwise for use in connection with the sale of the Contracts or Fund shares; or

(ii)   arise out of or as a result of statements or representations (other than statements or representations contained in the registration statement, prospectus or sales literature or other promotional material of the Fund not supplied by the Company or persons under its control) or wrongful conduct of the Company or persons under its control, with respect to the sale or distribution of the Contracts or Fund Shares; or

(iii)  arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, SAI, or sales literature or other promotional material of the Fund, or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, if such a statement or omission was made in reliance upon information furnished in writing to the Fund by or on behalf of the Company; or

(iv)  arise as a result of any failure by the Company to provide the services and furnish the materials under the terms of this Agreement; or

(v)   arise out of or result from any material breach of any representation and/or warranty made by the Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Company, including without limitation Section 2.12 and Section 6.4 hereof,

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as limited by and in accordance with the provisions of Sections 8.1(b) and 8.1(c) hereof.

(b)           The Company shall not be liable under this indemnification provision with respect to any losses, claims, expenses, damages, liabilities or litigation to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party’s willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party’s duties or by reason of such Indemnified Party’s reckless disregard of obligations or duties under this Agreement.

(c)           The Company shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Company in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Company of any such claim shall not relieve the Company from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision, except to the extent that the Company has been prejudiced by such failure to give notice.  In case any such action is brought against the Indemnified Parties, the Company shall be entitled to participate, at its own expense, in the defense of such action.  The Company also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action.  After notice from the Company to such party of the Company’s election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Company will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation.

(d)           The Indemnified Parties will promptly notify the Company of the commencement of any litigation or proceedings against them in connection with the issuance or sale of share of the Portfolios or the operation of the Fund.

8.2.          Indemnification by the Adviser

(a)           The Adviser agrees to indemnify and hold harmless the Company and its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (collectively, the “Indemnified Parties” for purposes of this Section 8.2) against any and all losses, claims, expenses, damages, liabilities (including amounts paid in settlement with the written consent of the Adviser) or litigation (including reasonable legal and other expenses) to which the Indemnified Parties may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of the Portfolios or the Contracts and:

(i)    arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement or prospectus or SAI or sales literature or other promotional material of the Fund prepared by the Fund, the Distributor or the Adviser (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the

18




omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this Agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished in writing to the Adviser, the Distributor or the Fund by or on behalf of the Company for use in the registration statement, prospectus or SAI for the Fund or in sales literature or other promotional material (or any amendment or supplement to any of the foregoing) or otherwise for use in connection with the sale of the Contracts or the Portfolios; or

(ii)   arise out of or as a result of statements or representations (other than statements or representations contained in the registration statement, prospectus, SAI or sales literature or other promotional material for the Contracts not supplied by the Adviser or persons under its control) or wrongful conduct of the Fund, the Distributor or the Adviser or persons under their control, with respect to the sale or distribution of the Contracts or Portfolios; or

(iii)  arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, SAI, or sales literature or other promotional material covering the Contracts, or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading, if such statement or omission was made in reliance upon information furnished in writing to the Company by or on behalf of the Adviser, the Distributor or the Fund; or

(iv)  arise as a result of any failure by the Fund, the Distributor or the Adviser to provide the services and furnish the materials under the terms of this Agreement (including a failure, whether unintentional or in good faith or otherwise, to comply with the diversification and other qualification requirements specified in Article VI of this Agreement); or

(v)   arise out of or result from any material breach of any representation and/or warranty made by the Fund, the Distributor or the Adviser in this Agreement or arise out of or result from any other material breach of this Agreement by the Adviser, the Distributor or the Fund; or

(vi)  arise out of or result from the incorrect or untimely calculation or reporting by the Fund, the Distributor, the Adviser or any service provider of the foregoing Parties of the daily net asset value per share (subject to Section 1.10 of this Agreement) or dividend or capital gain distribution rate;

as limited by and in accordance with the provisions of Sections 8.2(b) and 8.2(c) hereof.  This indemnification is in addition to and apart from the responsibilities and obligations of the Adviser specified in Article VI hereof.

19




(b)           The Adviser shall not be liable under this indemnification provision with respect to any losses, claims, expenses, damages, liabilities or litigation to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party’s willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party’s duties or by reason of such Indemnified Party’s reckless disregard of obligations or duties under this Agreement.

(c)           The Adviser shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Adviser in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Adviser of any such claim shall not relieve the Adviser from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision, except to the extent that the Adviser has been prejudiced by such failure to give notice.  In case any such action is brought against the Indemnified Parties, the Adviser will be entitled to participate, at its own expense, in the defense thereof.  The Adviser also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action.  After notice from the Adviser to such party of the Adviser’s election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Adviser will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation.

(d)           The Company agrees promptly to notify the Adviser of the commencement of any litigation or proceeding against it or any of its officers or directors in connection with the issuance or sale of the Contracts or the operation of the Account.

ARTICLE IX.        Applicable Law

9.1.          This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the Commonwealth of Massachusetts, without regard to conflict of laws provisions.

9.2.          This Agreement shall be subject to the provisions of the 1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder, including such exemptions from those statutes, rules and regulations as the SEC may grant (including, but not limited to, the Mixed and Shared Funding Exemptive Order) and the terms hereof shall be interpreted and construed in accordance therewith.

ARTICLE X.          Termination

10.1.        This Agreement shall terminate:

(a)           at the option of any party, with or without cause, with respect to some or all Portfolios, upon sixty (60) days advance written notice delivered to the other parties; or

20




(b)           at the option of the Company by written notice to the other parties with respect to any Portfolio based upon the Company’s determination that shares of such Portfolio are not reasonably available to meet the requirements of the Contracts; or

(c)           at the option of the Company by written notice to the other parties with respect to any Portfolio in the event any of the Portfolio’s shares are not registered, issued or sold in accordance with applicable state and/or federal law or such law precludes the use of such shares as the underlying investment media of the Contracts issued or to be issued by the Company; or

(d)           at the option of the Fund, Distributor or Adviser in the event that formal administrative proceedings are instituted against the Company by the NASD, the SEC, the Insurance Commissioner or like official of any state or any other regulatory body regarding the Company’s duties under this Agreement or related to the sale of the Contracts, the operation of any Account, or the purchase of the Fund shares, if, in each case, the Fund, Distributor or Adviser, as the case may be, reasonably determines in its sole judgment exercised in good faith, that any such administrative proceedings will have a material adverse effect upon the ability of the Company to perform its obligations under this Agreement; or

(e)           at the option of the Company in the event that formal administrative proceedings are instituted against the Fund, the Distributor or the Adviser by the NASD, the SEC, or any state securities or insurance department or any other regulatory body, if the Company reasonably determines in its sole judgment exercised in good faith, that any such administrative proceedings will have a material adverse effect upon the ability of the Fund, the Distributor or the Adviser to perform their obligations under this Agreement; or

(f)            at the option of the Company by written notice to the Fund with respect to any Portfolio if the Company reasonably believes that the Portfolio will fail to meet the Section 817(h) diversification requirements or Subchapter M qualifications specified in Article VI hereof; or

(g)           at the option of any non-defaulting party hereto in the event of a material breach of this Agreement by any party hereto (the “defaulting party”) other than as described in Section 10.1(a)-(h); provided, that the non-defaulting party gives written notice thereof to the defaulting party, with copies of such notice to all other non-defaulting parties, and if such breach shall not have been remedied within thirty (30) days after such written notice is given, then the non-defaulting party giving such written notice may terminate this Agreement by giving thirty (30) days written notice of termination to the defaulting party; or

(h)           at any time upon written agreement of all parties to this Agreement.

10.2.        Notice Requirement

No termination of this Agreement shall be effective unless and until the party terminating this Agreement gives prior written notice to all other parties of its intent to terminate, which notice shall set forth the basis for the termination.  Furthermore,

21




(a)           in the event any termination is based upon the provisions of Article VII, or the provisions of Section 10.1(a) of this Agreement, the prior written notice shall be given in advance of the effective date of termination as required by those provisions unless such notice period is shortened by mutual written agreement of the parties;

(b)           in the event any termination is based upon the provisions of Section 10.1(d), 10.1(e) or 10.1(g) of this Agreement, the prior written notice shall be given at least sixty (60) days before the effective date of termination; and

(c)           in the event any termination is based upon the provisions of Section 10.1(b), 10.1(c) or 10.1(f), the prior written notice shall be given in advance of the effective date of termination, which date shall be determined by the party sending the notice.

10.3.        Effect of Termination

Notwithstanding any termination of this Agreement, other than as a result of a failure by either the Fund or the Company to meet Section 817(h) of the Code diversification requirements, the Fund, the Distributor and the Adviser shall, at the option of the Company, continue to make available additional shares of the Fund pursuant to the terms and conditions of this Agreement, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as “Existing Contracts”).  Specifically, without limitation, the owners of the Existing Contracts shall be permitted to reallocate investments in the Fund, redeem investments in the Fund and/or invest in the Fund upon the making of additional purchase payments under the Existing Contracts.  The parties agree that this Section 10.3 shall not apply to any terminations under Article VII and the effect of such Article VII terminations shall be governed by Article VII of this Agreement.

10.4.        Surviving Provisions

Notwithstanding any termination of this Agreement, each party’s obligations under Article VIII to indemnify other parties shall survive and not be affected by any termination of this Agreement.  In addition, with respect to Existing Contracts, all provisions of this Agreement shall also survive and not be affected by any termination of this Agreement.

ARTICLE XI.        Notices

Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other parties.

If to the Company:

RiverSource Life Insurance Co. of New York
1765 Ameriprise Financial Center
Minneapolis, MN 55474
Attention:  Vice President

22




If to the Fund:

Wanger Advisors Trust

227 West Monroe Street

Suite 3000

Chicago, IL 60606

Attention:  Secretary

If to the Adviser:

Columbia Wanger Asset Management, L.P.

227 West Monroe Street

Suite 3000

Chicago, IL 60606

Attention:  Secretary

If to the Distributor:

Columbia Management Distributors, Inc.

One Financial Center

Boston, MA 02111

Attention:  Secretary

ARTICLE XII.       Miscellaneous

12.1.        Notwithstanding anything to the contrary contained in this Agreement, in addition and not in lieu of other provisions in this Agreement:

(a)           “Confidential Information” includes, but is not limited to all proprietary and confidential information of the Company and its subsidiaries, affiliates and licensees (collectively, the “Protected Parties”) for purposes of this Section 12.1), including without limitation all information regarding the customers of the Protected Parties, or the accounts, account numbers, names, addresses, social security numbers or any other personal identifier of such customers, or any information derived therefrom.

(b)           Neither the Fund, the Adviser, nor the Distributor may use or disclose Confidential Information for any purpose other than to carry out the purpose for which Confidential Information was provided to the Fund, the Adviser or the Distributor (or by the Fund, the Adviser or the Distributor to any service providers thereof) as set forth in this Agreement; and the Fund, the Adviser and the Distributor agree to require that all of their employees, agents and representatives, or any party to whom the Fund, the Adviser or the Distributor may provide access to or disclose Confidential Information to limit the use and disclosure of Confidential Information to that purpose.

(c)           The Company may not use or disclose any information that the Fund, the Adviser or the Distributor may designate from time to time as proprietary.  Such designation will be made in writing to the Company.  Likewise, to the extent not otherwise covered in this

23




Section 12.1, neither the Fund, the Advisor nor the Distributor may use or disclose any information that the Company may designate from time to time as proprietary.  Such designation will be made in writing to the Fund.

(d)           The Fund, the Adviser and the Distributor agree to implement appropriate measures designed to ensure the security and confidentiality of Confidential Information and any other information designated as proprietary pursuant to Section 12.1(c), to protect such information against any anticipated threats or hazards to the security or integrity of such information, and to protect against unauthorized access to, or use of, Confidential Information and any other information designated as proprietary pursuant to Section 12.1(c) that could result in substantial harm or inconvenience to any customer or Protected Parties; the Fund, the Adviser and the Distributor further agree to cause all their agents, representatives or subcontractors of, or any other party to whom the Fund, the Adviser or the Distributor may provide access to or disclose Confidential Information and any other information designated as proprietary pursuant to Section 12.1(c) to implement appropriate measures designed to meet the obligations set forth in this Section 12.1.  The Company agrees to implement appropriate measures designed to ensure the security and confidentiality of information designated by the Fund, the Advisor or the Distributor as proprietary in accordance with Section 12.1(c).

(e)           The Company, the Fund, the Adviser and the Distributor acknowledge that any breach of the agreements in this Section 12.1 would result in immediate and irreparable harm to the Protected Parties or alternatively to the Fund, the Adviser or the Distributor, for which there would be no adequate remedy at law and agree that in the event of such a breach, the Protected Parties or alternatively the Fund, the Adviser or the Distributor, will be entitled to equitable relief by way of temporary and permanent injunctions, as well as such other relief as any court of competent jurisdiction deems appropriate.

12.2.        The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect.

12.3.        This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument.

12.4.        If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby.

12.5.        Each party hereto shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the NASD and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby.

12.6.        Any controversy or claim arising out of or relating to this Agreement, or breach thereof, shall be settled by arbitration in a forum jointly selected by the relevant parties (but if applicable law requires some other forum, then such other forum) in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the

24




award rendered by the arbitrators may be entered in any court having jurisdiction thereof.  The number of arbitrators will be three, one of whom will be appointed by the Company or an affiliate, one of whom will be appointed by the Fund and/or the Adviser or an affiliate, and the third of whom will be selected by mutual agreement, if possible, within 30 days of the selection of the second arbitrator and thereafter by the administering authority.  The place of arbitration will be New York, NY.  The arbitrators will have no authority to award punitive damages or any other damages not measured by the prevailing party’s actual damages, and may not, in any event, make any ruling, finding or award that does not conform to the terms and conditions of this Agreement.  Any party may make an application to the arbitrators seeking injunctive relief to maintain the status quo until such time as the arbitration award is rendered or the controversy is otherwise resolved.  Any party may apply to any court having jurisdiction hereof and seek injunctive relief in order to maintain the status quo until such time as the arbitration award is rendered or the controversy is otherwise resolved.

12.7.        The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws.

12.8.        This Agreement or any of the rights and obligations hereunder may not be assigned by any party without the prior written consent of all parties hereto.

12.9.        The Company agrees that the obligations assumed by the Fund, Distributor and the Adviser pursuant to this Agreement shall be limited in any case to the Fund, Distributor and Adviser and their respective assets and the Company shall not seek satisfaction of any such obligation from the shareholders of the Fund, Distributor or the Adviser, the Directors, officers, employees or agents of the Fund, Distributor or Adviser, or any of them.

12.10.      The Fund, the Distributor and the Adviser agree that the obligations assumed by the Company pursuant to this Agreement shall be limited in any case to the Company and its assets and neither the Fund, Distributor nor Adviser shall seek satisfaction of any such obligation from the shareholders of the Company, the directors, officers, employees or agents of the Company, or any of them.

12.11.      No provision of this Agreement may be deemed or construed to modify or supersede any contractual rights, duties, or indemnifications, as between the Adviser and the Fund, and the Distributor and the Fund.

12.12       The parties to this Agreement may amend this Agreement in writing from time to time to reflect changes in or relating to the Contracts, the Portfolios available under the Contracts and other terms of this Agreement.

12.13       A copy of the Agreement and Declaration of Trust of the Fund is on file with the Secretary of the Commonwealth of Massachusetts, and notice is hereby given that this Agreement is executed on behalf of the Fund by an officer of the Fund in his or her capacity as an officer of the Fund and not individually and that the obligations of or arising out of this Agreement are not binding upon any of the trustees, officers or shareholders individually but are binding only upon the assets and property of the Fund.  Furthermore, notice is given that the

25




assets and liabilities of each series of the Fund is separate and distinct and that the obligations of or arising out of this Agreement with respect to the series of the Fund are several and not joint, and to the extent not otherwise reasonably allocated among such series by the trustees of the Fund, shall be deemed to have been allocated in accordance with the relative net assets of such series, and Company agrees not to proceed against any series for the obligations of another series.

26




IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and on its behalf by its duly authorized representative and its seal to be hereunder affixed hereto as of the date specified below.

RIVERSOURCE LIFE INSURANCE CO. OF NEW YORK

 

Attest:

 

 

 

 

 

 

By:

/s/ Patrick H. Carey III

 

 

By:

/s/ Betsy Hannum

Name: Patrick H. Carey III

 

Name: Betsy Hannum

Title: Vice President

 

Title: Assistant Secretary

 

 

 

WANGER ADVISORS TRUST

 

 

 

 

 

 

 

 

By:

/s/ Bruce H. Lauer

 

 

 

Name: Bruce H. Lauer

 

 

Title: Vice President, Treasurer and Secretary

 

 

 

 

 

COLUMBIA WANGER ASSET MANAGEMENT, L.P.

 

 

 

 

 

 

 

 

By:

/s/ Bruce H. Lauer

 

 

 

Name: Bruce H. Lauer

 

 

Title: Chief Operating Officer

 

 

 

 

 

COLUMBIA MANAGEMENT DISTRIBUTORS, INC.

 

 

 

 

 

 

 

 

By:

/s/ Michael A. Jones

 

 

 

Name: Michael A. Jones

 

 

Title: President

 

 

 

 

27




SCHEDULE A

RiverSource Life Insurance Co. of New York
Account, Contract, Fund and Portfolios

Separate Account
Name; Date Established
by Board of Directors

 

Contract
Form No.

 

Contract Name

 

Fund

 

Portfolios

RiverSource of New York Variable Annuity Account 2 (prior to January 1, 2007: ACL Variable Annuity Account 2), established October 12, 1995.

 

272877-NY

 

RiverSource Innovations SM Select Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

273640-NY

 

RiverSource Endeavor Select Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

Separate Account
Name; Date Established
by Board of Directors

 

Contract
Form No.

 

Contract Name

 

Fund

 

Portfolios

RiverSource of New York Account 8 (prior to January 1, 2007: IDS Life of New York Account 8), established September 12, 1985.

 

30060

 

RiverSource Variable Universal Life InsuranceSM

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

30061

 

RiverSource Variable Universal Life II

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

30090

 

RiverSource Variable Second-To-Die Life InsuranceSM

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

39090C

 

RiverSource Succession SelectSM Variable Life Insurance

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

39061

 

RiverSource Variable Universal Life II RiverSource Variable Universal Life IV and RiverSource Variable Universal Life IV—Estate Series

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 




 

Separate Account
Name; Date Established
by Board of Directors

 

Contract
Form No.

 

Contract Name

 

Fund

 

Portfolios

RiverSource of New York Variable Annuity Account (prior to January 1, 2007: IDS Life of New York Variable Annuity Account), established April 17, 1996.

 

31053, 31054, 31055-SEP, 31056-IRA

 

RiverSource Retirement Advisor Variable Annuity® and RiverSource Retirement Advisor Variable Annuity—BAND 3

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

31053, 31054, 31055-SEP, 31056-IRA

 

RiverSource Retirement Advisor AdvantageSM Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

139035, 139036, 139037 and 139038

 

RiverSource Retirement Advisor Select Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

31053A

 

RiverSource Retirement Advisor AdvantageSM Plus Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

139035A

 

RiverSource Retirement Advisor SelectSM Plus Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

139482

 

RiverSource Retirement Advisor 4 AdvantageSM Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

139483

 

RiverSource Retirement Advisor 4 SelectSM Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 

 

139484

 

RiverSource Retirement Advisor AccessSM Variable Annuity

 

 

 

International Small Cap; U.S. Smaller Companies

 

 

31053A

 

RiverSource Retirement Advisor AdvantageSM Plus Variable Annuity

 

Wanger Advisors Trust

 

International Small Cap; U.S. Smaller Companies

 




SCHEDULE B

EXPENSES

The Fund and/or the Distributor and/or Adviser, and the Company will coordinate the functions and pay the costs of the completing these functions based upon an allocation of costs in the tables below.  Costs shall be allocated to reflect the Fund’s share of the total costs determined according to the number of pages of the Fund’s respective portions of the documents.

Item

 

Function

 

Party Responsible
for Coordination

 

Party Responsible
for Expense

Mutual Fund Prospectus

 

Electronic copy of combined prospectuses made available

 

Company

 

Current - Fund Prospective - Company

 

 

Distribution (including postage) to Current Clients

 

Company

 

Fund

 

 

Distribution (including postage) to Prospective Clients

 

Company

 

Company

Product Prospectus

 

Printing and Distribution for Current and Prospective Clients

 

Company

 

Company

Mutual Fund Prospectus Update & Distribution

 

Electronic copy, if Required by Fund, Distributor or Adviser

 

Fund, Distributor or Adviser

 

Fund, Distributor or Adviser

 

 

If Required by Company

 

Company (Fund, Distributor or Adviser to provide Company with document in PDF format)

 

Company

Product Prospectus Update & Distribution

 

If Required by Fund, Distributor or Adviser

 

Company

 

Fund, Distributor or Adviser

 

 

If Required by Company

 

Company

 

Company

 




 

Item

 

Function

 

Party Responsible
for Coordination

 

Party Responsible
for Expense

Mutual Fund SAI

 

Printing

 

Fund, Distributor or Adviser

 

Fund, Distributor or Adviser

 

 

Distribution (including postage)

 

Party who receives the request

 

Party who receives the request

Product SAI

 

Printing

 

Company

 

Company

 

 

Distribution

 

Company

 

Company

Proxy Material for Mutual Fund

 

Electronic copy of proxy if required by Law

 

Fund, Distributor or Adviser

 

Fund, Distributor or Adviser

 

 

Distribution (including labor) if proxy required by Law

 

Company

 

Fund, Distributor or Adviser

 

 

Printing & distribution if required by Company

 

Company

 

Company

Mutual Fund Annual & Semi-Annual Report

 

Electronic copy made available

 

Fund, Distributor or Adviser

 

Fund, Distributor or Adviser

 

 

Distribution

 

Company

 

Fund, Distributor or Adviser

Operations of the Accounts

 

Federal registration of units of separate account (24f-2 fees)

 

Company

 

Company

 



EX-99.(H)(26) 11 a07-7397_5ex99dh26.htm EX-99.(H)(26)

Exhibit 99.(h)(26)

FUND PARTICIPATION AGREEMENT

between

WANGER ADVISORS TRUST,

COLUMBIA WANGER ASSET MANAGEMENT, LP,

ING LIFE INSURANCE AND ANNUITY COMPANY,

and

RELIASTAR LIFE INSURANCE COMPANY

ING Life Insurance and Annuity Company (“ING”), ReliaStar Life Insurance Company (ReliaStar) (collectively the “Company”), Wanger Advisors Trust (the “Fund”) and Columbia Wanger Asset Management, LP (the “Adviser”) hereby agree to an arrangement whereby the Fund shall be made available to serve as underlying investment media for Variable Annuity or Variable Life Contracts (“Contracts”) to be issued by the Company.

1.       60;                                Establishment of Accounts; Availability of Fund.

(a)  ING represents that it has established Variable Annuity Accounts B, C, D and F and Variable Life Accounts B and C and may establish such other accounts as may be set forth in Schedule A attached hereto and as may be amended from time to time with the mutual consent of the parties hereto (the “Accounts”), each of which is a separate account under Connecticut Insurance law, and has registered or will register each of the Accounts (except for such Accounts for which no such registration is required) as a unit investment trust under the Investment Company Act of 1940 (the “1940 Act”) , to serve as an investment vehicle for the Contracts. Each Contract provides for the allocation of net amounts received by ING to an Account for investment in the shares of one or more specified open-end management investment companies available through that Account as underlying investment media. Selection of a particular investment management company and changes therein from time to time are made by the participant or Contract owner, as applicable under a particular Contract.

(b)  ReliaStar represents that it has established Separate Account N and may establish such other accounts as may be set forth in Schedule A attached hereto and as may be amended from time to time with the mutual consent of the parties hereto (the “Accounts”), each of which is a separate account under Minnesota Insurance law, and has registered or will register each of the Accounts (except for such Accounts for which no such registration is required) as a unit investment trust under the 1940 Act, to serve as an investment vehicle for the Contracts. Each Contract provides for the allocation of net amounts received by ReliaStar to an Account for investment in the shares of one or more specified open-end management investment companies available through that Account as underlying investment media. Selection of a particular investment management company and changes therein from time to time are made by the participant or Contract owner, as applicable under a particular Contract.

1




(c)  The Fund and the Adviser represent and warrant that the investments of the series of the Fund (each designated a “Portfolio”) specified in Schedule B attached hereto (as may be amended from time to time with the mutual consent of the parties hereto) will at all times be adequately diversified within the meaning of Section 817(h) of the Internal Revenue Service Code of 1986, as amended (the “Code”), and the Regulations thereunder, and that at all times while this agreement is in effect, all beneficial interests will be owned by one or more insurance companies or by any other party permitted under Section 1.817-5(f)(3) of the Regulations promulgated under the Code or by the successor thereto, or by any other party permitted under a Revenue Ruling or private letter ruling granted by the Internal Revenue Service.

(d)  The Board of Trustees of the Fund (hereinafter the “Board”) may refuse to sell shares of any Portfolio to any person, or suspend or terminate the offering of shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Board acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, necessary in the best interests of the shareholders of such Portfolio.

2.                                       Pricing Information; Orders; Settlement.

(a)  The Fund will make Fund shares available to be purchased by the Company, and will accept redemption orders from the Company, on behalf of each Account at the net asset value applicable to each order on those days on which the Fund calculates its net asset value (a “Business Day”). Fund shares shall be purchased and redeemed in such quantity and at such time determined by the Company to be necessary to meet the requirements of those Contracts for which the Fund serve as underlying investment media, provided, however, that the Board of Trustees of the Fund (hereinafter the “Trustees”) may upon reasonable notice to the Company, refuse to sell shares of any Portfolio to any person, or suspend or terminate the offering of shares of any Portfolio if such action is (1) required by law or by regulatory authorities having jurisdiction or (2) in the sole discretion of the Trustees, acting in good faith and in the best interests of the shareholders of any Portfolio and acting in compliance with their fiduciary obligations under federal and/or any applicable state laws.

(b)  The Fund will make best efforts to provide to the Company closing net asset value, dividend and capital gain information at the close of trading each day that the New York Stock Exchange (the “Exchange”) is open (each such day a “Business Day”) by 6:30 p.m. East Coast Time but in no event later than 7:00 p.m. East Coast Time on such Business Day. The Company will send via facsimile or electronic transmission to the Fund or its specified agent orders to purchase and/or redeem Fund shares by 9:00 a.m. East Coast Time the following business day. Payment for net purchases will b e wired by the Company to an account designated by the Fund to coincide with the order for shares of the Fund.

(c)  The Fund hereby appoints the Company as its agent for the limited purpose of accepting purchase and redemption orders for Fund shares relating to the Contracts from Contract owners or participants. Orders from Contract owners or participants received from any distributor of the Contracts (including affiliates of the Company) by the Company, acting as agent for the Fund, prior to the close of the Exchange on any given business day will be executed by the Fund at the net asset value determined as of the close of the Exchange on such Business Day, provided that the Fund receives

2




written (or facsimile) notice of such order by 9 a.m. East Coast Time on the next following Business Day. Any orders received by the Company acting as agent on such day but after the close of the Exchange will be executed by the Fund at the net asset value determined as of the close of the Exchange on the next business day following the day of receipt of such order, provided that the Fund receives written (or facsimile) notice of such order by 9 a.m. East Coast Time within two days following the day of receipt of such order.

(d)  Payments for net redemptions of shares of the Fund will be wired by the Fund to an account designated by the Company, and payments for net purchases of the Fund will be wired by the Company to an account designated by the Fund. Payments for net redempt ions and net purchases will be made on the same Business Day as the order to purchase or redeem Fund shares. Payments shall be in federal funds transmitted by wire.

(e)  In lieu of applicable provisions set forth in paragraphs 2(a) through 2(d) above, the parties may agree to provide pricing information, execute orders and wire payments for purchases and redemptions through National Securities Clearing Corporation’s Fund/SERV system in which case such activities will be governed by the provisions set forth in Exhibit I to this Agreement.

(f)  Each party has the right to rely on information or confirmations provided by the other party (or by any affiliate of the other party), and shall not be liable in the event that an error is a resu lt of any misinformation supplied by the other party.

(g)  The Company agrees to purchase and redeem the shares of the Portfolios named in Schedule B offered by the then current prospectus and statement of additional information of the Fund in accordance with the provisions of such prospectus and statement of additional information. The Company shall not permit any person other than a Contract owner or Participant to give instructions to the Company which would require the Company to redeem or exchange shares of the Fund. This provision shall not be construed to prohibit the Company from substituting shares of another fund, as permitted by law.

(h)  ING represents and warrants that it has adopted and implemented controls reasonably designe d to ensure that all orders received by the Company after the close of the Exchange on a particular Business Day will not be aggregated with orders received by the Company before the close of the Exchange on such Business Day.

3.                                       Expenses.

(a)  Except as otherwise provided in this Agreement, all expenses incident to the performance by the Fund under this Agreement shall be paid by the Fund, including the cost of registratio n of Fund shares with the Securities and Exchange Commission (the “SEC”) and in states where required. The Fund and Adviser shall pay no fee or other compensation to the Company under this Agreement, and the Company shall pay no fee or other compensation to the Fund or Adviser, except as provided herein and in Schedule C attached hereto and made a part of this Agreement as may be amended from time to time with the mutual consent of the parties hereto. All expenses incident to performance by each party of its respective dues under this Agreement shall be paid by that party, unless otherwise specified in this Agreement.

3




(b)  The Fund or the Adviser shall provide to the Company Post Script files of periodic fund reports to shareholders and other materials that are required by law to be sent to Contract owners. In addition, the Fund or the Adviser shall provide the Company with a sufficient quantity of its prospectuses, statements of additional information and any supplements to any of these materials, to be used in connection with the offerings and transactions contemplated by this Agreement. In addition, the Fund shall provide the Company with a sufficient quantity of its proxy material that is required to be sent to Contract owners. The Adviser shall be permitted to review and approve the typeset form of such material prior to such printing provided such material has been provided by the Adviser to the Company within a reasonable period of time prior to typesetting.

(c)  In lieu of the Fund’s or Adviser’s providing printed copies of prospectuses, statements of additional information and any supplements to any of these materials, and periodic fund reports to shareholders, the Company shall have the right to request that the Fund transmit a copy of such materials in an electronic format (Post Script files), which the Company may use to have such materials printed together with similar materials of other Account funding media that the Company or any distributor will distribute to existing or prospective Contract owners or participants.

4.                      & #160;                Representations.

The Company agrees that it and its agents shall not, without the written consent of the Fund or the Adviser, make representations concerning the Fund, or its shares except those contained in the then current prospectuses and in current printed sales literature approved by or deemed approved by the Fund or the Adviser.

The Company agrees to cooperate fully with any and all efforts by the Funds to assure the Funds that the Company has implemented effective compliance policies and procedures administered by qualified personnel as required by and in accordance with any and all applicable laws, rules and regulations.

5.                                       Termination.

This agreement shall terminate as to the sale and issuance of new Contracts:

(a)  at the option of either the Company, the Adviser or the Fund, upon sixty days advance written notice to the other parties;

(b)  at the option of the Company, upon one week advance written notice to the Adviser and the Fund, if Fund shares are not available for ally reason to meet the requirement of Contracts as determined by the Company. Reasonable advance notice of election to terminate shall be furnished by the Company;

(c)  at the option of either the Company, the Adviser or the Fund, immediately upon institution of formal proceedings against the broker-dealer or broker-dealers marketing the Contracts, the Account, the Company, the Fund or the Adviser by the National Association of Securities Dealers, Inc. (the “NASD”), the SEC or any other regulatory body;

4




(d)  upon the determination of the Accounts to substitute for the Fund’s shares the shares of another investment company in accordance with the terms of the applicable Contracts. The Company will give 60 days written notice to the Fund and the Adviser of any decision to replace the Fund’s’ shares;

(e)  upon assignment of this Agreement, unless made with the written consent of all other parties hereto; and/or

(f)  if Fund shares are not registered, issued or sold in conformance with Federal law or such law precludes the use of Fund shares as an underlying investment medium for Contracts issued or to b e issued by the Company. Prompt notice shall be given by the appropriate party should such situation occur.

6.                                       Continuation of Agreement.

Termination as the result of any cause listed in Section 5 shall not affect the Fund’s obligation to furnish its shares to Contracts then in force for which its shares serve or may serve as the underlying medium unless such further sale of Fund shares is prohibited by law or the SEC or other r egulatory body, or is determined by the Fund’s Board to be necessary to remedy or eliminate an irreconcilable conflict pursuant to Section 10 hereof

7.                                       Advertising Materials; Filed Documents.

(a)  Advertising and sales literature with respect to the fund prepared by the Company or its agents for use in marketing its Contracts will be submitted to the Fund or its designee for review before such material is submitted to arty regulatory body for review. The Fund or its designee shall advise the submitting part in writing within three (3) Business Days of its approval or disapproval of such materials.

(b)  The Fund will provide additional copies of its financials as soon as available to the Company and at least one complete copy of all registration statements, prospectuses, statements of additional information, annual and semi-annual reports, proxy statements and all amendments or supplements to any of the above that relate to the Fund promptly after the filing of such document with the SEC or other regulatory authorities. At the Adviser’s request, the Company will provide to the Adviser at least one complete copy of all registration statements, prospectuses, statements of additional information, annual and semi-annual reports, proxy statements, and all amendments or supplements to any of the above that relate to the Account promptly after the filing of such document with the SEC or other regulatory authority.

(c)  The Fund or the Adviser will provide via Excel spreadsheet diskette format or in electronic transmission to the Company at least quarterly portfolio information necessary to update Fund profiles within seven business days following the end of each quarter.

(d)  The Advisor will reimburse the Company for any incorrect information provided to the Company under this Section as provided for in Schedule C.

5




8.                                       Proxy Voting.

(a)  The Company shall provide pass-through voting privileges on Fund shares held by registered separate accounts to all Contract owners and participants to the extent the SEC continues to interpret the 1940 Act as requiring such privileges. The Company shall provide pass-through voting privileges on Fund shares held by unregistered separate accounts to all Contract owners.

(b)  The Company will distribute to Contract owners and participants, as appropriate, all proxy material furnished by the Fund and will vote Fund shares in accordance with instructions received from such Contract owners and participants. If and to the extent required by law, the Company, with respect to each group Contract and in each Account, shall vote Fund shares for which no instructions have been received in the same proportion as shares for which such instructions have been received. The Company and its agents shall not oppose or interfere with the solicitation of proxies for Fund shares held for such Contract owners and participants.

9.               ;                         Indemnification.

(a)  The Company agrees to indemnify and hold harmless the Fund and the Adviser, and its directors, officers, employees, agents and each person, if any, who controls the Fund or its Adviser within the meaning of the Securities Act of 1933 (the “1933 Act”) against any, losses, claims, damages or liabilities to which the Fund or any such director, officer, employee, agent, or controlling person may become subject, under the 1933 Act or otherwise, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement , prospectus or sales literature of the Company or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or arise out of or as a result of conduct, statements or representations (other than statements or representations contained in the prospectuses or sales literature of the Fund) of the Company or its agents, with respect to the sale and distribution of Contracts for which Fund shares are the underlying investment. The Company will reimburse any legal or other expenses reasonably incurred by the Fund or any such director, officer, employee, agent, investment adviser, or controlling person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon (i) an untrue statement or omission or alleged omission made in such Registration Statement or prospectus in conformity with written materials furnished to the Company by the Fund specifically for use therein or (ii) the willful misfeasance, bad faith, or gross negligence by the Fund or Adviser in the performance of its duties or the Fund’s or Adviser’s reckless disregard of obligations or duties under this Agreement or to the Company, whichever is applicable. This indemnity agreement will be in addition to any liability which the Company may otherwise have.

(b)  The Fund and the Adviser agree to indemnify and hold harmless the Company and its directors, officers, employees, agents and each person, if any, who controls the Company within the meaning of the 1933 Act against any losses, claims, damages or liabilities to which the Company or any such director, officer, employee, agent or contr olling person may become subject,

6




under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, prospectuses or sales literature of the Fund or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or material fact required to be stated therein or necessary to make the statements therein not misleading. The Fund will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, employee, agent, or controlling person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Fund will not be liable in any such case to the extent that any such loss, claim; damage or lia bility arises out of or is based upon an untrue statement or omission or alleged omission made in such Registration Statement or prospectuses which are in conformity with written materials furnished to the Fund by the Company specifically for use therein.

(c)  Promptly after receipt by an indemnified party hereunder of notice of the commencement of action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under this Section 9. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to part icipate therein and, to the extent that it may wish to, assume the defense thereof, with counsel satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 9 for any legal or other expenses subsequently incurred by such indemnified patty in connection with the defense thereof other than reasonable costs of investigation.

10.                                 Potential Conflicts.

(a)  The Company has received a copy of an application for exemptive relief, as amended, filed by the Fund on and with the SEC and the order issued by the SEC dated December 18, 1996 (Order No. IC-22404) in response thereto (the “Mixed and Shared Funding Exemptive Order”). The Company has reviewed the conditions to the requested relief set forth in such application for exemptive relief. As set forth in such application, the Board of Directors of Fund (the “Board”) will monitor the Fund for the existence of any material irreconcilable conflict between the interests of the contractholders of all separate accounts (“Participating Companies”) investing in the Fund. An irreconcilable material conflict may arise for a variety of reasons, including: (i) an action by any state insurance regulatory authority; (ii) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ru ling, private letter ruling, no-action or interpretative letter, or any similar actions by insurance, tax or securities regulatory authorities; (iii) an administrative or judicial decision in any relevant proceeding; (iv) the manner in which the investments of any portfolio are being managed; (v) a difference in voting instructions given by variable annuity contractholders and variable life insurance contractholders; or (vi) a decision by an insurer to disregard the voting instructions of contractholders. The Board shall promptly inform the Company if it determines that an irreconcilable material conflict exists and the implications thereof.

7




(b)  The Company will report any potential or existing conflicts of which it is aware to the Board. The Company will assist the Board in carrying out its responsibilities under the Shared Funding Exemptive Order by providing the Board with all information reasonably necessary for the Board to consider any issues raised, This includes, but is not limited to, an obligation by the Company to inform the Board whenever contractholder voting instructions are disregarded.

(c)  If a majority of the Board, or a majority of its disinterested Board members, determines that a material irreconcilable conflict exists with regard to contractholder investments in a Fund, the Board shall give prompt notice to all Participating Companies. If the Board determines that the Company is responsible for causing or creating said conflict, the Company shall at its sole cost and expense, and to the extent reasonably practicable (as determined by a majority of the disinterested Board members), take such action as is necessary to remedy or eliminate the irreconcilable material conflict. Such necessary action may include but shall not be limited to:

(i)  withdrawing the assets allocable to the Account from the Fund and reinvesting such assets in a different investment medium or submitting the question of whether such segregation should be implemented to a vote of all affected contractholders and as appropriate, segregating the assets of any appropriate group (i.e., annuity contract owners, life insurance contract owners, or variable contract owners of one or more Participating Companies) that votes in favor of such segregation, or offering to the affected contractholders the option of making such a change; and/or

(ii)  establishing a new registered management investment company or managed separate account.

(d)  If a material irreconcilable conflict arises as a result of a decision by the Company to disregard its contractholder voting instructions and said decision represents a minority position or would preclude a majority vote by all of its contractholders having an interest in the Fund, the Company at its sole cost, may be required, at the Board’s election, to withdraw an Account’s investment in the Fund and terminate this Agreement; provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable c onflict as determined by a majority of the disinterested members of the Board.

(c)  For the purpose of this Section 10, a majority of the disinterested Board members shall determine whether or not any proposed action adequately remedies any irreconcilable material conflict, but in no event will the Fund be required to establish a new funding medium for any Contract. The Company shall not be required by this Section 10 to establish a new funding medium for any Contract if an offer to do so has been declined by vote of a majority of the Contract owners or participants materially adversely affected by the irreconcilable material conflict.

11.       &# 160;                         Miscellaneous.

(a)  Amendment and Waiver. Neither this Agreement, nor any provision hereof, may be amended, waived, discharged or terminated orally, but only by an instrument in writing signed by all parties hereto.

8




(b)  Notices. All notices and other communications hereunder shall be given or made in writing and shall be delivered personally, or sent by telex, telecopier or registered or certified mail, postage prepaid, return receipt requested, or recognized overnight courier service to the party or parties to whom they are directed at the following addresses, or at such other addresses as may be designated by notice from such party to all other parties.

To the Company:

ING Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156
Attention: Lisa S. Gilarde

ReliaStar Life Insurance Company

151 Farmington Avenue

Hartford, Connecticut 06156

Attention: Lisa S. Gilarde

To the Fund:

Columbia Funds Distributor, Inc.

One Financia l Center

Boston, Massachusetts 02111

Attn: Joe Feloney, Senior Vice President

Any notice, demand or other communication given in a manner prescribed in this subsection (b) shall be deemed to have been delivered on receipt.

(c)  Successors and Assigns. This agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns.

(d)  ; Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any party hereto may execute this Agreement by signing any such counterpart.

(e)  Severability. In case any one or more of the provisions contained in this Agreement should be invalid illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

(f)  Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties hereto and supersedes all prior agreement and understandings relating to the subject matter hereof.

(g)  Governing Law. This Agreement shall be governed and interpreted in accordance with the laws of the State of Connecticut.

9




(h)  It is understood by the parties that this Agreement is not an exclusive arrangement in any respect.

(i)  The terms of this Agreement and the Schedules thereto will be held confidential by each party except to the extent that either party or its counsel may deem it necessary to disclose such terms.

12.                                 Limitation on Liability of T rustees, etc.

This agreement has been executed on behalf of the Fund by the undersigned officer of the Fund in his or her capacity as an officer of, the Fund. The obligations of this agreement shall be binding upon the assets and property of the Fund only and shall not be binding on any Trustee, officer or shareholder of the Fund individually.

10




IN WITNESS WHEREOF, the undersigned have executed this Agreement by their duly authorized officers effective as of the 1st day of May, 2004.

ING LIFE INSURANCE AND ANNUITY COMPANY

 

By:

/s/ Laurie M. Tilinghast

 

Name:

Laurie M. Tilinghast

Title:

Vice President

 

 

RELIASTAR LIFE INSURANCE COMPANY

 

By:

/s/ Laurie M. Tilinghast

 

Name:

Laurie M. Tilinghast

Title:

Vice President

 

 

 

 

WANGER ADVISORS TRUST

 

By:

/s/ Kenneth A. Kalina

 

Name:

Kenneth A. Kalina

Title:

Asst. Treasurer

 

 

COLUMBIA WANGER ASSET MANAGEMENT, LP

 

By:

/s/ Kenneth A. Kalina

 

Name:

Kenneth A. Kalina

Title:

CFO

 

11




SCHEDULE A

(For any future separate accounts - See Section 1(a)

12




SCHEDULE B

(List of portfolios available - See Section 1(b))

Wanger Select

Wanger U.S. Smaller Companies

13




SCHEDULE C

The following costs, expenses and reimbursements will be paid by the party indicated:

1.  For purposes of Sections 2 and 7, the Fund or the Adviser shall be liable to the Company for any amount the Company is required to pay to Contract owners or participants due to (i) an incorrect calculation of a Fund’s daily net asset value, dividend rate, or capital gain distribution rate or (ii) incorrect or late reporting of the daily net asset value, capital gain distribution rate of a Fund, upon written notification by the Company, with supporting data, to the Adviser. In addition, the Fund or the Adviser shall be liable to the Company for systems and out of pocket costs incurred by the Company in making a Contract owner’s or a participant’s account whole, if such costs or expenses are a result of the Fund’s failure to provide timely or correct net asset values, dividend and capital gains or financial information. If a mistake is caused in supplying such information or confirmations, which results in a reconciliation with incorrect information, the amount required to make a Contact owner’s or a Participant’s amount whole shall be borne by the party providing the incorrect information, regardless of when the error is corrected.

2.  For purposes of Section 3, the Fund or the Adviser shall pay for the cost of typesetting and printing periodic fund reports to shareholders, prospectuses, prospectus supplements, statements of additional information and other materials that are required by law to be sent to Contract owners or particip ants, as well as the cost of distributing such materials. The Company shall pay for the cost of prospectuses and statements of additional information and the distribution thereof for prospective Contract owners or participants. Each party shall be provided with such supporting data as may reasonably be requested for determining expenses under Section 3.

3.  The Fund shall pay all expenses in connection with the provision to the Company of a sufficient quantity of its proxy material under Section 3. The cost associated with proxy preparation, group authorization letters, programming for tabulation and necessary materials (including postage) will be paid by the Fund.

14




EXHIBIT I

TO

PARTICIPATION AGREEMENT

Procedures for Pricing and Order/Settlement Through National Securities Clearing Corporation’s Mutual Fund Profile System and Mutual Fund Settlement, Entry and Registration Verification System

1.  As provided in Section 2(e) of the Fund Participation Agreement, the parties hereby agree to provide pricing information, execute orders and wire payments for purchas es and redemptions of Fund shares through National Securities Clearing Corporation (“NSCC”) and its subsidiary systems as follows:

(a)  Distributor or the Funds will furnish to the Company or its affiliate through NSCC’s Mutual Fund Profile System (“MFPS”) (1) the most current net asset value information for each Fund, (2) a schedule of anticipated dividend and distribution payment dates for each Fund, which is subject to change without prior notice, ordinary income and capital gain dividend rates on the Fund’s ex-date, and (3) in the case of fixed income funds that declare daily dividends, the daily accrual or the interest rate factor. Best efforts will be made to provide all such information to the Company or its affiliate by 6:30 p.m. Eastern Time but in no event later than 7:00 p.m. Eastern Time on each business day that the Fund is open for business (each a “Business Day”). Changes in pricing information will be communicated to both NSCC and the Company.

(b)  Upon receipt of Fund purchase, exchange and redemption instructions for acceptance as of the time at which a Fund’s net asset value is calculated as specified in such Fund’s prospectus (“Close of Trading”) on each Business Day (“Instructions”), and upon its determination that there are good funds with respect to Instructions involving the purchase of Shares, the Company or its affiliate will calculate the net purchase or redemption order for each Fund. Orders for net purchases or net redemptions derived from Instructions received by the Company or its affiliate prior to the Close of Trading on any given Business Day will be sent to the Defined Contribution Interface of NSCC’s Mutual Fund Settlement, Entry and Registration Verification System ( 47;Fund/SERV”) by 5:00 am. Eastern Time on the next Business Day. Subject to the Company’s or its affiliate’s compliance with the foregoing, the Company or its affiliate will be considered the agent of the Distributor and the Funds, and the Business Day on which Instructions are received by the Company or its affiliate in proper form prior to the Close of Trading will be the date as of which shares of the Funds are deemed purchased, exchanged or redeemed pursuant to such Instructions. Instructions received in proper form by the Company or its affiliate after the Close of Trading on any given Business Day will be treated as if received on the next following Business Day. Dividends and capital gains distributions will be automatically reinvested at net asset value in accordance with the Fund’s then current prospectuses.

(c)  The Company or its affiliate will wire payment fo r net purchase orders by the Fund’s NSCC Firm Number, in immediately available funds, to an NSCC settling bank account designated by the Company or its affiliate no later than 5:00 p.m. Eastern time on the same Business Day such purchase orders are communicated to NSCC. For purchases of shares of daily dividend accrual

15




funds, those shares will not begin to accrue dividends until the day the payment for those shares is received.

(d)  NSCC will wire payment for net redemption orders by Fund, in immediately available funds, to an NSCC settling bank account designated by the Company or its affiliate, by 5:00 p.m. Eastern Time on the Business Day such redemption orders are communicated to NSCC, except as provided in a Fund’s prospectus and statement of additional information.

(e)  With respect to (c) or (d) above, if Distributor does not send a confirmation of the Company’s or its affiliate’s purchase or redemption order to NSCC by the applicable deadline to be included in that Busines s Day’s payment cycle, payment for such purchases or redemptions will be made the following Business Day.

(f)  If on any day the Company or its affiliate, or Distributor is unable to meet the NSCC deadline for the transmission of purchase or redemption orders, it may at its option transmit such orders and make such payments for purchases and redemptions directly to Distributor or the Company or its affiliate, as applicable, as is otherwise provided in the Agreement.

(g)  These procedures are subject to any additional terms in each Fund’s prospectus and the requirements of applicable law. The Funds reserve the right, at their discretion and without notice, to suspend the sale of shares or withdraw the sale of shares of any Fund.

2.  The Company or its affiliate, Distributor and clearing agents (if applicable) are each required to have entered into membership agreements with NSCC and met all requirements to participate in the MFPS and Fund/SERV systems before these procedures may be utilized. Each party will be bound by the terms of their membership agreement with NSCC and will perform any and all duties, functions, procedures and responsibilities assigned to it and as otherwise established by NSCC applicable to the MFPS and Fund/SERV system and the Networking Matrix Level utilized.

3.  Except as modified hereby, all other terms and conditions of the Agreement shall remain in full force and effect. Unless otherwise indicated herein, the terms defined in the Agreement shall have the same meaning as in this Exhibit.

16



EX-99.(I) 12 a07-7397_5ex99di.htm EX-99.(I)

Exhibit 99(i)

 

 

70 West Madison Street, Suite 3100
Chicago, Illinois 60602-4207
312.372.1121
Ÿ Fax 312.827.8000

 

April 16, 2007

As counsel for Wanger Advisors Trust (the “Registrant”), we consent to the incorporation by reference of our opinion for the Registrant’s series designated Wanger U.S. Smaller Companies (formerly named Wanger U.S. Small Cap) and Wanger International Small Cap dated April 27, 1998, filed with the Registrant’s registration statement on Form N-1A on April 29, 1998, and our opinion for the Registrant’s series designated Wanger Select (formerly named Wanger Twenty) and Wanger International Select (formerly named Wanger Foreign Forty) dated September 30, 1998, filed with the Registrant’s registration statement on Form N-1A on September 30, 1998 (Securities Act file no.  33-83548).

In giving this consent we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933.

/s/ BELL, BOYD & LLOYD LLP

 

 

chicago · washington

 



EX-99.(J) 13 a07-7397_5ex99dj.htm EX-99.(J)

Exhibit 99(j)

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in this Registration Statement on Form N-1A of our reports dated February 13, 2007, relating to the financial statements and financial highlights which appear in the December 31, 2006 Annual Reports to the Shareholders of Wanger Advisors Trust, which are also incorporated by reference into the Registration Statement.  We also consent to the references to us under the captions “Financial Highlights” and “Independent Registered Public Accounting Firm” in such Registration Statement.

/s/ PRICEWATERHOUSECOOPERS LLP

 

 

Chicago, Illinois

April 13, 2007

 

 



EX-99.(P)(1) 14 a07-7397_5ex99dp1.htm EX-99.(P)(1)

Exhibit 99.(p)(1)

 

CWAM Code of Ethics

 

 

Effective January 2, 2007

 



 

Overview

3

Part I -  Statement of General Principles

4

A.

Compliance with the Spirit of the Code

5

B.

Federal Law Prohibits Fraudulent and Deceptive Acts

5

C.

Compliance with other CWAM and BAC Policies

6

D.

Contacts for Questions and Reporting Violations of this Code

6

E.

Training and Education

7

Part II -  Prohibited Transactions and Activities

8

A.

Prohibited Transactions in Mutual Funds

8

1.

Short-Term Trading Prohibition

8

2.

Late Trading Prohibition

8

3.

Market Timing Prohibition

8

B.

Prohibited Transactions in Reportable Securities

9

1.

Client Conflict

9

2.

Fourteen Calendar Day Blackout Period

9

3.

IPOs and Limited Offerings

9

4.

Short-Term Trading (60 Calendar Days)

9

5.

Selling Short and Transactions Involving Certain Derivatives

10

6.

Bank of America Closed-end Funds

10

7.

Excessive Trading

10

C.

Other Prohibitions

11

1.

Disclosure of Nonpublic Information

11

2.

Restriction on Service as Officer or Director by Covered Persons

11

3.

Participation in Investment Clubs

11

4.

Additional Restrictions for Specific Sub-Groups

11

D.

Additional Trading Restrictions Applicable to Investment Persons

11

1.

IPOs and Limited Offerings

11

2.

Client Account Priority

12

3.

Trade Restrictions Pertaining to Portfolio Managers

12

4.

Trade Restrictions Pertaining to Analysts

13

5.

Gifts

13

E.

Exemptions

13

Part III -  Pre-Clearance of Transactions

15

A.

General Requirement to Pre-clear

15

B.

Procedures

15

C.

Exemptions

15

Part IV -  Administration and Reporting Requirements

16

A.

Annual Code Coverage Acknowledgment and Compliance Certification

16

B.

Reporting Requirements for Covered Persons

16

C.

Exceptions from the above Reporting Requirements

17

D.

Code Administration

17

Part V -  Penalties for Non-Compliance

18

Appendix A - Beneficial Ownership

20

Appendix B - Definitions

22

Appendix C – Other CWAM and BAC Policies

25

Appendix D – Reportable Funds

26

Appendix E – Reporting Forms

30

 

 

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Overview

 

This Code of Ethics (the “Code”) covers a wide range of ethical conduct with a focus on obligations with respect to personal securities trading. You are obligated to comply with the terms of this Code, and thus you are a “Covered Person” for purposes of this Code, if you have been notified by the Compliance Department (“Compliance) of Columbia Wanger Asset Management (“CWAM”) that this Code applies to you.

 

You will be notified by Compliance that this Code applies to you if you are a director, officer or employee of CWAM.

 

Bank of America (“BAC”) associates who are not employees of CWAM will be notified if this Code applies to them due to their status as a support partner of CWAM.

 

Certain Covered Persons, including but not limited to portfolio managers and research analysts, may also be designated by Compliance as “Investment Persons” and have heightened responsibility under this Code. Investment Persons are obligated to comply with all provisions of the Code applicable to Covered Persons and additional provisions applicable to Investment Persons. If you are registered with the National Association of Securities Dealers (“NASD”) you may have additional obligations not identified in this Code due to such registration.

 

If you believe you should have been notified by Compliance that this Code applies to you and have not been so notified, you are obligated to contact Compliance.

 

Certain provisions of this Code apply to securities you beneficially own, or securities that you intend to beneficially acquire. Beneficial Ownership is defined in Appendix A and includes, among other things, securities held by members of your immediate household.

 

Part I of this Code sets forth certain general principles relating to the Code. Part II identifies certain prohibited transactions and activities. Part III identifies your obligation to pre-clear your personal security transactions. Part IV identifies your reporting obligations with respect to your personal securities transactions and holdings. Part V sets forth sanctions for failure to comply with this Code.

 

The CWAM Code of Ethics Committee (the “Committee”) is responsible for enforcing compliance with this Code. Failure to comply with this Code may result in disciplinary action, including termination of employment.

 

This Code is intended to satisfy the requirements of Rule 204A-1 of the Investment Advisers Act of 1940 (the “Advisers Act”) and Rule 17j-1 of the Investment Company Act of 1940 (the “Investment Company Act”). In addition, this Code is intended to satisfy certain NASD requirements for registered personnel.

 

Terms used herein that are both capitalized and bolded have the meaning set forth in Appendix B.

 

 

3



 

Part I

Part I - Statement of General Principles

 

Our relationship with our Clients is fiduciary in nature. A fiduciary has an affirmative duty of care, loyalty, honesty and good faith. A number of specific obligations flow from the fiduciary duty we owe to our Clients, including:

                  To act solely in the best interests of Clients and to make full and fair disclosure of all material facts, particularly where CWAM’s interest may conflict with those of its Clients;

                  To have a reasonable, independent basis for our investment advice;

                  To ensure that our investment advice is suitable to the Client’s investment objectives, needs and circumstances;

                  To refrain from effecting personal securities transactions inconsistent with our Clients’ interests;

                  To obtain best execution for our Clients’ securities transactions;

                  To refrain from favoring the interest of a particular Client over the interests of another Client;

                  To keep all information about Clients (including former Clients) confidential, including the Client’s identity, Client’s securities holdings information, and other non-public information; and

                  To exercise a high degree of care to ensure that adequate and accurate representations and other information is presented.

 

All Covered Persons are in a position of trust and that position of trust dictates that you act at all times with the utmost integrity, avoid any actual or potential conflict of interest (described below), and not otherwise abuse that position of trust. As a fiduciary, you are required to put the interests of our Clients before your personal interests. All Covered Persons have a fiduciary duty with respect to each and all of our Clients.

 

A conflict of interest is any situation that presents an incentive to act other than in the best interest of a Client. A conflict of interest may arise, for example, when a Covered Person engages in a transaction that potentially favors: (i) CWAM’s interests over a Client’s interest, (ii) an associate’s interest over a Client’s interest, or (iii) one Client’s interest over another Client’s interest.

 

CWAM has adopted various policies designed to prevent, or otherwise manage, conflicts of interest. To effectively manage conflicts of interest, all Covered Persons must seek to prevent conflicts of interest, including the appearance of a conflict. Covered Persons must be vigilant about circumstances that present a conflict of interest and immediately seek assistance from their manager or one of the other resources identified in Part I.D of this Code.

 

Independence in the investment decision-making process is paramount. All Covered Persons must avoid situations that might compromise or call into question their exercise of independent judgment in the interest of Clients. For example, Covered Persons should not take personal advantage of unusual or limited investment opportunities appropriate for Clients.

 

 

4



 

The general principles discussed in this section govern all conduct, regardless of whether or not such conduct is also covered by more specific standards and procedures set forth in other sections of this Code.

 

A.                                    Compliance with the Spirit of the Code

 

The Committee recognizes that sound, responsible personal securities investing is an appropriate activity when trading is not excessive in nature, when it is conducted consistent with the Code and when it does not cause any actual, potential or apparent conflict of interest.

 

The Committee will not tolerate personal securities trading activity that is inconsistent with duties to our Clients or that injures the reputation and professional standing of our organization. Technical compliance with the specific requirements of this Code will not insulate you from sanction should a review of your personal securities trades indicate breach of your duty of loyalty to a Client or otherwise pose harm to our organization’s reputation.

 

The Committee has the authority to grant written waivers of the provisions of this Code. It is expected that this authority will be exercised only in rare instances.

 

B.                                    Federal Law Prohibits Fraudulent and Deceptive Acts

 

All Covered Persons are required to comply with all Federal Securities Laws, including but not limited to Rule 204A-1 of the Advisers Act, Rule 17j-1 of the Investment Company Act and the anti-fraud provisions of both the Advisers Act and Investment Company Act.

 

The Advisers Act makes it unlawful for any investment adviser, directly or indirectly, to employ any device, scheme or artifice to defraud any client or prospective client, or to engage in any transaction or practice that operates as a fraud or deceit on such persons.

 

The Investment Company Act makes it unlawful for any director, trustee, officer or employee of an investment adviser of an investment company, as well as certain other persons, in connection with the purchase or sale, directly or indirectly, by such person of a security held or to be acquired by the investment company:

 

1.

 

To employ any device, scheme or artifice to defraud the fund;

 

 

 

2.

 

To make to the fund any untrue statement of a material fact or omit to state to the fund a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading;

 

 

 

3.

 

To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon the fund; or

 

 

 

4.

 

To engage in any manipulative practice with respect to the fund.

 

5



 

C.                                    Compliance with other CWAM and BAC Policies

 

Compliance with this Code is in addition to your obligation to comply with other CWAM and BAC policies that may be applicable to you.

 

All Covered Persons who maintain personal investment accounts must comply with the Bank of America Global Wealth and Investment Management Associate Designated Brokerage Account Policy. Unless an exception has been granted, that policy requires Covered Persons to maintain their current and any new Associate Accounts with Banc of America Investment Services, Inc. (“BAI”) or Merrill Lynch. The policy is available on the CWAM intranet.

 

Covered Persons are subject to additional policies, including but not limited to the following (also set forth in Appendix C):

 

                  CWAM Statement of Operations and Supervisory Procedures Manual

                  CWAM Information Wall Policy

                  CWAM Misuses of Material Nonpublic Information Policy

                  CWAM Portfolio Holdings Disclosure Policy

                  Bank of America Corporation Code of Ethics and General Policy on Insider Trading

                  Bank of America Policy on Excessive Trading and Market Timing in the Bank of America Retirement Plans

                  Bank of America Global Wealth and Investment Management Gifts and Hospitality Policy

 

D.                                    Contacts for Questions and Reporting Violations of this Code

 

Each Covered Person must promptly report any conduct that he or she reasonably believes constitutes or may constitute a violation of the Code. Covered Persons must promptly report all relevant facts and circumstances relating to such potential violation of the Code to either the Chief Compliance Officer (“CCO”; currently, Joe LaPalm at 312-634-9829) or the Ethics and Compliance Helpline at 1-888-411-1744 (domestic) or 1-770-623-6334 (international). If you wish to remain anonymous, you may simply refer to yourself as a “BAC Associate.”  You will not be retaliated against for reporting information in good faith in accordance with this policy.

 

All questions, comments or concerns may be directed to Columbia Management’s Ombudsperson (currently, Kevin V. Wasp at 212-893-7246).

 

In addition, if you have any questions relating to a personal securities transaction, you may call Compliance  directly or send an email to “DG 227w-Compliance Dept” and if you have any questions relating to the conflict of interest provisions of this Code, you may contact Joe LaPalm at 312-634-9829.

 

6



 

E.                                      Training and Education

 

Training on this Code will occur periodically. All Covered Persons are required to attend all assigned training sessions and read any applicable materials.

 

7



 

Part II

Part II - Prohibited Transactions and Activities

 

Part II of the Code focuses on personal securities trading and identifies certain prohibited transactions and activities. In the event there is a stated exception to a prohibited transaction and you qualify for the exception, you are not relieved of any other obligation you may have under this Code, including any requirement to pre-clear (see Part III) and report (see Part IV) the transaction.

 

A.                                    Prohibited Transactions in Mutual Funds

 

1.                                       Short-Term Trading Prohibition.

No Covered Person may engage in the purchase and subsequent sale or exchange of the same class of shares of a Reportable Fund (an open-end mutual fund managed by Bank of America or its subsidiaries, except for money market and short-term bond funds, as listed in Appendix D) within 60 calendar days of one another. Funds held in a Bank of America 401(k) account or other retirement plan shall be subject to the short-term trading prohibitions of that plan. Therefore, if a Covered Person purchases shares of a Reportable Fund outside of a Bank of America retirement plan, he or she will not be permitted to sell or exchange any shares of that fund, including shares previously purchased, for at least 60 calendar days. The CCO has the authority to grant exceptions to the requirements of this section; however, such exceptions will be granted in only rare cases of hardship or other unusual circumstances.

 

2.                                       Late Trading Prohibition.

Late Trading of mutual funds, wherein an order for mutual fund shares is placed after the fund is closed for the day and the transaction is priced using the closing price for that day, is illegal. No Covered Person shall engage in any such Late Trading transaction in mutual fund shares. In addition to being illegal, Late Trading presents a conflict of interest and a violation of fiduciary duty.

 

3.                                       Market Timing Prohibition.

No Covered Person shall engage in mutual fund Market Timing activities. The Committee believes that the interests of a mutual fund’s long-term shareholders and the ability of a mutual fund to manage its investments may be adversely affected when fund shares are repeatedly bought, sold or exchanged by any individual or entity within short periods of time to take advantage of short-term differentials in the net asset values of such funds. This practice, known as Market Timing can occur in direct purchases and sales of mutual fund shares, through rapid reallocation of funds held in a 401(k) plan or similarly structured retirement plan or other accounts invested in mutual fund assets, or through the rapid reallocation of funds held in variable annuity and variable life policies invested in mutual fund assets. In addition to being prohibited by this Code, mutual fund Market Timing presents a conflict of interest and is a violation of fiduciary duty.

 

8



 

B.                                    Prohibited Transactions in Reportable Securities  

 

1.                                       Client Conflict.

No Covered Person shall purchase or sell, directly or indirectly, any Reportable Security (all corporate securities, Closed-end Funds, and exchange traded funds, further defined in Appendix B)  in which such person had, or by reason of such transaction acquires, any direct or indirect Beneficial Ownership when, at the time of such purchase or sale, the Covered Person knew, or should have known, that the same class of security:

                  is the subject of an open buy or sell order for a Client Account; or

                  is Being Considered for Purchase or Sale by a Client Account.

 

2.                                       Fourteen Calendar Day Blackout Period.

No Covered Person shall purchase or sell any Reportable Security within a period of seven calendar days before or after a purchase or sale of the same class of security by a Client Account. The spirit of this Code requires that no Covered Person intentionally delay trades on behalf of a Client Account so that their own personal trades avoid falling within the fourteen day blackout period.

 

3.                                       IPOs and Limited Offerings.

No Covered Person shall acquire Beneficial Ownership of securities in an IPO or Limited Offering except with the prior written approval of the CCO. Covered Persons registered with the NASD are prohibited from investing in IPOs. Investment Persons may invest in IPOs but are subject to the additional restrictions outlined in Part II.D.1, below. In approving such acquisition, the CCO must determine that the acquisition does not conflict with the Code or its underlying policies, that the investment opportunity could not instead be reserved for Clients, and that the opportunity has not been offered to the Covered Person because of the Covered Person’s relationship with BAC or a Client. The CCO may approve acquisition under certain circumstances, such as:

                  An opportunity to acquire securities of an insurance company converting from a mutual ownership structure to a stockholder ownership structure, if the Covered Person’s ownership of an insurance policy issued by the IPO company or an affiliate of the IPO company conveys the investment opportunity;

                  An opportunity resulting from the Covered Person’s pre-existing ownership of an interest in the IPO company or status of an investor in the IPO company; or

                  An opportunity made available to the Covered Person’s spouse, in circumstances permitting the CCO reasonably to determine that the opportunity is being made available for reasons other than the Covered Person’s relationship with BAC or its Clients (for example, because of the spouse’s employment).

 

4.                                       Short-Term Trading (60 Calendar Days).  

No Covered Person may profit from any purchase and sale of the same class of Reportable Security within any period of 60 calendar days or less. Note, regarding this restriction, that:

 

(a)          The 60 calendar day restriction period commences the day after the purchase of any Reportable Security.

 

9



 

(b)         The 60-day restriction applies on a “last in, first out basis.”  As a result, a Covered Person (or Family/Household Member) may not buy and sell the same class of Reportable Security within 60 days even though the specific shares or other securities involved may have been held longer than 60 days, when doing so will result in a profit to the Covered Person.

(c)          Purchase and sale transactions in the same security within 60 days that result in a loss to the Covered Person (or Family/Household Member) are not restricted.

(d)         The 60-day restriction does not apply to the exercise of options to purchase shares of BAC stock and the immediate sale of the same or identical shares, including so-called “cashless exercise” transactions.

(e)          Strategies involving corporate securities options with expirations of less than 60 days may result in violations of the short-term trading ban.

(f)            Involuntary transactions that are the result of unforeseen corporate activity occurring within 60 days of purchase are not restricted.

(g)         Exceptions to the short-term trading ban may be requested in writing, addressed to the CCO, in advance of a trade and will generally be granted only in rare cases of hardship, gifting of securities or other unusual circumstances where it is determined that no abuse is involved and the equities of the situation strongly support an exception to the ban. Circumstances that could provide the basis for an exception from short-term trading restriction might include, for example, among others:

                  the disclosure of a previously nonpublic, material corporate, economic or political event or activity that could cause a reasonable person in like circumstances to sell a security even if originally purchased as a long-term investment; or

                  the Covered Person’s economic circumstances materially change in such a manner that enforcement of the short-term trading ban would result in the Covered Person being subjected to an avoidable, inequitable economic hardship.

                  An irrevocable charitable gift of securities provided no abuse is intended.

 

5.                                       Selling Short and Transactions Involving Certain Derivatives

No Covered Person may sell short any Reportable Security; provided, however, that Covered Persons may sell short against broad market indexes and “against the box.”

 

No Covered Person may write a “naked” call option on any Reportable Security or purchase a put option on any Reportable Security; provided, however, that Covered Persons may write a covered call or buy a protective put on a Reportable Security.

 

6.                                       Bank of America Closed-end Funds.

No Covered Person shall acquire Beneficial Ownership of securities of any Closed-end Fund advised by BAC except with the prior written approval of Compliance.

 

7.                                       Excessive Trading.

Covered Persons are strongly discouraged from engaging in excessive trading for their personal accounts. Trading activity of Covered Persons that, by the sole determination of  

 

10



 

management, interferes with daily responsibilities is prohibited. Covered persons who are warned of excessive trading by Compliance must appropriately reduce trading activity or will be subject to disciplinary action.

 

C.                                    Other Prohibitions

 

1.                                       Disclosure of Nonpublic Information.

Covered Persons are prohibited from disclosing to persons outside of CWAM any material nonpublic information about any Client, the securities investments made on behalf of a Client, information about contemplated securities transactions, or information regarding our trading strategies, except as required to effectuate securities transactions on behalf of a Client or for other legitimate business purposes. Disclosure of nonpublic information is a breach of fiduciary duty.

 

2.                                       Restriction on Service as Officer or Director by Covered Persons.

Covered Persons are prohibited from serving as an officer or director of any publicly traded company, other than Bank of America Corporation or its affiliates, absent prior authorization from Compliance based on a determination that the board service would not be inconsistent with the interests of any Client. A Covered Person serving as a director or officer of a private company may be required to resign, either immediately or at the end of the current term, if the company goes public during his or her term as director or officer.

 

3.                                       Participation in Investment Clubs.

Covered Persons (including with respect to assets that are beneficially owned by the Covered Person) may participate in private investment clubs or other similar groups only upon advance written approval from Compliance, subject to such terms and conditions as Compliance may determine to impose. Investment Persons may not begin participation in private investment clubs or other similar groups.

 

4.                                       Additional Restrictions for Specific Sub-Groups.

Specific sub-groups in the organization may be subject to additional restrictions, as determined by Compliance. Compliance shall keep separate applicable procedures and communicate accordingly to these groups.

 

D.                                    Additional Trading Restrictions Applicable to Investment Persons

 

1.                                       IPOs and Limited Offerings.  

All Investment Persons are required to obtain written manager pre-approval for personal investments in IPOs and Limited Offerings. This means you are required to obtain approval from your immediate manager or their designee. After obtaining manager pre-approval, Investment Persons must obtain pre-approval from the CCO.

 

Investment Persons who have been authorized to acquire securities in a Limited Offering are required to disclose that investment to their manager when the Investment Person plays a role in any Client’s subsequent consideration of an investment in the issuer. In such circumstances, the decision to purchase securities of the issuer for the Client should be made  

 

11



 

either by another employee or, at a minimum, should be subject to an independent review by investment personnel with no personal interest in the issuer.

 

2.                                       Client Account Priority

The Funds and Client Accounts under management shall be given priority when investment opportunities arise. Portfolio Managers and Analysts may not execute transactions for their personal accounts without first determining whether the transaction is appropriate for a Fund or Client Account.

 

Analysts at CWAM are assigned industry coverage areas. Portfolio Managers at CWAM are also assigned coverage areas, in addition to their overall responsibility for Funds and Client Accounts. All Portfolio Managers and Analysts must comply with the pre-clearance and reporting restrictions of this Code, and are, in addition, subject to the following restrictions. A security is “followed by CWAM” for purposes of this Section if it has been entered into CWAM’s Equity Research Data Base.

 

3.                                       Trade Restrictions Pertaining to Portfolio Managers

 (a)       Purchases

i. Portfolio Managers may not purchase any securities owned by CWAM and within the coverage area of that Portfolio Manager, or not within the coverage area of that Portfolio Manager but held by the Funds or Client Accounts managed by the Portfolio Manager.

 

ii. Portfolio Managers may not purchase securities followed by CWAM and within the coverage area of that Portfolio Manager.

 

iii.Portfolio Managers may not purchase any security that is within the investment parameters established by the Funds or Client Accounts managed by the Portfolio Manager UNLESS:

                  It is outside the Portfolio Manager’s coverage area;

                  The Analyst responsible for that coverage area declines the investment opportunity on behalf of the Funds and Client Accounts advised by the Portfolio Manager; and

                  The Analyst’s conclusion is provided in writing to Compliance in advance of the transaction.

 

 (b)      Sales

Absent a showing of hardship or other extraordinary circumstances, a Portfolio Manager who owns a security that is later purchased by the Fund or Client Accounts advised by that Portfolio Manager may not sell that security unless and until the Fund or Client Accounts completely dispose of that security.

 

12



 

4.                                       Trade Restrictions Pertaining to Analysts

 (a)       Purchases

i. Analysts may not purchase any security within their coverage areas that is owned by the Funds or Client Accounts.

 

ii. Analysts may not purchase any security within their coverage areas that is followed by CWAM.

 

iii. Analysts may not purchase any security within their coverage areas UNLESS:

                  The investment is inappropriate for Funds or Client Accounts because it is not within their investment parameters or is otherwise unsuitable;

                  The purchase is approved in advance and in writing by the CIO based on that person’s independent decision to decline the investment opportunity on the basis that the security is inappropriate for Funds or Client Accounts, or is otherwise unsuitable; and

                  The Chief Investment Officer’s conclusion is provided in writing to Compliance in advance of the transaction.

 

 (b)      Sales

Absent a showing of hardship or other extraordinary circumstances, an Analyst who owns a security within his or her coverage area that is later purchased by the Fund or Client Accounts may not sell that security unless and until the Fund or Client Accounts completely dispose of that security.

 

5.                                       Gifts

Notwithstanding the restrictions above, an Investment Person may make an irrevocable gift of securities to a charitable organization, provided any such gift is first approved by Compliance.

 

E.                                      Exemptions

 

The following transactions are exempt from the prohibitions contained in this Part II:

 

                  Transactions effected pursuant to an Automatic Investment Plan. Note this does not include transactions that override or otherwise depart from the pre-determined schedule or allocation features of the investment plan.

                  Purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired.

                  Transactions that are involuntary on the part of the Covered Person (e.g., stock splits and automatic conversions including redemptions, mergers and acquisitions).

                  Transactions effected in any account in which the Covered Person may have a beneficial interest, but no direct or indirect Influence or Control of investment or  

 

13



 

trading activity, such as a blind trust or third-party advised discretionary account. Accounts managed by another Covered Person do not qualify for this exemption.

                  Securities issued by BAC; provided, however, that this exemption does not apply to BAC securities purchased in a Limited Offering. BAC securities are subject to the short-term trading provisions of this Code and the standards of conduct and liability discussed in the Bank of America Corporation’s General Policy on Insider Trading.

                  Such other transactions as the Committee shall approve in their sole discretion, provided that Compliance shall find that such transactions are consistent with the Statement of General Principles of this Code and applicable law. The Committee shall maintain a record of the approval and will communicate to the Covered Person’s manager(s).

 

14



Part III

 

Part III - Pre-Clearance of Transactions

 

A.                                    General Requirement to Pre-clear

 

Covered Persons must pre-clear all transactions in Reportable Securities in which they have, or intend to acquire, Beneficial Ownership using the appropriate pre-clearance procedures. In addition, Covered Persons must pre-clear all redemptions or exchanges of Reportable Funds.

 

B.                                    Procedures

 

In order to pre-clear a transaction, Covered Persons shall email CWAM Compliance with the request, specifying the Reportable Security or Reportable Fund, and shall not effect a trade until approval is granted by CWAM Compliance. Pre-clearance requests will be considered during New York Stock Exchange hours; requests submitted after the close of trading will be considered the following business day. Pre-clearance approvals are valid until 3:00 pm central time of the next business day after approval. For example, if a pre-clearance approval is granted on Tuesday, the approval is valid until 3:00 pm central time Wednesday.

 

C.                                    Exemptions

 

The following transactions are exempt from the pre-clearance requirement:

                  Transactions in BAC Retirement Plans

                  Transactions in Company-Directed 401(k) Plans (provided they do not hold Reportable Funds or Reportable Securities)

                  Transactions in 529 Plans

                  Transactions by Covered Persons on leave that do not have home access to CWAM’s data; provided, however, that transactions by Covered Persons on leave with home access are not exempt from the pre-clearance requirements.

                  Transactions effected in any account in which the Covered Person may have a beneficial interest, but no direct or indirect Influence or Control of investment or trading activity, such as a blind trust or third-party advised discretionary account. Accounts managed by another Covered Person do not qualify for this exemption.

                  Transactions effected pursuant to an Automatic Investment Plan. Note this does not include transactions that override or otherwise depart from the pre-determined schedule or allocation features of the investment plan.

                  Purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired.

                  Transactions that are involuntary on the part of the Covered Person (e.g., stock splits, automatic conversions).

                  Such other transactions as the Committee shall approve in their sole discretion, provided that Compliance shall find that such transactions are consistent with the Statement of General Principles of this Code and applicable law. The Committee shall maintain a record of the approval and will communicate to the Covered Person’s manager(s).

 

15



Part IV

Part IV - Administration and  Reporting Requirements

 

A.                                    Annual Code Coverage Acknowledgment and Compliance Certification

 

All Covered Persons will annually furnish acknowledgment of coverage (including Family/Household Members) under, and certification of compliance with, this Code. Copies of this Code and any amendments to the Code are required to be provided to all Covered Persons. All Covered Persons are required to provide acknowledgment of their receipt of the Code and any amendments.

 

B.                                    Reporting Requirements for Covered Persons

 

You must report holdings of you and your Family/Household Members of Reportable Securities and Reportable Funds.

 

You must also report accounts in which you or any Family/Household Member have direct or indirect ownership interest that are capable of holding Reportable Securities or Reportable Funds, including accounts such as those with broker-dealers, banks, fund companies and insurance companies (“Investment Accounts”). Therefore, even if an Investment Account does not currently contain Reportable Securities or Reportable Funds, you are obligated to report the existence of such Investment Account if it has the capacity to hold such securities.

 

The information you report regarding your Investment Accounts and holdings of Reportable Securities and Reportable Funds must not be more than 45 days old. Such reporting is required as follows:

                  By the 10th calendar day after becoming a Covered Person, you must report such holdings, acknowledge that you have read and understand this Code, that you understand that it applies to you and to your Family/Household Members and that you understand that you are a Covered Person (and, if applicable, an Investment Person) under the Code (Form A).

                  By the 30th calendar day following the end of the calendar quarter, all Covered Persons are required to provide Compliance with a report of their Investment Accounts (including Investment Accounts opened during the quarter) and all transactions, whether automatic or voluntary, in Reportable Securities and Reportable Funds during the quarter (Form B).

                  By the 30th calendar day after the end of the calendar year, Covered Persons are required to provide Compliance with a detailed annual report of their holdings of any Reportable Securities and Reportable Funds (Form C).

 

Each Covered Person shall cause every broker-dealer or investment services provider with whom he or she (or a Family/Household Member) maintains an Investment Account to provide duplicate periodic statements and trade confirmations to Compliance for all accounts holding or transacting trades in Reportable Securities or Reportable Funds. All duplicate statements and confirmations should be sent to the following address:

 

 

16



 

Compliance Department

Columbia Wanger Asset Management

227 W. Monroe Street, Suite 3000

Chicago, IL 60606

 

C.                                    Exceptions from the above Reporting Requirements

 

Covered Persons on leave who do not have home access will be exempt from the above reporting requirements while on leave. Covered Persons on leave with home access will be responsible for the above reporting.

 

The following Investment Accounts do not need to be reported, and therefore transactions within these accounts also do not need to be reported:

                BAC Retirement Plans

                Company-Directed 401(k) Plans (provided they  are not capable of holding any Reportable Funds or Reportable Securities)

                529 Plans

                Accounts in which a Covered Person has Beneficial Ownership but not investment discretion, Influence or Control, such as a blind trust or third-party advised discretionary account. Accounts managed by another Covered Person do not qualify for this exemption.

 

D.                                    Code Administration

 

The Committee has charged Compliance with the responsibility of day-to-day administration of this Code. Compliance will quarterly provide reports to the Committee that will include all material violations noted during the period. The quarterly report will include associate name, job title, manager name, description of the violation, and a record of any recommended sanction.

 

The CCO shall report any relevant issues to the respective Fund CCO and mutual fund board of trustees as required by Rule 17j-1 of the Investment Company Act and such fund’s code of ethics.

 

 

17



 

Part V

Part V - Penalties for Non-Compliance

 

Upon discovering a violation of the Code, Compliance shall take whatever remedial steps it deems necessary and available to correct an actual or apparent conflict (e.g., trade reversal, etc.). Following those corrective efforts, the Committee may impose sanctions if, based upon all of the facts and circumstances considered, such action is deemed appropriate. The magnitude of these penalties varies with the severity of the violation, although repeat offenders will likely be subjected to harsher punishment. It is important to note that violations of the Code may occur without employee fault (e.g., despite pre-clearance). In those cases, punitive action may not be warranted, although remedial steps may still be necessary. Violations of the Code include, but are not limited to the following:

 

                  Execution of a personal securities transaction without pre-clearance;

                  Execution of a personal securities transaction with pre-clearance, but Client account activity in the same issuer occurs within seven days of the employee’s personal securities transaction;

                  Execution of a personal securities transaction after being denied approval;

                  Profiting from short-term trading of Reportable Securities (60 calendar days);

                  Trading Reportable Funds in violation of the 60 day restriction;

                  Failure to disclose the opening or existence of an Investment Account;

                  Failure to obtain prior approval of a purchase of an IPO or shares in a Limited Offering; and

                  Failure to timely complete and return periodic certifications and acknowledgments.

 

The Committee will consider the specific facts and circumstances of any violations and will determine appropriate sanctions. Factors to be considered during any review would include but are not limited to:

 

                  Whether the act or omission was intentional or voluntary;

                  Whether mitigating or aggravating factors existed;

                  The person’s history or prior violations of the Code;

                  The person’s cooperation, acknowledgment of transgression and demonstrable remorse;

                  The person’s position within the firm (i.e., whether the employee is deemed to be a Covered Person or Investment Person);

                  Whether the person transacted in the security of an issuer in which his/her product area has invested or could invest;

                  Whether the person was aware of any information concerning an actual or contemplated investment in that same issuer for any Client account; and

                  Whether the price at which the personal securities transaction was effected was more advantageous than the price at which the Client transaction in question was effected.

 

18



 

The type of sanctions to be imposed include, but are not limited to, oral or written warnings, trade reversals, disgorgement of profits, monetary fines, suspension or termination of personal trading privileges and employment suspension or termination.

 

19



 

Appendix A - Beneficial Ownership

 

For purposes of the Code, the term “Beneficial Ownership” shall be interpreted in accordance with the definition of “beneficial owner” set forth in Rule 16a-l(a)(2) under the Securities Exchange Act of 1934, as amended, which states that the term “beneficial owner” means “any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest in a security.”  The term “pecuniary interest” is further defined to mean “the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the subject securities.”

 

The pecuniary interest standard looks beyond the record owner of securities. As a result, the definition of Beneficial Ownership is very broad and encompasses many situations that might not ordinarily be thought to confer a “pecuniary interest” in or “beneficial ownership” of securities.

 

Securities Deemed to be “Beneficially Owned”

 

Securities owned “beneficially” would include not only securities held by you for your own benefit, but also securities held (regardless of whether or how they are registered) by others for your benefit in an account over which you have Influence or Control, such as securities held for you by custodians, brokers, relatives, executors, administrators, or trustees. The term also includes securities held for your account by pledgees, securities owned by a partnership in which you are a general partner, and securities owned by any corporation that you control.

 

Set forth below are some examples of how Beneficial Ownership may arise in different contexts.

 

                  Family Holdings. Securities held by members of your immediate family sharing the same household with you (“Family/Household Member”) are presumed to be beneficially owned by you. Your “immediate family” includes any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, significant other, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (but does not include aunts and uncles, or nieces and nephews). The definition also includes adoptive relationships. You may also be deemed to be the beneficial owner of securities held by an immediate family member not living in your household if the family member is economically dependent upon you.

 

                  Partnership and Corporate Holdings. A general partner of a general or limited partnership will generally be deemed to beneficially own securities held by the partnership, as long as the partner has direct or indirect Influence or Control over the management and affairs of the partnership. A limited partner will generally not be deemed to beneficially own securities held by a limited partnership, provided he or she does not own a controlling voting interest in the partnership. If a corporation is your “alter ego” or “personal holding company”, the corporation’s holdings of securities are attributable to you.

 

20



 

                  Trusts. Securities held by a trust of which you are a beneficiary and over which you have any direct or indirect Influence or Control would be deemed to be beneficially owned by you. An example would be where you as settlor have the power to revoke the trust without the consent of another person, or have or share investment control over the trust.

 

                  Estates. Ordinarily, the term “Beneficial Ownership” would not include securities held by executors or administrators in estates in which you are a legatee or beneficiary unless there is a specific bequest to you of such securities, or you are the sole legatee or beneficiary and there are other assets in the estate sufficient to pay debts ranking ahead of such bequest.

 

Securities Deemed Not to be “Beneficially Owned”

 

For purposes of the Code, the term “Beneficial Ownership excludes securities or securities accounts held by you for the benefit of someone else if you do not have a pecuniary interest in such securities or accounts. For example, securities held by a trust would not be considered beneficially owned by you if neither you nor an immediate family member is a beneficiary of the trust. Another example illustrating the absence of pecuniary interest, and therefore also of Beneficial Ownership, would be securities held by an immediate family member not living in the same household with you, and who is not economically dependent upon you.

 

“Influence or Control”

 

Transactions/Accounts over which neither you nor any other Covered Person have “any direct or indirect influence or control” are not subject to the trading restrictions in Parts II and III or reporting requirements in Part IV of the Code. To have Influence or Control, you must have an ability to prompt, induce or otherwise effect transactions in the account. Like Beneficial Ownership, the concept of Influence or Control encompasses a wide variety of factual situations. An example of where Influence or Control exists would be where you, as a beneficiary of a revocable trust, have significant ongoing business and social relationships with the trustee of the trust. Examples of where Influence or Control does not exist would be a true blind trust, or securities held by a limited partnership in which your only participation is as a non-controlling limited partner. The determining factor in each case will be whether you (or any other Covered Person) have any direct or indirect Influence or Control over the securities account.

 

21



 

Appendix B - Definitions

 

Terms used in this Code that are capitalized and bolded have a special meaning. To understand the Code, you need to understand the definitions of these terms below.

 

Automatic Investment Plan” means a plan or other program in which regular periodic purchases or withdrawals are made automatically in or from investment accounts in accordance with a pre-determined schedule and allocation. These may include payroll deduction plans, issuer dividend reinvestment programs, 401(k) automatic investment plans, or the annual vesting of units into shares in a Mutual Fund Incentive Program.

 

BAC” means Bank of America Corporation and its affiliates.

 

BAC Retirement Plan” means any retirement plan sponsored by BAC for the benefit of its employees.

 

Being Considered for Purchase or Sale” –  a security is being considered for purchase or sale when a recommendation to purchase or sell a security has been made and communicated or, with respect to the person making the recommendation, when such person decides to make the recommendation.

 

Beneficial Ownership” has the meaning set forth in Appendix A, and refers to securities not only held by a Covered Person for his or her benefit, but also held by others for his or her benefit in an account over which the Covered Person has Influence or Control.

 

CCO” means CWAM’s Chief Compliance Officer or his/her designee.

 

Client” means any entity to which CWAM provides financial services.

 

Client Account” means any investment management account or fund for which CWAM  acts as investment advisor or sub-advisor.

 

Closed-end Fund” refers to a registered investment company whose shares are publicly traded in a secondary market rather than directly with the fund.

 

Company-Directed 401(k) Plan” means a 401(k) plan that offers a limited number of investment options consisting solely of mutual funds in which one directs their investments. A 401(k) plan whereby the participant may direct stock investments is not a Company-Directed 401(k) Plan for purposes of this Code.

 

Covered Person” is a person to whom this Code applies, including but not limited to CWAM officers, employees, and support partners.

 

Family Holdings” and “Family/Household Member” refer to immediate family, sharing the same household as a Covered Person, or a family member outside of the household who is economically dependent on the Covered Person.

 

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Federal Securities Laws” means the Securities Act of 1933 (15 U.S.C. 77a-aa), the Securities Exchange Act of 1934 (15 U.S.C. 78a –mm), the Sarbanes-Oxley Act of 2002 (Pub. L. 107-204, 116 Stat. 745 (2002)), the Investment Company Act of 1940 (15 U.S.C 80a), the Investment Advisers Act of 1940 (15 U.S.C. 80b), Title V of the Gramm-Leach-Bliley Act (Pub. L. No. 106-102, 113 Stat. 1338 (1999)), any rules adopted by the Commission under any of these statutes, the Bank Secrecy Act (31 U.S.C. 5311 –5314; 5316 – 5332) as it applies to funds and investment advisers, and any rules adopted thereunder by the Securities and Exchange Commission or the Department of Treasury.

 

Influence or Control” has the meaning set forth in Appendix A, and refers to a person’s direct or indirect ability to affect the management of securities.

 

Investment Account” means an account comprising all or a part of a person’s portfolio, held with a broker-dealer, bank, fund company, insurance company, or other entity capable of administering holdings of securities and funds on behalf of a client.

 

Investment Person” refers to a Covered Person whose knowledge and influence on Client Accounts as a portfolio manager or research analyst necessitates the imposition of additional obligations and responsibilities under the Code.

 

IPO” generally refers to a company’s first offer of shares to the public. Specifically, an offering of securities registered under the Securities Act of 1933, the issuer of which, immediately before the registration, was not subject to the reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934.

 

Late Trading” is the illegal trading of mutual funds wherein an order is placed after the fund is closed for the day and the transaction is priced using the closing price for that day.

 

Limited Offering” generally refers to an offering of securities that is not offered to the public and includes an offering that is exempt from registration under the Securities Act of 1933 pursuant to Sections 4(2) or 4(6) of, or Regulation D under, the Securities Act of 1933.

 

Market Timing” is the repeated buying, selling, or exchanging of fund shares by an individual or entity within short periods of time to take advantage of short-term differentials in the net asset values of such funds. This practice can occur in direct purchases and sales of fund shares, or through rapid reallocation of funds held in 401(k) plans or variable annuity or life policies.

 

Reportable Fund” means shares of any open-end mutual fund registered under the Investment Company Act, other than money market funds or other short-term bond funds, whose investment adviser, sub-adviser or principal underwriter is controlled by Bank of America Corporation. The following companies are deemed to be controlled by Bank of America Corporation for purposes of this Code: Columbia Management Advisors, LLC, Columbia Management Distributors, Inc., Marsico Capital Management, LLC, Banc of America Capital Management (Ireland), Limited, Columbia Wanger Asset Management L.P., Grosvenor Capital Management, L.P. A list of Reportable Funds as of the date of the last revision of this Code is attached hereto as Appendix D.

 

23



 

Reportable Security” includes corporate securities, Closed-end Funds, and exchange traded funds. Reportable Securities therefore include anything that is considered a “security” under the Investment Advisers Act, but do not include:

 

1.

 

Any government obligations , including U.S., municipal, and foreign securities.

2.

 

Bankers’ acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements.

3.

 

Insurance company general accounts (short-term cash equivalent options of a variable life insurance policy).

4.

 

Shares of a money market fund or other short-term income or short-term bond funds.

5.

 

Shares of any open-end mutual fund, including any shares of a Reportable Fund.

6.

 

Futures and options on futures. However, a proposed trade in a “single stock future” (a security future which involves a contract for sale for future delivery of a single security) is subject to the Code’s pre-clearance requirement.

 

If you have any question or doubt about whether an investment is a Reportable Security under this Code, ask Compliance.

 

24



 

Appendix C – Other CWAM and BAC Policies

 

                  CWAM Statement of Operations and Supervisory Procedures Manual

                  CWAM Information Wall Policy

                  CWAM Misuses of Material Nonpublic Information Policy

                  CWAM Portfolio Holdings Disclosure Policy

                  Bank of America Corporation Code of Ethics and General Policy on Insider Trading

                  Bank of America Global Wealth and Investment Management Associate Designated Brokerage Account Policy

                  Bank of America Policy on Excessive Trading and Market Timing in the Bank of America Retirement Plans

                  Bank of America Global Wealth and Investment Management Gifts and Hospitality Policy

 

25



 

Appendix D – Reportable Funds

 

Reportable Fund” means shares of any open-end mutual fund registered under the Investment Company Act, other than money market funds or other short-term bond funds, whose investment adviser, sub-adviser or principal underwriter is controlled by Bank of America Corporation. The following companies are deemed to be controlled by Bank of America Corporation for purposes of this Code: Columbia Management Advisors, LLC, Columbia Management Distributors, Inc., Marsico Capital Management, LLC, Banc of America Capital Management (Ireland), Limited, Columbia Wanger Asset Management L.P., Grosvenor Capital Management, L.P.

 

Columbia Management Advisors, LLC and Columbia Management Distributors, Inc.

 

CMG Core Bond Fund

CMG Enhanced S&P 500 Index Fund

CMG High Yield Fund

CMG International Stock Fund

CMG Large Cap Growth Fund

CMG Large Cap Value Fund

CMG Mid Cap Growth Fund

CMG Mid Cap Value Fund

CMG Small Cap Growth Fund

CMG Small Cap Value Fund

CMG Small/Mid Cap Fund

CMG Strategic Equity Fund

Columbia Acorn Fund

Columbia Acorn International

Columbia Acorn International Select

Columbia Acorn Select

Columbia Acorn USA

Columbia Asset Allocation Fund

Columbia Asset Allocation Fund II

Columbia Asset Allocation Fund, VS

Columbia Balanced Fund

Columbia California Intermediate Municipal Bond Fund

Columbia California Tax-Exempt Fund

Columbia Common Stock Fund

Columbia Connecticut Intermediate Municipal Bond Fund

Columbia Connecticut Tax-Exempt Fund

Columbia Conservative High Yield Fund

Columbia Convertible Securities Fund

Columbia Core Bond Fund

Columbia Disciplined Value Fund

Columbia Dividend Income Fund

Columbia Federal Securities Fund

Columbia Federal Securities Fund, VS

Columbia Florida Intermediate Municipal Bond Fund

Columbia Georgia Intermediate Municipal Bond Fund

Columbia Global Value Fund

Columbia Greater China Fund

Columbia Growth Stock Fund

Columbia High Income Fund

Columbia High Income Master Portfolio

Columbia High Yield Fund, VS

Columbia High Yield Municipal Fund

Columbia High Yield Opportunity Fund

Columbia Income Fund

Columbia Intermediate Bond Fund

Columbia Intermediate Core Bond Fund

Columbia Intermediate Core Bond Master Portfolio

Columbia Intermediate Municipal Bond Fund

Columbia International Fund, VS

Columbia International Stock Fund

Columbia International Value Fund

Columbia International Value Master Portfolio

Columbia Large Cap Core Fund

Columbia Large Cap Core Master Portfolio

Columbia Large Cap Enhanced Core Fund

Columbia Large Cap Growth Fund

Columbia Large Cap Growth Fund, VS

 

26



 

Columbia Large Cap Index Fund

Columbia Large Cap Value Fund

Columbia Large Cap Value Fund, VS

Columbia Liberty Fund

Columbia LifeGoal Balanced Growth Portfolio

Columbia LifeGoal Growth Portfolio

Columbia LifeGoal Income & Growth Portfolio

Columbia LifeGoal Income Portfolio

Columbia Marsico 21st Century Fund

Columbia Marsico 21st Century Fund, VS

Columbia Marsico 21st Century Master Portfolio

Columbia Marsico Focused Equities Fund

Columbia Marsico Focused Equities Fund, VS

Columbia Marsico Focused Equities Master Portfolio

Columbia Marsico Growth Fund

Columbia Marsico Growth Fund, VS

Columbia Marsico Growth Master Portfolio

Columbia Marsico International Opportunities Fund

Columbia Marsico International Opportunities Fund, VS

Columbia Marsico International Opportunities Master Portfolio

Columbia Marsico Mid Cap Growth Fund

Columbia Marsico Mid Cap Growth Fund, VS

Columbia Maryland Intermediate Municipal Bond Fund

Columbia Massachusetts Intermediate Municipal Bond Fund

Columbia Massachusetts Tax-Exempt Fund

Columbia Masters Global Equity Portfolio

Columbia Masters Heritage Portfolio

Columbia Masters International Equity Portfolio

Columbia Mid Cap Growth Fund

Columbia Mid Cap Index Fund

Columbia Mid Cap Value Fund

Columbia Mid Cap Value Fund, VS

Columbia Multi-Advisor International Equity Fund

Columbia Multi-Advisor International Equity Master Portfolio

Columbia Municipal Income Fund

Columbia New Jersey Intermediate Municipal Bond Fund

Columbia New York Intermediate Municipal Bond Fund

Columbia New York Tax-Exempt Fund

Columbia North Carolina Intermediate Municipal Bond Fund

Columbia Oregon Intermediate Municipal Bond Fund

Columbia Real Estate Equity Fund

Columbia Rhode Island Intermediate Municipal Bond

Columbia S&P 500 Index Fund, VS

Columbia Small Cap Core Fund

Columbia Small Cap Growth Fund I

Columbia Small Cap Growth Fund II

Columbia Small Cap Growth Master Portfolio II

Columbia Small Cap Index Fund

Columbia Small Cap Value Fund I

Columbia Small Cap Value Fund II

Columbia Small Cap Value Fund, VS

Columbia Small Cap Value II Master Portfolio

Columbia Small Company Equity Fund

Columbia Small Company Growth Fund, VS

Columbia South Carolina Intermediate Municipal Bond Fund

Columbia Strategic Income Fund

Columbia Strategic Income Fund, VS

Columbia Strategic Investor Fund

Columbia Tax-Exempt Fund

Columbia Tax-Exempt Insured Fund

Columbia Tax-Managed Growth Fund

Columbia Technology Fund

Columbia Texas Intermediate Municipal Bond Fund

Columbia Thermostat Fund

Columbia Total Return Bond Fund

Columbia U.S. Treasury Index Fund

Columbia Utilities Fund

 

27



 

Columbia Virginia Intermediate Municipal Bond Fund

Columbia World Equity Fund

Columbia Young Investor Fund

Corporate Bond Portfolio

Mortgage and Asset Backed Portfolio

Wanger International Select

Wanger International Small Cap

Wanger Select

Wanger US Smaller Companies

 

CMA Sub-Advised Funds

ALZ Columbia Technology Portfolio

ING Columbia Small Cap Value II Portfolio

Merrill Lynch Global Selects High Yield

Merrill Lynch Global Selects Small Cap

Nordea High Yield Bond Fund

Pacific Life: Pacific Select Fund, Technology Portfolio

 

Columbia Wanger Asset Management, L.P.

 

Columbia Funds

Columbia Acorn Fund

Columbia Acorn USA

Columbia Acorn Select

Columbia Acorn International

Columbia Acorn International Select

Columbia Thermostat

Wanger Funds

Wanger US Smaller Companies

Wanger Select

Wanger International Small Cap

Wanger International Select

Wanger US Smaller Companies

Wanger European Smaller Companies

Optimum Funds

Optimum Small Cap Growth

RiverSource Funds

RiverSource International Aggressive Growth

 

Marsico Capital Management, LLC

 

Columbia Funds

Columbia Marsico Focused Equities Master Portfolio

Columbia Marsico Growth Master Portfolio

Columbia Marsico 21st Century Master Portfolio

Columbia Marsico Mid Cap Growth Fund

Columbia Marsico International Opportunities Fund

Columbia Multi-Advisor International Equity Fund

Columbia Marsico Focused Equities Fund, Variable Series

Columbia Marsico Growth Fund, Variable Series

Columbia Marsico 21st Century Fund, Variable Series

Columbia Marsico Mid Cap Growth Fund, Variable Series

Columbia Marsico In’tl Opportunities Fund, Variable Series

(The) Marsico Investment Fund

Marsico Focus Fund

Marsico Growth Fund

Marsico 21st Century Fund

Marsico International Opportunities Fund

AEGON/Transamerica Series Fund, Inc.

TA/IDEX Marsico Growth Fund

ATST Marsico Growth Fund

TA/IDEX Marsico International Growth Fund

American Skandia Trust/Prudential Investments

Strategic Partners Capital Growth

AST Marsico Capital Growth

AST Advanced Strategies Portfolio

Target Portfolio Trust – Large Cap Growth

Strategic Partners Conservative Allocation Fund

 

28



 

Strategic Partners Moderate Allocation Fund

Strategic Partners Growth Allocation Fund

Prudential Series Fund Global Portfolio

AXA Funds

AXA Enterprise Multimanager International Equity Fund

AXA Premier VIP International Equity Fund

AXA Premier VIP Aggressive Equity Portfolio

EQ/Marsico Focus Portfolio

AXA/Enterprise Capital Appreciation Fund

Counsel Group of Funds

Counsel Select America

Discovery Group of Funds (Luxembourg SICAV)

Global

North America

North America Large Cap Ethical GES

(The) Diversified Investors Funds Group

Diversified Investors Equity Growth Fund

Frank Russell Investment Company

Equity I Fund

Diversified Equity Fund

Frank Russell Multi Style, Multi-Manager Funds PLC

The U.S. Equity Fund (UCITS)

Frank Russell Investment Company PLC II (Irish)

U.S. Growth Equity Fund (UCITS)

GuideStone Funds

Growth Equity Fund

Harbor Fund

Harbor International Growth Fund

ING Investors Trust

ING Marsico Growth Portfolio

ING Marsico International Opportunities Portfolio

Jefferson Pilot Variable Fund, Inc.

International Equity Portfolio

John Hancock Trust

International Opportunities Trust

John Hancock Funds II

Funds II International Opportunities Trust

Masters Select Funds Trust

Masters Select International Fund

Merrill Lynch

Global Selects Portfolios PLC - North American Large Cap Growth Portfolio III

Marsico Growth FDP Fund of FDP Series, Inc.

Roszel/Marsico Large Cap Growth Portfolio

Optimum Fund Trust

Optimum Large Cap Growth Fund

RiverSource

RiverSource International Equity Fund

Skandia Global Funds PLC

Skandia-Marsico US Capital Growth Fund (UCITS)

SunAmerica Asset Management

Focused Series Large Cap Growth Portfolio

Focused Series Growth and Income Portfolio

Focused Series International Equity Portfolio

Season Series Trust Focus Growth Portfolio

Season Series Trust Focus Growth & Income Portfolio

SunAmerica Series Trust Marsico Growth Portfolio

SunAmerica Focused Alpha Growth Fund

SunAmerica Focused Alpha Large-Cap Fund

UBS Pace Select Advisors Trust

Large Company Growth Equity Investments Fund

USAA

USAA Growth Fund

USAA Aggressive Growth Fund

USAA Life Aggressive Growth Fund

 

29



 

Appendix E – Reporting Forms

 

INITIAL HOLDINGS REPORT
For New CWAM Covered and Investment Persons  

 

 

Please complete this form and submit it to the Compliance Department (37th floor) no later than 10 days after you become a Covered Person of Columbia Wanger Asset Management.

 

YOU MUST REPORT: all investment accounts, holding or capable of holding Reportable Securities or Reportable Funds, in which you have “Beneficial Ownership,” and investment discretion, influence or control. “Beneficial Ownership” includes shares held in your name and/or the name of (1) your spouse, (2) your minor children, (3) your adult children and relatives who live in your home, (4) any nominee or other person if you can reacquire title now or in the future. (See Page 20 for further clarification)

 

YOU NEED NOT REPORT: BAC Retirement Plans, Company-Directed 401(k) Plans (that cannot hold Reportable Funds or Reportable Securities), 529 Plans, accounts in which you have “Beneficial Ownership” but not investment discretion, influence or control, US Government Securities, commercial paper, certificates of deposit, repurchase agreements, banker’s acceptance, and any other money market instruments, municipal bonds, index options, and mutual funds not advised or controlled by Bank of America Corporation.

 

Name:

 

1.  Code Classification

 

I understand that for purposes of the Code I am classified as:

 

 

o

Covered Person

o

An Investment Person

 

2.  Personal Holdings

 

o

Neither I, nor any member of my Family/Household, have Beneficial Ownership of Investment Accounts or Personal Holdings of any Reportable Securities or Reportable Funds.

o

I and/or a member of my Family/Household have Beneficial Ownership of an Investment Account, but this Investment Account is not subject to my (or my Family/Household member’s) control and discretion.

o

I and/or a member of my Family/Household have Beneficial Ownership of Investment Accounts or Personal Holdings of Reportable Securities and/or Reportable Funds, and these holdings are subject to my (or my Family/Household member’s) control and discretion.*

 

3.  Initial Certification

 

o

I have read the Code, and will keep a copy for future reference. I understand my responsibilities under the Code and agree to comply with all of its terms and conditions. In particular, I understand that the Code applies to me and to all investments in which I have Beneficial Ownership, as well as investments in which members of my Family/Household have Beneficial Ownership.

 

All information provided in this Form A is true and complete to the best of my knowledge.

 

Signature:

 

  Date:

 

 

 


*  Please provide photocopies of the most recent statements from your reported accounts and holdings.

 

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QUARTERLY PERSONAL SECURITIES TRANSACTIONS
REPORT
FOR CWAM COVERED AND INVESTMENT PERSONS  

 

 

Please complete this form and submit it to the Compliance Department (37th floor) no later than 30 days after each quarter-end (March, June, September, December).

 

YOU MUST REPORT: all transactions (whether voluntary or automatic) in Reportable Securities and Reportable Funds of which you have “Beneficial Ownership.” “Beneficial Ownership” includes shares held in the name of (1) your spouse, (2) your minor children, (3) your adult children and relatives who live in your home, (4) any nominee or other person if you can reacquire title now or in the future.

 

YOU NEED NOT REPORT: Transactions in accounts, funds and securities that are not subject to initial reporting requirements such as: US Government Securities, commercial paper, certificates of deposit, repurchase agreements, banker’s acceptance, and any other money market instruments, municipal bonds, index options, and mutual funds not advised or controlled by Bank of America Corporation.

 

Name: 

 

Status:  o Covered    o Investment                                For Quarter:  o 1    o 2    o 3    o 4

 

1.  Transactions  (Please check one.)

 

o            I have made no reportable transactions during this quarter.

 

o            I have made reportable transactions during this quarter.*

 

2.  Statements  (Please check all that apply.)

 

o            I have no reportable accounts and, as such, no statements to submit.

 

o            Duplicate statements are sent directly to Compliance from the broker or dealer.

 

o            I have provided photocopies of account statements.

 

3.  New Accounts (Please check one.)

 

o            I have not opened a new account during the quarter.

 

o            I have opened a new account(s) during the quarter.**

 

Signature:

 

  Date:

 

 

 


*

 

Such transactions should appear in statements submitted to Compliance. Please use the reverse side of this form to describe any transactions that do not appear on submitted statements

**

 

Please submit the following information to Compliance: Name on Account, Institution Name, Account Number, and Date Account was Opened.

 

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ANNUAL RECERTIFICATION

Code of Ethics, Policy Concerning Material Non-Public
Information, & Personal Holdings  

 

 

Please complete Sections 1-3 of this form and submit it to the Compliance Department (37th floor) no later than 30 days after the year-end.

 

Name:                                                                                                       Status:  o Covered    o Investment

 

1.    Code of Ethics

(Please initial both affirmations.)

 

A.    I have read the Code, and will keep a copy for future reference. I understand my responsibilities under the Code and agree to comply with all of its terms and conditions. In particular, I understand that the Code applies to me and to all investments in which I have Beneficial Ownership, as well as investments in which members of my Family/Household have Beneficial Ownership.

 

 

Initials: 

 

 

 

B.    I hereby certify that during the year covered by this report December 31,            , I complied with all applicable requirements of the Code and have reported to Compliance all transactions required to be reported under the Code. *

 

 

Initials: 

 

 

 


* Please describe Code violations or instances of non-compliance on a separate attachment.

 

2.    Additional CWAM Policies

(Please initial the following three affirmations.)

 

A.    I have read the CWAM Statement of Operations and Supervisory Procedures Manual  (and its Appendices, including: Policy & Procedures Concerning Material Non-Public Information, and the Information Wall Policy), and the CWAM Portfolio Holdings Disclosure Policy and understand my responsibilities under these policies and acknowledge compliance with these policies.

 

 

Initials: 

 

 

 

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3.    Personal Holdings & Exemptions

(Please check all that apply.)

 

o

Neither I, nor any member of my Family/Household, have Beneficial Ownership of Investment Accounts or Personal Holdings of any Reportable Securities or Reportable Funds.

 

 

 

 

o

I and/or a member of my Family/Household have Beneficial Ownership of an Investment Account, but this Investment Account is not subject to my (or my Family/Household member’s) control and discretion.

 

 

 

 

o

I and/or a member of my Family/Household have Beneficial Ownership of Investment Accounts or Personal Holdings of Reportable Securities and/or Reportable Funds, and these holdings are subject to my (or my Family/Household member’s) control and discretion. (Please list all such accounts/holdings on a separate attachment.)

 

 

 

All information provided in this Form C is true and complete to the best of my knowledge.

 

Signature:

 

  Date:

 

 

 

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COLUMBIA WANGER ASSET MANAGEMENT
MULTI-APPROVAL FORM  

 

 

ATTENTION:  To ensure efficient processing, submit the completed form via email to: Joe LaPalm or Bruce Lauer.

 

SECTION I:  REQUIRED – Complete or check ALL of these required fields.

 

Name

 

 

Date

 

 

 

 

SECTION II:  IPO, Hedge Fund or Private Placement Transaction Request for Approval

 

Security name / description:

 

Broker-Dealer handling the transaction:


Your relationship to the offering:

 

Is the security eligible for accounts in which you are associated?  If not, where will the security be held?


How did you hear about it?


 

Other relevant information & attach documentation:

What is the principal amount of your requested transaction?

 

 

 

 

 

SECTION III:  Bank of America Affiliate Advised Closed-end Fund Transaction Request for Approval

 

Security name / description:

 

Broker-Dealer handling the transaction:


What is your relationship to the offering?



 

Is the security eligible for accounts in which you are associated?  If not, where will the security be held?

What is the principal amount of your requested transaction?


 

Other relevant information & attach documentation:

Section IV:  Officer/Director of Public Company Request for Approval

 

Are you an Investment Person?     YES  or  NO

Firm Name:


 

Position being requested:

Expected time period for position being held:

 

Explain how the position would not be a conflict and other relevant information & attach documentation:



 

34



 

Compliance Decision

 

Permission to Grant Approval to the Code Requirement:

 

 

  YES

 

  NO

Effective date:

 

  Manager Approval

 

 

 

 

 

 

Compliance Approval:

 

 

 

 

For Compliance Purposes Only:

 

 

 

 

 

 

Date Compliance Received:

 

 

 

Compliance Officer Handling:

 

 

 

 

 

 

 

Date Compliance Responded:

 

 

 

 

 

 

 

 

 

 

 

Date Associate Notified:

 

 

 

Method of Reporting to Associate:

 

 

Multi-Approval Form

 

35


 

EX-99.(P)(2) 15 a07-7397_5ex99dp2.htm EX-99.(P)(2)

Exhibit 99(p)(2)

COLUMBIA ACORN TRUST
WANGER ADVISORS TRUST

Code of Ethics
for
Non-Management Trustees

The Investment Company Act of 1940, as amended (the “1940 Act”) and rules thereunder require that Columbia Acorn Trust and Wanger Advisors Trust (the “Trusts”) establish standards and procedures for the detection and prevention of certain conflicts of interest, including activities by which persons having knowledge of the investments and investment intentions of the series of each Trust (each a “Fund” and collectively, the “Funds”) might take advantage of that knowledge for their own benefit.  For that purpose, each Trust has adopted this Code of Ethics (the “Code”) applicable to those members of the Trust’s board of trustees who are not affiliated with Columbia Wanger Asset Management, L.P. (“CWAM”), the investment adviser of the Trusts.

Any questions about the Code or about the applicability of the Code to a personal securities transaction should be directed to CWAM’s designated compliance officer, the Trusts’ chief compliance officer or counsel for the Trusts.

I.  STATEMENT OF PRINCIPLE

General Prohibitions.  The 1940 Act and rules thereunder make it illegal for any person covered by the Code, directly or indirectly, in connection with the purchase or sale of a security held or to be acquired by a Fund to:

a.                                       employ any device, scheme, or artifice to defraud the Fund;

b.                                      make to the Fund any untrue statement of a material fact or omit to state to the Fund a material fact necessary in order to make the statements made, in light of cir­cumstances under which they are made, not misleading;

c.                                       engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon the Fund; or

d.                                      engage in any manipulative practice with respect to the Fund.

Personal Securities Transactions.  The Code regulates personal securities transactions as a part of the effort by the Funds to detect and prevent conduct that might violate the general prohibitions outlined above.  A personal securities transaction is a transaction in a Covered Security held in any account over which the Non-Management Trustee, as defined below, has a beneficial interest, also as defined below.




Covered Security is interpreted very broadly for this purpose, and includes any right to acquire any security (an option or warrant, for example).

You have a beneficial interest in a security in which you have, directly or indirectly, the opportunity to profit or share in any profit derived from a transaction in the security, or in which you have an indirect interest, including beneficial ownership by your spouse or minor children or other dependents living in your household, or your share of securities held by a partnership of which you are a general partner.  Technically, the rules under section 16 of the Securities Exchange Act of 1934 will be applied to determine if you have a beneficial interest in a security (even if the security would not be within the scope of section 16).  Examples of beneficial interest and a copy of Rule 16a-1(a), defining beneficial ownership, are attached as Appendix B.

In any situation where the potential for conflict exists, transactions for a Fund must take precedence over any personal transaction.  Each Fund’s Non-Management Trustees owe a duty to the Fund and its shareholders to conduct their personal securities transactions in a manner which does not interfere with the portfolio transactions of the Fund, take inappropriate advantage of their relationship with the Fund, or create any actual or potential conflict of interest between their interests and the interests of the Fund and its shareholders.

Situations not specifically governed by this Code of Ethics will be resolved in light of this general principle.

II.  TO WHOM THE CODE’S RESTRICTIONS APPLY

The Code applies to each board member who is not an “interested person” of the Funds within the meaning of Section 2(a)(19) of the 1940 Act, including any board member who is not an “interested person” of the Funds within the meaning of Section 2(a)(19) of the 1940 Act but whom the boards have determined to treat as an “interested person” of the Funds (the “Non-Management Trustees”).  The Non-Management Trustees are listed on Appendix A hereto.

III.  RESTRICTIONS ON PERSONAL SECURITIES TRANSACTIONS

A.                                    No Transactions with the Funds.  No Non-Management Trustee shall knowingly sell to, or purchase from the Funds any security or other property, except securities issued by the Funds.

B.                                    No Conflicting Transactions.  No Non-Management Trustee shall purchase or sell any security in which such Non-Management Trustee has or would thereby acquire a beneficial interest which the person knows or has reason to believe is being purchased or sold or considered for purchase or sale by the Funds, until the Funds’ transactions have been completed or consideration of such transactions has been abandoned.

IV.  COMPLIANCE PROCEDURES

A.                                    Quarterly Reporting of Personal Securities Transactions.

1.                                       Each Non-Management Trustee shall report to CWAM’s compliance officer, within ten days after the end of the calendar quarter in which a reportable transaction occurs, any personal securities transaction in which the Non-Management Trustee, at the time of the transaction, knew, or in the ordinary

2




course of fulfilling his or her duties as a trustee should have known, that on the day of the transaction or within 15 days before or after that day a purchase or sale of that security was made by or considered for the Funds.

2.                                       Quarterly reports of personal securities transactions for Non-Management Trustees may be in any form (including copies of confirmations or monthly statements) but must include (i) the date of the transaction, the title and number of shares, and the principal amount of each security involved; (ii) the nature of the transaction (i.e., purchase, sale, gift, or other type of acquisition or disposition); (iii) the price at which the transaction was effected; (iv) the name of the broker, dealer, or bank with or through whom the transaction was effected; and (v) the name of the reporting person.

B.                                  Monitoring of Transactions.  CWAM’s compliance officer will review the quarterly reports of personal securities transactions of each Fund’s Non-Management Trustees.

D.                                    Certification of Compliance.  Each Non-Management Trustee is required to certify annually that he or she has read and understands the Code and recognizes that he or she is subject to the Code.  To accomplish this, the Secretary of the Funds shall annually distribute a copy of the Code and request certification.

E.                                      Review by the Funds’ Boards.  The officers of the Funds shall prepare an annual report to the boards that:

1.                                       summarizes existing procedures concerning personal investing and any changes in those procedures during the past year;

2.                                       identifies any violations of the Code requiring significant remedial action during the past year; and

3.                                       identifies any recommended changes in existing restrictions or proce­dures based upon experience under the Code, evolving industry practices, or developments in applicable laws or regulations.

V.            EXEMPT TRANSACTIONS

The provisions of this Code are intended to restrict the personal investment activities of persons subject to the Code only to the extent necessary to accomplish the purposes of the Code.  Therefore, the provisions of Section III (Restrictions on Personal Securities Transactions) and Section IV (Compliance Procedures) of this Code shall not apply to:

A.                                   Purchases or sales effected in any account over which the persons subject to this Code have no direct or indirect influence or control;

B.                                     Purchases or sales of:

1.                                       U.S. government securities;

3




2.                                       shares of open-end investment companies (mutual funds), including but not limited to shares of any of the Funds; and

3.                                       bank certificates of deposit or commercial paper.

C.                                     Purchases or sales over which neither the person subject to this Code nor the Funds have control;

D.                                    Purchases that are part of an automatic dividend reinvestment plan;

E.                                      Purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of securities to the extent such rights were acquired from such issuer, and sales of such rights so acquired;

F.                                      Purchases or sales in an account managed by an independent investment adviser with discretion where the Non-Management Trustee has no advance knowledge of the transactions before they had been executed; and

G.                                     Purchases or sales that receive the prior approval of the Funds’ compliance officer because they are not inconsistent with this Code or the provisions of Rule 17j-1(a) under the 1940 Act.

VI.  CONSEQUENCES OF FAILURE TO COMPLY WITH THE CODE

Compliance with this Code is a condition of retention of positions with the Funds.  The Funds’ boards of trustees shall determine what action is appropriate for any breach of the provisions of the Code by a Non-Management Trustee, which may include removal from the boards.

Reports filed pursuant to the Code will be maintained in confidence but will be reviewed by CWAM or the Funds to verify compliance with the Code.  Additional information may be required to clarify the nature of particular transactions.

VII.  RETENTION OF RECORDS

CWAM’s designated compliance officer shall maintain the records listed below for a period of five years at the Funds’ principal place of business in an easily accessible place:

A.                                   a list of all persons subject to the Code during the period;

B.                                     receipts signed by all persons subject to the Code acknowledging receipt of copies of the Code and acknowledging that they are subject to it;

C.                                     a copy of each code of ethics that has been in effect at any time during the period; and

D.                                    a copy of each report filed pursuant to the Code and a record of any known violation and action taken as a result thereof during the period.

4




*                              *                              *                              *                              *

Columbia Acorn Trust:

Adopted effective 5/28/96
Amended effective 5/25/99
Amended effective 9/29/00
Amended effective 5/23/01
Amended effective 3/4/02
Amended effective 11/16/04
Amended effective 6/6/06
Amended effective 9/26//06

Wanger Advisors Trust:

Adopted effective 6/15/96
Amended effective 6/8/99
Amended effective 9/29/00
Amended effective 6/5/01
Amended effective 12/28/03
Amended effective 6/7/06
 Amended effective 9/26//06

 

5




Appendix A

Non-Management Trustees
Margaret Eisen
Jerome Kahn, Jr.
Steven Kaplan
David C. Kleinman
Allan B. Muchin
Robert E. Nason
James A. Star
Ralph Wanger
Patricia H. Werhane
John A. Wing




Appendix B

Examples of Beneficial Ownership

For purposes of the Code, you will be deemed to have a beneficial interest in a security if you have the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the security.  Examples of beneficial ownership under this definition include:

·                                          securities you own, no matter how they are registered, and including securities held for you by others (for example, by a custodian or broker, or by a relative, executor or administrator) or that you have pledged to another (as security for a loan, for example);

·                                          securities held by a trust of which you are a beneficiary (except that, if your interest is a remainder interest and you do not have or participate in investment control of trust assets, you will not be deemed to have a beneficial interest in securities held by the trust);

·                                          securities held by you as trustee or co-trustee, where either you or any member of your immediate family (i.e., spouse, children or descendants, stepchildren, parents and their ancestors, and stepparents, in each case treating a legal adoption as blood relationship) has a beneficial interest (using these rules) in the trust;

·                                          securities held by a trust of which you are the settlor, if you have the power to revoke the trust without obtaining the consent of all the beneficiaries and have or participate in investment control;

·                                          securities held by any partnership in which you are a general partner, to the extent of your interest in partnership capital or profits;

·                                          securities held by a personal holding company controlled by you alone or jointly with others;

·                                          securities held by (i) your spouse, unless legally separated, or you and your spouse jointly, or (ii) your minor children or any immediate family member of you or your spouse (including an adult relative), directly or through a trust, who is sharing your home, even if the securities were not received from you and the income from the securities is not actually used for the maintenance of your household; or

·                                          securities you have the right to acquire (for example, through the exercise of a derivative security), even if the right is not presently exercisable, or securities as to which, through any other type of arrangement, you obtain benefits substantially equivalent to those of ownership.

You will not be deemed to have beneficial ownership of securities in the following situations:

·                                          securities held by a limited partnership in which you do not have a controlling interest and do not have or share investment control over the partnership’s portfolio; and

·                                          securities held by a foundation of which you are a trustee and donor, provided that the beneficiaries are exclusively charitable and you have no right to revoke the gift.




These examples are not exclusive.  There are other circumstances in which you may be deemed to have a beneficial interest in a security.  Any questions about whether you have a beneficial interest should be directed to CWAM’s designated compliance officer or chief operating officer.




Attachment A

COLUMBIA ACORN TRUST
WANGER ADVISORS TRUST

Code of Ethics Affirmation

I affirm that I have received a copy of the Columbia Acorn Trust and Wanger Advisors Trust Code of Ethics for Non-Management Trustees (the “Code”) and have read and understand it.  I acknowledge that I am subject to the Code and will comply with the Code in all respects.

 

Date:

 

 

 

 

 

 

 

Signature

 

 



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