Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-08748
Wanger Advisors Trust
(Exact name of registrant as specified in charter)
227 W. Monroe Street
Suite 3000
Chicago, IL 60606
(Address of principal executive offices) (Zip code)
Mary C. Moynihan
Perkins Coie LLP
700 13th Street, NW
Suite 600
Washington, DC 20005
Paul B. Goucher, Esq.
Columbia Management Investment Advisers, LLC
100 Park Avenue
New York, New York 10017
P. Zachary Egan
Columbia Acorn Trust
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606
(Name and address of agent for service)
Registrant’s telephone number, including area code: (312) 634-9200
Date of fiscal year end: December 31
Date of reporting period: December 31, 2017
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Table of Contents
Item 1. Reports to Stockholders.
Table of Contents
WANGER USA
Managed by Columbia Wanger Asset Management,
LLC
Please remember that you may not buy (nor will you own)
shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies as well as qualified pension and retirement plans.
Please contact your financial advisor or insurance representative for more information.
Not FDIC Insured • No bank guarantee • May lose
value
Table of Contents
Table of Contents
Fund at a Glance
Investment objective
Wanger USA (the Fund) seeks long-term
capital appreciation.
Portfolio
management
Matthew A. Litfin,
CFA
Lead
Portfolio Manager
Managed Fund
since 2016
Richard Watson,
CFA
Co-Portfolio
Manager
Managed Fund
since November 2017
| Wanger
USA | Annual Report 2017 |
3 |
Table of Contents
Fund at a Glance (continued)
Performance of a
hypothetical $10,000 investment (December 31, 2007 — December 31, 2017)
This graph compares the
results of $10,000 invested in Wanger USA on December 31, 2007 through December 31, 2017 to the Russell 2000 Growth Index and the Russell 2000 Index, with dividends and capital gains reinvested. Although the indexes are provided for use in assessing
the Fund’s performance, the Fund’s holdings may differ significantly from those in an index. Performance numbers reflect all Fund expenses but do not include any fees and expenses imposed under your variable annuity contract or life
insurance policy or qualified pension or retirement plan. If performance numbers included the effect of these additional charges, they would be lower.
| 4 | Wanger USA | Annual Report 2017 |
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Manager Discussion of Fund Performance
| Wanger
USA | Annual Report 2017 |
5 |
Table of Contents
Manager Discussion of Fund Performance (continued)
Shares of Papa John’s International pulled back on
disappointing same-store restaurant sales in the third quarter. Even though Papa John’s increased its market share in the fragmented U.S. pizza industry, its NFL-oriented marketing strategy was challenged with lower NFL viewership, and the
company lost ground to a leading rival in the competitive pizza delivery sector.
Optimism, expectations and the potential for inflationary
pressures appear to be increasing at a time when stocks are trading at elevated valuations, which have been supported by low interest rates. As we move into 2018, we are monitoring risks such as a less accommodative Federal Reserve, the inflation
implications of tighter labor markets and the potential for normalizing volatility. We continue to position the portfolio toward companies that exhibit higher quality and structural growth as measured across several metrics, including return on
invested capital, revenue and earnings growth and superior debt ratios.
Columbia Wanger has specialized in investing in small and
mid-cap equities since 1970. While cognizant of macroeconomic trends, our investment process takes a bottom-up approach, relying on intensive fundamental research and disciplined valuation techniques. We seek companies with sustainable competitive
advantages, entrepreneurial management and the potential to gain market share. Our team will continue to employ our time-tested process to look for opportunities for investors to benefit from growth in small-cap businesses.
Market risk may affect a single
issuer, sector of the economy, industry or the market as a whole. Investments in small and mid-cap companies involve risks and volatility and possible illiquidity greater than investments in larger, more
established companies. The Fund may invest significantly in issuers within a particular sector, which may be negatively affected by market, economic or other conditions, making the Fund more vulnerable to
unfavorable developments in the sector.
The views
expressed in this report reflect the current views of the respective parties. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict, so actual outcomes and results
may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties disclaim any responsibility to update such views. These views may not be
relied on as investment advice and, because investment decisions for a Columbia Wanger Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any particular Columbia Wanger Fund. References to
specific securities should not be construed as a recommendation or investment advice.
| 6 | Wanger USA | Annual Report 2017 |
Table of Contents
Understanding Your Fund’s Expenses
(Unaudited)
(Unaudited)
As a shareholder, you incur three types of costs. There are
transaction costs, which generally include sales charges on purchases and may include redemption fees. There are also ongoing costs, which generally include management fees and other expenses for Wanger USA (the Fund). Lastly, there may be
additional fees or charges imposed by the insurance company that sponsors your variable annuity and/or variable life insurance product. The following information is intended to help you understand your ongoing costs (in dollars) of investing in the
Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
Analyzing your Fund’s expenses
To illustrate these ongoing costs, we have provided an
example and calculated the expenses paid by investors in the Fund during the period. The actual and hypothetical information in the table below is based on an initial investment of $1,000 at the beginning of the period indicated and held for the
entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the “Actual” column is calculated using the Fund’s actual operating expenses and total return
for the period. You may use the Actual information, together with the amount invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the results by the expenses paid during the period under the Actual column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and
then applies the Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you
paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are required to include the same
hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the ongoing cost of investing in a fund only and do not reflect any
transaction costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If
transaction costs were included in these calculations, your costs would be higher.
| July 1, 2017 — December 31, 2017 | |||||||
| Account
value at the beginning of the period ($) |
Account
value at the end of the period ($) |
Expenses
paid during the period ($) |
Fund’s
annualized expense ratio (%) | ||||
| Actual | Hypothetical | Actual | Hypothetical | Actual | Hypothetical | Actual | |
| Wanger USA | 1,000.00 | 1,000.00 | 1,072.60 | 1,020.00 | 5.12 | 4.99 | 0.99 |
Expenses paid during the period
are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, then multiplied by the number of days in the Fund’s most recent fiscal half-year and divided by 365.
Had the investment manager and/or certain of its affiliates not
waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced. See Note 3 to the Financial Statements.
It is important to note that the expense amounts shown in the
table are meant to highlight only ongoing costs of investing in the Fund. Expenses paid during the period do not include any insurance charges imposed by your insurance company’s separate account. The hypothetical example provided is useful in
comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
| Wanger
USA | Annual Report 2017 |
7 |
Table of Contents
Portfolio of Investments
December 31, 2017
December 31, 2017
(Percentages represent value of investments compared to net
assets)
The accompanying Notes to Financial Statements are an integral part
of this statement.
| 8 | Wanger USA | Annual Report 2017 |
Table of Contents
Portfolio of Investments (continued)
December 31, 2017
December 31, 2017
The accompanying Notes to Financial Statements are an integral part
of this statement.
| Wanger
USA | Annual Report 2017 |
9 |
Table of Contents
Portfolio of Investments (continued)
December 31, 2017
December 31, 2017
The accompanying Notes to Financial Statements are an integral part
of this statement.
| 10 | Wanger USA | Annual Report 2017 |
Table of Contents
Portfolio of Investments (continued)
December 31, 2017
December 31, 2017
The accompanying Notes to Financial Statements are an integral part
of this statement.
| Wanger
USA | Annual Report 2017 |
11 |
Table of Contents
Portfolio of Investments (continued)
December 31, 2017
December 31, 2017
| Securities Lending Collateral 3.1% | ||
| Shares | Value ($) | |
| Dreyfus
Government Cash Management Fund, Institutional Shares, 1.190%(c),(d) |
20,915,991 | 20,915,991 |
| Total
Securities Lending Collateral (Cost: $20,915,991) |
20,915,991 | |
| Money Market Funds 0.7% | ||
| JPMorgan U.S. Government Money Market Fund, Agency Shares, 1.090%(c) | 5,021,142 | 5,021,142 |
| Total
Money Market Funds (Cost: $5,021,142) |
5,021,142 | |
| Total
Investments (Cost $566,810,735) |
704,445,108 | |
| Obligation to Return Collateral for Securities Loaned | (20,915,991) | |
| Other Assets & Liabilities, Net | 1,182,773 | |
| Net Assets | $684,711,890 | |
Notes to Portfolio of Investments
| (a) | Non-income producing security. |
| (b) | All or a portion of this security was on loan at December 31, 2017. The total market value of securities on loan at December 31, 2017 was $19,761,790. |
| (c) | The rate shown is the seven-day current annualized yield at December 31, 2017. |
| (d) | Investment made with cash collateral received from securities lending activity. |
Abbreviation Legend
| ADR | American Depositary Receipt |
Fair value
measurements
Various inputs are used in determining the
value of the Fund’s investments, following the input prioritization hierarchy established by accounting principles generally accepted in the United States of America (GAAP). These inputs are summarized in the three broad levels listed
below:
| ¦ | Level 1 – quoted prices in active markets for identical securities |
| ¦ | Level 2 – prices determined using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others) |
| ¦ | Level 3 – prices determined using significant unobservable inputs where quoted prices or observable inputs are unavailable or less reliable (including management’s own assumptions about the factors market participants would use in pricing an investment) |
The inputs or methodology used for
valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Examples of the types of securities in which the Fund would
typically invest and how they are classified within this hierarchy are as follows. Typical Level 1 securities include exchange traded domestic equities, mutual funds whose net asset values are published each day and exchange traded foreign equities
that are not statistically fair valued. Typical Level 2 securities include exchange traded foreign equities that are statistically fair valued, forward foreign currency exchange contracts and short-term investments valued at amortized cost.
Additionally, securities fair valued by Columbia Wanger Asset Management’s Valuation Committee (the Committee) that rely on significant observable inputs are also included in Level 2. Typical Level 3 securities include any security fair valued
by the Committee that relies on significant unobservable inputs.
The Committee is responsible for applying the Wanger Advisors
Trust Portfolio Pricing Policy and the Columbia Wanger Asset Management pricing procedures (the Policies), which are approved by and subject to the oversight of the Board of Trustees.
The Committee meets as necessary, and no less frequently than
quarterly, to determine fair values for securities for which market quotations are not readily available or for which Columbia Wanger Asset Management believes that available market quotations are unreliable. The Committee also reviews the
continuing appropriateness of the Policies. In circumstances where a security has been fair valued, the Committee will also review the continuing appropriateness of the current value of the security. The Policies address, among other things:
circumstances under which market quotations will be deemed readily available; selection of third party pricing vendors; appropriate pricing methodologies; events that require fair valuation and fair value techniques; circumstances under which
securities will be deemed to pose a potential for stale pricing, including when securities are illiquid, restricted, or in default; and certain delegations of authority to determine fair values to the Fund’s investment manager. The Committee
may also meet to discuss additional valuation matters, which may include review of back-testing results, review of time-sensitive information or approval of other valuation related actions, and to review the appropriateness of the Policies.
The accompanying
Notes to Financial Statements are an integral part of this statement.
| 12 | Wanger USA | Annual Report 2017 |
Table of Contents
Portfolio of Investments (continued)
December 31, 2017
December 31, 2017
Fair value
measurements (continued)
For investments categorized as Level 3, the significant unobservable inputs used in the fair value measurement of the Fund’s securities may include: (i) data specific to the issuer or comparable issuers, (ii) general market or specific sector news and (iii) quoted prices and specific or similar security transactions. The Committee considers this data and any changes from prior periods in order to assess the reasonableness of observable and unobservable inputs, any assumptions or internal models used to value those securities and changes in fair value. Significant changes in any of these factors could result in lower or higher fair value measurements. Various factors impact the frequency of monitoring (which may occur as often as daily), however the Committee may determine that changes to inputs, assumptions and models are not required with the same frequency.
For investments categorized as Level 3, the significant unobservable inputs used in the fair value measurement of the Fund’s securities may include: (i) data specific to the issuer or comparable issuers, (ii) general market or specific sector news and (iii) quoted prices and specific or similar security transactions. The Committee considers this data and any changes from prior periods in order to assess the reasonableness of observable and unobservable inputs, any assumptions or internal models used to value those securities and changes in fair value. Significant changes in any of these factors could result in lower or higher fair value measurements. Various factors impact the frequency of monitoring (which may occur as often as daily), however the Committee may determine that changes to inputs, assumptions and models are not required with the same frequency.
The following table is a summary of the inputs used to value the
Fund’s investments at December 31, 2017:
| Level
1 quoted prices in active markets for identical assets ($) |
Level
2 other significant observable inputs ($) |
Level
3 significant unobservable inputs ($) |
Total ($) | |
| Investments | ||||
| Common Stocks | ||||
| Consumer Discretionary | 134,469,788 | — | — | 134,469,788 |
| Consumer Staples | 23,037,235 | — | — | 23,037,235 |
| Energy | 9,754,158 | — | — | 9,754,158 |
| Financials | 86,626,264 | — | — | 86,626,264 |
| Health Care | 190,426,057 | — | — | 190,426,057 |
| Industrials | 72,853,404 | — | — | 72,853,404 |
| Information Technology | 135,856,187 | — | — | 135,856,187 |
| Materials | 11,387,852 | — | — | 11,387,852 |
| Real Estate | 14,097,030 | — | — | 14,097,030 |
| Total Common Stocks | 678,507,975 | — | — | 678,507,975 |
| Securities Lending Collateral | 20,915,991 | — | — | 20,915,991 |
| Money Market Funds | 5,021,142 | — | — | 5,021,142 |
| Total Investments | 704,445,108 | — | — | 704,445,108 |
There were no transfers of financial
assets between levels during the period.
The accompanying Notes to Financial Statements are an integral part of this
statement.
| Wanger
USA | Annual Report 2017 |
13 |
Table of Contents
Statement of Assets and Liabilities
December 31, 2017
December 31, 2017
| Assets | |
| Investments in unaffiliated issuers, at cost | $566,810,735 |
| Investments in unaffiliated issuers, at value (including securities on loan: $19,761,790) | 704,445,108 |
| Receivable for: | |
| Investments sold | 1,771,492 |
| Capital shares sold | 39,400 |
| Dividends | 316,636 |
| Securities lending income | 18,924 |
| Foreign tax reclaims | 402 |
| Prepaid expenses | 15,742 |
| Trustees’ deferred compensation plan | 204,607 |
| Total assets | 706,812,311 |
| Liabilities | |
| Due upon return of securities on loan | 20,915,991 |
| Payable for: | |
| Investments purchased | 84,842 |
| Capital shares purchased | 749,252 |
| Investment advisory fee | 16,402 |
| Administration fees | 948 |
| Trustees’ fees | 1,705 |
| Compensation of chief compliance officer | 1,026 |
| Other expenses | 125,648 |
| Trustees’ deferred compensation plan | 204,607 |
| Total liabilities | 22,100,421 |
| Net assets applicable to outstanding capital stock | $684,711,890 |
| Represented by | |
| Paid in capital | 387,351,875 |
| Excess of distributions over net investment income | (152,351) |
| Accumulated net realized gain | 159,877,993 |
| Unrealized appreciation (depreciation) on: | |
| Investments - unaffiliated issuers | 137,634,373 |
| Total - representing net assets applicable to outstanding capital stock | $684,711,890 |
| Shares outstanding | 25,603,574 |
| Net asset value per share | 26.74 |
The accompanying Notes to Financial Statements are an
integral part of this statement.
| 14 | Wanger USA | Annual Report 2017 |
Table of Contents
Statement of Operations
Year Ended December 31, 2017
Year Ended December 31, 2017
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $5,647,585 |
| Income from securities lending — net | 547,502 |
| Foreign taxes withheld | (41,754) |
| Total income | 6,153,333 |
| Expenses: | |
| Investment advisory fee | 5,857,677 |
| Service fees | 280,703 |
| Transfer agent fees | 293 |
| Administration fees | 338,283 |
| Trustees’ fees | 64,335 |
| Custodian fees | 16,392 |
| Printing and postage fees | 197,625 |
| Audit fees | 40,532 |
| Legal fees | 137,314 |
| Compensation of chief compliance officer | 2,098 |
| Other | 27,261 |
| Total expenses | 6,962,513 |
| Fees waived by transfer agent | (280,703) |
| Total net expenses | 6,681,810 |
| Net investment loss | (528,477) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 163,958,845 |
| Net realized gain | 163,958,845 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (42,319,867) |
| Net change in unrealized appreciation (depreciation) | (42,319,867) |
| Net realized and unrealized gain | 121,638,978 |
| Net increase in net assets resulting from operations | $121,110,501 |
The accompanying Notes to Financial Statements are an
integral part of this statement.
| Wanger
USA | Annual Report 2017 |
15 |
Table of Contents
Statement of Changes in Net Assets
| Year
Ended December 31, 2017 |
Year
Ended December 31, 2016 | |
| Operations | ||
| Net investment loss | $(528,477) | $(1,023,088) |
| Net realized gain | 163,958,845 | 107,626,627 |
| Net change in unrealized appreciation (depreciation) | (42,319,867) | (26,013,693) |
| Net increase in net assets resulting from operations | 121,110,501 | 80,589,846 |
| Distributions to shareholders | ||
| Net realized gains | (108,009,366) | (177,478,615) |
| Total distributions to shareholders | (108,009,366) | (177,478,615) |
| Increase in net assets from capital stock activity | 7,375,038 | 68,519,737 |
| Total increase (decrease) in net assets | 20,476,173 | (28,369,032) |
| Net assets at beginning of year | 664,235,717 | 692,604,749 |
| Net assets at end of year | $684,711,890 | $664,235,717 |
| Excess of distributions over net investment income | $(152,351) | $(168,676) |
| Year Ended | Year Ended | |||
| December 31, 2017 | December 31, 2016 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Subscriptions | 368,297 | 9,709,107 | 358,725 | 9,663,627 |
| Distributions reinvested | 4,399,567 | 108,009,366 | 7,321,725 | 177,478,615 |
| Redemptions | (4,199,383) | (110,343,435) | (4,460,294) | (118,622,505) |
| Total net increase | 568,481 | 7,375,038 | 3,220,156 | 68,519,737 |
The accompanying Notes to Financial Statements are an integral part of this
statement.
| 16 | Wanger USA | Annual Report 2017 |
Table of Contents
Financial Highlights
The
following table is intended to help you understand the Fund’s financial performance. Certain information reflects financial results for a single share held for the periods shown. Per share net investment income (loss) amounts are calculated
based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect payment of the expenses that apply to the variable accounts or contract charges, if
any. Total return and portfolio turnover are not annualized for periods of less than one year. The portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If
such transactions were included, the Fund’s portfolio turnover rate may be higher.
| Year Ended December 31, | |||||
| 2017 | 2016 | 2015 | 2014 | 2013 | |
| Per share data | |||||
| Net asset value, beginning of period | $26.53 | $31.75 | $37.71 | $41.13 | $33.84 |
| Income from investment operations: | |||||
| Net investment loss | (0.02) | (0.04) | (0.12) | (0.06) | (0.05) |
| Net realized and unrealized gain | 4.81 | 3.56 | 0.45 | 1.70 | 10.79 |
| Total from investment operations | 4.79 | 3.52 | 0.33 | 1.64 | 10.74 |
| Less distributions to shareholders from: | |||||
| Net investment income | — | — | — | — | (0.06) |
| Net realized gains | (4.58) | (8.74) | (6.29) | (5.06) | (3.39) |
| Total distributions to shareholders | (4.58) | (8.74) | (6.29) | (5.06) | (3.45) |
| Net asset value, end of period | $26.74 | $26.53 | $31.75 | $37.71 | $41.13 |
| Total return | 19.58% (a) | 13.69% | (0.61)% | 4.78% | 33.75% |
| Ratios to average net assets | |||||
| Total gross expenses(b) | 1.03% | 1.00% | 1.01% | 0.96% | 0.96% |
| Total net expenses(b) | 0.99% | 1.00% | 1.01% | 0.96% | 0.96% |
| Net investment loss | (0.08)% | (0.16)% | (0.34)% | (0.15)% | (0.12)% |
| Supplemental data | |||||
| Portfolio turnover | 96% | 118% | 45% | 14% | 15% |
| Net assets, end of period (in thousands) | $684,712 | $664,236 | $692,605 | $800,933 | $912,143 |
| Notes to Financial Highlights | |
| (a) | Had the Investment Manager and/or its affiliates not waived a portion of expenses, total return would have been reduced. |
| (b) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
The accompanying Notes to Financial Statements are an integral part of this
statement.
| Wanger
USA | Annual Report 2017 |
17 |
Table of Contents
Notes to Financial Statements
December 31, 2017
December 31, 2017
Note 1. Organization
Wanger USA (the Fund), a series of Wanger Advisors Trust
(the Trust), is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The investment objective of the Fund is to seek long-term
capital appreciation. The Fund is available only for allocation to certain life insurance company separate accounts established for the purpose of funding participating variable annuity contracts and variable life insurance policies and may also be
offered directly to certain qualified pension and retirement plans.
Note 2. Summary of significant accounting
policies
Basis of preparation
The Fund is an investment company that applies the accounting
and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared
in accordance with U.S. generally accepted accounting principles (GAAP), which requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial statements.
Security valuation
Securities of the Fund are valued at market value or, if a
market quotation for a security is not readily available or is deemed not to be reliable because of events or circumstances that have occurred between the market quotation and the time as of which the security is to be valued, the security is valued
at its fair value determined in good faith under consistently applied procedures established by the Board of Trustees. A security traded on a securities exchange or in an over-the-counter market in which transaction prices are reported is valued at
the last sales price at the time of valuation. A security traded principally on NASDAQ is valued at the NASDAQ official closing price. Exchange-traded funds are valued at their closing net asset value as reported on the applicable exchange. A
security for which there is no reported sale on the valuation date is valued by comparison of the mean of the latest bid and ask quotations.
Foreign equity securities are generally valued based on the
closing price on the foreign exchange in which such securities are primarily traded. If any foreign equity security closing prices are not readily available, the securities are valued at the mean of the latest quoted bid and ask prices on such
exchanges or markets. Foreign currency exchange rates are generally determined at 4:00 p.m. Eastern (U.S.) time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing
prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange. In situations where foreign markets are closed, where a significant event has
occurred after the foreign exchange closes but before the time at which the Fund’s share price is calculated, and in the event of significant movement in the trigger index for the statistical fair valuation process established by the Board of
Trustees, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. The Trust has retained an independent statistical fair value pricing service that employs a systematic methodology 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 market and the time as of which the securities are to be valued. If a security
is valued at a fair value, that value may be different from the last quoted market price for the security.
Short-term investments maturing in 60 days or less are valued
at amortized cost, which approximates market value.
| 18 | Wanger USA | Annual Report 2017 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2017
December 31, 2017
Fund
share valuation
Fund shares are sold and redeemed on a
continuing basis at net asset value. Net asset value per share is determined daily as of the close of trading on the New York Stock Exchange on each day the New York Stock Exchange is open for trading by dividing the total value of the Fund’s
investments and other assets, less liabilities, by the number of Fund shares outstanding.
GAAP requires disclosure regarding the inputs and valuation
techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following the Fund’s Portfolio of Investments.
Securities lending
The Fund may lend securities up to one-third of the value of
its total assets to certain approved brokers, dealers and other financial institutions to earn additional income. The Fund retains the benefits of owning the securities, including the economic equivalent of dividends or interest generated by the
security. The Fund also receives a fee for the loan. The Fund has the ability to recall the loans at any time and could do so in order to vote proxies or to sell the loaned securities. Each loan is collateralized by cash that exceeded the value of
the securities on loan. The market value of the loaned securities is determined daily at the close of business of the Fund and any additional required collateral is delivered to each Fund on the next business day. The Fund has elected to invest the
cash collateral in the Dreyfus Government Cash Management Fund. The income earned from the securities lending program is paid to the Fund, net of any fees remitted to Goldman Sachs Agency Lending, the Fund’s lending agent, and borrower
rebates. The Fund’s investment manager, Columbia Wanger Asset Management, LLC (the Investment Manager or CWAM), does not retain any fees earned by the lending program. Generally, in the event of borrower default, the Fund has the right to use
the collateral to offset any losses incurred. In the event the Fund is delayed or prevented from exercising its right to dispose of the collateral, there may be a potential loss to the Fund. Some of these losses may be indemnified by the lending
agent. The Fund bears the risk of loss with respect to the investment of collateral. The net lending income earned by the Fund as of December 31, 2017, is included in the Statement of Operations.
The following table indicates the total amount of securities
loaned by type, reconciled to gross liability payable upon return of the securities loaned by the Fund as of December 31, 2017:
| Overnight
and continuous |
Up
to 30 days |
30-90
days |
Greater
than 90 days |
Total | |
| Wanger USA | |||||
| Securities lending transactions | |||||
| Equity securities | $19,761,790 | $— | $— | $— | $19,761,790 |
| Gross amount of recognized liabilities for securities lending (collateral received) | 20,915,991 | ||||
| Amounts due to counterparty in the event of default | $1,154,201 |
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of December 31, 2017:
| Goldman
Sachs ($) | |
| Liabilities | |
| Collateral on Securities loaned | 20,915,991 |
| Total Liabilities | 20,915,991 |
| Total Financial and Derivative Net Assets | (20,915,991) |
| Financial Instruments | 19,761,790 |
| Net Amount (a) | (1,154,201) |
| (a) | Represents the net amount due from/(to) counterparties in the event of default. |
| Wanger
USA | Annual Report 2017 |
19 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2017
December 31, 2017
Security transactions and investment income
Security transactions are accounted for on the trade date
(date the order to buy or sell is executed) and dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as soon as the information is available to the Fund. Interest income is recorded
on the accrual basis and includes amortization of discounts on debt obligations when required for federal income tax purposes. Realized gains and losses from security transactions are recorded on an identified cost basis.
Income recognition
Corporate actions and dividend income are generally recorded
net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions from holdings in equity
securities, exchange traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts (REITs), which report information on the tax character of their distributions annually. These
distributions are allocated to dividend income, capital gain and return of capital based on actual information reported. Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable
securities, return of capital is recorded as a realized gain. With respect to REITs, to the extent actual information has not yet been reported, estimates for return of capital may be made by the Fund’s management. Management’s estimates
are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a proportionate change in return of capital to shareholders.
Awards, if any, from class action litigation related to
securities owned may be recorded as a reduction of cost of those securities. If the applicable securities are no longer owned, the proceeds are recorded as realized gains.
Expenses
General expenses of the Trust are allocated to the Fund and
the other series of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are charged to the Fund.
Federal income tax status
The Fund intends to comply with the provisions of the Internal
Revenue Code available to regulated investment companies and, in the manner provided therein, intends to distribute substantially all its taxable income, as well as any net realized gain on sales of investments and foreign currency transactions
reportable for federal income tax purposes. Accordingly, the Fund paid no federal income taxes and no federal income tax provision was required. The Fund meets the exception under Internal Revenue Code Section 4982(f) and the Fund expects not to be
subject to federal excise tax.
Foreign taxes
Gains in certain countries may be subject to foreign taxes at
the fund level. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction. The amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to shareholders
Distributions to shareholders are recorded on the ex-dividend
date.
Guarantees and indemnification
In the normal course of business, the Trust on behalf of the
Fund enters into contracts that contain a variety of representations and warranties and that provide general indemnities. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims against the Fund.
Also under the Trust’s organizational documents, the trustees and officers of the Trust are indemnified against certain liabilities that may arise out of their duties to the Trust. However, based on experience, the Fund expects the risk of
loss due to these warranties and indemnities to be remote.
| 20 | Wanger USA | Annual Report 2017 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2017
December 31, 2017
Recent
accounting pronouncement
Accounting Standards Update
2017-08 Premium Amortization on Purchased Callable Debt Securities
In March 2017, the Financial Accounting Standards Board issued
Accounting Standards Update (ASU) No. 2017-08 Premium Amortization on Purchased Callable Debt Securities. ASU No. 2017-08 updates the accounting standards to shorten the amortization period for certain purchased callable debt securities, held at a
premium, to be amortized to the earliest call date. The update applies to securities with explicit, noncontingent call features that are callable at fixed prices and on preset dates. The standard is effective for annual periods beginning after
December 15, 2018 and interim periods within those fiscal years. At this time, management is evaluating the implication of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
Note 3. Fees and other transactions with
affiliates
Management services fees
CWAM is a wholly owned subsidiary of Columbia Management
Investment Advisers, LLC (Columbia Management), which in turn is a wholly owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). CWAM furnishes continuing investment supervision to the Fund and is responsible for the overall
management of the Fund’s business affairs.
CWAM
receives a monthly advisory fee based on the Fund’s daily net assets at the following annual rates:
| Average daily net assets | Annual
fee rate |
| Up to $100 million | 0.94% |
| $100 million to $250 million | 0.89% |
| $250 million to $2 billion | 0.84% |
| $2 billion and over | 0.80% |
For the year ended December 31,
2017, the effective investment advisory fee rate was 0.87% of the Fund’s average daily net assets.
Administration fees
CWAM provides administrative services and receives an
administration fee from the Fund at the following annual rates:
| Aggregate average daily net assets of the Trust | Annual
fee rate |
| Up to $4 billion | 0.05% |
| $4 billion to $6 billion | 0.04% |
| $6 billion to $8 billion | 0.03% |
| $8 billion and over | 0.02% |
For the year ended December 31,
2017, the effective administration fee rate was 0.05% of the Fund’s average daily net assets. CWAM has delegated to Columbia Management responsibility to provide certain sub-administrative services to the Fund.
Compensation of board members
Certain officers and trustees of the Trust are also officers
of CWAM or Columbia Management. The Trust makes no direct payments to its officers and trustees who are affiliated with CWAM or Columbia Management. The Trust offers a deferred compensation plan for its independent trustees. Under that plan, a
trustee may elect to defer all or a portion of his or her compensation. Amounts deferred are retained by the Trust and may represent an unfunded obligation of the Trust. The value of amounts deferred is determined by reference to the change in value
of Institutional Class shares of one or more series of Columbia Acorn Trust or a money market fund as specified by the trustee. Benefits under the deferred compensation plan are payable in accordance with the plan.
| Wanger
USA | Annual Report 2017 |
21 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2017
December 31, 2017
Compensation of Chief Compliance Officer
The Board of Trustees has appointed a Chief Compliance Officer
of the Fund in accordance with federal securities regulations. A portion of the Chief Compliance Officer’s total compensation is allocated to the Fund, along with other affiliated funds governed by the Board, based on relative net assets. The
total amount allocated to all affiliated funds governed by the Board will not exceed $40,000 annually.
Service fees
Effective July 1, 2017, pursuant to the Transfer, Dividend
Disbursing and Shareholder Servicing Agreement between the Fund and Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, the Fund bears a
service fee paid to the Transfer Agent to compensate it for amounts paid to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for various sub-transfer agency and other shareholder services
each Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time.
The Transfer Agent may retain as compensation for its services
revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to balances in accounts the Transfer Agent maintains in connection
with its services to the Fund.
Effective July 1, 2017
through June 30, 2018, the Transfer Agent has contractually agreed to waive a portion of the service fee payable by the Fund such that the annual service fee paid by the Fund does not exceed 0.00% of the Fund’s average daily net assets, unless
sooner terminated at the sole discretion of the Board of Trustees.
Transfer agency fees
Prior to July 1, 2017, the Fund paid the Transfer Agent a
monthly fee at the annual rate of $21.00 per open account for its services. The Transfer Agent also received reimbursement from the Fund for certain out-of-pocket expenses. Effective July 1, 2017, the Fund no longer pays a transfer agency fee.
Distributor
Columbia Management Investment Distributors, Inc., a wholly
owned subsidiary of Ameriprise Financial, serves as the Fund’s distributor and principal underwriter.
Note 4. Federal tax information
The timing and character of income and capital gain
distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2017 these differences were primarily due to
differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation and net operating loss reclassification. To the extent these differences were permanent, reclassifications were made among the components of the
Fund’s net assets in the Statement of Assets and Liabilities. Temporary differences do not require reclassifications.
In the Statement of Assets and Liabilities the following
reclassifications were made:
| Excess
of distributions over net investment income ($) |
Accumulated
net realized gain ($) |
Paid
in capital ($) |
| 544,802 | (544,802) | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
| 22 | Wanger USA | Annual Report 2017 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2017
December 31, 2017
The
tax character of distributions paid during the years indicated was as follows:
| December 31, 2017 | December 31, 2016 | ||||
| Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) | Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
| — | 108,009,366 | 108,009,366 | — | 177,478,615 | 177,478,615 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At December 31, 2017, the components of distributable earnings
on a tax basis were as follows:
| Undistributed
ordinary income ($) |
Undistributed
long-term capital gains ($) |
Capital
loss carryforwards ($) |
Net
unrealized appreciation ($) |
| 42,274,149 | 119,070,805 | — | 136,167,412 |
At December 31, 2017, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal
tax cost ($) |
Gross
unrealized appreciation ($) |
Gross
unrealized (depreciation) ($) |
Net
unrealized appreciation ($) |
| 568,277,696 | 150,730,179 | (14,562,767) | 136,167,412 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
Management is required to determine whether a tax position of
the Fund is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be
recognized by the Fund is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Management is not aware of any tax positions in the Fund for which it is reasonably possible
that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. However, management’s conclusions may be subject to review and adjustment at a later date based on factors including, but not limited to,
new tax laws, regulations, and administrative interpretations (including relevant court decisions). The Fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio information
The aggregate cost of purchases and proceeds from sales
other than short-term obligations for the year ended December 31, 2017, were $637,621,301 and $730,588,033, respectively. The amount of purchase and sales activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Line of credit
Effective April 25, 2017, the Fund has access to a revolving
credit facility with a syndicate of banks led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The
credit facility, which is a collective agreement between the Fund and other participating funds, including other funds managed by another affiliated investment manager, severally and not jointly, permits collective borrowings up to $1 billion.
Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the overnight federal funds rate plus 1.00% or (ii) the one-month LIBOR rate plus 1.00%. Each borrowing under the credit facility matures no
later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.15% per annum. Prior to April 25, 2017, the Trust together with Columbia Acorn Trust,
another trust managed by the Investment Manager, participated in a revolving credit facility in the amount of $200 million with a syndicate of banks led by JPMorgan Chase Bank, N.A. Under this facility, interest was charged to each participating
fund based on its borrowings at a rate per annum equal to the higher
| Wanger
USA | Annual Report 2017 |
23 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2017
December 31, 2017
of (i) the
overnight federal funds rate plus 1.00% or (ii) the one-month LIBOR rate plus 1.00%. In addition, a commitment fee of 0.15% per annum of the unutilized line of credit was accrued and apportioned among the participating funds based on their relative
net assets. The commitment fee is disclosed as a part of other expenses in the Statement of Operations.
No amounts were borrowed for the benefit of the Fund under the
line of credit during the year ended December 31, 2017.
Note 7. Significant risks
Health care sector risk
The Fund may be more susceptible to the particular risks that
may affect companies in the health care sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the health care sector are subject to certain risks, including restrictions on government reimbursement for
medical expenses, government approval of medical products and services, competitive pricing pressures, and the rising cost of medical products and services (especially for companies dependent upon a relatively limited number of products or
services). Performance of such companies may be affected by factors including, government regulation, obtaining and protecting patents (or the failure to do so), product liability and other similar litigation as well as product obsolescence.
Shareholder concentration risk
At December 31, 2017, two unaffiliated shareholders of record
owned 33.8% of the outstanding shares of the Fund in one or more accounts. The Fund has no knowledge about whether any portion of those shares was owned beneficially. Affiliated shareholders of record owned 59.7% of the outstanding shares of the
Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune
times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for
non-redeeming Fund shareholders.
Note
8. Subsequent events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 9. Information regarding pending and settled
legal proceedings
Ameriprise Financial and certain of
its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their
business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are
likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary,
8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse
publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe proceedings are not likely to have a material adverse effect on the
Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result.
An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of
Ameriprise Financial.
| 24 | Wanger USA | Annual Report 2017 |
Table of Contents
Report of Independent Registered Public Accounting Firm
To the
Trustees of Wanger Advisors Trust and Shareholders of Wanger USA
Opinion on the Financial Statements
We have audited the accompanying statement of assets and
liabilities, including the portfolio of investments, of Wanger USA (one of the funds constituting Wanger Advisors Trust, referred to hereinafter as the "Fund") as of December 31, 2017, the related statement of operations for the year ended December
31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017
(collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles
generally accepted in the United States of America.
Basis
for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits of these financial
statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or
fraud.
Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures
included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Chicago, Illinois
February 20, 2018
We have served as the auditor of one or more investment
companies in Wanger Advisors Trust since 2004.
| Wanger
USA | Annual Report 2017 |
25 |
Table of Contents
Federal Income Tax Information
(Unaudited)
(Unaudited)
The Fund hereby designates the following tax attributes for
the fiscal year ended December 31, 2017.
| Capital
gain dividend |
|
| $125,129,435 |
Capital gain dividend. The Fund designates as a capital gain
dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
| 26 | Wanger USA | Annual Report 2017 |
Table of Contents
Board of Trustees and Management of Wanger Advisors Trust
Each
trustee may serve a term of unlimited duration. The Trust’s Bylaws generally require that a trustee retire at the end of the calendar year in which the trustee attains the age of 75 years. The trustees appoint their own successors, provided
that at least two-thirds of the trustees, after such appointment, have been elected by shareholders. Shareholders may remove a trustee, with or without cause, upon the vote of two-thirds of the Trust’s outstanding shares at any meeting called
for that purpose. A trustee may be removed, with or without cause, upon the vote of a majority of the trustees. The names of the trustees and officers of the Trust, the date each was first elected or appointed to office and the principal business
occupations of each during at least the last five years, and for the trustees, the number of portfolios in the fund complex they oversee and other directorships they hold, are shown below. Each trustee and officer serves in such capacity for each of
the eight series of Columbia Acorn Trust and for each of the three series of Wanger Advisors Trust.
The address for the trustees and officers of the Trust is
Columbia Wanger Asset Management, LLC, 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606. The Funds’ Statement of Additional Information includes additional information about the Funds’ trustees and officers. You may obtain a
free copy of the Statement of Additional Information by writing or calling toll-free:
Columbia Wanger Asset Management, LLC
Shareholder Services Group
227 W. Monroe, Suite 3000
800.922.6769
Shareholder Services Group
227 W. Monroe, Suite 3000
800.922.6769
Independent trustees
| Name
and age at December 31, 2017 |
Year first appointed or elected to a Board in the Columbia Funds Complex | Principal
occupation(s) during the past five years |
Number
of Funds in the Columbia Funds Complex overseen (1) |
Other
directorships held by the Trustee during the past five years in addition to Columbia Acorn Trust and Wanger Advisors Trust |
| Laura
M. Born, 52, Chair |
2007 | Adjunct Associate Professor of Finance, University of Chicago Booth School of Business since 2007; Director, Carlson Inc. (private global hospitalities and travel company) since 2015; Managing Director – Investment Banking, JP Morgan Chase & Co. (broker-dealer) 2002-2007. | 11 | None. |
| Maureen M. Culhane, 69 | 2007 | Retired. Formerly, Vice President, Goldman Sachs Asset Management, L.P. (investment adviser), 2005-2007; Vice President (Consultant) – Strategic Relationship Management, Goldman, Sachs & Co., 1999-2005. | 11 | None. |
| Margaret M. Eisen, 64 | 2002 | Chief Investment Officer, EAM International LLC (corporate finance and asset management), 2003-2013; Managing Director, CFA Institute, 2005-2008. | 11 | RMB Investors Trust (formerly Burnham Investors Trust) (3 series). |
| Thomas M. Goldstein, 58 | 2014 | Retired. Formerly, Chief Financial Officer, Allstate Protection Division, 2011-2014; Founding Partner, The GRG Group LLC, 2009-2011; Managing Director and Chief Financial Officer, Madison Dearborn Partners, 2007-2009. | 11 | Federal Home Loan Bank – Chicago; Federal Home Loan Mortgage Corporation; Kemper Corporation (insurance). |
| John C. Heaton, 58 | 2010 | Deputy Dean for Faculty, University of Chicago Booth School of Business; Joseph L. Gidwitz Professor of Finance, University of Chicago Booth School of Business since July 2000. | 11 | None. |
| Wanger
USA | Annual Report 2017 |
27 |
Table of Contents
Board of Trustees and Management of Wanger Advisors Trust (continued)
Independent trustees (continued)
| Name
and age at December 31, 2017 |
Year first appointed or elected to a Board in the Columbia Funds Complex | Principal
occupation(s) during the past five years |
Number
of Funds in the Columbia Funds Complex overseen (1) |
Other
directorships held by the Trustee during the past five years in addition to Columbia Acorn Trust and Wanger Advisors Trust |
| Charles R. Phillips, 61 | 2015 | Consultant, Finger Rock, LLC (strategic consulting business). Director, University of North Carolina School of Law Foundation since 2010. Formerly, Vice Chairman, J.P. Morgan Private Bank, 2011-2014; Managing Director, J.P. Morgan Private Bank, 2001-2011. | 11 | None. |
| David
J. Rudis, 64, Vice Chair |
2010 | Retired. Formerly, National Checking and Debit Executive, and Illinois President, Bank of America, 2007-2009; President, Consumer Banking Group, LaSalle National Bank, 2004-2007. | 11 | None. |
Interested trustee affiliated
with Investment Manager
| Name
and age at December 31, 2017 |
Year
first appointed or elected to a Board in the Columbia Funds Complex |
Principal
occupation(s) during the past five years |
Number
of Funds in the Columbia Funds Complex overseen (1) |
Other
directorships held by the Trustee during the past five years in addition to Columbia Acorn Trust and Wanger Advisors Trust |
| P. Zachary Egan, 49 (2) | 2015 | President, CWAM and President, Columbia Acorn Trust and Wanger Advisors Trust since April 2014; Global Chief Investment Officer, CWAM since October 2015; International Chief Investment Officer, CWAM, April 2014-September 2015; Director of International Research, CWAM, December 2004-March 2014; Vice President of Columbia Acorn Trust, 2003-2014, and Wanger Advisors Trust, 2007-2014; portfolio manager and analyst, CWAM or its predecessors, since 1999. | 11 | None. |
Trustee Emeritus
| Name
and age at December 31, 2017 |
Year
first appointed or elected to a Board in the Columbia Funds Complex |
Principal
occupation(s) during the past five years |
Number
of Funds in the Columbia Funds Complex overseen (1) |
Other
directorships held by the Trustee during the past five years in addition to Columbia Acorn Trust and Wanger Advisors Trust |
| Ralph Wanger, 83 (3) | 1970 (4) | Founder, CWAM. Formerly, President, Chief Investment Officer and portfolio manager, CWAM or its predecessors, July 1992-September 2003; Director, Wanger Investment Company PLC; Consultant to CWAM or its predecessors, September 2003-September 2005. | 11 | None. |
| (1) | The Trustees oversee the series of Wanger Advisors Trust and Columbia Acorn Trust. |
| (2) | Mr. Egan is an "interested person" of Wanger Advisors Trust and Columbia Acorn Trust, and of CWAM, as defined in the 1940 Act, because he is an officer of each Trust and an employee of CWAM. |
| (3) | As permitted under the Trust’s Bylaws, Mr. Wanger serves as a non-voting Trustee Emeritus of Columbia Acorn Trust and Wanger Advisors Trust. |
| 28 | Wanger USA | Annual Report 2017 |
Table of Contents
Board of Trustees and Management of Wanger Advisors Trust (continued)
| (4) | Dates prior to 1992 relate to the Acorn Fund, Inc., the predecessor trust to Columbia Acorn Trust. |
Fund officers
| Name
and age at December 31, 2017 |
Position
held with Columbia Acorn Trust and Wanger Advisors Trust |
Year
first appointed or elected to office |
Principal
occupation(s) during the past five years |
| Alan G. Berkshire, 57 | Vice President | 2015 | Chief Operating Officer, CWAM since April 2015. Formerly, Independent Director, ValueQuest India Moat Fund Limited (Mauritius), April 2014-March 2015; President – North America, Religare Global Asset Management, Inc., June 2011-November 2013; Partner, Estancia Capital Management LLC, September 2009-June 2011. |
| Michael G. Clarke, 48 | Assistant Treasurer | 2004 | Vice President – Mutual Fund Administration, Columbia Management Investment Advisers, LLC since May 2010; Managing Director of Fund Administration, Columbia Management Advisors, LLC, September 2004-April 2010; Senior officer of Columbia funds and affiliated funds since 2002. |
| P. Zachary Egan, 49 | President | 2007 | President, CWAM and President, Columbia Acorn Trust and Wanger Advisors Trust since April 2014; Global Chief Investment Officer, CWAM since October 2015; International Chief Investment Officer, CWAM, April 2014-September 2015; Director of International Research, CWAM, December 2004-March 2014; Vice President of Columbia Acorn Trust, 2003-2014, and Wanger Advisors Trust, 2007-2014; portfolio manager and analyst, CWAM or its predecessors, since 1999. |
| David L. Frank, 54 | Vice President | 2014 | Portfolio manager and/or analyst, CWAM or its predecessors since 2002; Vice President, Columbia Acorn Trust and Wanger Advisors Trust since 2014. |
| Paul B. Goucher, 49 | Assistant Secretary | 2015 | Senior Vice President and Assistant General Cousel, Ameriprise Financial, Inc. since January 2017 (previously Vice President and Lead Chief Counsel, November 2008 - January 2017 and January 2013 - January 2017, respectively, and Chief Counsel, January 2010 - January 2013); Vice President, Chief Legal Counsel and Assistant Secretary, Columbia Management Investment Advisers, LLC since May 2010. |
| John Kunka, 47 | Vice
President, Treasurer and Principal Accounting and Financial Officer |
2006 | Treasurer and Principal Accounting and Financial Officer, Columbia Acorn Trust and Wanger Advisors Trust since 2014; Vice President of Accounting and Operations, CWAM since May 2006; formerly, Assistant Treasurer, Columbia Acorn Trust and Wanger Advisors Trust 2006-2014. |
| Stephen Kusmierczak, 50 | Vice President | 2011 | Portfolio manager and/or analyst, CWAM or its predecessors since 2001; Vice President, Columbia Acorn Trust and Wanger Advisors Trust since 2011. |
| Joseph C. LaPalm, 48 | Vice President | 2006 | Chief Compliance Officer, CWAM since 2005. |
| Ryan C. Larrenaga, 47 | Assistant Secretary | 2015 | Vice President and Group Counsel, Ameriprise Financial, Inc. since August 2011 (previously, Counsel, May 2010-August 2011); Assistant General Counsel, Bank of America, 2005-April 2010; officer of Columbia funds and affiliated funds since 2005. |
| Matthew A. Litfin, 46 | Vice President | 2016 | Director of Research (U.S.) and portfolio manager, CWAM since December 2015; formerly, portfolio manager, William Blair & Company 1993-2015; Vice President, Columbia Acorn Trust and Wanger Advisors Trust since 2016. |
| Satoshi Matsunaga, 46 | Vice President | 2015 | Portfolio manager and/or analyst, CWAM or its predecessors since 2005; Vice President, Columbia Acorn Trust and Wanger Advisors Trust since 2015. |
| Thomas P. McGuire, 45 | Chief Compliance Officer | 2015 | Senior Vice President and Chief Compliance Officer of the Columbia Funds since 2012; Vice President – Asset Management Compliance, Ameriprise Financial, Inc., since May 2010; Chief Compliance Officer, Ameriprise Certificate Company since September 2010; Compliance Executive, Bank of America, 2005-April 2010. |
| Wanger
USA | Annual Report 2017 |
29 |
Table of Contents
Board of Trustees and Management of Wanger Advisors Trust (continued)
Fund officers (continued)
| Name
and age at December 31, 2017 |
Position
held with Columbia Acorn Trust and Wanger Advisors Trust |
Year
first appointed or elected to office |
Principal
occupation(s) during the past five years |
| Louis J. Mendes III, 53 | Vice President | 2003 | International Director of Research, CWAM, since 2015; portfolio manager and/or analyst, CWAM or its predecessors since 2001; Vice President, Columbia Acorn Trust since 2003 and Wanger Advisors Trust since 2005. |
| Julian Quero, 50 | Assistant Treasurer | 2015 | Vice President – Tax, Columbia Management Investment Advisers, LLC since 2009. |
| Martha A. Skinner, 43 | Assistant Treasurer | 2016 | Vice President of Financial Reporting and Administration, Columbia Management since November 2015; Director of Financial Reporting, Columbia Management, April 2013-November 2015; Manager of Financial Reporting, Columbia Management, August 2010-April 2013. |
| Matthew S. Szafranski, 40 | Vice President | 2015 | Portfolio manager and/or analyst, CWAM or its predecessors since 2008; Vice President, Columbia Acorn Trust and Wanger Advisors Trust since 2015. |
| Linda Roth-Wiszowaty, 48 | Secretary | 2006 | Business support analyst, CWAM since April 2007; Secretary, Columbia Acorn Trust and Wanger Advisors Trust since 2014; Assistant Secretary, Columbia Acorn Trust and Wanger Advisors Trust, 2006-2014. |
| 30 | Wanger USA | Annual Report 2017 |
Table of Contents
Additional information
Proxy
voting policies and procedures
The policy of the Board
of Trustees is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling
800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by
August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting investor.columbiathreadneedleus.com, or searching the website of the SEC at sec.gov.
Quarterly schedule of investments
The Fund files a complete schedule of portfolio holdings
with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q is available on the SEC’s website at sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by calling 800.SEC.0330. The Fund’s complete schedule of portfolio holdings, as filed on Form N-Q, can also be obtained without charge, upon request, by calling
800.345.6611.
Additional Fund information
Fund investment manager
Columbia Wanger Asset Management, LLC
227 West Monroe, Suite 3000
Chicago, IL 60606
888.4.WANGER
(888.492.6437)
Fund distributor
Columbia Management Investment Distributors, Inc.
225 Franklin Street
Boston, MA 02110
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 8081
Boston, MA 02266-8081
| Wanger
USA | Annual Report 2017 |
31 |
Table of Contents
Please read and consider the investment objectives, risks,
charges and expenses for any fund carefully before investing. For variable fund and variable contract prospectuses, which contain this and other important information, including the fees and expenses imposed under your contract, investors should
contact their financial advisor or insurance representative. Read the prospectus for the Fund and your variable contract carefully before investing. Columbia Wanger Funds are distributed by Columbia Management
Investment Distributors, Inc., member FINRA, and are managed by Columbia Wanger Asset Management, LLC.
Columbia Threadneedle Investments (Columbia Threadneedle) is
the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 225 Franklin Street, Boston, MA 02110-2804
© 2018 Columbia Management Investment Advisers, LLC.
C-1466 AP
(2/18)
Table of Contents
WANGER SELECT
Managed by Columbia Wanger Asset Management,
LLC
Please remember that you may not buy (nor will you own)
shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies as well as qualified pension and retirement plans.
Please contact your financial advisor or insurance representative for more information.
Not FDIC Insured • No bank guarantee • May lose
value
Table of Contents
Table of Contents
Fund at a Glance
Investment objective
Wanger Select (the Fund) seeks
long-term capital appreciation.
Portfolio
management
David L. Frank,
CFA
Co-Portfolio
Manager
Managed Fund
since 2015
Matthew S.
Szafranski, CFA
Co-Portfolio
Manager
Managed Fund
since 2015
| Wanger
Select | Annual Report 2017 |
3 |
Table of Contents
Fund at a Glance (continued)
Performance of a
hypothetical $10,000 investment (December 31, 2007 — December 31, 2017)
This graph compares the
results of $10,000 invested in Wanger Select on December 31, 2007 through December 31, 2017 to the Russell 2500 Growth Index and the S&P MidCap 400 Index, with dividends and capital gains reinvested. Although the indexes are provided for use in
assessing the Fund’s performance, the Fund’s holdings may differ significantly from those in an index. Performance numbers reflect all Fund expenses but do not include any fees and expenses imposed under your variable annuity contract or
life insurance policy or qualified pension or retirement plan. If performance numbers included the effect of these additional charges, they would be lower.
| 4 | Wanger Select | Annual Report 2017 |
Table of Contents
Manager Discussion of Fund Performance
| Wanger
Select | Annual Report 2017 |
5 |
Table of Contents
Manager Discussion of Fund Performance (continued)
normalizing volatility. We continue to position the Fund toward higher
quality and structural growth as measured across several metrics such as return on invested capital, revenue and earnings growth as well as superior debt ratios.
Market risk may affect a single
issuer, sector of the economy, industry or the market as a whole. Investments in small and mid-cap companies involve risks and volatility and possible illiquidity greater than investments in larger, more
established companies. Foreign investments subject the Fund to risks, including political, economic, market, social and other risks, within a particular country, as well as to potential currency instabilities
and less stringent financial and accounting standards generally applicable to U.S. issuers. Risks are enhanced for emerging market issuers. The Fund may invest significantly in issuers within a particular
sector, which may be negatively affected by market, economic or other conditions, making the Fund more vulnerable to unfavorable developments in the sector. See the Fund’s prospectus for more information on these and other risks.
The views expressed in this report reflect the current views of
the respective parties. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict, so actual outcomes and results may differ significantly from the views expressed.
These views are subject to change at any time based upon economic, market or other conditions and the respective parties disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment
decisions for a Columbia Wanger Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any particular Columbia Wanger Fund. References to specific securities should not be construed as a
recommendation or investment advice.
| 6 | Wanger Select | Annual Report 2017 |
Table of Contents
Understanding Your Fund’s Expenses
(Unaudited)
(Unaudited)
As a shareholder, you incur three types of costs. There are
transaction costs, which generally include sales charges on purchases and may include redemption fees. There are also ongoing costs, which generally include management fees and other expenses for Wanger Select (the Fund). Lastly, there may be
additional fees or charges imposed by the insurance company that sponsors your variable annuity and/or variable life insurance product. The following information is intended to help you understand your ongoing costs (in dollars) of investing in the
Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
Analyzing your Fund’s expenses
To illustrate these ongoing costs, we have provided an
example and calculated the expenses paid by investors in the Fund during the period. The actual and hypothetical information in the table below is based on an initial investment of $1,000 at the beginning of the period indicated and held for the
entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the “Actual” column is calculated using the Fund’s actual operating expenses and total return
for the period. You may use the Actual information, together with the amount invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the results by the expenses paid during the period under the Actual column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and
then applies the Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you
paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are required to include the same
hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the ongoing cost of investing in a fund only and do not reflect any
transaction costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If
transaction costs were included in these calculations, your costs would be higher.
| July 1, 2017 — December 31, 2017 | |||||||
| Account
value at the beginning of the period ($) |
Account
value at the end of the period ($) |
Expenses
paid during the period ($) |
Fund’s
annualized expense ratio (%) | ||||
| Actual | Hypothetical | Actual | Hypothetical | Actual | Hypothetical | Actual | |
| Wanger Select | 1,000.00 | 1,000.00 | 1,133.30 | 1,021.04 | 4.15 | 3.93 | 0.78 |
Expenses paid during the period
are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, then multiplied by the number of days in the Fund’s most recent fiscal half-year and divided by 365.
Had the investment manager and/or certain of its affiliates not
waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced. See Note 3 to the Financial Statements.
It is important to note that the expense amounts shown in the
table are meant to highlight only ongoing costs of investing in the Fund. Expenses paid during the period do not include any insurance charges imposed by your insurance company’s separate account. The hypothetical example provided is useful in
comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
| Wanger
Select | Annual Report 2017 |
7 |
Table of Contents
Portfolio of Investments
December 31, 2017
December 31, 2017
(Percentages represent value of investments compared to net
assets)
The accompanying Notes to Financial Statements are an integral part
of this statement.
| 8 | Wanger Select | Annual Report 2017 |
Table of Contents
Portfolio of Investments (continued)
December 31, 2017
December 31, 2017
Notes to Portfolio of Investments
| (a) | Non-income producing security. |
| (b) | The rate shown is the seven-day current annualized yield at December 31, 2017. |
Fair value measurements
Various inputs are used in determining the value
of the Fund’s investments, following the input prioritization hierarchy established by accounting principles generally accepted in the United States of America (GAAP). These inputs are summarized in the three broad levels listed below:
| ¦ | Level 1 – quoted prices in active markets for identical securities |
| ¦ | Level 2 – prices determined using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others) |
| ¦ | Level 3 – prices determined using significant unobservable inputs where quoted prices or observable inputs are unavailable or less reliable (including management’s own assumptions about the factors market participants would use in pricing an investment) |
The inputs or methodology
used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Examples of the types of securities in which the
Fund would typically invest and how they are classified within this hierarchy are as follows. Typical Level 1 securities include exchange traded domestic equities, mutual funds whose net asset values are published each day and exchange traded
foreign equities that are not statistically fair valued. Typical Level 2 securities include exchange traded foreign equities that are statistically fair valued, forward foreign currency exchange contracts and short-term investments valued at
amortized cost. Additionally, securities fair valued by Columbia Wanger Asset Management’s Valuation Committee (the Committee) that rely on significant observable inputs are also included in Level 2. Typical Level 3 securities include any
security fair valued by the Committee that relies on significant unobservable inputs.
The Committee is responsible for applying the Wanger
Advisors Trust Portfolio Pricing Policy and the Columbia Wanger Asset Management pricing procedures (the Policies), which are approved by and subject to the oversight of the Board of Trustees.
The Committee meets as necessary, and no less
frequently than quarterly, to determine fair values for securities for which market quotations are not readily available or for which Columbia Wanger Asset Management believes that available market quotations are unreliable. The Committee also
reviews the continuing appropriateness of the Policies. In circumstances where a security has been fair valued, the Committee will also review the continuing appropriateness of the current value of the security. The Policies address, among other
things: circumstances under which market quotations will be deemed readily available; selection of third party pricing vendors; appropriate pricing methodologies; events that
The accompanying Notes
to Financial Statements are an integral part of this statement.
| Wanger
Select | Annual Report 2017 |
9 |
Table of Contents
Portfolio of Investments (continued)
December 31, 2017
December 31, 2017
Fair value
measurements (continued)
require fair valuation and fair value techniques; circumstances under which securities will be deemed to pose a potential for stale pricing, including when securities are illiquid, restricted, or in default; and certain delegations of authority to determine fair values to the Fund’s investment manager. The Committee may also meet to discuss additional valuation matters, which may include review of back-testing results, review of time-sensitive information or approval of other valuation related actions, and to review the appropriateness of the Policies.
require fair valuation and fair value techniques; circumstances under which securities will be deemed to pose a potential for stale pricing, including when securities are illiquid, restricted, or in default; and certain delegations of authority to determine fair values to the Fund’s investment manager. The Committee may also meet to discuss additional valuation matters, which may include review of back-testing results, review of time-sensitive information or approval of other valuation related actions, and to review the appropriateness of the Policies.
For investments categorized as Level 3, the significant
unobservable inputs used in the fair value measurement of the Fund’s securities may include: (i) data specific to the issuer or comparable issuers, (ii) general market or specific sector news and (iii) quoted prices and specific or similar
security transactions. The Committee considers this data and any changes from prior periods in order to assess the reasonableness of observable and unobservable inputs, any assumptions or internal models used to value those securities and changes in
fair value. Significant changes in any of these factors could result in lower or higher fair value measurements. Various factors impact the frequency of monitoring (which may occur as often as daily), however the Committee may determine that changes
to inputs, assumptions and models are not required with the same frequency.
The following table is a summary of the inputs used to value the
Fund’s investments at December 31, 2017:
| Level
1 quoted prices in active markets for identical assets ($) |
Level
2 other significant observable inputs ($) |
Level
3 significant unobservable inputs ($) |
Total ($) | |
| Investments | ||||
| Common Stocks | ||||
| Consumer Discretionary | 27,416,274 | — | — | 27,416,274 |
| Financials | 21,772,103 | — | — | 21,772,103 |
| Health Care | 24,352,254 | — | — | 24,352,254 |
| Industrials | 34,697,037 | — | — | 34,697,037 |
| Information Technology | 22,258,122 | — | — | 22,258,122 |
| Materials | 4,001,258 | — | — | 4,001,258 |
| Real Estate | 3,892,882 | — | — | 3,892,882 |
| Total Common Stocks | 138,389,930 | — | — | 138,389,930 |
| Money Market Funds | 2,578,251 | — | — | 2,578,251 |
| Total Investments | 140,968,181 | — | — | 140,968,181 |
There were no transfers of financial
assets between levels during the period.
The accompanying Notes to Financial Statements are an integral part of this
statement.
| 10 | Wanger Select | Annual Report 2017 |
Table of Contents
Statement of Assets and Liabilities
December 31, 2017
December 31, 2017
| Assets | |
| Investments in unaffiliated issuers, at cost | $106,404,431 |
| Investments in unaffiliated issuers, at value | 140,968,181 |
| Receivable for: | |
| Investments sold | 574,643 |
| Capital shares sold | 167 |
| Dividends | 84,389 |
| Prepaid expenses | 3,025 |
| Total assets | 141,630,405 |
| Liabilities | |
| Payable for: | |
| Capital shares purchased | 323,585 |
| Investment advisory fee | 2,343 |
| Administration fees | 195 |
| Trustees’ fees | 44,761 |
| Compensation of chief compliance officer | 197 |
| Printing and postage fees | 24,607 |
| Other expenses | 21,744 |
| Total liabilities | 417,432 |
| Net assets applicable to outstanding capital stock | $141,212,973 |
| Represented by | |
| Paid in capital | 91,792,960 |
| Excess of distributions over net investment income | (32,311) |
| Accumulated net realized gain | 14,888,574 |
| Unrealized appreciation (depreciation) on: | |
| Investments - unaffiliated issuers | 34,563,750 |
| Total - representing net assets applicable to outstanding capital stock | $141,212,973 |
| Shares outstanding | 6,774,460 |
| Net asset value per share | 20.84 |
The accompanying Notes to Financial Statements are an
integral part of this statement.
| Wanger
Select | Annual Report 2017 |
11 |
Table of Contents
Statement of Operations
Year Ended December 31, 2017
Year Ended December 31, 2017
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $1,249,917 |
| Income from securities lending — net | 2,669 |
| Total income | 1,252,586 |
| Expenses: | |
| Investment advisory fee | 1,048,059 |
| Service fees | 103,053 |
| Transfer agent fees | 115 |
| Administration fees | 65,504 |
| Trustees’ fees | 12,594 |
| Custodian fees | 3,568 |
| Printing and postage fees | 60,251 |
| Audit fees | 31,145 |
| Legal fees | 26,249 |
| Compensation of chief compliance officer | 399 |
| Other | 19,401 |
| Total expenses | 1,370,338 |
| Fees waived by transfer agent | (103,053) |
| Advisory fee waiver | (262,015) |
| Total net expenses | 1,005,270 |
| Net investment income | 247,316 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 15,047,757 |
| Net realized gain | 15,047,757 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 15,936,463 |
| Net change in unrealized appreciation (depreciation) | 15,936,463 |
| Net realized and unrealized gain | 30,984,220 |
| Net increase in net assets resulting from operations | $31,231,536 |
The accompanying Notes to Financial Statements are an
integral part of this statement.
| 12 | Wanger Select | Annual Report 2017 |
Table of Contents
Statement of Changes in Net Assets
| Year
Ended December 31, 2017 |
Year
Ended December 31, 2016 | |
| Operations | ||
| Net investment income | $247,316 | $213,763 |
| Net realized gain | 15,047,757 | 17,763,750 |
| Net change in unrealized appreciation (depreciation) | 15,936,463 | (2,720,919) |
| Net increase in net assets resulting from operations | 31,231,536 | 15,256,594 |
| Distributions to shareholders | ||
| Net investment income | (229,911) | (209,776) |
| Net realized gains | (17,779,427) | (39,392,500) |
| Total distributions to shareholders | (18,009,338) | (39,602,276) |
| Increase in net assets from capital stock activity | 2,491,048 | 14,004,583 |
| Total increase (decrease) in net assets | 15,713,246 | (10,341,099) |
| Net assets at beginning of year | 125,499,727 | 135,840,826 |
| Net assets at end of year | $141,212,973 | $125,499,727 |
| Excess of distributions over net investment income | $(32,311) | $(49,893) |
| Year Ended | Year Ended | |||
| December 31, 2017 | December 31, 2016 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Subscriptions | 229,255 | 4,453,222 | 122,251 | 2,468,559 |
| Distributions reinvested | 990,881 | 18,009,338 | 2,263,039 | 39,602,276 |
| Redemptions | (1,016,605) | (19,971,512) | (1,433,386) | (28,066,252) |
| Total net increase | 203,531 | 2,491,048 | 951,904 | 14,004,583 |
The accompanying Notes to Financial Statements are an integral part of this
statement.
| Wanger
Select | Annual Report 2017 |
13 |
Table of Contents
Financial Highlights
The
following table is intended to help you understand the Fund’s financial performance. Certain information reflects financial results for a single share held for the periods shown. Per share net investment income (loss) amounts are calculated
based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect payment of the expenses that apply to the variable accounts or contract charges, if
any. Total return and portfolio turnover are not annualized for periods of less than one year. The portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If
such transactions were included, the Fund’s portfolio turnover rate may be higher.
| Year Ended December 31, | |||||
| 2017 | 2016 | 2015 | 2014 | 2013 | |
| Per share data | |||||
| Net asset value, beginning of period | $19.10 | $24.18 | $32.99 | $36.41 | $27.54 |
| Income from investment operations: | |||||
| Net investment income | 0.04 | 0.03 | (0.02) | (0.07) | (0.05) |
| Net realized and unrealized gain | 4.62 | 2.48 | 0.69 | 1.07 | 9.46 |
| Total from investment operations | 4.66 | 2.51 | 0.67 | 1.00 | 9.41 |
| Less distributions to shareholders from: | |||||
| Net investment income | (0.03) | (0.03) | (0.00) (a) | — | (0.09) |
| Net realized gains | (2.89) | (7.56) | (9.48) | (4.42) | (0.45) |
| Total distributions to shareholders | (2.92) | (7.59) | (9.48) | (4.42) | (0.54) |
| Net asset value, end of period | $20.84 | $19.10 | $24.18 | $32.99 | $36.41 |
| Total return | 26.67% (b) | 13.31% (b) | 0.26% (b) | 3.17% | 34.58% |
| Ratios to average net assets | |||||
| Total gross expenses(c) | 1.05% | 0.93% (d) | 0.98% | 0.93% (e) | 0.93% |
| Total net expenses(c) | 0.77% | 0.73% (d) | 0.85% | 0.93% (e) | 0.93% |
| Net investment income | 0.19% | 0.17% | (0.06)% | (0.20)% | (0.15)% |
| Supplemental data | |||||
| Portfolio turnover | 52% | 93% | 59% | 18% | 24% |
| Net assets, end of period (in thousands) | $141,213 | $125,500 | $135,841 | $191,647 | $257,911 |
| Notes to Financial Highlights | |
| (a) | Rounds to zero. |
| (b) | Had the Investment Manager and/or its affiliates not waived a portion of expenses, total return would have been reduced. |
| (c) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests, if any. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (d) | Expenses have been reduced due to a reimbursement of expenses overbilled by a third party. If the reimbursement had been excluded, the expense ratios would have been higher by 0.03%. All fee waivers and expense reimbursements by the Investment Manager and its affiliates were applied before giving effect to this third party reimbursement. |
| (e) | Ratios include line of credit interest expense which is less than 0.01%. |
The accompanying Notes to Financial Statements are an integral part of this
statement.
| 14 | Wanger Select | Annual Report 2017 |
Table of Contents
Notes to Financial Statements
December 31, 2017
December 31, 2017
Note 1. Organization
Wanger Select (the Fund), a series of Wanger Advisors Trust
(the Trust), is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The investment objective of the Fund is to seek long-term
capital appreciation. The Fund is available only for allocation to certain life insurance company separate accounts established for the purpose of funding participating variable annuity contracts and variable life insurance policies and may also be
offered directly to certain qualified pension and retirement plans.
Note 2. Summary of significant accounting
policies
Basis of preparation
The Fund is an investment company that applies the accounting
and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared
in accordance with U.S. generally accepted accounting principles (GAAP), which requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial statements.
Security valuation
Securities of the Fund are valued at market value or, if a
market quotation for a security is not readily available or is deemed not to be reliable because of events or circumstances that have occurred between the market quotation and the time as of which the security is to be valued, the security is valued
at its fair value determined in good faith under consistently applied procedures established by the Board of Trustees. A security traded on a securities exchange or in an over-the-counter market in which transaction prices are reported is valued at
the last sales price at the time of valuation. A security traded principally on NASDAQ is valued at the NASDAQ official closing price. Exchange-traded funds are valued at their closing net asset value as reported on the applicable exchange. A
security for which there is no reported sale on the valuation date is valued by comparison of the mean of the latest bid and ask quotations.
Foreign equity securities are generally valued based on the
closing price on the foreign exchange in which such securities are primarily traded. If any foreign equity security closing prices are not readily available, the securities are valued at the mean of the latest quoted bid and ask prices on such
exchanges or markets. Foreign currency exchange rates are generally determined at 4:00 p.m. Eastern (U.S.) time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing
prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange. In situations where foreign markets are closed, where a significant event has
occurred after the foreign exchange closes but before the time at which the Fund’s share price is calculated, and in the event of significant movement in the trigger index for the statistical fair valuation process established by the Board of
Trustees, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. The Trust has retained an independent statistical fair value pricing service that employs a systematic methodology 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 market and the time as of which the securities are to be valued. If a security
is valued at a fair value, that value may be different from the last quoted market price for the security.
Short-term investments maturing in 60 days or less are valued
at amortized cost, which approximates market value.
| Wanger
Select | Annual Report 2017 |
15 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2017
December 31, 2017
Fund
share valuation
Fund shares are sold and redeemed on a
continuing basis at net asset value. Net asset value per share is determined daily as of the close of trading on the New York Stock Exchange on each day the New York Stock Exchange is open for trading by dividing the total value of the Fund’s
investments and other assets, less liabilities, by the number of Fund shares outstanding.
GAAP requires disclosure regarding the inputs and valuation
techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following the Fund’s Portfolio of Investments.
Securities lending
The Fund may lend securities up to one-third of the value of
its total assets to certain approved brokers, dealers and other financial institutions to earn additional income. The Fund retains the benefits of owning the securities, including the economic equivalent of dividends or interest generated by the
security. The Fund also receives a fee for the loan. The Fund has the ability to recall the loans at any time and could do so in order to vote proxies or to sell the loaned securities. Each loan is collateralized by cash that exceeded the value of
the securities on loan. The market value of the loaned securities is determined daily at the close of business of the Fund and any additional required collateral is delivered to each Fund on the next business day. The Fund has elected to invest the
cash collateral in the Dreyfus Government Cash Management Fund. The income earned from the securities lending program is paid to the Fund, net of any fees remitted to Goldman Sachs Agency Lending, the Fund’s lending agent, and borrower
rebates. The Fund’s investment manager, Columbia Wanger Asset Management, LLC (CWAM) or the Investment Manager, does not retain any fees earned by the lending program. Generally, in the event of borrower default, the Fund has the right to use
the collateral to offset any losses incurred. In the event the Fund is delayed or prevented from exercising its right to dispose of the collateral, there may be a potential loss to the Fund. Some of these losses may be indemnified by the lending
agent. The Fund bears the risk of loss with respect to the investment of collateral. The net lending income earned by the Fund as of December 31, 2017, is included in the Statement of Operations.
Security transactions and investment income
Security transactions are accounted for on the trade date
(date the order to buy or sell is executed) and dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as soon as the information is available to the Fund. Interest income is recorded
on the accrual basis and includes amortization of discounts on debt obligations when required for federal income tax purposes. Realized gains and losses from security transactions are recorded on an identified cost basis.
Income recognition
Corporate actions and dividend income are generally recorded
net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions from holdings in equity
securities, exchange traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts (REITs), which report information on the tax character of their distributions annually. These
distributions are allocated to dividend income, capital gain and return of capital based on actual information reported. Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable
securities, return of capital is recorded as a realized gain. With respect to REITs, to the extent actual information has not yet been reported, estimates for return of capital may be made by the Fund’s management. Management’s estimates
are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a proportionate change in return of capital to shareholders.
Awards, if any, from class action litigation related to
securities owned may be recorded as a reduction of cost of those securities. If the applicable securities are no longer owned, the proceeds are recorded as realized gains.
| 16 | Wanger Select | Annual Report 2017 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2017
December 31, 2017
Expenses
General expenses of the Trust are allocated to the Fund and
the other series of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are charged to the Fund.
Federal income tax status
The Fund intends to comply with the provisions of the Internal
Revenue Code available to regulated investment companies and, in the manner provided therein, intends to distribute substantially all its taxable income, as well as any net realized gain on sales of investments and foreign currency transactions
reportable for federal income tax purposes. Accordingly, the Fund paid no federal income taxes and no federal income tax provision was required. The Fund meets the exception under Internal Revenue Code Section 4982(f) and the Fund expects not to be
subject to federal excise tax.
Distributions to
shareholders
Distributions to shareholders are recorded
on the ex-dividend date.
Guarantees and
indemnification
In the normal course of business, the
Trust on behalf of the Fund enters into contracts that contain a variety of representations and warranties and that provide general indemnities. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future
claims against the Fund. Also under the Trust’s organizational documents, the trustees and officers of the Trust are indemnified against certain liabilities that may arise out of their duties to the Trust. However, based on experience, the
Fund expects the risk of loss due to these warranties and indemnities to be remote.
Recent accounting pronouncement
Accounting Standards Update 2017-08 Premium Amortization on
Purchased Callable Debt Securities
In March 2017, the
Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2017-08 Premium Amortization on Purchased Callable Debt Securities. ASU No. 2017-08 updates the accounting standards to shorten the amortization period for certain
purchased callable debt securities, held at a premium, to be amortized to the earliest call date. The update applies to securities with explicit, noncontingent call features that are callable at fixed prices and on preset dates. The standard is
effective for annual periods beginning after December 15, 2018 and interim periods within those fiscal years. At this time, management is evaluating the implication of this guidance and the impact it will have on the financial statement amounts and
footnote disclosures, if any.
Note 3. Fees and
other transactions with affiliates
Management services
fees
CWAM is a wholly owned subsidiary of Columbia
Management Investment Advisers, LLC (Columbia Management), which in turn is a wholly owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). CWAM furnishes continuing investment supervision to the Fund and is responsible for the
overall management of the Fund’s business affairs.
CWAM receives a monthly advisory fee based on the Fund’s
daily net assets at the following annual rates:
| Average daily net assets | Annual
fee rate |
| Up to $500 million | 0.80% |
| $500 million and over | 0.78% |
Through April 30, 2018, CWAM has
contractually agreed to waive 0.20% of the advisory fee otherwise payable to it by the Fund. When determining whether the Fund’s total expenses exceed the contractual expense cap described below, the Fund’s net advisory fee, reflecting
application of the 0.20% waiver, will be used to calculate the Fund’s total expenses. This arrangement may be modified or amended with approval from the Fund and CWAM.
| Wanger
Select | Annual Report 2017 |
17 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2017
December 31, 2017
For
the year ended December 31, 2017, the effective investment advisory fee rate, net of fee waivers, was 0.60% of the Fund’s average daily net assets.
Administration fees
CWAM provides administrative services and receives an
administration fee from the Fund at the following annual rates:
| Aggregate average daily net assets of the Trust | Annual
fee rate |
| Up to $4 billion | 0.05% |
| $4 billion to $6 billion | 0.04% |
| $6 billion to $8 billion | 0.03% |
| $8 billion and over | 0.02% |
For the year ended December 31,
2017, the effective administration fee rate was 0.05% of the Fund’s average daily net assets. CWAM has delegated to Columbia Management responsibility to provide certain sub-administrative services to the Fund.
Compensation of board members
Certain officers and trustees of the Trust are also officers
of CWAM or Columbia Management. The Trust makes no direct payments to its officers and trustees who are affiliated with CWAM or Columbia Management. The Trust offers a deferred compensation plan for its independent trustees. Under that plan, a
trustee may elect to defer all or a portion of his or her compensation. Amounts deferred are retained by the Trust and may represent an unfunded obligation of the Trust. The value of amounts deferred is determined by reference to the change in value
of Institutional Class shares of one or more series of Columbia Acorn Trust or a money market fund as specified by the trustee. Benefits under the deferred compensation plan are payable in accordance with the plan.
Compensation of Chief Compliance Officer
The Board of Trustees has appointed a Chief Compliance Officer
of the Fund in accordance with federal securities regulations. A portion of the Chief Compliance Officer’s total compensation is allocated to the Fund, along with other affiliated funds governed by the Board, based on relative net assets. The
total amount allocated to all affiliated funds governed by the Board will not exceed $40,000 annually.
Service fees
Effective July 1, 2017, pursuant to the Transfer, Dividend
Disbursing and Shareholder Servicing Agreement between the Fund and Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, the Fund bears a
service fee paid to the Transfer Agent to compensate it for amounts paid to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for various sub-transfer agency and other shareholder services
each Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time.
The Transfer Agent may retain as compensation for its services
revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to balances in accounts the Transfer Agent maintains in connection
with its services to the Fund.
Effective July 1, 2017
through June 30, 2018, the Transfer Agent has contractually agreed to waive a portion of the service fee payable by the Fund such that the annual service fee paid by the Fund does not exceed 0.00% of the Fund’s average daily net assets, unless
sooner terminated at the sole discretion of the Board of Trustees.
| 18 | Wanger Select | Annual Report 2017 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2017
December 31, 2017
Transfer agency fees
Prior to July 1, 2017, the Fund paid the Transfer Agent a
monthly fee at the annual rate of $21.00 per open account for its services. The Transfer Agent also received reimbursement from the Fund for certain out-of-pocket expenses. Effective July 1, 2017, the Fund no longer pays a transfer agency fee.
Distributor
Columbia Management Investment Distributors, Inc., a wholly
owned subsidiary of Ameriprise Financial, serves as the Fund’s distributor and principal underwriter.
Expenses waived/reimbursed by the Investment Manager and its
affiliates
Through April 30, 2018, CWAM has
contractually agreed to bear a portion of the Fund’s expenses so that its ordinary operating expenses (excluding transaction costs and certain other investment-related expenses, interest and fees on borrowings and expenses associated with the
Fund’s investment in other investment companies, if any), after giving effect to any balance credits from the Fund’s custodian, do not exceed the annual rate of 1.35% of the Fund’s average daily net assets. This expense arrangement
may only be modified or amended with approval from the Fund and CWAM. For the year ended December 31, 2017, the Fund was not reimbursed any expenses by CWAM.
Note 4. Federal tax information
The timing and character of income and capital gain
distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2017, these differences were primarily due to
differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation and investments in partnerships. To the extent these differences were permanent, reclassifications were made among the components of the
Fund’s net assets in the Statement of Assets and Liabilities. Temporary differences do not require reclassifications.
In the Statement of Assets and Liabilities the following
reclassifications were made:
| Excess
of distributions over net investment income ($) |
Accumulated
net realized gain ($) |
Paid
in capital ($) |
| 177 | (177) | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions paid during the years
indicated was as follows:
| December 31, 2017 | December 31, 2016 | ||||
| Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) | Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
| 229,911 | 17,779,427 | 18,009,338 | 5,992,230 | 33,610,046 | 39,602,276 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At December 31, 2017, the components of distributable earnings
on a tax basis were as follows:
| Undistributed
ordinary income ($) |
Undistributed
long-term capital gains ($) |
Capital
loss carryforwards ($) |
Net
unrealized appreciation ($) |
| 3,399,053 | 11,612,509 | — | 34,452,650 |
| Wanger
Select | Annual Report 2017 |
19 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2017
December 31, 2017
At
December 31, 2017, the cost of all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal
tax cost ($) |
Gross
unrealized appreciation ($) |
Gross
unrealized (depreciation) ($) |
Net
unrealized appreciation ($) |
| 106,515,531 | 38,320,141 | (3,867,491) | 34,452,650 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
Management is required to determine whether a tax position of
the Fund is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be
recognized by the Fund is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Management is not aware of any tax positions in the Fund for which it is reasonably possible
that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. However, management’s conclusions may be subject to review and adjustment at a later date based on factors including, but not limited to,
new tax laws, regulations, and administrative interpretations (including relevant court decisions). The Fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio information
The aggregate cost of purchases and proceeds from sales
other than short-term obligations for the year ended December 31, 2017, were $66,206,003 and $80,762,676, respectively. The amount of purchase and sales activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Line of credit
Effective April 25, 2017, the Fund has access to a revolving
credit facility with a syndicate of banks led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The
credit facility, which is a collective agreement between the Fund and other participating funds, including other funds managed by another affiliated investment manager, severally and not jointly, permits collective borrowings up to $1 billion.
Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the overnight federal funds rate plus 1.00% or (ii) the one-month LIBOR rate plus 1.00%. Each borrowing under the credit facility matures no
later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.15% per annum. Prior to April 25, 2017, the Trust together with Columbia Acorn Trust,
another trust managed by the Investment Manager, participated in a revolving credit facility in the amount of $200 million with a syndicate of banks led by JPMorgan Chase Bank, N.A. Under this facility, interest was charged to each participating
fund based on its borrowings at a rate per annum equal to the higher of (i) the overnight federal funds rate plus 1.00% or (ii) the one-month LIBOR rate plus 1.00%. In addition, a commitment fee of 0.15% per annum of the unutilized line of credit
was accrued and apportioned among the participating funds based on their relative net assets. The commitment fee is disclosed as a part of other expenses in the Statement of Operations.
No amounts were borrowed for the benefit of the Fund under the
line of credit during the year ended December 31, 2017.
Note 7. Significant risks
Industrial sector risk
The Fund may be more susceptible to the particular risks that
may affect companies in the industrials sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the industrials sector are subject to certain risks, including changes in supply and demand for their specific
product or service and for industrial sector products in general, including decline in demand for such products due to rapid technological developments and frequent new product introduction. Performance of such companies may be affected by factors
including government regulation, world events and economic conditions and risks for environmental damage and product liability claims.
| 20 | Wanger Select | Annual Report 2017 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2017
December 31, 2017
Shareholder concentration risk
At December 31, 2017, two unaffiliated shareholders of record
owned 89.7% of the outstanding shares of the Fund in one or more accounts. The Fund has no knowledge about whether any portion of those shares was owned beneficially. Subscription and redemption activity by concentrated accounts may have a
significant effect on the operations of the Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher
percentage of less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 8. Subsequent events
Management has evaluated the events and transactions that
have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 9. Information regarding pending and settled
legal proceedings
Ameriprise Financial and certain of
its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their
business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are
likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary,
8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse
publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe proceedings are not likely to have a material adverse effect on the
Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result.
An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of
Ameriprise Financial.
| Wanger
Select | Annual Report 2017 |
21 |
Table of Contents
Report of Independent Registered Public Accounting Firm
To the
Trustees of Wanger Advisors Trust and Shareholders of Wanger Select
Opinion on the Financial Statements
We have audited the accompanying statement of assets and
liabilities, including the portfolio of investments, of Wanger Select (one of the funds constituting Wanger Advisors Trust, referred to hereinafter as the "Fund") as of December 31, 2017, the related statement of operations for the year ended
December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017
(collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles
generally accepted in the United States of America.
Basis
for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits of these financial
statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or
fraud.
Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures
included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Chicago, Illinois
February 20, 2018
We have served as the auditor of one or more investment
companies in Wanger Advisors Trust since 2004.
| 22 | Wanger Select | Annual Report 2017 |
Table of Contents
Federal Income Tax Information
(Unaudited)
(Unaudited)
The Fund hereby designates the following tax attributes for
the fiscal year ended December 31, 2017.
| Dividends
received deduction |
Capital
gain dividend |
| 23.87% | $12,224,652 |
Dividends received deduction. The
percentage of ordinary income distributed during the fiscal year that qualifies for the corporate dividends received deduction.
Capital gain dividend. The Fund designates as a capital gain
dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
| Wanger
Select | Annual Report 2017 |
23 |
Table of Contents
Board of Trustees and Management of Wanger Advisors Trust
Each
trustee may serve a term of unlimited duration. The Trust’s Bylaws generally require that a trustee retire at the end of the calendar year in which the trustee attains the age of 75 years. The trustees appoint their own successors, provided
that at least two-thirds of the trustees, after such appointment, have been elected by shareholders. Shareholders may remove a trustee, with or without cause, upon the vote of two-thirds of the Trust’s outstanding shares at any meeting called
for that purpose. A trustee may be removed, with or without cause, upon the vote of a majority of the trustees. The names of the trustees and officers of the Trust, the date each was first elected or appointed to office and the principal business
occupations of each during at least the last five years, and for the trustees, the number of portfolios in the fund complex they oversee and other directorships they hold, are shown below. Each trustee and officer serves in such capacity for each of
the eight series of Columbia Acorn Trust and for each of the three series of Wanger Advisors Trust.
The address for the trustees and officers of the Trust is
Columbia Wanger Asset Management, LLC, 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606. The Funds’ Statement of Additional Information includes additional information about the Funds’ trustees and officers. You may obtain a
free copy of the Statement of Additional Information by writing or calling toll-free:
Columbia Wanger Asset Management, LLC
Shareholder Services Group
227 W. Monroe, Suite 3000
800.922.6769
Shareholder Services Group
227 W. Monroe, Suite 3000
800.922.6769
Independent trustees
| Name
and age at December 31, 2017 |
Year first appointed or elected to a Board in the Columbia Funds Complex | Principal
occupation(s) during the past five years |
Number
of Funds in the Columbia Funds Complex overseen (1) |
Other
directorships held by the Trustee during the past five years in addition to Columbia Acorn Trust and Wanger Advisors Trust |
| Laura
M. Born, 52, Chair |
2007 | Adjunct Associate Professor of Finance, University of Chicago Booth School of Business since 2007; Director, Carlson Inc. (private global hospitalities and travel company) since 2015; Managing Director – Investment Banking, JP Morgan Chase & Co. (broker-dealer) 2002-2007. | 11 | None. |
| Maureen M. Culhane, 69 | 2007 | Retired. Formerly, Vice President, Goldman Sachs Asset Management, L.P. (investment adviser), 2005-2007; Vice President (Consultant) – Strategic Relationship Management, Goldman, Sachs & Co., 1999-2005. | 11 | None. |
| Margaret M. Eisen, 64 | 2002 | Chief Investment Officer, EAM International LLC (corporate finance and asset management), 2003-2013; Managing Director, CFA Institute, 2005-2008. | 11 | RMB Investors Trust (formerly Burnham Investors Trust) (3 series). |
| Thomas M. Goldstein, 58 | 2014 | Retired. Formerly, Chief Financial Officer, Allstate Protection Division, 2011-2014; Founding Partner, The GRG Group LLC, 2009-2011; Managing Director and Chief Financial Officer, Madison Dearborn Partners, 2007-2009. | 11 | Federal Home Loan Bank – Chicago; Federal Home Loan Mortgage Corporation; Kemper Corporation (insurance). |
| John C. Heaton, 58 | 2010 | Deputy Dean for Faculty, University of Chicago Booth School of Business; Joseph L. Gidwitz Professor of Finance, University of Chicago Booth School of Business since July 2000. | 11 | None. |
| 24 | Wanger Select | Annual Report 2017 |
Table of Contents
Board of Trustees and Management of Wanger Advisors Trust (continued)
Independent trustees (continued)
| Name
and age at December 31, 2017 |
Year first appointed or elected to a Board in the Columbia Funds Complex | Principal
occupation(s) during the past five years |
Number
of Funds in the Columbia Funds Complex overseen (1) |
Other
directorships held by the Trustee during the past five years in addition to Columbia Acorn Trust and Wanger Advisors Trust |
| Charles R. Phillips, 61 | 2015 | Consultant, Finger Rock, LLC (strategic consulting business). Director, University of North Carolina School of Law Foundation since 2010. Formerly, Vice Chairman, J.P. Morgan Private Bank, 2011-2014; Managing Director, J.P. Morgan Private Bank, 2001-2011. | 11 | None. |
| David
J. Rudis, 64, Vice Chair |
2010 | Retired. Formerly, National Checking and Debit Executive, and Illinois President, Bank of America, 2007-2009; President, Consumer Banking Group, LaSalle National Bank, 2004-2007. | 11 | None. |
Interested trustee affiliated
with Investment Manager
| Name
and age at December 31, 2017 |
Year
first appointed or elected to a Board in the Columbia Funds Complex |
Principal
occupation(s) during the past five years |
Number
of Funds in the Columbia Funds Complex overseen (1) |
Other
directorships held by the Trustee during the past five years in addition to Columbia Acorn Trust and Wanger Advisors Trust |
| P. Zachary Egan, 49 (2) | 2015 | President, CWAM and President, Columbia Acorn Trust and Wanger Advisors Trust since April 2014; Global Chief Investment Officer, CWAM since October 2015; International Chief Investment Officer, CWAM, April 2014-September 2015; Director of International Research, CWAM, December 2004-March 2014; Vice President of Columbia Acorn Trust, 2003-2014, and Wanger Advisors Trust, 2007-2014; portfolio manager and analyst, CWAM or its predecessors, since 1999. | 11 | None. |
Trustee Emeritus
| Name
and age at December 31, 2017 |
Year
first appointed or elected to a Board in the Columbia Funds Complex |
Principal
occupation(s) during the past five years |
Number
of Funds in the Columbia Funds Complex overseen (1) |
Other
directorships held by the Trustee during the past five years in addition to Columbia Acorn Trust and Wanger Advisors Trust |
| Ralph Wanger, 83 (3) | 1970 (4) | Founder, CWAM. Formerly, President, Chief Investment Officer and portfolio manager, CWAM or its predecessors, July 1992-September 2003; Director, Wanger Investment Company PLC; Consultant to CWAM or its predecessors, September 2003-September 2005. | 11 | None. |
| (1) | The Trustees oversee the series of Wanger Advisors Trust and Columbia Acorn Trust. |
| (2) | Mr. Egan is an "interested person" of Wanger Advisors Trust and Columbia Acorn Trust, and of CWAM, as defined in the 1940 Act, because he is an officer of each Trust and an employee of CWAM. |
| (3) | As permitted under the Trust’s Bylaws, Mr. Wanger serves as a non-voting Trustee Emeritus of Columbia Acorn Trust and Wanger Advisors Trust. |
| Wanger
Select | Annual Report 2017 |
25 |
Table of Contents
Board of Trustees and Management of Wanger Advisors Trust (continued)
| (4) | Dates prior to 1992 relate to the Acorn Fund, Inc., the predecessor trust to Columbia Acorn Trust. |
Fund officers
| Name
and age at December 31, 2017 |
Position
held with Columbia Acorn Trust and Wanger Advisors Trust |
Year
first appointed or elected to office |
Principal
occupation(s) during the past five years |
| Alan G. Berkshire, 57 | Vice President | 2015 | Chief Operating Officer, CWAM since April 2015. Formerly, Independent Director, ValueQuest India Moat Fund Limited (Mauritius), April 2014-March 2015; President – North America, Religare Global Asset Management, Inc., June 2011-November 2013; Partner, Estancia Capital Management LLC, September 2009-June 2011. |
| Michael G. Clarke, 48 | Assistant Treasurer | 2004 | Vice President – Mutual Fund Administration, Columbia Management Investment Advisers, LLC since May 2010; Managing Director of Fund Administration, Columbia Management Advisors, LLC, September 2004-April 2010; Senior officer of Columbia funds and affiliated funds since 2002. |
| P. Zachary Egan, 49 | President | 2007 | President, CWAM and President, Columbia Acorn Trust and Wanger Advisors Trust since April 2014; Global Chief Investment Officer, CWAM since October 2015; International Chief Investment Officer, CWAM, April 2014-September 2015; Director of International Research, CWAM, December 2004-March 2014; Vice President of Columbia Acorn Trust, 2003-2014, and Wanger Advisors Trust, 2007-2014; portfolio manager and analyst, CWAM or its predecessors, since 1999. |
| David L. Frank, 54 | Vice President | 2014 | Portfolio manager and/or analyst, CWAM or its predecessors since 2002; Vice President, Columbia Acorn Trust and Wanger Advisors Trust since 2014. |
| Paul B. Goucher, 49 | Assistant Secretary | 2015 | Senior Vice President and Assistant General Cousel, Ameriprise Financial, Inc. since January 2017 (previously Vice President and Lead Chief Counsel, November 2008 - January 2017 and January 2013 - January 2017, respectively, and Chief Counsel, January 2010 - January 2013); Vice President, Chief Legal Counsel and Assistant Secretary, Columbia Management Investment Advisers, LLC since May 2010. |
| John Kunka, 47 | Vice
President, Treasurer and Principal Accounting and Financial Officer |
2006 | Treasurer and Principal Accounting and Financial Officer, Columbia Acorn Trust and Wanger Advisors Trust since 2014; Vice President of Accounting and Operations, CWAM since May 2006; formerly, Assistant Treasurer, Columbia Acorn Trust and Wanger Advisors Trust 2006-2014. |
| Stephen Kusmierczak, 50 | Vice President | 2011 | Portfolio manager and/or analyst, CWAM or its predecessors since 2001; Vice President, Columbia Acorn Trust and Wanger Advisors Trust since 2011. |
| Joseph C. LaPalm, 48 | Vice President | 2006 | Chief Compliance Officer, CWAM since 2005. |
| Ryan C. Larrenaga, 47 | Assistant Secretary | 2015 | Vice President and Group Counsel, Ameriprise Financial, Inc. since August 2011 (previously, Counsel, May 2010-August 2011); Assistant General Counsel, Bank of America, 2005-April 2010; officer of Columbia funds and affiliated funds since 2005. |
| Matthew A. Litfin, 46 | Vice President | 2016 | Director of Research (U.S.) and portfolio manager, CWAM since December 2015; formerly, portfolio manager, William Blair & Company 1993-2015; Vice President, Columbia Acorn Trust and Wanger Advisors Trust since 2016. |
| Satoshi Matsunaga, 46 | Vice President | 2015 | Portfolio manager and/or analyst, CWAM or its predecessors since 2005; Vice President, Columbia Acorn Trust and Wanger Advisors Trust since 2015. |
| Thomas P. McGuire, 45 | Chief Compliance Officer | 2015 | Senior Vice President and Chief Compliance Officer of the Columbia Funds since 2012; Vice President – Asset Management Compliance, Ameriprise Financial, Inc., since May 2010; Chief Compliance Officer, Ameriprise Certificate Company since September 2010; Compliance Executive, Bank of America, 2005-April 2010. |
| 26 | Wanger Select | Annual Report 2017 |
Table of Contents
Board of Trustees and Management of Wanger Advisors Trust (continued)
Fund officers (continued)
| Name
and age at December 31, 2017 |
Position
held with Columbia Acorn Trust and Wanger Advisors Trust |
Year
first appointed or elected to office |
Principal
occupation(s) during the past five years |
| Louis J. Mendes III, 53 | Vice President | 2003 | International Director of Research, CWAM, since 2015; portfolio manager and/or analyst, CWAM or its predecessors since 2001; Vice President, Columbia Acorn Trust since 2003 and Wanger Advisors Trust since 2005. |
| Julian Quero, 50 | Assistant Treasurer | 2015 | Vice President – Tax, Columbia Management Investment Advisers, LLC since 2009. |
| Martha A. Skinner, 43 | Assistant Treasurer | 2016 | Vice President of Financial Reporting and Administration, Columbia Management since November 2015; Director of Financial Reporting, Columbia Management, April 2013-November 2015; Manager of Financial Reporting, Columbia Management, August 2010-April 2013. |
| Matthew S. Szafranski, 40 | Vice President | 2015 | Portfolio manager and/or analyst, CWAM or its predecessors since 2008; Vice President, Columbia Acorn Trust and Wanger Advisors Trust since 2015. |
| Linda Roth-Wiszowaty, 48 | Secretary | 2006 | Business support analyst, CWAM since April 2007; Secretary, Columbia Acorn Trust and Wanger Advisors Trust since 2014; Assistant Secretary, Columbia Acorn Trust and Wanger Advisors Trust, 2006-2014. |
| Wanger
Select | Annual Report 2017 |
27 |
Table of Contents
Additional information
Proxy
voting policies and procedures
The policy of the Board
of Trustees is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling
800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by
August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting investor.columbiathreadneedleus.com, or searching the website of the SEC at sec.gov.
Quarterly schedule of investments
The Fund files a complete schedule of portfolio holdings
with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q is available on the SEC’s website at sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by calling 800.SEC.0330. The Fund’s complete schedule of portfolio holdings, as filed on Form N-Q, can also be obtained without charge, upon request, by calling
800.345.6611.
Additional Fund information
Fund investment manager
Columbia Wanger Asset Management, LLC
227 West Monroe, Suite 3000
Chicago, IL 60606
888.4.WANGER
(888.492.6437)
Fund distributor
Columbia Management Investment Distributors, Inc.
225 Franklin Street
Boston, MA 02110
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 8081
Boston, MA 02266-8081
| 28 | Wanger Select | Annual Report 2017 |
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Table of Contents
Please read and consider the investment objectives, risks,
charges and expenses for any fund carefully before investing. For variable fund and variable contract prospectuses, which contain this and other important information, including the fees and expenses imposed under your contract, investors should
contact their financial advisor or insurance representative. Read the prospectus for the Fund and your variable contract carefully before investing. Columbia Wanger Funds are distributed by Columbia Management
Investment Distributors, Inc., member FINRA, and are managed by Columbia Wanger Asset Management, LLC.
Columbia Threadneedle Investments (Columbia Threadneedle) is
the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 225 Franklin Street, Boston, MA 02110-2804
© 2018 Columbia Management Investment Advisers, LLC.
C-1461 AP
(2/18)
Table of Contents
WANGER INTERNATIONAL
Managed by Columbia Wanger Asset Management,
LLC
Please remember that you may not buy (nor will you own)
shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies as well as qualified pension and retirement plans.
Please contact your financial advisor or insurance representative for more information.
Not FDIC Insured • No bank guarantee • May lose
value
Table of Contents
Table of Contents
Fund at a Glance
Investment objective
Wanger International (the Fund) seeks
long-term capital appreciation.
Portfolio
management
Louis J. Mendes,
CFA
Co-Portfolio
Manager
Managed Fund
since 2005
P. Zachary Egan,
CFA
Co-Portfolio
Manager
Managed Fund
since 2016
Tae Han (Simon)
Kim, CFA
Co-Portfolio
Manager
Managed Fund
since December 2017
| Wanger
International | Annual Report 2017 |
3 |
Table of Contents
Fund at a Glance (continued)
Performance of a
hypothetical $10,000 investment (December 31, 2007 — December 31, 2017)
This graph compares the
results of $10,000 invested in Wanger International on December 31, 2007 through December 31, 2017 to the MSCI ACWI ex USA Small Cap Index (Net) and the MSCI ACWI ex USA Small Cap Growth Index (Net) with dividends and capital gains reinvested.
Although the indexes are provided for use in assessing the Fund’s performance, the Fund’s holdings may differ significantly from those in an index. Performance numbers reflect all Fund expenses but do not include any fees and expenses
imposed under your variable annuity contract or life insurance policy or qualified pension or retirement plan. If performance numbers included the effect of these additional charges, they would be lower.
| 4 | Wanger International | Annual Report 2017 |
Table of Contents
Fund at a Glance (continued)
| Wanger
International | Annual Report 2017 |
5 |
Table of Contents
Manager Discussion of Fund Performance
| 6 | Wanger International | Annual Report 2017 |
Table of Contents
Manager Discussion of Fund Performance (continued)
characteristics can perform well even if rising interest rates begin to fuel
higher volatility. Entering 2018, we are monitoring risks such as less accommodative monetary policy, the inflation implications of tighter labor markets and the potential for market volatility to revert to more normal levels. While we are mindful
of valuations following the rally of the past year, we would also note that international stocks still generally trade at a discount relative to those in the United States.
Market risk may affect a single
issuer, sector of the economy, industry or the market as a whole. International investing involves certain risks and volatility due to potential political, economic or currency instabilities and different,
potentially less stringent, financial and accounting standards than those generally applicable to U.S. issuers. Risks are enhanced for emerging market issuers. Investments in small- and mid-cap companies involve risks and volatility and possible illiquidity greater than investments in larger, more established companies.
The views expressed in this report reflect the current views of
the respective parties. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict, so actual outcomes and results may differ significantly from the views expressed.
These views are subject to change at any time based upon economic, market or other conditions and the respective parties disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment
decisions for a Columbia Wanger Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any particular Columbia Wanger Fund. References to specific securities should not be construed as a
recommendation or investment advice.
| Wanger
International | Annual Report 2017 |
7 |
Table of Contents
Understanding Your Fund’s Expenses
(Unaudited)
(Unaudited)
As a shareholder, you incur three types of costs. There are
transaction costs, which generally include sales charges on purchases and may include redemption fees. There are also ongoing costs, which generally include management fees and other expenses for Wanger International (the Fund). Lastly, there may be
additional fees or charges imposed by the insurance company that sponsors your variable annuity and/or variable life insurance product. The following information is intended to help you understand your ongoing costs (in dollars) of investing in the
Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
Analyzing your Fund’s expenses
To illustrate these ongoing costs, we have provided an
example and calculated the expenses paid by investors in the Fund during the period. The actual and hypothetical information in the table below is based on an initial investment of $1,000 at the beginning of the period indicated and held for the
entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the “Actual” column is calculated using the Fund’s actual operating expenses and total return
for the period. You may use the Actual information, together with the amount invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the results by the expenses paid during the period under the Actual column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and
then applies the Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you
paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are required to include the same
hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the ongoing cost of investing in a fund only and do not reflect any
transaction costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If
transaction costs were included in these calculations, your costs would be higher.
| July 1, 2017 — December 31, 2017 | |||||||
| Account
value at the beginning of the period ($) |
Account
value at the end of the period ($) |
Expenses
paid during the period ($) |
Fund’s
annualized expense ratio (%) | ||||
| Actual | Hypothetical | Actual | Hypothetical | Actual | Hypothetical | Actual | |
| Wanger International | 1,000.00 | 1,000.00 | 1,106.40 | 1,019.30 | 5.93 | 5.69 | 1.13 |
Expenses paid during the period
are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, then multiplied by the number of days in the Fund’s most recent fiscal half-year and divided by 365.
Had the investment manager and/or certain of its affiliates not
waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced. See Note 3 to the Financial Statements.
It is important to note that the expense amounts shown in the
table are meant to highlight only ongoing costs of investing in the Fund. Expenses paid during the period do not include any insurance charges imposed by your insurance company’s separate account. The hypothetical example provided is useful in
comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
| 8 | Wanger International | Annual Report 2017 |
Table of Contents
Portfolio of Investments
December 31, 2017
December 31, 2017
(Percentages represent value of investments compared to net
assets)
The accompanying Notes to Financial Statements are an integral part
of this statement.
| Wanger
International | Annual Report 2017 |
9 |
Table of Contents
Portfolio of Investments (continued)
December 31, 2017
December 31, 2017
The accompanying Notes to Financial Statements are an integral part
of this statement.
| 10 | Wanger International | Annual Report 2017 |
Table of Contents
Portfolio of Investments (continued)
December 31, 2017
December 31, 2017
The accompanying Notes to Financial Statements are an integral part
of this statement.
| Wanger
International | Annual Report 2017 |
11 |
Table of Contents
Portfolio of Investments (continued)
December 31, 2017
December 31, 2017
Notes to Portfolio of Investments
| (a) | All or a portion of this security was on loan at December 31, 2017. The total market value of securities on loan at December 31, 2017 was $12,584,508. |
| (b) | Non-income producing security. |
| (c) | The rate shown is the seven-day current annualized yield at December 31, 2017. |
| (d) | Investment made with cash collateral received from securities lending activity. |
The accompanying Notes to Financial Statements are an integral part of this
statement.
| 12 | Wanger International | Annual Report 2017 |
Table of Contents
Portfolio of Investments (continued)
December 31, 2017
December 31, 2017
Abbreviation Legend
| ADR | American Depositary Receipt |
Fair value
measurements
Various inputs are used in determining the
value of the Fund’s investments, following the input prioritization hierarchy established by accounting principles generally accepted in the United States of America (GAAP). These inputs are summarized in the three broad levels listed
below:
| ¦ | Level 1 – quoted prices in active markets for identical securities |
| ¦ | Level 2 – prices determined using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others) |
| ¦ | Level 3 – prices determined using significant unobservable inputs where quoted prices or observable inputs are unavailable or less reliable (including management’s own assumptions about the factors market participants would use in pricing an investment) |
The inputs or methodology used for
valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Examples of the types of securities in which the Fund would
typically invest and how they are classified within this hierarchy are as follows. Typical Level 1 securities include exchange traded domestic equities, mutual funds whose net asset values are published each day and exchange traded foreign equities
that are not statistically fair valued. Typical Level 2 securities include exchange traded foreign equities that are statistically fair valued, forward foreign currency exchange contracts and short-term investments valued at amortized cost.
Additionally, securities fair valued by Columbia Wanger Asset Management’s Valuation Committee (the Committee) that rely on significant observable inputs are also included in Level 2. Typical Level 3 securities include any security fair valued
by the Committee that relies on significant unobservable inputs.
The Committee is responsible for applying the Wanger Advisors
Trust Portfolio Pricing Policy and the Columbia Wanger Asset Management pricing procedures (the Policies), which are approved by and subject to the oversight of the Board of Trustees.
The Committee meets as necessary, and no less frequently than
quarterly, to determine fair values for securities for which market quotations are not readily available or for which Columbia Wanger Asset Management believes that available market quotations are unreliable. The Committee also reviews the
continuing appropriateness of the Policies. In circumstances where a security has been fair valued, the Committee will also review the continuing appropriateness of the current value of the security. The Policies address, among other things:
circumstances under which market quotations will be deemed readily available; selection of third party pricing vendors; appropriate pricing methodologies; events that require fair valuation and fair value techniques; circumstances under which
securities will be deemed to pose a potential for stale pricing, including when securities are illiquid, restricted, or in default; and certain delegations of authority to determine fair values to the Fund’s investment manager. The Committee
may also meet to discuss additional valuation matters, which may include review of back-testing results, review of time-sensitive information or approval of other valuation related actions, and to review the appropriateness of the Policies.
For investments categorized as Level 3, the significant
unobservable inputs used in the fair value measurement of the Fund’s securities may include: (i) data specific to the issuer or comparable issuers, (ii) general market or specific sector news and (iii) quoted prices and specific or similar
security transactions. The Committee considers this data and any changes from prior periods in order to assess the reasonableness of observable and unobservable inputs, any assumptions or internal models used to value those securities and changes in
fair value. Significant changes in any of these factors could result in lower or higher fair value measurements. Various factors impact the frequency of monitoring (which may occur as often as daily), however the Committee may determine that changes
to inputs, assumptions and models are not required with the same frequency.
The following table is a summary of the inputs used to value
the Fund’s investments at December 31, 2017:
| Level
1 quoted prices in active markets for identical assets ($) |
Level
2 other significant observable inputs ($) |
Level
3 significant unobservable inputs ($) |
Total ($) | |
| Investments | ||||
| Common Stocks | ||||
| Australia | — | 6,321,292 | — | 6,321,292 |
| Belgium | — | 6,521,623 | — | 6,521,623 |
| Brazil | 4,473,084 | — | — | 4,473,084 |
| Cambodia | — | 9,684,880 | — | 9,684,880 |
| Canada | 24,028,913 | — | — | 24,028,913 |
| Cayman Islands | 6,313,812 | 7,895,498 | — | 14,209,310 |
| China | 6,434,948 | 6,529,456 | — | 12,964,404 |
| Denmark | — | 10,228,145 | — | 10,228,145 |
| Finland | — | 4,330,123 | — | 4,330,123 |
| France | — | 6,948,853 | — | 6,948,853 |
| Germany | — | 51,868,697 | — | 51,868,697 |
| Hong Kong | — | 9,690,906 | — | 9,690,906 |
| India | — | 19,930,854 | — | 19,930,854 |
| Indonesia | — | 9,714,449 | — | 9,714,449 |
| Ireland | — | 6,273,950 | — | 6,273,950 |
| Italy | — | 16,338,596 | — | 16,338,596 |
| Japan | — | 110,666,551 | — | 110,666,551 |
| Malta | — | 12,208,077 | — | 12,208,077 |
| Mexico | 7,077,999 | — | — | 7,077,999 |
| Netherlands | — | 7,052,743 | — | 7,052,743 |
The accompanying Notes to Financial Statements are an integral part of this
statement.
| Wanger
International | Annual Report 2017 |
13 |
Table of Contents
Portfolio of Investments (continued)
December 31, 2017
December 31, 2017
Fair value
measurements (continued)
| Level
1 quoted prices in active markets for identical assets ($) |
Level
2 other significant observable inputs ($) |
Level
3 significant unobservable inputs ($) |
Total ($) | |
| New Zealand | — | 7,051,947 | — | 7,051,947 |
| Norway | — | 10,774,867 | — | 10,774,867 |
| Singapore | — | 5,085,363 | — | 5,085,363 |
| South Africa | — | 12,810,010 | — | 12,810,010 |
| South Korea | — | 24,254,627 | — | 24,254,627 |
| Spain | — | 5,361,984 | — | 5,361,984 |
| Sweden | — | 24,725,767 | — | 24,725,767 |
| Switzerland | — | 8,180,358 | — | 8,180,358 |
| Taiwan | — | 16,870,630 | — | 16,870,630 |
| Thailand | — | 16,577,075 | — | 16,577,075 |
| Turkey | — | 3,293,720 | — | 3,293,720 |
| United Kingdom | 3,053,583 | 77,266,259 | — | 80,319,842 |
| United States | 3,640,598 | — | — | 3,640,598 |
| Total Common Stocks | 55,022,937 | 514,457,300 | — | 569,480,237 |
| Securities Lending Collateral | 13,200,989 | — | — | 13,200,989 |
| Money Market Funds | 12,388,117 | — | — | 12,388,117 |
| Total Investments | 80,612,043 | 514,457,300 | — | 595,069,343 |
The Fund’s assets assigned to
the Level 2 input category are generally valued using a market approach, in which a security’s value is determined through its correlation to prices and information from observable market transactions for similar or identical assets. Foreign
equities are generally valued at the last sale price on the foreign exchange or market on which they trade. The Fund may use a statistical fair valuation model, in accordance with the policy adopted by the Board of Trustees, provided by an
independent third party to value securities principally traded in foreign markets in order to adjust for possible stale pricing that may occur between the close of the foreign exchanges and the time for valuation. These models take into account
available market data including intraday index, ADR, and ETF movements.
There were no transfers of financial assets between levels
during the period.
The accompanying Notes to Financial Statements are an integral part of this
statement.
| 14 | Wanger International | Annual Report 2017 |
Table of Contents
Statement of Assets and Liabilities
December 31, 2017
December 31, 2017
| Assets | |
| Investments in unaffiliated issuers, at cost | $436,897,505 |
| Investments in unaffiliated issuers, at value (including securities on loan: $12,584,508) | 595,069,343 |
| Receivable for: | |
| Investments sold | 688,844 |
| Capital shares sold | 36,715 |
| Regulatory settlements (Note 6) | 131,912 |
| Dividends | 695,315 |
| Securities lending income | 39,053 |
| Foreign tax reclaims | 346,390 |
| Prepaid expenses | 12,758 |
| Trustees’ deferred compensation plan | 208,993 |
| Total assets | 597,229,323 |
| Liabilities | |
| Due upon return of securities on loan | 13,200,989 |
| Payable for: | |
| Investments purchased | 4,832,615 |
| Capital shares purchased | 696,844 |
| Investment advisory fee | 14,790 |
| Administration fees | 792 |
| Trustees’ fees | 1,051 |
| Compensation of chief compliance officer | 828 |
| Other expenses | 183,689 |
| Trustees’ deferred compensation plan | 208,993 |
| Other liabilities | 926 |
| Total liabilities | 19,141,517 |
| Net assets applicable to outstanding capital stock | $578,087,806 |
| Represented by | |
| Paid in capital | 357,990,860 |
| Undistributed net investment income | 2,858,259 |
| Accumulated net realized gain | 59,051,631 |
| Unrealized appreciation (depreciation) on: | |
| Investments - unaffiliated issuers | 158,171,838 |
| Foreign currency translations | 15,218 |
| Total - representing net assets applicable to outstanding capital stock | $578,087,806 |
| Shares outstanding | 18,741,854 |
| Net asset value per share | 30.84 |
The accompanying Notes to Financial Statements are an
integral part of this statement.
| Wanger
International | Annual Report 2017 |
15 |
Table of Contents
Statement of Operations
Year Ended December 31, 2017
Year Ended December 31, 2017
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $11,795,788 |
| Interest | 561 |
| Income from securities lending — net | 576,077 |
| Foreign taxes withheld | (1,175,245) |
| Total income | 11,197,181 |
| Expenses: | |
| Investment advisory fee | 5,155,467 |
| Service fees | 212,875 |
| Transfer agent fees | 320 |
| Administration fees | 273,917 |
| Trustees’ fees | 51,079 |
| Custodian fees | 163,634 |
| Printing and postage fees | 251,175 |
| Audit fees | 100,156 |
| Legal fees | 108,633 |
| Compensation of chief compliance officer | 1,558 |
| Other | 30,845 |
| Total expenses | 6,349,659 |
| Fees waived by transfer agent | (212,875) |
| Total net expenses | 6,136,784 |
| Net investment income | 5,060,397 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 64,290,031 |
| Foreign currency translations | (140,462) |
| Net realized gain | 64,149,569 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 85,401,911 |
| Foreign currency translations | 47,286 |
| Net change in unrealized appreciation (depreciation) | 85,449,197 |
| Net realized and unrealized gain | 149,598,766 |
| Net increase in net assets resulting from operations | $154,659,163 |
The accompanying Notes to Financial Statements are an
integral part of this statement.
| 16 | Wanger International | Annual Report 2017 |
Table of Contents
Statement of Changes in Net Assets
| Year
Ended December 31, 2017 |
Year
Ended December 31, 2016 | |
| Operations | ||
| Net investment income | $5,060,397 | $6,634,683 |
| Net realized gain | 64,149,569 | 6,134,947 |
| Net change in unrealized appreciation (depreciation) | 85,449,197 | (19,665,305) |
| Net increase (decrease) in net assets resulting from operations | 154,659,163 | (6,895,675) |
| Distributions to shareholders | ||
| Net investment income | (6,572,360) | (6,158,671) |
| Net realized gains | (4,004,590) | (44,383,757) |
| Total distributions to shareholders | (10,576,950) | (50,542,428) |
| Decrease in net assets from capital stock activity | (60,789,221) | (34,395,890) |
| Total increase (decrease) in net assets | 83,292,992 | (91,833,993) |
| Net assets at beginning of year | 494,794,814 | 586,628,807 |
| Net assets at end of year | $578,087,806 | $494,794,814 |
| Undistributed net investment income | $2,858,259 | $1,437,848 |
| Year Ended | Year Ended | |||
| December 31, 2017 | December 31, 2016 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Subscriptions | 501,656 | 13,324,413 | 374,135 | 9,287,190 |
| Distributions reinvested | 366,553 | 10,576,950 | 2,014,153 | 50,542,428 |
| Redemptions | (3,058,127) | (84,690,584) | (3,745,214) | (94,225,508) |
| Total net decrease | (2,189,918) | (60,789,221) | (1,356,926) | (34,395,890) |
The accompanying Notes to Financial Statements are an integral part of this
statement.
| Wanger
International | Annual Report 2017 |
17 |
Table of Contents
Financial Highlights
The
following table is intended to help you understand the Fund’s financial performance. Certain information reflects financial results for a single share held for the periods shown. Per share net investment income (loss) amounts are calculated
based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect payment of the expenses that apply to the variable accounts or contract charges, if
any. Total return and portfolio turnover are not annualized for periods of less than one year. The portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If
such transactions were included, the Fund’s portfolio turnover rate may be higher.
| Year Ended December 31, | |||||
| 2017 | 2016 | 2015 | 2014 | 2013 | |
| Per share data | |||||
| Net asset value, beginning of period | $23.64 | $26.32 | $29.07 | $34.55 | $31.19 |
| Income from investment operations: | |||||
| Net investment income | 0.25 | 0.31 | 0.31 | 0.36 | 0.39 |
| Net realized and unrealized gain (loss) | 7.49 | (0.56) | (0.09) | (1.56) | 6.18 |
| Total from investment operations | 7.74 | (0.25) | 0.22 | (1.20) | 6.57 |
| Less distributions to shareholders from: | |||||
| Net investment income | (0.34) | (0.29) | (0.41) | (0.48) | (0.88) |
| Net realized gains | (0.20) | (2.14) | (2.57) | (3.80) | (2.33) |
| Total distributions to shareholders | (0.54) | (2.43) | (2.98) | (4.28) | (3.21) |
| Proceeds from regulatory settlements | — | — | 0.01 | — | — |
| Net asset value, end of period | $30.84 | $23.64 | $26.32 | $29.07 | $34.55 |
| Total return | 32.91% (a) | (1.41)% | 0.10% (b) | (4.40)% | 22.37% |
| Ratios to average net assets | |||||
| Total gross expenses(c) | 1.16% | 1.08% (d) | 1.12% | 1.05% | 1.07% |
| Total net expenses(c) | 1.12% | 1.08% (d) | 1.12% | 1.05% | 1.07% |
| Net investment income | 0.92% | 1.23% | 1.11% | 1.10% | 1.19% |
| Supplemental data | |||||
| Portfolio turnover | 55% | 56% | 53% | 28% | 44% |
| Net assets, end of period (in thousands) | $578,088 | $494,795 | $586,629 | $667,023 | $784,977 |
| Notes to Financial Highlights | |
| (a) | Had the Investment Manager and/or its affiliates not waived a portion of expenses, total return would have been reduced. |
| (b) | The Fund received proceeds from regulatory settlements. Had the Fund not received these proceeds, the total return would have been lower by 0.02%. |
| (c) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (d) | Expenses have been reduced due to a reimbursement of expenses overbilled by a third party. If the reimbursement had been excluded, the expense ratios would have been higher by 0.05%. All fee waivers and expense reimbursements by the Investment Manager and its affiliates were applied before giving effect to this third party reimbursement. |
The accompanying Notes to Financial Statements are an integral part of this
statement.
| 18 | Wanger International | Annual Report 2017 |
Table of Contents
Notes to Financial Statements
December 31, 2017
December 31, 2017
Note 1. Organization
Wanger International (the Fund), a series of Wanger Advisors
Trust (the Trust), is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The investment objective of the Fund is to seek long-term
capital appreciation. The Fund is available only for allocation to certain life insurance company separate accounts established for the purpose of funding participating variable annuity contracts and variable life insurance policies and may also be
offered directly to certain qualified pension and retirement plans.
Note 2. Summary of significant accounting
policies
Basis of preparation
The Fund is an investment company that applies the accounting
and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared
in accordance with U.S. generally accepted accounting principles (GAAP), which requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial statements.
Security valuation
Securities of the Fund are valued at market value or, if a
market quotation for a security is not readily available or is deemed not to be reliable because of events or circumstances that have occurred between the market quotation and the time as of which the security is to be valued, the security is valued
at its fair value determined in good faith under consistently applied procedures established by the Board of Trustees. A security traded on a securities exchange or in an over-the-counter market in which transaction prices are reported is valued at
the last sales price at the time of valuation. A security traded principally on NASDAQ is valued at the NASDAQ official closing price. Exchange-traded funds are valued at their closing net asset value as reported on the applicable exchange. A
security for which there is no reported sale on the valuation date is valued by comparison of the mean of the latest bid and ask quotations.
Foreign equity securities are generally valued based on the
closing price on the foreign exchange in which such securities are primarily traded. If any foreign equity security closing prices are not readily available, the securities are valued at the mean of the latest quoted bid and ask prices on such
exchanges or markets. Foreign currency exchange rates are generally determined at 4:00 p.m. Eastern (U.S.) time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing
prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange. In situations where foreign markets are closed, where a significant event has
occurred after the foreign exchange closes but before the time at which the Fund’s share price is calculated, and in the event of significant movement in the trigger index for the statistical fair valuation process established by the Board of
Trustees, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. The Trust has retained an independent statistical fair value pricing service that employs a systematic methodology 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 market and the time as of which the securities are to be valued. If a security
is valued at a fair value, that value may be different from the last quoted market price for the security.
Short-term investments maturing in 60 days or less are valued
at amortized cost, which approximates market value.
| Wanger
International | Annual Report 2017 |
19 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2017
December 31, 2017
Fund
share valuation
Fund shares are sold and redeemed on a
continuing basis at net asset value. Net asset value per share is determined daily as of the close of trading on the New York Stock Exchange on each day the New York Stock Exchange is open for trading by dividing the total value of the Fund’s
investments and other assets, less liabilities, by the number of Fund shares outstanding.
GAAP requires disclosure regarding the inputs and valuation
techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following the Fund’s Portfolio of Investments.
Foreign currency transactions and translations
Values of investments denominated in foreign currencies are
converted into U.S. dollars using the New York spot market rate of exchange at the time of valuation. Purchases and sales of investments and dividend and interest income are translated into U.S. dollars using the spot market rate of exchange
prevailing on the respective dates of such transactions. The gain or loss resulting from changes in foreign exchange rates is included with net realized and unrealized gain or loss from investments, as appropriate.
Securities lending
The Fund may lend securities up to one-third of the value of
its total assets to certain approved brokers, dealers and other financial institutions to earn additional income. The Fund retains the benefits of owning the securities, including the economic equivalent of dividends or interest generated by the
security. The Fund also receives a fee for the loan. The Fund has the ability to recall the loans at any time and could do so in order to vote proxies or to sell the loaned securities. Each loan is collateralized by cash that exceeded the value of
the securities on loan. The market value of the loaned securities is determined daily at the close of business of the Fund and any additional required collateral is delivered to each Fund on the next business day. The Fund has elected to invest the
cash collateral in the Dreyfus Government Cash Management Fund. The income earned from the securities lending program is paid to the Fund, net of any fees remitted to Goldman Sachs Agency Lending, the Fund’s lending agent, and borrower
rebates. The Fund’s investment manager, Columbia Wanger Asset Management, LLC (the Investment Manager or CWAM), does not retain any fees earned by the lending program. Generally, in the event of borrower default, the Fund has the right to use
the collateral to offset any losses incurred. In the event the Fund is delayed or prevented from exercising its right to dispose of the collateral, there may be a potential loss to the Fund. Some of these losses may be indemnified by the lending
agent. The Fund bears the risk of loss with respect to the investment of collateral. The net lending income earned by the Fund as of December 31, 2017, is included in the Statement of Operations.
The following table indicates the total amount of securities
loaned by type, reconciled to gross liability payable upon return of the securities loaned by the Fund as of December 31, 2017:
| Overnight
and continuous |
Up
to 30 days |
30-90
days |
Greater
than 90 days |
Total | |
| Wanger International | |||||
| Securities lending transactions | |||||
| Equity securities | $12,584,508 | $— | $— | $— | $12,584,508 |
| Gross amount of recognized liabilities for securities lending (collateral received) | 13,200,989 | ||||
| Amounts due to counterparty in the event of default | $616,481 |
| 20 | Wanger International | Annual Report 2017 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2017
December 31, 2017
Offsetting of assets and liabilities
The following table presents the Fund’s gross and net
amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of December 31, 2017:
| Goldman
Sachs ($) | |
| Liabilities | |
| Collateral on Securities loaned | 13,200,989 |
| Total Liabilities | 13,200,989 |
| Total Financial and Derivative Net Assets | (13,200,989) |
| Financial Instruments | 12,584,508 |
| Net Amount (a) | (616,481) |
| (a) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions and investment income
Security transactions are accounted for on the trade date
(date the order to buy or sell is executed) and dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as soon as the information is available to the Fund. Interest income is recorded
on the accrual basis and includes amortization of discounts on debt obligations when required for federal income tax purposes. Realized gains and losses from security transactions are recorded on an identified cost basis.
Income recognition
Corporate actions and dividend income are generally recorded
net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions from holdings in equity
securities, exchange traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts (REITs), which report information on the tax character of their distributions annually. These
distributions are allocated to dividend income, capital gain and return of capital based on actual information reported. Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable
securities, return of capital is recorded as a realized gain. With respect to REITs, to the extent actual information has not yet been reported, estimates for return of capital may be made by the Fund’s management. Management’s estimates
are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a proportionate change in return of capital to shareholders.
Awards, if any, from class action litigation related to
securities owned may be recorded as a reduction of cost of those securities. If the applicable securities are no longer owned, the proceeds are recorded as realized gains.
Expenses
General expenses of the Trust are allocated to the Fund and
the other series of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are charged to the Fund.
Federal income tax status
The Fund intends to comply with the provisions of the Internal
Revenue Code available to regulated investment companies and, in the manner provided therein, intends to distribute substantially all its taxable income, as well as any net realized gain on sales of investments and foreign currency transactions
reportable for federal income tax purposes. Accordingly, the Fund paid no federal income taxes and no federal income tax provision was required. The Fund meets the exception under Internal Revenue Code Section 4982(f) and the Fund expects not to be
subject to federal excise tax.
| Wanger
International | Annual Report 2017 |
21 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2017
December 31, 2017
Foreign taxes
Gains in certain countries may be subject to foreign taxes at
the fund level. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction. The amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to shareholders
Distributions to shareholders are recorded on the ex-dividend
date.
Guarantees and indemnification
In the normal course of business, the Trust on behalf of the
Fund enters into contracts that contain a variety of representations and warranties and that provide general indemnities. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims against the Fund.
Also under the Trust’s organizational documents, the trustees and officers of the Trust are indemnified against certain liabilities that may arise out of their duties to the Trust. However, based on experience, the Fund expects the risk of
loss due to these warranties and indemnities to be remote.
Recent accounting pronouncement
Accounting Standards Update 2017-08 Premium Amortization on
Purchased Callable Debt Securities
In March 2017, the
Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2017-08 Premium Amortization on Purchased Callable Debt Securities. ASU No. 2017-08 updates the accounting standards to shorten the amortization period for certain
purchased callable debt securities, held at a premium, to be amortized to the earliest call date. The update applies to securities with explicit, noncontingent call features that are callable at fixed prices and on preset dates. The standard is
effective for annual periods beginning after December 15, 2018 and interim periods within those fiscal years. At this time, management is evaluating the implication of this guidance and the impact it will have on the financial statement amounts and
footnote disclosures, if any.
Note 3. Fees and
other transactions with affiliates
Management services
fees
CWAM is a wholly owned subsidiary of Columbia
Management Investment Advisers, LLC (Columbia Management), which in turn is a wholly owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). CWAM furnishes continuing investment supervision to the Fund and is responsible for the
overall management of the Fund’s business affairs.
CWAM receives a monthly advisory fee based on the Fund’s
daily net assets at the following annual rates:
| Average daily net assets | Annual
fee rate |
| Up to $100 million | 1.10% |
| $100 million to $250 million | 0.95% |
| $250 million to $500 million | 0.90% |
| $500 million to $1 billion | 0.80% |
| $1 billion and over | 0.72% |
For the year ended December 31,
2017, the effective investment advisory fee rate was 0.94% of the Fund’s average daily net assets.
| 22 | Wanger International | Annual Report 2017 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2017
December 31, 2017
Administration fees
CWAM provides administrative services and receives an
administration fee from the Fund at the following annual rates:
| Aggregate average daily net assets of the Trust | Annual
fee rate |
| Up to $4 billion | 0.05% |
| $4 billion to $6 billion | 0.04% |
| $6 billion to $8 billion | 0.03% |
| $8 billion and over | 0.02% |
For the year ended December 31,
2017, the effective administration fee rate was 0.05% of the Fund’s average daily net assets. CWAM has delegated to Columbia Management responsibility to provide certain sub-administrative services to the Fund.
Compensation of board members
Certain officers and trustees of the Trust are also officers
of CWAM or Columbia Management. The Trust makes no direct payments to its officers and trustees who are affiliated with CWAM or Columbia Management. The Trust offers a deferred compensation plan for its independent trustees. Under that plan, a
trustee may elect to defer all or a portion of his or her compensation. Amounts deferred are retained by the Trust and may represent an unfunded obligation of the Trust. The value of amounts deferred is determined by reference to the change in value
of Institutional Class shares of one or more series of Columbia Acorn Trust or a money market fund as specified by the trustee. Benefits under the deferred compensation plan are payable in accordance with the plan.
Compensation of Chief Compliance Officer
The Board of Trustees has appointed a Chief Compliance Officer
of the Fund in accordance with federal securities regulations. A portion of the Chief Compliance Officer’s total compensation is allocated to the Fund, along with other affiliated funds governed by the Board, based on relative net assets. The
total amount allocated to all affiliated funds governed by the Board will not exceed $40,000 annually.
Transactions with affiliates
For the year ended December 31, 2017, the Fund engaged in
purchase and/or sale transactions with affiliates and/or accounts that have a common investment manager (or affiliated investment managers), common directors/trustees, and/or common officers. Those purchase and sale transactions complied with
provisions of Rule 17a-7 under the 1940 Act and were $635,434 and $0, respectively.
Service fees
Effective July 1, 2017, pursuant to the Transfer, Dividend
Disbursing and Shareholder Servicing Agreement between the Fund and Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, the Fund bears a
service fee paid to the Transfer Agent to compensate it for amounts paid to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for various sub-transfer agency and other shareholder services
each Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time.
The Transfer Agent may retain as compensation for its services
revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to balances in accounts the Transfer Agent maintains in connection
with its services to the Fund.
Effective July 1, 2017
through June 30, 2018, the Transfer Agent has contractually agreed to waive a portion of the service fee payable by the Fund such that the annual service fee paid by the Fund does not exceed 0.00% of the Fund’s average daily net assets, unless
sooner terminated at the sole discretion of the Board of Trustees.
| Wanger
International | Annual Report 2017 |
23 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2017
December 31, 2017
Transfer agency fees
Prior to July 1, 2017, the Fund paid the Transfer Agent a
monthly fee at the annual rate of $21.00 per open account for its services. The Transfer Agent also received reimbursement from the Fund for certain out-of-pocket expenses. Effective July 1, 2017, the Fund no longer pays a transfer agency fee.
Distributor
Columbia Management Investment Distributors, Inc., a wholly
owned subsidiary of Ameriprise Financial, serves as the Fund’s distributor and principal underwriter.
Note 4. Federal tax information
The timing and character of income and capital gain
distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2017, these differences were primarily due to
differing treatment for deferral/reversal of wash sale losses, passive foreign investment company (PFIC) holdings, derivative investments, trustees’ deferred compensation and foreign currency transactions. To the extent these differences were
permanent, reclassifications were made among the components of the Fund’s net assets in the Statement of Assets and Liabilities. Temporary differences do not require reclassifications.
In the Statement of Assets and Liabilities the following
reclassifications were made:
| Undistributed
net investment income ($) |
Accumulated
net realized gain ($) |
Paid
in capital ($) |
| 2,932,374 | (2,932,373) | (1) |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions paid during the years
indicated was as follows:
| December 31, 2017 | December 31, 2016 | ||||
| Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) | Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
| 6,572,360 | 4,004,590 | 10,576,950 | 6,158,671 | 44,383,757 | 50,542,428 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At December 31, 2017, the components of distributable earnings
on a tax basis were as follows:
| Undistributed
ordinary income ($) |
Undistributed
long-term capital gains ($) |
Capital
loss carryforwards ($) |
Net
unrealized appreciation ($) |
| 14,854,712 | 55,417,464 | — | 149,982,946 |
At December 31, 2017, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal
tax cost ($) |
Gross
unrealized appreciation ($) |
Gross
unrealized (depreciation) ($) |
Net
unrealized appreciation ($) |
| 445,086,397 | 162,097,502 | (12,114,556) | 149,982,946 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
| 24 | Wanger International | Annual Report 2017 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2017
December 31, 2017
Management is required to determine whether a tax position of
the Fund is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be
recognized by the Fund is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Management is not aware of any tax positions in the Fund for which it is reasonably possible
that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. However, management’s conclusions may be subject to review and adjustment at a later date based on factors including, but not limited to,
new tax laws, regulations, and administrative interpretations (including relevant court decisions). The Fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio information
The aggregate cost of purchases and proceeds from sales
other than short-term obligations for the year ended December 31, 2017, were $293,743,426 and $362,624,402, respectively. The amount of purchase and sales activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Regulatory settlements
During the year ended 2015, the Fund recorded a receivable
of $131,912 as a result of a regulatory settlement proceeding brought by the Securities and Exchange Commission against a third party relating to market timing and/or late trading of mutual funds. This amount represented the Fund’s portion of
the proceeds from the settlement (neither the Fund nor the Investment Manager were a party to the proceeding) and is disclosed as a receivable on the Statement of Assets and Liabilities.
Note 7. Line of credit
Effective April 25, 2017, the Fund has access to a revolving
credit facility with a syndicate of banks led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The
credit facility, which is a collective agreement between the Fund and other participating funds, including other funds managed by another affiliated investment manager, severally and not jointly, permits collective borrowings up to $1 billion.
Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the overnight federal funds rate plus 1.00% or (ii) the one-month LIBOR rate plus 1.00%. Each borrowing under the credit facility matures no
later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.15% per annum. Prior to April 25, 2017, the Trust together with Columbia Acorn Trust,
another trust managed by the Investment Manager, participated in a revolving credit facility in the amount of $200 million with a syndicate of banks led by JPMorgan Chase Bank, N.A. Under this facility, interest was charged to each participating
fund based on its borrowings at a rate per annum equal to the higher of (i) the overnight federal funds rate plus 1.00% or (ii) the one-month LIBOR rate plus 1.00%. In addition, a commitment fee of 0.15% per annum of the unutilized line of credit
was accrued and apportioned among the participating funds based on their relative net assets. The commitment fee is disclosed as a part of other expenses in the Statement of Operations.
No amounts were borrowed for the benefit of the Fund under the
line of credit during the year ended December 31, 2017.
Note 8. Significant risks
Consumer discretionary sector risk
The Fund may be more susceptible to the particular risks that
may affect companies in the consumer discretionary sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the consumer discretionary sector are subject to certain risks, including fluctuations in the
performance of the overall domestic and international economy, interest rate changes, increased competition and consumer confidence. Performance of such companies may be affected by factors including reduced disposable household income, reduced
consumer spending, changing demographics and consumer tastes.
| Wanger
International | Annual Report 2017 |
25 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2017
December 31, 2017
Foreign securities and emerging market countries risk
Investing in foreign securities may include certain risks and
considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition,
certain foreign securities may not be as liquid as U.S. securities. Investing in emerging markets may accentuate these risks. These countries are also more likely to experience high levels of inflation, deflation or currency devaluation which could
hurt their economies and securities markets. To the extent that the Fund concentrates its investment exposure to any one or a few specific countries, the Fund will be particularly susceptible to the various conditions, events or other factors
impacting those countries and may, therefore, have a greater risk than that of a fund which is more geographically diversified.
Industrial sector risk
The Fund may be more susceptible to the particular risks that
may affect companies in the industrials sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the industrials sector are subject to certain risks, including changes in supply and demand for their specific
product or service and for industrial sector products in general, including decline in demand for such products due to rapid technological developments and frequent new product introduction. Performance of such companies may be affected by factors
including government regulation, world events and economic conditions and risks for environmental damage and product liability claims.
Shareholder concentration risk
At December 31, 2017, two unaffiliated shareholders of record
owned 28.9% of the outstanding shares of the Fund in one or more accounts. The Fund has no knowledge about whether any portion of those shares was owned beneficially. Affiliated shareholders of record owned 60.2% of the outstanding shares of the
Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune
times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for
non-redeeming Fund shareholders.
Note
9. Subsequent events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information regarding pending and settled
legal proceedings
Ameriprise Financial and certain of
its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their
business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are
likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary,
8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse
publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe proceedings are not likely to have a material adverse effect on the
Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result.
An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of
Ameriprise Financial.
| 26 | Wanger International | Annual Report 2017 |
Table of Contents
Report of Independent Registered Public Accounting Firm
To the
Trustees of Wanger Advisors Trust and Shareholders of Wanger International
Opinion on the Financial Statements
We have audited the accompanying statement of assets and
liabilities, including the portfolio of investments, of Wanger International (one of the funds constituting Wanger Advisors Trust, referred to hereinafter as the "Fund") as of December 31, 2017, the related statement of operations for the year ended
December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017
(collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles
generally accepted in the United States of America.
Basis
for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits of these financial
statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or
fraud.
Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures
included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Chicago, Illinois
February 20, 2018
We have served as the auditor of one or more investment
companies in Wanger Advisors Trust since 2004.
| Wanger
International | Annual Report 2017 |
27 |
Table of Contents
Federal Income Tax Information
(Unaudited)
(Unaudited)
The Fund hereby designates the following tax attributes for
the fiscal year ended December 31, 2017.
| Capital
gain dividend |
Foreign
taxes paid to foreign countries |
Foreign
taxes paid per share to foreign countries |
Foreign
source income |
Foreign
source income per share |
| $58,230,235 | $935,788 | $0.05 | $10,654,941 | $0.57 |
Capital gain dividend. The Fund
designates as a capital gain dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
Foreign taxes. The Fund makes the election to pass through to
shareholders the foreign taxes paid. Eligible shareholders may claim a foreign tax credit. These taxes, and the corresponding foreign source income, are provided.
| 28 | Wanger International | Annual Report 2017 |
Table of Contents
Board of Trustees and Management of Wanger Advisors Trust
Each
trustee may serve a term of unlimited duration. The Trust’s Bylaws generally require that a trustee retire at the end of the calendar year in which the trustee attains the age of 75 years. The trustees appoint their own successors, provided
that at least two-thirds of the trustees, after such appointment, have been elected by shareholders. Shareholders may remove a trustee, with or without cause, upon the vote of two-thirds of the Trust’s outstanding shares at any meeting called
for that purpose. A trustee may be removed, with or without cause, upon the vote of a majority of the trustees. The names of the trustees and officers of the Trust, the date each was first elected or appointed to office and the principal business
occupations of each during at least the last five years, and for the trustees, the number of portfolios in the fund complex they oversee and other directorships they hold, are shown below. Each trustee and officer serves in such capacity for each of
the eight series of Columbia Acorn Trust and for each of the three series of Wanger Advisors Trust.
The address for the trustees and officers of the Trust is
Columbia Wanger Asset Management, LLC, 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606. The Funds’ Statement of Additional Information includes additional information about the Funds’ trustees and officers. You may obtain a
free copy of the Statement of Additional Information by writing or calling toll-free:
Columbia Wanger Asset Management, LLC
Shareholder Services Group
227 W. Monroe, Suite 3000
800.922.6769
Shareholder Services Group
227 W. Monroe, Suite 3000
800.922.6769
Independent trustees
| Name
and age at December 31, 2017 |
Year first appointed or elected to a Board in the Columbia Funds Complex | Principal
occupation(s) during the past five years |
Number
of Funds in the Columbia Funds Complex overseen (1) |
Other
directorships held by the Trustee during the past five years in addition to Columbia Acorn Trust and Wanger Advisors Trust |
| Laura
M. Born, 52, Chair |
2007 | Adjunct Associate Professor of Finance, University of Chicago Booth School of Business since 2007; Director, Carlson Inc. (private global hospitalities and travel company) since 2015; Managing Director – Investment Banking, JP Morgan Chase & Co. (broker-dealer) 2002-2007. | 11 | None. |
| Maureen M. Culhane, 69 | 2007 | Retired. Formerly, Vice President, Goldman Sachs Asset Management, L.P. (investment adviser), 2005-2007; Vice President (Consultant) – Strategic Relationship Management, Goldman, Sachs & Co., 1999-2005. | 11 | None. |
| Margaret M. Eisen, 64 | 2002 | Chief Investment Officer, EAM International LLC (corporate finance and asset management), 2003-2013; Managing Director, CFA Institute, 2005-2008. | 11 | RMB Investors Trust (formerly Burnham Investors Trust) (3 series). |
| Thomas M. Goldstein, 58 | 2014 | Retired. Formerly, Chief Financial Officer, Allstate Protection Division, 2011-2014; Founding Partner, The GRG Group LLC, 2009-2011; Managing Director and Chief Financial Officer, Madison Dearborn Partners, 2007-2009. | 11 | Federal Home Loan Bank – Chicago; Federal Home Loan Mortgage Corporation; Kemper Corporation (insurance). |
| John C. Heaton, 58 | 2010 | Deputy Dean for Faculty, University of Chicago Booth School of Business; Joseph L. Gidwitz Professor of Finance, University of Chicago Booth School of Business since July 2000. | 11 | None. |
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Board of Trustees and Management of Wanger Advisors Trust (continued)
Independent trustees (continued)
| Name
and age at December 31, 2017 |
Year first appointed or elected to a Board in the Columbia Funds Complex | Principal
occupation(s) during the past five years |
Number
of Funds in the Columbia Funds Complex overseen (1) |
Other
directorships held by the Trustee during the past five years in addition to Columbia Acorn Trust and Wanger Advisors Trust |
| Charles R. Phillips, 61 | 2015 | Consultant, Finger Rock, LLC (strategic consulting business). Director, University of North Carolina School of Law Foundation since 2010. Formerly, Vice Chairman, J.P. Morgan Private Bank, 2011-2014; Managing Director, J.P. Morgan Private Bank, 2001-2011. | 11 | None. |
| David
J. Rudis, 64, Vice Chair |
2010 | Retired. Formerly, National Checking and Debit Executive, and Illinois President, Bank of America, 2007-2009; President, Consumer Banking Group, LaSalle National Bank, 2004-2007. | 11 | None. |
Interested trustee affiliated
with Investment Manager
| Name
and age at December 31, 2017 |
Year
first appointed or elected to a Board in the Columbia Funds Complex |
Principal
occupation(s) during the past five years |
Number
of Funds in the Columbia Funds Complex overseen (1) |
Other
directorships held by the Trustee during the past five years in addition to Columbia Acorn Trust and Wanger Advisors Trust |
| P. Zachary Egan, 49 (2) | 2015 | President, CWAM and President, Columbia Acorn Trust and Wanger Advisors Trust since April 2014; Global Chief Investment Officer, CWAM since October 2015; International Chief Investment Officer, CWAM, April 2014-September 2015; Director of International Research, CWAM, December 2004-March 2014; Vice President of Columbia Acorn Trust, 2003-2014, and Wanger Advisors Trust, 2007-2014; portfolio manager and analyst, CWAM or its predecessors, since 1999. | 11 | None. |
Trustee Emeritus
| Name
and age at December 31, 2017 |
Year
first appointed or elected to a Board in the Columbia Funds Complex |
Principal
occupation(s) during the past five years |
Number
of Funds in the Columbia Funds Complex overseen (1) |
Other
directorships held by the Trustee during the past five years in addition to Columbia Acorn Trust and Wanger Advisors Trust |
| Ralph Wanger, 83 (3) | 1970 (4) | Founder, CWAM. Formerly, President, Chief Investment Officer and portfolio manager, CWAM or its predecessors, July 1992-September 2003; Director, Wanger Investment Company PLC; Consultant to CWAM or its predecessors, September 2003-September 2005. | 11 | None. |
| (1) | The Trustees oversee the series of Wanger Advisors Trust and Columbia Acorn Trust. |
| (2) | Mr. Egan is an "interested person" of Wanger Advisors Trust and Columbia Acorn Trust, and of CWAM, as defined in the 1940 Act, because he is an officer of each Trust and an employee of CWAM. |
| (3) | As permitted under the Trust’s Bylaws, Mr. Wanger serves as a non-voting Trustee Emeritus of Columbia Acorn Trust and Wanger Advisors Trust. |
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Board of Trustees and Management of Wanger Advisors Trust (continued)
| (4) | Dates prior to 1992 relate to the Acorn Fund, Inc., the predecessor trust to Columbia Acorn Trust. |
Fund officers
| Name
and age at December 31, 2017 |
Position
held with Columbia Acorn Trust and Wanger Advisors Trust |
Year
first appointed or elected to office |
Principal
occupation(s) during the past five years |
| Alan G. Berkshire, 57 | Vice President | 2015 | Chief Operating Officer, CWAM since April 2015. Formerly, Independent Director, ValueQuest India Moat Fund Limited (Mauritius), April 2014-March 2015; President – North America, Religare Global Asset Management, Inc., June 2011-November 2013; Partner, Estancia Capital Management LLC, September 2009-June 2011. |
| Michael G. Clarke, 48 | Assistant Treasurer | 2004 | Vice President – Mutual Fund Administration, Columbia Management Investment Advisers, LLC since May 2010; Managing Director of Fund Administration, Columbia Management Advisors, LLC, September 2004-April 2010; Senior officer of Columbia funds and affiliated funds since 2002. |
| P. Zachary Egan, 49 | President | 2007 | President, CWAM and President, Columbia Acorn Trust and Wanger Advisors Trust since April 2014; Global Chief Investment Officer, CWAM since October 2015; International Chief Investment Officer, CWAM, April 2014-September 2015; Director of International Research, CWAM, December 2004-March 2014; Vice President of Columbia Acorn Trust, 2003-2014, and Wanger Advisors Trust, 2007-2014; portfolio manager and analyst, CWAM or its predecessors, since 1999. |
| David L. Frank, 54 | Vice President | 2014 | Portfolio manager and/or analyst, CWAM or its predecessors since 2002; Vice President, Columbia Acorn Trust and Wanger Advisors Trust since 2014. |
| Paul B. Goucher, 49 | Assistant Secretary | 2015 | Senior Vice President and Assistant General Cousel, Ameriprise Financial, Inc. since January 2017 (previously Vice President and Lead Chief Counsel, November 2008 - January 2017 and January 2013 - January 2017, respectively, and Chief Counsel, January 2010 - January 2013); Vice President, Chief Legal Counsel and Assistant Secretary, Columbia Management Investment Advisers, LLC since May 2010. |
| John Kunka, 47 | Vice
President, Treasurer and Principal Accounting and Financial Officer |
2006 | Treasurer and Principal Accounting and Financial Officer, Columbia Acorn Trust and Wanger Advisors Trust since 2014; Vice President of Accounting and Operations, CWAM since May 2006; formerly, Assistant Treasurer, Columbia Acorn Trust and Wanger Advisors Trust 2006-2014. |
| Stephen Kusmierczak, 50 | Vice President | 2011 | Portfolio manager and/or analyst, CWAM or its predecessors since 2001; Vice President, Columbia Acorn Trust and Wanger Advisors Trust since 2011. |
| Joseph C. LaPalm, 48 | Vice President | 2006 | Chief Compliance Officer, CWAM since 2005. |
| Ryan C. Larrenaga, 47 | Assistant Secretary | 2015 | Vice President and Group Counsel, Ameriprise Financial, Inc. since August 2011 (previously, Counsel, May 2010-August 2011); Assistant General Counsel, Bank of America, 2005-April 2010; officer of Columbia funds and affiliated funds since 2005. |
| Matthew A. Litfin, 46 | Vice President | 2016 | Director of Research (U.S.) and portfolio manager, CWAM since December 2015; formerly, portfolio manager, William Blair & Company 1993-2015; Vice President, Columbia Acorn Trust and Wanger Advisors Trust since 2016. |
| Satoshi Matsunaga, 46 | Vice President | 2015 | Portfolio manager and/or analyst, CWAM or its predecessors since 2005; Vice President, Columbia Acorn Trust and Wanger Advisors Trust since 2015. |
| Thomas P. McGuire, 45 | Chief Compliance Officer | 2015 | Senior Vice President and Chief Compliance Officer of the Columbia Funds since 2012; Vice President – Asset Management Compliance, Ameriprise Financial, Inc., since May 2010; Chief Compliance Officer, Ameriprise Certificate Company since September 2010; Compliance Executive, Bank of America, 2005-April 2010. |
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Board of Trustees and Management of Wanger Advisors Trust (continued)
Fund officers (continued)
| Name
and age at December 31, 2017 |
Position
held with Columbia Acorn Trust and Wanger Advisors Trust |
Year
first appointed or elected to office |
Principal
occupation(s) during the past five years |
| Louis J. Mendes III, 53 | Vice President | 2003 | International Director of Research, CWAM, since 2015; portfolio manager and/or analyst, CWAM or its predecessors since 2001; Vice President, Columbia Acorn Trust since 2003 and Wanger Advisors Trust since 2005. |
| Julian Quero, 50 | Assistant Treasurer | 2015 | Vice President – Tax, Columbia Management Investment Advisers, LLC since 2009. |
| Martha A. Skinner, 43 | Assistant Treasurer | 2016 | Vice President of Financial Reporting and Administration, Columbia Management since November 2015; Director of Financial Reporting, Columbia Management, April 2013-November 2015; Manager of Financial Reporting, Columbia Management, August 2010-April 2013. |
| Matthew S. Szafranski, 40 | Vice President | 2015 | Portfolio manager and/or analyst, CWAM or its predecessors since 2008; Vice President, Columbia Acorn Trust and Wanger Advisors Trust since 2015. |
| Linda Roth-Wiszowaty, 48 | Secretary | 2006 | Business support analyst, CWAM since April 2007; Secretary, Columbia Acorn Trust and Wanger Advisors Trust since 2014; Assistant Secretary, Columbia Acorn Trust and Wanger Advisors Trust, 2006-2014. |
| 32 | Wanger International | Annual Report 2017 |
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Additional information
Proxy
voting policies and procedures
The policy of the Board
of Trustees is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling
800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by
August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting investor.columbiathreadneedleus.com, or searching the website of the SEC at sec.gov.
Quarterly schedule of investments
The Fund files a complete schedule of portfolio holdings
with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q is available on the SEC’s website at sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by calling 800.SEC.0330. The Fund’s complete schedule of portfolio holdings, as filed on Form N-Q, can also be obtained without charge, upon request, by calling
800.345.6611.
Additional Fund information
Fund investment manager
Columbia Wanger Asset Management, LLC
227 West Monroe, Suite 3000
Chicago, IL 60606
888.4.WANGER
(888.492.6437)
Fund distributor
Columbia Management Investment Distributors, Inc.
225 Franklin Street
Boston, MA 02110
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 8081
Boston, MA 02266-8081
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Please read and consider the investment objectives, risks,
charges and expenses for any fund carefully before investing. For variable fund and variable contract prospectuses, which contain this and other important information, including the fees and expenses imposed under your contract, investors should
contact their financial advisor or insurance representative. Read the prospectus for the Fund and your variable contract carefully before investing. Columbia Wanger Funds are distributed by Columbia Management
Investment Distributors, Inc., member FINRA, and are managed by Columbia Wanger Asset Management, LLC.
Columbia Threadneedle Investments (Columbia Threadneedle) is
the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 225 Franklin Street, Boston, MA 02110-2804
© 2018 Columbia Management Investment Advisers, LLC.
C-1456 AP
(2/18)
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Item 2. Code of Ethics.
| (a) | The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. |
| (b) | During the period covered by this report, there were not any amendments to a provision of the code of ethics adopted in 2(a) above. |
| (c) | During the period covered by this report, there were no waivers, including any implicit waivers, from a provision of the code of ethics described in 2(a) above that relates to one or more of the items set forth in paragraph (b) of this item’s instructions. |
Item 3. Audit Committee Financial Expert.
The registrant’s Board of Trustees has determined that Thomas Goldstein, a member of the registrant’s Board of Trustees and Audit Committee, qualifies as an audit committee financial expert. Mr. Goldstein is an independent trustee, as defined in paragraph (a)(2) of this item’s instructions
Item 4. Principal Accountant Fees and Services.
Fee information below is disclosed for the three series of the registrant whose reports to stockholders are included in this annual filing.
(a) Audit Fees. Aggregate Audit Fees billed by the principal accountant for professional services rendered during the fiscal years ended December 31, 2017 and December 31, 2016 are approximately as follows:
| 2017 | 2016 | |
| $84,100 |
$81,800 |
Audit Fees include amounts related to the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years.
(b) Audit-Related Fees. Aggregate Audit-Related Fees billed to the registrant by the principal accountant for professional services rendered during the fiscal years ended December 31, 2017 and December 31, 2016 are approximately as follows:
| 2017 | 2016 | |
| $6,700 |
$6,500 |
Audit-Related Fees include amounts for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s
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financial statements and are not reported in Audit Fees above. In both fiscal years 2017 and 2016, Audit-Related Fees consist of agreed-upon procedures performed for other audit-related additional testing.
During the fiscal years ended December 31, 2017 and December 31, 2016, there were no Audit-Related Fees billed by the registrant’s principal accountant to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for an engagement that related directly to the operations and financial reporting of the registrant.
(c) Tax Fees. Aggregate Tax Fees billed by the principal accountant to the registrant for professional services rendered during the fiscal years ended December 31, 2017 and December 31, 2016 are approximately as follows:
| 2017 | 2016 | |
| $24,000 |
$44,000 |
Tax Fees incurred in both fiscal years 2017 and 2016 relate to the review of annual tax returns, the review of required shareholder distribution calculations and include amounts for professional services by the principal accountant for tax compliance, tax advice and tax planning. Fiscal year 2016 also includes Tax Fees for agreed upon procedures related to a fund merger and review of a final tax return.
During the fiscal years ended December 31, 2017 and December 31, 2016, there were no Tax Fees billed by the registrant’s principal accountant to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for an engagement that related directly to the operations and financial reporting of the registrant.
(d) All Other Fees. Aggregate All Other Fees billed by the principal accountant to the registrant for professional services rendered during the fiscal years ended December 31, 2017 and December 31, 2016 are as follows:
| 2017 | 2016 | |
| $0 |
$0 |
All Other Fees include amounts for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) above. Aggregate All Other Fees billed by the registrant’s principal accountant to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that
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provides ongoing services to the registrant for an engagement that related directly to the operations and financial reporting of the registrant during the fiscal years ended December 31, 2017 and December 31, 2016 are approximately as follows:
| 2017 | 2016 | |
| $225,000 |
$225,000 |
In both fiscal years 2017 and 2016, All Other Fees primarily consist of professional services rendered for internal control reviews.
(e)(1) Audit Committee Pre-Approval Policies and Procedures
The policy of the registrant’s Audit Committee is to specifically pre-approve (i) all audit and non-audit (including audit related, tax and all other) services provided by the registrant’s independent auditor to the registrant and individual funds (collectively “Fund Services”) and (ii) all non-audit services provided by the registrant’s independent auditor to the funds’ adviser or a control affiliate of the adviser, that relate directly to the funds’ operations and financial reporting (collectively “Fund-related Adviser Services”). A “control affiliate” is an entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the funds, and the term “adviser” is deemed to exclude any unaffiliated sub-adviser whose role is primarily portfolio management and is sub-contracted or overseen by another investment adviser.
If such Fund Services or Fund-related Adviser Services are required during the period between the Audit Committee’s regularly scheduled meetings, the Chairman of the Audit Committee has the authority to pre-approve the service, with reporting to the full Audit Committee at the next regularly scheduled meeting.
The Audit Committee will waive pre-approval of Fund Services or Fund-related Adviser Services provided that the requirements under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are met.
(e)(2) The percentage of services described in paragraphs (b) through (d) of this Item approved pursuant to the “de minimis” exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X during both fiscal years ended December 31, 2017 and December 31, 2016 was zero.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for the fiscal years ended December 31, 2017 and December 31, 2016 are approximately as follows:
| 2017 | 2016 | |
| $255,700 |
$275,500 |
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(h) The registrant’s Audit Committee of the Board of Directors has considered whether the provision of non-audit services that were rendered to the registrant’s adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, is compatible with maintaining the principal accountant’s independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments
| (a) | The registrant’s “Schedule I – Investments in securities of unaffiliated issuers” (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form N-CSR. |
| (b) | Not applicable |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There were no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of directors.
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Item 11. Controls and Procedures.
| (a) | The registrant’s principal executive officer and principal financial officer, based on their evaluation of the registrant’s disclosure controls and procedures as of a date within 90 days of the filing of this report, have concluded that such controls and procedures are adequately designed to ensure that material information required to be disclosed by the registrant in Form N-CSR is accumulated and communicated to the registrant’s management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. |
| (b) | There was no change in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies
Not applicable.
Item 13. Exhibits.
(a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR attached hereto as Exhibit 99.CODE ETH.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT.
(a)(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (registrant) Wanger Advisors Trust | ||
| By (Signature and Title) /s/ P. Zachary Egan | ||
| P. Zachary Egan, President and Principal Executive Officer | ||
| Date February 20, 2018 | ||
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By (Signature and Title) /s/ P. Zachary Egan | ||
| P. Zachary Egan, President and Principal Executive Officer | ||
| Date February 20, 2018 | ||
| By (Signature and Title) /s/ John M. Kunka | ||
| John M. Kunka, Treasurer and Principal Accounting and Financial Officer | ||
| Date February 20, 2018 | ||